Banco Bilbao Vizcaya Argentaria. - ADR Stock

Good morning, everyone, and welcome to BBVA's Second quarter results presentation. Joining me today are our CEO, Onur Genc and the Group CFO, Luisa Gomez Bravo. As in previous quarters, Onur and Luisa will begin by reviewing the quarterly figures, after which we will open the line for the live Q&A session.

With that, I turn it over to Onur.

Thank you, Patricia. Good morning to everyone. Welcome, and thank you for joining BBVA's Second Quarter 2026 Earnings Webcast. Before we begin, I would like to say a few words about Luisa as this is her last results presentation as the CFO of BBVA. And in very short few sentences, we are a 169-year old bank, 169 year bank built by generations of exceptional professionals in my view. Exceptional professionals like you, Luisa. And over the past few years, we had delivered some of the best results in our history, and I would like to recognize the fact that you have been one of the architects of that success. So I'm very pleased that you will continue to be connected to the bank as a Board member of some of our most important subsidiaries so that we can continue to benefit from your experience and judgment. So in short, Luisa, thank you for your leadership, your professionalism, everything you have done for this institution. It has been a true privilege to work with you.

Now let me start with the quarterly results. In short, once again, we have demonstrated in my view, the strength of BBVA's business model. We have delivered record earnings, industry-leading profitability, strong activity growth, exceptional activity growth and capital generation, while reinforcing our competitive position across different geographies.

So let me start with Slide #3. One of the most important messages for the quarter. As always, we continue to deliver outstanding value creation for our shareholders. On the left-hand side of the page, you can see the strong evolution of tangible book value per share plus dividends, which increased by 17.3% year-over-year and 5.4% in the quarter. Very strong figures, which are even better if you exclude the impact of the share buybacks, then the growth goes up to 21.8% year-over-year, an outstanding figure. This strong value creation was mainly supported by the record earnings, obviously, together with a positive contribution from the exchange rates in the quarter, particularly the appreciation of the Mexican peso.

On the right-hand side of the page, our profitability ratios, they have further improved, reaching a return on tangible equity of 22.2% and return on equity of 21.1% for the first half of the year, placing BBVA as one of the most profitable large bank in Europe.

On Page #4 on the left-hand side, another record quarter, as we discussed, in net attributable profit reaching EUR 3.062 billion, 14% increase year-over-year and 2.4% growth versus the previous quarter. Earnings per share at the bottom, it grew even better at 15.2% year-over-year, thanks to the share buyback programs actually executed over the period. In cumulative terms, net attributable profit in the bubble, it reached EUR 6.051 billion in the first half of the year.

On the right-hand side, our CET1 capital ratio, it improved 7 basis points during the quarter to [ 12.90 ], strong results and also asserted transactions more than compensate for the impact of exceptional loan growth and shareholder distributions.

Move to Slide #5. This slide illustrates what I believe is BBVA's truly unique profile that we talk about from time to time. But our ability to combine strong growth with best-in-class profitability consistently along the years. On the left-hand side, since December 2020, our loan book, it has grown by 62% in current years compared with 10% for our European peers. This reflects the strength of our leading franchises wherever we are. And also it's -- I think it points to our ability to gain new customers and growing our customer franchise. And importantly, this growth, we always pay attention to this, and we always talk about this, but this growth has not come at the expense of returns.

As shown on the right-hand side of the slide, starting at more or less the same initial point with the peers. We have widened the profitability gap versus our peers over the same period. As mentioned before, today, our return on tangible equity stands at 22.2%, well above the 15.1% of the peers.

Profitable growth is the best predictor of future value creation, and this is precisely what BBVA continues to deliver. Moving to Page #6. This page summarizes the key financial messages of the quarter, which I will cover in more detail in the following slides. So let me move directly to the next page, Slide #7, as usual, the summarized P&L for the quarter. If there is one thing to highlight, I would highlight the excellent performance of the core revenues in both annual and quarterly comparisons serving as the main drivers behind our net attributable profit growth.

Slide #8, the summarized P&L for the first half of the year, similar to quarterly evolution. As you can see, our solid revenue and core revenue growth, once again, are the main drivers behind the outstanding EUR 6.051 billion of net attributable profit double-digit growth, both in constant and current euros. As usual, some more light into the revenue breakdown.

On Slide #9, both components, as I mentioned, our core revenues continue to contribute very positively to our results. And in a very consistent manner. We call this [Foreign Language] in Spanish, the [indiscernible]. So they have been growing very nicely, again, a very consistent fashion. So as you can see, net interest income growth remains very strong, increasing by 17.8% year-over-year and 2.1% quarter-over-quarter, supported by very robust activity growth. Net fees and commissions continued their excellent trajectory, up by 16.2% versus the same quarter last year, driven by payments, asset management and the higher contribution from CIB. Net trading income increased by 13% year-over-year. Yet, as you can see in the page, declined quarter-over-quarter due to a more normalized contribution from the global markets following the exceptionally strong performance in the first quarter.

And also, as you can imagine, we are benefiting in general in a major way from the currencies, but then you get a small hit out of this in the net trading income. So there were some losses from the FX hedges, especially related to the Mexican peso appreciation. All in, gross income is increasing by 15.7% year-over-year and broadly stable versus the previous quarter.

Moving to Slide #10. I like these pages because they give signals about the future as well. So let me focus on activity and loan growth, which remain as the key drivers of NII. At group level, our loan portfolio grew by an impressive 17.7% year-over-year at constant euros, and around 20% in current euros, loan portfolio. On this slide, we focus only on Spain and Mexico, our two largest markets, where lending activity continues to evolve very positively. Talking about growth, it's worth mentioning once again that we -- from time to time, we highlight this, but we have deployed micro capital planning tools to all of our geographies in the past few years. Using these tools, we maintain, as we grow a strict profitability discipline around growth by measuring, I'm not sure whether there's any global bank to do it at this level of detail, but we are measuring the return on capital metric on a loan-by-loan basis in any part of the world. So when Peru originates a loan, immediately, we see what the return on capital metric on that one is. And we have clear mechanisms to manage that process.

But going back to the slide, in Spain, loan growth accelerated to 7.4% year-over-year, while in Mexico, it remained close to 10%. In both markets, growth is being driven by the key profitable segments, Consumer and Credit Cards on the Retail side and Private Enterprises on the Wholesale segment. And as shown in the center of the page, the growth for these profitable segments is clearly above the total loan growth. As a result of all of this, net interest income growth in Spain is at 4.5% year-over-year and 8.9% in the case of Mexico at constant euros.

Moving to Slide #11 and continuing with the deep dive in Spain and Mexico. This page shows how our growth goes beyond the overall industry growth in a consistent manner once again and gives positive signals for the future. On the left-hand side of the slide, in Spain, we have increased our total loan market share by 84 basis points since the end of 2020. And the improvement, as you can see on the page, has been even stronger in those key segments with gains of 276 basis points in Consumer, 249 basis points in Enterprises.

And on the right side of the page, BBVA Mexico, an amazing franchise that we have remains the clear market leader in total loan and across, again, main lending segments. Similarly, since 2020, our total loan market share has increased by 272 basis points to now 26.17% market share. Again, this is particularly noteworthy -- let me not go through the numbers, but all the key segments we are gaining basically market share. And this is even more important in the context of fintech players in the market. Despite newcomers, despite very aggressive competition, we have continued to improve our market position.

Moving to Slide #12 on efficiency. On the left side of the slide, gross income grew by 16.9% year-over-year in the first half, while expenses increased by [ 17.9% ], but it is important to note that growth rate for expenses, we have discussed about this in the previous quarter, but it is impacted by two nonrecurring impacts. The voluntary redundancies implemented in the first quarter in Spain, especially in Spain and the holding, the effect was mainly in those two areas. And then the extraordinary VAT regularization booked last year in the second quarter and a remaining amount this quarter also. Excluding these effects, you see it in the bubble, cost growth rate would have been 14.5%. Again, maintaining our positive jaws which is important to us.

On the right side of the slide, our efficiency ratio, it stood at 37.8%, clearly better than our guidance for the year. And excluding the mentioned nonrecurring effects, the two of them, the VAT and the redundancies, the ratio actually would have improved by 77 basis points in the first half. In short, we continue to deliver industry-leading efficiency ratio while investing on growth and transformation.

Turning to Slide #13. Asset quality. Asset quality metrics, they remain very sound during the quarter despite the context of macro uncertainties, strong activity growth, especially, as I mentioned, in the most profitable segments. Despite all that, very sound asset quality metrics. Starting with the cost of risk on the bottom left, it stood at 143 basis points for the first half of the year, improving from 154 basis points in the last quarter. This improvement, it was supported partially by a portfolio sale that we did in Spain. But overall, underlying provisioning requirements, they remain broadly stable, even better than expectations in most geographies except for retail portfolios in Turkey and in Argentina. And even in those situations, we see some elevated levels, but some contained at stable levels.

Looking ahead, based on the underlying trends, we expect cost of risk to remain around current levels at the end of the year. And on the bottom right, we quickly, our NPL ratio and the coverage ratio they remained broadly stable year-to-date.

Slide 14, the next page. On capital, we have generated 7 basis points of CET1 during the quarter, driving the ratio to 12.90%, increasing the room for further capital remuneration First, on the left side, following the waterfall, main impact of the quarter, strong results, 75 basis points. Dividend accrual and AT1 coupons, minus 40 basis points then minus 41 basis points due to the RWA growth. This figure also includes the result of the several best transactions SRTs, which positively contributed 6 basis points to the ratio in the quarter. Then we have a bucket of others on the page in the waterfall of 13 basis points, which comprises, among others, the market-related impacts, and the credit in OC for the hyperinflationary countries.

On shareholder lumination on the right-hand side, I want to highlight that we will be completing the EUR 4 billion share buyback program approved at the end of last year in December. In the next few days. We'll be finalizing the whole program in the next few days, August 3 is the final date. And thanks to the strong results that we are presenting today and our solid capital position, we are announcing today the launch of a new extraordinary share buyback program with the first tranche amounting to EUR 1 billion, which will begin on the 5th of August.

Page 15, a let me update you on the advances in the execution of our AI transformation strategy. Again, at BBVA, our DNA, it has innovation and transformation written all of it, and we are determined to lead the AI transformation in banking as we did in our view, in digital transformation. On that path, the first step was to promote the adoption of artificial intelligence tools across the organization. Today, these tools are part of our team's daily work with more than 100,000 teammates already actively using AI within the guidelines, obviously established by the bank.

Then at the end of last year, you might remember, we introduced the our top-down and bank-wide strategic road map on very specific initiatives to embed artificial intelligence across the group's key areas and functions. And now we are taking the next step with the frame to create deploy and manage AI agents at scale. In our view, this is important. This is a key milestone in the industrialization of AI agents across BBVA. It will provide a common framework for governance, architecture, security and performance measurement of agents, allowing us to accelerate implementation while maintaining rigorous goal of risks over costs and outcomes.

We have also reinforced our organizational setup for AI. As you might have seen in the last few weeks, we have brought together the relevant capabilities together under an AI transformation unit represented at the highest level. And we will further provide details on all of this on our AI strategy and progress at the next BBVA strategic talks, which is scheduled for October 6.

Finally, moving to Page #16 regarding the evolution of our financial goals for the 2025-2028 period that we shared with you last year. I will not go through each one of them for time. But what I can say is that after 18 months of execution of the strategic plan, which we launched in January 2025, in general, we are performing ahead of our original expectations in the key metrics.

And now for the business areas update, I turn it to Luisa.

Thank you, Onur, and thank you very much for your very kind words at the beginning of this presentation. Looking back at over 25 years with the BBVA, I am profoundly grateful for the continued learning opportunities and the great people I have worked with. While I didn't anticipate stepping off the train at this particular station, I find myself looking forward with optimism towards the new journeys that lie ahead, including staying connected to the bank as mentioned by your.

Onur, the privilege has been mined. A word I use in its fullest sense to describe the profound respect and admiration I have for you as an exceptional leader, but more so as an amazing person, the unique combination. I also want to extend my heartful thanks to everyone on this call, sell-side and buy-side analysts, PMs, rating agencies. Your challenge has been a continuous source of self-improvement, never a dull moment. And before I get to emotional, the show must go on.

So let me start with Spain on Slide 18, where we delivered another strong quarter. Net profit reached EUR 1.1 billion in the second quarter, bringing first half earnings to EUR 2.2 billion, up 2.3% year-on-year. This performance was underpinned by another solid increase in net interest income, up 4.1% year-on-year, supported by strong commercial momentum and effective pricing. Loan growth remained very robust, increasing by 7.4% year-on-year, as mentioned by Onur, and 3.3% quarter-on-quarter with broad-based growth across all customer segments. Momentum remained particularly strong in consumer lending as well as in midsized companies and corporates outpacing the overall loan growth.

Customer spread improved also in the quarter by 3 basis points, reflecting effective price management in the context of higher rates while maintaining the cost of deposits contained.

Turning to fees. Commissions increased by 2.2% year-on-year. The decrease you see in the quarter mainly reflected lower CIB related fees after an exceptional strong first quarter. This was partly offset by continued growth in asset management and a solid contribution from card fees this quarter. Costs remain well under control. Operating expenses increased by 10.3% in the first half of the year, mainly reflecting the one-off items already mentioned by Onur. Excluding the impact of the one-offs, underlying costs increased by 5% year-on-year and 3.8% quarter-on-quarter. Our efficiency ratio remains best in class at 33.6%.

Asset quality also continued to improve. This quarter, supported by the sale of our mortgage portfolio, the NPL ratio declined further to a new historical low of 2.86%, while coverage increased to 71%. Cost of risk stood at 31 basis points in the first half of the year, fully in line with our low 30s basis points guidance. Overall, Spain delivered another very strong quarter with strong commercial momentum, continued revenue growth, disciplined cost management and very solid asset quality metrics.

Turning to Mexico on Slide 19. Once again, BBVA Mexico delivered an excellent quarter. Net attributable profit reached EUR 3 billion in the first half of the year, increasing 8.2% year-on-year and 3.4% quarter-on-quarter in constant euros. Net interest income increased by 2.7% quarter-on-quarter, supported by solid growth across both retail and wholesale businesses and a higher contribution from the ALCO portfolio, which largely offset customer spread compression in the current leasing rate cycle. NIM remains broadly stable, both quarter-on-quarter and year-on-year. Fee income continued to perform well, supported by higher activity and asset management as well as solid performance in credit card and CIB related fees.

Overall, strong gross revenues performance supports an outstanding efficiency ratio of 30.8%, while we continue to invest in future growth. Asset quality remained also very sound. Impairments declined during the quarter, supported by solid underlying credit trends, along with a small positive one-off impact. As a result, cost of risk improved to 326 basis points. Based on this performance, we now expect the cost of risk to the end of the year below 335 basis points ahead of our initial expectations. Overall, Mexico continues to deliver a very strong performance. Based on this performance, we are upgrading our full year guidance. We now expect loan growth of around 10%, net interest income growth at high single digit and cost of risk, as I mentioned before, to end below 335 basis points.

Moving now to Turkey on Slide 20. BBVA Turkey delivered resilient results in the second quarter, supported by strong fees and lower impairments. Net profit reached EUR 269 million. First half earnings reached EUR 532 million. Looking first at revenues. Net interest income declined on a quarterly basis, mainly reflecting a significantly tighter TL customer spread as funding costs remain elevated. This was partly offset by strong growth in fees and commissions supported by continued business activity, particularly in payment systems. The other income line benefited from a stronger contribution from the Insurance business, while the hyperinflation adjustment remained broadly stable quarter-on-quarter.

Turning to asset quality. Cost of risk stood at 236 basis points year-to-date, reflecting still elevated provisioning needs in the retail portfolio, as Onur mentioned, in a higher longer interest rate environment. Underlying asset quality trends remain broadly in line with our expectations. However, the normalization of the retail portfolio is taking longer than previously expected due to the current macro environment. As a result, we are updating our full year cost of risk guidance to around 220 basis points with an expected better second half of the year, but still above our previous guidance of 200 basis points.

Let's turn now to South America on Slide 21. The region delivered another very strong quarter. Net attributable profit reached EUR 308 million in current euros. First half earnings totaled EUR 556 million, up 33.6% year-on-year in current euros. This performance was driven by solid revenue growth across all our main franchises. Net interest income increased by 23.7% year-on-year, supported by strong lending growth across our core markets, primarily in Peru and Colombia and higher spreads.

Fee income continued to perform strongly across the region, driven by higher activity in fee-generating businesses and pricing initiatives, reflecting our strategic focus on strengthening this revenue stream. Strong revenue growth of 21.6% year-on-year continue to translate into solid positive jaws, driving the efficiency ratio down to 41.5% in the first half of the year.

Turning to asset quality. Cost of risk improved to 269 basis points in the first half of the year. Looking ahead, we expect cost of risk to continue improving and converge towards full year guidance of below 250 basis points, supported by solid underlying trends in Peru and Colombia as well as a gradual improvement in asset quality metrics in Argentina, following the tightening of risk appetite since late 2025. Overall, the region is performing ahead of our expectations. As a result, we are upgrading our full year guidance for gross revenues to grow at high teens.

And finally, let me turn to the Rest of Business on Slide 22. The Rest of Business delivered another strong quarter with net attributable profit reaching EUR 271 million, increasing by 14.5% quarter-over-quarter. First half earnings amounted to EUR 508 million. The key drivers of revenue growth remain unchanged from last quarter. Loan growth continued at a strong pace, mainly driven by the corporate portfolio, which accounts for around 80% of the total loan book, supporting revenue growth.

Net interest income increased 17.2% quarter-on-quarter, while fees and net trading income remained at high levels, supported by the strength of our client franchise following the exceptionally strong first quarter. On costs, operating expenses continue to reflect ongoing investment to support future growth. At the same time, we continue to deliver positive jaws on a year-on-year basis.

Asset quality remained very strong. The NPL ratio increased driven by some specific clients migrating to Stage 3, which had already been largely provisioned in the first quarter. Cost of risk declined to 14 basis points in the first half. Overall, Rest of Business continues to deliver strong profitable growth supported a strong commercial momentum. Taken together, our business units delivered another excellent set of results, a reflection of the strength and resilience of our franchises across all our core markets.

And now back to Onur for the final remarks on the quarter.

Thank you, Luisa. And lastly, for the main takeaways on Page 23. Let me take -- is always by repeating all the key messages we are already seeing them on the page written all over it. But in short, excellent results, in my view, in the quarter, driven by the strength in activity and core revenues, which is very important to us, obviously, and further improving our industry-leading growth profitability and efficiency ratios, while executing our AI transformation plan on different fronts.

Given our positive momentum at the bottom of the page, you can also see that we are upgrading our 2026 outlook for group return on tangible equity to around 21% as well as improved our guidance for key metrics in Mexico and South America. As Luisa mentioned, we have also slightly downgraded our cost of risk guidance for Turkey, again, as you can see at the bottom of the page.

And now back to Patricia for the questions. And as I mentioned, this is the last presentation of Luisa, so be nice and don't ask challenging questions.

I'll just put the questions to you Onur.

Thank you very much, Onur, and Luisa. So we are ready now to move on to the Q&A session. Operator, the first question, please.

[Operator Instructions] Our first question today comes from Max Mishyn from JB Capital.

Two questions from me, please. The first one is on Spain. Cost of deposits was flat quarter-on-quarter despite a faster growth in their counts. What are you doing to manage the cost of deposits? And what should we expect? And the second question is on the Rest of the Business. Even though NPLs increased, cost of risk has been virtually 0. I was wondering if you could share some more color on this, please.

Very good. Thank you, Maks, for the questions. On Spain, what are we doing to keep the cost of deposits? Their levels as you're asking. If you also look into the Spain page, in the same page, you would see that our demand deposits in Spain has gone up by 5% in the last year, year-over-year. If you include that fact of we are growing in deposits with the notion that our loan-to-deposit ratio in Spain is still around 98%, which means we have a lot of liquidity still, we have the tools or we have the capacity to manage the cost of funding.

But the key thing here is that 5.1 number in my view, the fact that we keep growing in deposits despite all what's happening? And how is that happening? That are basically, I would say, two factors. Number one, we are growing in a number of customers. You might have seen it in the last 3 years. Every year, we have added 1 million new customers to our franchise in Spain. And this half is not an exception. I think the number was 490,000 new customers joining BBVA as a customer in the first half, which is obviously helping. So this new customer, they typically come with their product and transactionality. It's an amazing figure actually.

70% of these customers, after 6 months of acquisition, they become -- obviously, we manage this, we track this very, very, very closely, but they become what we call target customers. So they become much more engaged with the bank, 70%. 1/3 of them after acquisition, they become a payroll customer for us. So the focus on new customers and making sure that those customers become target primary customers in due time is one of the reasons that I would highlight.

The second topic that I would highlight is our continuously. It's not only true for Spain, for every single geography, but in Spain, for sure, also, our focus on transactionality. The fact that we are focusing a lot on all transactional products, cash management for companies, payrolls in retail, acquiring for SMEs and companies as well, we have basically higher market share in all of those products versus our base. So we have 14.2% market share in Spain in lending, as you know, 14.2%. In payroll, we have 16.6% market share in acquiring similar. In cash management, we are upgrading all of our systems in the last year to be able to provide the best cash management systems to enterprises.

In short, a lot of new customers and a lot of focus on transactionality is the key reason for that 5% in demand deposits, and that 5% is helping us to manage the cost of deposits. Rest of Business cost of risk number. As you know, cost of risk number for that segment or for that business is very low in general. So one customer coming in or out is basically creating a lot of difference. But at the moment, it's a small number in any case. So it's the fluctuation or very few anecdotal things that is creating the risk.

As you might remember, in the strategic plan when we announced our targets in 2020 -- last year June, basically, we said that the expected cost of risk for that business is to be around 20 basis points, okay? And we are more or less in that range in the first quarter. Second quarter was better. There was also some cost of the country risk adjustments. There was a new regulation on country risk, which allowed us to lower the provisions a bit. But overall, you would see the cost of risk in that segment to be around 20 basis points going forward, which is where we are.

The next question comes from Marta Sanchez Romero, from JPMorgan.

My first question is on the management changes. Should we infer any change in financial strategy, capital return priorities or on guidance philosophy from the CFO transition? Or is the hand over to [indiscernible] Purely organizational? And then my second question turns to the Rest of Business. and I'll take it in two parts, earnings and then risk. On earnings pace has caught us all off guard. You are now running above EUR 1 billion on an annualized basis, so expanding far faster than anyone than anyone had done it. I take the point about negative staff cost seasonality in the fourth quarter. But even allowing for that, you are close to EUR 200 million ahead of consensus. So how should we think about the run rate from here?

And then on risk, look, you just keep growing like a weed, another EUR 11 billion of lending in the quarter. So help me out with two things. First, what's actually in there? And second, the market is getting twitchy about how AI capabilities are being underwritten. So give us some color on your exposures, how much of the book is AI related?

Very good questions, as always. Marta, very quickly. On the first one, should we expect any changes in our strategic thinking or financial management principles. Obviously, no. It's a natural transition. So no changes you should expect. Then on the Rest of Business, for popular demand, we have added a page you might see in the appendix of the documentation that we have for you on the broader CIB. But if you look into those 2 pages, Page 22, which is the Rest of our Business, which is basically CIB, half of CIB is that or a bit more than half in terms of lending. And then you can see the rest of the details also in the page in the appendix.

On the earnings, what I can tell you is that, yes, we are growing very nicely. It's growing a bit higher than our guidance also. So year-over-year growth in loans is now -- in the Rest of Business is 52%. But it is happening at a very profitable level as well. You might see it in the [indiscernible] we are providing [indiscernible] as you can see on this page, and for CIB, the [indiscernible] the Rest of our Business is [ 2. ]1. And as you can see, in the CIB Appendix page. If you exclude Argentina and Turkey because they give too much of a positive boost to the number, it's going to be around 3%, the ROA for the overall CIB business.

And then in the appendix page, Marta, you would also see that at the bottom right that the cross-border revenues of total client revenues for the CIB business is 40%, 40%. We've discussed it many times before. We are a global bank being present in many geographies in Mexico and South America in Turkey, many of the emerging economies. Being in those geographies with a full-fledged universal bank is a competitive advantage, and we want to focus on the fact that our lines in these geographies and beyond, when they go, do business outside of their home geographies, we help them out. And that is 40% of the CIB business client revenues.

I'm saying client revenues because you can also deduce from this that CIB revenues that we have is practically client revenues. The nonclient revenues are like prop trading revenues and so on, they are very small compared to many other corporate and investment banks that you would see out there. What I'm saying all of this, why I'm saying all of this is very simple. Our CIB business is cross-border focused, mainly corporate banking focused business. focusing on our existing lines and taking their relationship to other geographies.

Given that the growth rates that you see because you are pointing out to the fact that the growth rates are quite healthy and there are some jitters in the market and so on, our focus is on our existing clients, mainly, and the growth rates that you see are sustainable and the profits associated with that business is also quite sustainable. As you have seen, with the [indiscernible]. Maybe I tell you the RORC number, excluding Argentina and Turkey, the RORC of the CIB business is 24%, clearly above cost of equity. So we are very happy with the returns that we are generating there and with the growth that's coming with it.

On cost of risk, you asked about a specific dimension called AI, on that one, we have basically identified every single sub chapter of the portfolio on how they might be affected. You might remember this for sustainability also. We had something called transition risk indicators. In the bank, we have developed this metric or the framework now on AI transition indicators. So we are looking into every single client of BBVA and identifying the vulnerability that they might have with the transition that's happening with the disruption that is happening with AI. And we don't see a major risk profile for BBVA in these sub chapters.

For example, software. Software and IT services, the direct lending that we have with them is less than -- it's like around EUR 700 million, EUR 800 million, and they are all top quality names and so on. So we do already have the tools to manage that risk. And we, in general, as you know, we do have a quite conservative risk profile.

Do you want to add anything, Luisa?

I would just like to add that perhaps you may recall from our strategic talks when we had Javier explained in the CIB area. And also when we presented midterm goals that to highlight a little bit the outlook, Marta, when we were thinking that the CIB business could grow as a whole, we did say that we were aiming for a EUR 10 billion revenue at the end of our strategic period, priorities. And it is an area where, strategically, we want to continue to grow together with our Commercial Banking business.

So in that sense, we do have expectations of revenue growth ahead. And also just to give a little bit more color, remember some of the numbers that we have done in the past in terms of exposures. Their exposure that we have to data centers remains very solid, 0.7% of EAD. As Onur mentioned, the technology side is 0.5%. And direct exposures to financial sponsors remains also very subdued below 0.8. So I think everything is, as Onur mentioned, growing in a diversified manner in an adequate manner, supporting our corporate client relationships as well.

Maybe one final point on this one. I mean this is a general trend in the industry, but the technology industry is triggering not only in the core industry itself, but all the adjacent industries, demand for lending demand for loans. And players like us who have a lot of liquidity, and you might seen it in the different documentation that we publish, but our leverage ratio is one of the best in Europe and people who have clear liquidity, we do have some advantage to benefit from this way with very decent margins, we can create some good loans, and that is the reflection that you see in the CIB pages.

The next question comes from Francisco Riquel from Alantra.

Luisa, I will start with a final question for you, which is you can update on the ALCO strategy. In Mexico, I see that you are increasing the size and duration of the ALCO portfolio. So I wonder if you are positioning the balance sheet to lower interest rates there? Or if you are just trying to support short-term NII because you are striving to reduce the cost of deposits in that country.

And in Spain, is the other way around, you are reducing the bond portfolio. And you were guiding for low to mid-single-digit NII growth. So I wonder if we should be more on the lower in the mid-single digit because of these changes in the ALCO portfolio. And my second question is for -- Onur, on capital allocation. So you see one falls to 12.4% after the new share buyback, which I appreciate, but I wonder if the commitment to distribute any excess above 12% is still [indiscernible] if we should expect more buybacks by the end of the year or the 12% is a target for '28? And if we should be done with the EUR 6 billion for '26?

Maybe I'll take the second question and Luisa, if you want to talk about ALCO and so on. So -- and we said it many times, multiple times before, some of you were not expecting the share buyback announcement that we have done today, but it was very clear, and we have been very consistent in our communication all along. We don't like to work with excess capital. Our target is our target, 11.5% to 12%. We take the upper end of that range as the key target 12%. So we have excess capital when we have excess capital above 12%, we will distribute it back to our shareholders. So as you say, it's going to be [indiscernible] pro forma after the EUR 2 billion that we are announcing today. And we have started it right after because we are running as fast as we can, but we are also generating capital in the process. Despite the fact that we are growing very nicely, we are generating excess capital. And as a result, it's taking time.

So the one that we started, the EUR 2 billion that we are going to be starting on August 5, our expectation is it's going to take us to the end of the year. So we have been running full speed, more or less full speed since December last year. We are announcing today right after, and it's going to take us to the end of the year. So we are going to continue on this process and our commitment to distribute the excess capital back to our shareholders is a clear and firm commitment.

On the ALCO strategies?

Yes. So on the ALCO strategies, I think both in Mexico and Spain, the strategy has been defined already for quite a while, specifically in ensuring that we can anticipate upcoming maturities advantage of the rates at the point in time. Particularly in Mexico, the growth in the portfolio book the Mexican ALCO book stepped at EUR 19.1 billion. It's grown EUR 4.1 billion year-on-year. Part of this is obviously due to the Mexican euro, the peso appreciation that you have to take into account. But I would say that most of the acquisitions that we've done reflect continuous purchases and anticipated upcoming maturities and trying to lock in our rate sensitivity.

Also to remind, your rate sensitivity is at 2.4%, 1.6% to the Mexican peso. And in this regard, I think this is a strategy that we have been trying to pursue that unlocking that rate sensitivity. Just to also finally give you some details on the book. The duration is now [ 3.2 ]. We have been extending durations as well. Remember that this, a year ago, it was [ 2.6 ]. So that has also been part of the strategy that extension and the yield that is at 8.8%. So I think a good positive ALCO strategy definitely will support our NII going forward.

With regards to Spain, Here, we have a book that stands at roughly EUR 55 billion. It has decreased in the quarter, primarily because of maturities. We have also been doing some acquisitions as again, as we try to anticipate maturities in the year and also in the following year. So I think it's been also a strategy of trying to manage our interest rate sensitivity adequately. In this regard, maybe giving you a little bit more color on the sensitivity. We have around a 4% NII sensitivity. And I think I also want to add here that even though we state sensitivities in parallel movements to 100 basis points, move of the yield curve. Really, in Spain, what we've seen is that we have an asymmetrical sensitivity with a more open position to the short end. And this is important because as you see in the short end with the interest rates going up, we have an exposure that actually now, aside from the 12-month Euribor rate is also more exposed to the 1-month and 3-month part of the curve as we are growing, as Onur said, on the commercial side of the business.

So we have a sensitivity, that is more exposed or more open in the short term, but we have those longer-term bonds that allow us to hedge overall sensitivity to that circa 4% number. And to finalize with the details on the ALCO book in Spain, you have the details, I think, also on the annex. But currently, we've also been extending durations. Our duration stands at 3.5 with a yield of 3%.

Maybe I'll add a few quick things on top of this. So PARCO, we don't use ALCO as the alternative to what we do. We take our business as serving clients, okay? ALCO is not like an alternative, okay. So I now reduce my lending and I do that, no. We do as much as possible with clients. And then if you have additional excess liquidity for different reasons of managing NII sensitivity, we use ALCO. But ALCO is not like a competing client for the thing.

As we look into ALCO today, we like the slope that we see of the curve. You like the slope. But it's also a policy. And you might remember, we have been in this for so long. You might remember certain banks that have thought that slope was an amazing slope, and they have bought so much paper with very long duration, which then hurt those businesses. You have seen examples of this in the U.S., in Europe, in many geographies. So although we like the slope, as Luisa mentioned, our effective duration is around 3 years -- 3.5 years because we want to maintain that risk perspective even on the ALCO book.

But in short, I want to give you two messages. Number one, we are focused on the client business. ALCO business is a separate business or a separate thing that we do for other purposes, but not as an alternative to our client business. Number two, we can increase the ALCO very quickly now because we like to slope, but we have to be also careful on the risk profile of those decisions. which might come and hurt us. You never know what happens in the world in 3 years, the inflation and the interest rate profile might be a very different one. So you have to be careful with those kind of decisions.

And finally, on the topic of Mexico because you said your cost of deposits is not coming down. And as a result, you are doing ALCO -- again, they are not related at all. As much as possible, we want to do the client business. And we are -- as you have seen in the guidance upgrade also, we are quite positive for Mexico going forward for two reasons. Number one, the activity levels. In our view, going forward, will be much better, even better, and we are at close to 10% in any case, 9.9%. It might be even better going forward for a reason of -- for the first time in Mexico, we are seeing signals of investments triggered by the public sector, but you might have seen this, there was -- there were 38 [indiscernible] the tenders for renewable energy that were done in the second quarter, 38.

The lending needs of these projects is basically going to come towards the end of this year or more likely 2027. But these projects, they are projects worth of EUR 9.3 billion. It's a huge set of investments coming into the country finally. Again, triggered by the public dimension, the Plan Mexico, as the government calls it, has a lot of investment dimensions underneath which gives us hope and we are already seeing these 38 projects for each one of them, we are engaging with the winners to help them in the financing because they are good projects powered by the PPAs, power purchase agreements of the state utility.

So you will see better activity in the short to midterm even, which is making us relatively positive, but more importantly, as we said before, the spread situation is, in our view, is now going to be -- we have reached the bottom in the sense of the interest rates, [ 6.5% ]. We do think it's not going to go down any further, maybe some more, but we are at the bottom of the curve because inflation in Mexico is 4%. As a result, we are very rate sensitive. As you know, in Mexico, if rates do not come down, you would also see spreads picking up, which was the key driver of our strategic plan numbers in any case. So that's also positive. Activity positive, spread positive, we are quite positive on Mexico in general. ALCO, when we have more liquidity to manage the NII sensitivity as well, we use as an alternative mechanism, not as a replacement of the client business.

The next question comes from Ignacio Ulargui from BNP Pariba.

I just have two questions on my side. One is on capital. If you could help us see a bit what should we expect in terms of organic capital generation in the second half? And how SRT usage will will perform in the second half to support that lending growth and activity growth that you were talking Onur, during the call? And the second one is on Turkey just trying to get a bit of a sense on how should we think about the Turkish lira spread and the evolution of NII in the coming quarters, after a bit of a bumpy first half?

Capital, do you want to talk?

Yes. Well, as Onur mentioned, we are generating capital and continue to generate capital. We do so over the second half as well in our capital planning. With regards to the SRT topic, we have delivered 6 basis points of SRT capital CET1 in the quarter, a total of 18 basis points in the first half over EUR 6 billion of RWAs that have been released. For the year, as you know, our guidance in the midterm plan is to do between 30 and 40 basis points a year. I think, with the planning that we have, we're going to be at the higher end of that range and above what we did last year, which was 35 basis points. So I think on track to deliver on that side as well.

And on the organic level after the growth, after everything else after SRTs, we guided or we told that we are aiming 30 to 40 basis points a year, creation of capital on top quarterly changes because the growth profile changes and so on, but that 30 to 40 basis point is a very fair assumption to have going forward as well. If we maintain the very large, very nice growth profile that we have. If growth comes down, you will have more capital basically.

One final topic on this SRT issue is -- Again, that SRT topic, I did raise it to you some quarters ago saying that it's an opportunity for the European banking system to leverage that for a reason. Basically, the market thinks that the losses to be incurred from those portfolios would be much lower than what the supervisors is basically guiding us to book as a capital charge in our books. It's a bit of a supervisory arbitrage in short that the market has and the market says it's going to be lower than what you are putting capital for.

One of the things that we have been working and this third quarter in July, actually, we executed one of them is that, that arbitrage that I talked to you about is even larger the geographies of Mexico and Turkey and so on. The RWA densities that we have for geographies beyond Spain, beyond the Rest of our Business, it is basically that arbitrage is a much larger opportunity. And in July, we finally executed the first Mexican transaction on the SME portfolio, which is going to help us even more because the RWA densities for those portfolios versus the amount -- the value that we create from those transactions is going to be better.

Then the Turkish lira spread naturally depends on how the situation evolves. At the moment, as you can see, very low, the spread because the rates are very high. Why rates are very high because of the war, the Iran situation, inflation numbers are not coming very nice. And given inflation being very high, the tight stance of the Turkish Central Bank continues. Our spreads margins are completely dependent on the macro interest rates. If interest rates come down, you would see a better number. If interest rates do not come down, you would see more or less very meager numbers as you see today.

We are seeing -- we have seen the bottom of the spreads in June. So we are now slightly improving. But as you have seen in July, the Central Bank of Turkey has kept the interest rates the same 37%, but the effective interest rate is actually 40%. So they kept the 40 number. We are expecting as of September that the effective interest rate, which is 40% will come down to the official interest rate, which is 37% with time maybe September, October. And by the end of the year, we expect the official interest rate and the real effective interest rate to come down to 36% or so. So not much of a decrease. But even that increase will help us on the spreads and on the margins. But in the very short term, it's going to be very scarce the number.

The next question comes from Sophie Peterzens from Goldman Sachs.

It's Sofie from Goldman Sachs. So my first question is on your medium-term target, the EUR 48 billion. I got to take your [ EUR 25 billion ] net income on the first half net income and then just assume the second quarter run rate going forward, I get slightly below EUR 48 billion, so not far from your target. Could you maybe just discuss how we should think about the upside risk, the year EUR 48 billion target because that seems very, very easy for you to reach? So that would be my first question. My second question would be on M&A. You announced the [indiscernible] share buyback, which was very good news today. But how do you think about kind of M&A opportunities? Or is the focus purely on organic growth here?

Thank you, Sofie. I'm being told that I'm being too slow or talking to much, so I'm going to speed up. So on the first one, the upside risk or the EUR 48 billion. The only thing I can tell you because we are not revising that plan at the moment. The only thing I can tell you is for the first two years that we had in the plan versus what we have already realized in the 18 months, we are doing better than in the 48 number, we are doing better than what we originally planned. And on the second question, M&A topic, we are completely organic focused. You have followed the history. And so we are organic -- we are focused on organic growth in short.

Next question comes from Cecilia Romero from Barclays.

My first one is on Spain. And my second one is in Mexico. Spain continued to grow both the market in SMEs or midsize corporates. What's driving those share gains? And are those within any particular region in Spain? Is it primarily customer acquisition, the per penetration of existing relationships or change in the competitive landscape? If this level of commercial momentum persists through the second half, do you see any upside risk to your loan growth and expand NII guidance of low single-digit growth this year?

And also a follow-up to what was said before in regards to rate sensitivity. Obviously, customer spread was up quarter-on-quarter. Should we continue to see an improvement throughout the rest of the year on customer spread in Spain? And my second question on Mexico, Novan has recently received authorization to operate as a full bank in Mexico. Does that change anything on your assessment of the competitive landscape?

Thank you, Cecilia, as always very good questions. On Spain, it's mainly driven by two things. As I mentioned also before for other segments, new customers, customer franchise growth in SMEs we have been in the last two years, the #1 new account opener for that segment. We obviously measure this only through surveys and so on, but customer acquisition market share that we have is around 20%, much higher than anyone else. So we are #1 in new customer acquisition in SMEs.

And the same for enterprises, we are after new customer acquisition, and we are growing our customer franchise in a very nice way. And the second thing on this is the transactionality topic. Again, I mentioned it before, acquiring the POS terminals that we have and so on cash management platforms. We are investing so much in all of them. to make sure that we are in the transactionality. As a result, if you have all of that, if you become the primary bank of those clients, you also do the lending business with them, and that's what you see. We are expecting basically for second half or for the near future for that trend to continue, and we maintain our strength in terms of growth in those segments.

Customer spread, how is it going to evolve? It's going to be improving in the coming quarters. We do think we have reached the bottom if the interest rate situation develops as we expect, we are going to be improving every single quarter from now on, on the customer spread in Spain. And Mexico, there are newcomers that are new -- there have been newcomers that are like really relatively sizable fintechs and so on, there are more than 60 of them now. So the newcomers, we respect them all. They're amazing competitors really. And we watch them very closely. But we are not particularly worried.

I showed you in the presentation today, and there's a footnote on that market are presentation, that, for example, in credit cards, which the fintechs are very active in Mexico, despite the fact that they are very active, and some of them, one of them now has 3.6% market share, despite very heavy market share gains, relatively large market share gains for some of them, we have increased our market share in that same period. So we will compete. We will compete really nice.

The next question comes from [indiscernible] from Jefferies.

I just had one on Mexico loan growth, and we've noted your upgraded guidance, but I was wondering if you could give us a bit of color in terms of your expectations by segment. I guess, based on your previous comments, you would expect corporate loans to accelerate in the second half of the year. But what is the dynamic that you see for retail loans? And then secondly, a clarification on Turkey. I was wondering if you could formalize a bit your expectations for net income in Turkey this year. Previously, you were talking about the downward bias to the EUR 1 billion. And then also, is it still the case that you expect to exit hyperinflation accounting by 2028? Or is that more of a 2029 story now?

Luisa, do you want to take Mexico loan growth?

Yes. Well, I think here, what we expect, first of all, is for the system to maintain a growth for the year that's similar to the one that we've seen in the first half. It's true that we expect that the system a slight deceleration on the retail portfolios and the consumer lending. But we do expect the system -- a higher growth in terms of activity on the wholesale side.

In our case, I think that we've mentioned also Onur has mentioned it in this call that we and focus in the areas of opportunity and where we see more value. We have been actually growing market share in most of the customer segments. But as you know, our specific focus is in SMEs and we will continue to build our franchise there and also in the credit card and consumer loan portfolios, where we do see the potential for continued positive growth.

In general, I think also we are expecting to see the impact in the second half of the year, the Plan Mexico. It's unclear whether the dynamics will be accelerating towards the third or fourth quarter. But definitely, we have a strong corporate pipelines that we expect to be delivered also as well. So I think the dynamics very supportive to that guidance upgrade that we gave in the call today.

And Miruna, on Turkey, first of all, on the topic of the guidance and so on, we don't have an NII guidance that we provide to the market because it's very tough to forecast as we just discussed, depends a lot on the rates and the macro situation. But as you know, last quarter, we have given the guidance of around EUR 1 billion with a downward bias. In the first 6 months of the year, as you see in the presentation, we have done [ EUR 532 million ]. So this implies that in the second half, it might be lower than what we have delivered in the first half.

But again, it depends a bit on the rate situation and whether the Central Bank takes down rates and how it evolves and so on. But so far, in the first 6 months, we are doing better than what we thought we would do. But we still maintain the same guidance as we gave last quarter of EUR 1 billion with a slight downward bias.

Regarding hyperinflation, the 2028, it is very much at risk in our humble view, given how inflation stickiness is in the country. So last year, it was 31%, if you remember. This year, the expectation that we have is around 30%, again, not much of a change versus last year. As you all know, necessary condition, not a sufficient condition but a necessary condition. One of the conditions or many to be fair, but it's the only quantitative condition that the 3-year cumulative inflation has to be less than [ 100 for ] the country to be out of hyperinflation. And we might not be at that stage in 2028.

But as we said to you multiple times before, what matters is not accounting itself, but whether inflation comes down. because it's also a very simple -- relatively simple math. And you do see it in the numbers that we provided in the presentation also in the appendix. The hyperinflationary accounting basically is inflation times net [indiscernible] position, which is a negative number directly correlated to inflation, but you are compensating this with the inflation-linked bonds that you have, which is, again, a direct multiplication of the inflation rate.

What does that -- by the way, the CPI linker revenue is taxed, but the cost of net monetary position is not taxed. You cannot deduct it from tax basically. So there is a tax component on those two items. But what I told you -- why I told you this, because the numbers of the hyperinflation in accounting is a direct multiplication of inflation. So independent of the fact that Turkey gets out or not or hyperinflationary accounting, if Turkey reduces inflation to a lower level, the negative impact that you get from hyper inflation will disappear.

So rather than whether we get out in 2028, I think the key question to ask is, would Turkey managed to lower inflation in 2028 as we had in the plan. And on that one, we are optimistic. The country, they are doing the right things to take the inflation down. But let's see, let's see how it evolves. And in any case, independent of the inflation levels, as we see it today, we are committed with EUR 48 billion that Sophie was asking, independent of whether there is hyperinflation or not.

The next question comes from Hugo Cruz from KBW.

I just have one more question and its high level. But so you're launching agents at scale. When will you have a firm view on the impact of AI on the ideal size of the workforce and how do you want to manage that impact?

Thank you, Hugo, for the question. The answer is we don't know. It's a new -- still new development. We will give some more update on this in October when we have the strategic talks, but the real impact quantitative impact, it's too early to put on the table.

The next question comes from Carlos Pesto from CaixaBank.

Just a quick one from my side to be on the Spanish NII. So we're seeing NII year-on-year in the first half. So loans are growing around 7%. You did mention you're expecting customer has spread to have touch bottom, if I understood correctly. So should we expect NII pace of growth in the coming quarters, the year-on-year growth in the quarter to to catch up with volumes growth? And looking into 2027, do we expect NII evolution more aligned with that of loan growth?

Carlos, you made that comparison, so let me do very quickly. So 4.1% is the growth in net interest income when loan balances, they have grown 7.4%. So why is it not at the same level as the activity growth? It goes back to the average spreads. So last year, first half, this year first half, when you look into the average spreads, obviously, it's much lower in this first half. And that thing will disappear over time. But still, the average spread is what we need to look into. The second half, obviously, would be much better. it might be even better than the average spread but for the second half only. But year-over-year, still it's going to be lower. So when next year we start that average spread notion will disappear, if rates develop as we forecast at the moment.

Next question comes from Andrea Filtri from Mediobanca.

I've got two questions. The first is on regulation. It looks like something is moving in Brussels on the regulatory framework after the recent publication from the European Commission. Are you seeing that? And are you hopeful of an improvement coming up for you? The second is on your share buyback. It is welcome news. At the same time, it is dilutive to group RoTE, which is very high. Do you consider the hurdle for external growth very high at this stage?

Very good. Thank you, Andrea, for the questions. Are we hopeful on the improvements on the regulatory side? We are. This latest competitiveness report also is a step in the right direction, talking about simplification in terms of like reporting requirements or the additional workload that you all have the need for the simplification on that one, talking about single market and the fact that the consumer clients standards that are very different across countries, some more perspective on that one saying that it cannot be that different if we are living in a single market.

The capital buffers, there's a discussion on that one. That's the area that, to be fair, we haven't seen anything yet. But in general, we're hopeful we're awful. But we have to see the intentions in action and in reality, that's the only thing I can tell you. But the intentions are clearly being raised, and we are quite happy about those positive intentions.

About the hurdle rate for growth and also share buyback and so on. The hurdle rate for growth is cost of equity because we are in very different geographies, in very different segments. We want to make sure that we use the cost of equity as the benchmark. And as long as -- and we call it EVA in bank, economic value added, as long as you are delivering value above your cost of equity in that respective business that you are doing, you are free to do that business, obviously. And to be able to get a better return and positive ever Again, the focus on scale and the focus on transactionality. If you have those, you get that to return.

The next question comes from Borja Ramirez from Citi.

I have one on the [indiscernible]. So I can see you have a strong growth in the deposit volumes year-over-year. So I think -- I guess that's cheap funding source for the group. So I would like to ask what are your plans for deposit growth in this area, please?

Thank you, Borja. The digital banks, again, you see it in the Rest of our Business chart, we are EUR 11.9 billion deposits in franchises that we have, which is Italy and Germany. You asked about the growth. The growth is there also because of the fact that we started in Germany exactly June last year. So it's a new franchise and in the first year, you get a lot of deposits and then you lose some of them because they are typically promotional deposits and some of them disappears after the period of 9 months, 1 year, 15 months and so on because we reduced the rates on those deposit areas.

But our -- what are our plans, you are saying, I don't know in which dimension you were asking, but if you're asking from a strategic dimension, these two markets are very large markets, Italy and Germany. We would rather focus consolidate our job there before we do anything else. So we are going to be focused on those two to grow the business there. Any again, unlike any other fintech and so on, our game plan, our strategy in digital banks is to be a universal bank in whereever we are. If you look into Italy, for example, if you want to buy your mortgage, you can get it from us. If you want to get a consumer loan, you can get it from us insurance from us. We are not focused only on deposits, but given the fact that deposits are the first entry to customer franchise, you see that the number for the deposits to be that high, EUR 12 billion for the two franchises that we have.

The next question comes from Britta Schmidt from Autonomous Research.

A question on [indiscernible], please. The underlying cost growth is not slightly up versus the 4.8% in Q1 year-on-year. Is that also the year-on-year growth rate underlying that we should expect for 2026 and other tax rebates to be expected? -- either in 2026 or 2027? And then please correct me if I'm wrong, but if I take the ROTE 12 months trailing, which was 22% in first half, the 21% guidance and plus around EUR 5.5 billion of profit in the second half, slightly down on the first half. If that is correct, could you just comment briefly on some of the main drivers here. I think you mentioned Turkey, should we expect some cost seasonality? So any comment appreciated.

Very good. Maybe I'll start with the second one and then the first one on the costs, Luisa, help me out. On the return on tangible equity, Britta will say, around 21%. It depends on your imagination of what that means. So we are expecting slightly lower in the second half profits maybe, but going to be, again, 21% -- around 21%, also because of the fact that it depends a bit also on the denominator and equity and how fast we do the share buybacks and so on. But it's around 21%. It doesn't imply that the second half would be much lower than the first. It might be slightly lower because of Turkey mainly. But overall, we expect to have very good second half.

On the costs?

Yes. On the cost side, as you mentioned, that 5.3% year-on-year growth rate, excluding extraordinary items in the first half is aligned with our guidance for the year, which we maintain, which is mid- to high single-digit growth in expenses. We maintain our guidance of an efficiency that is below 35%. With the current rate being at 33.6%. So I think very much in line of with our expectations here, just to mention and also clarify that as with the rest of the group, we are and continue to invest in Spain as well.

We think Spain is a very good profitable growth market, and we do think that investing in Spain will generate future growth for the bank. So that is implicit and embedded also as well in our mid- to high single-digit growth guidance but very much focusing on that efficiency ratio at below 35% with a midterm goal of low 30s or circa in 30% in 2028.

Next question comes from Ignacio Cerezo from UBS.

The first one is on Colombia and Peru. I mean, pretty strong results actually in the second quarter again. So just as some color on whether you think the contribution in the first half is sustainable for the second half? And what is driving basically the improvement in both countries? The second one, sorry for the small detail on the CIB business. Can I ask if you're seeing differences in terms of the growth within the 3 main regions, Europe, U.S. or Asia? All three of them are growing more or less at the same pace.

On Colombia and Peru, Ignacio, thank you for the questions on Colombia and Peru, you see it on the South America chapter basically. There are two factors, I would say. Number one is the currency. By the way, in current euros, it helps us, especially in the Colombian case, we have seen depreciation of Colombian peso in the last 6 months year-to-date as of June, 20% -- 21% year-over-year in 1 year appreciation of Columbian peso. And same in Peru, overall, the currencies have been quite helpful, more in Colombia and Peru.

More importantly, if you look and take on Page 21 of the presentation, you would see that Colombia loan growth is around 8.3%. Peru loan growth is around 9.7%. So there is, again, very nice activity also in those geographies, which then translates into. And in the case of Peru, we are rate sensitive, rates have reached bottom also there, 4.5%. It's going to be helpful going forward. The fact that we are already at the bottom and Colombia, the rates are going up, but we are -- we have basically very little rate sensitivity. So it's more about activity than anything else. In short, different drivers, but activity, I would say, is the key driver together with the currency. And the second half also looks quite good both geographies.

CIB, the 3 regions, the 3 you are asking, I guess, the nonfootprint regions of U.S., Asia and Europe. As you can see, again, on the page of the Rest of the Business, U.S. and Asia, they are growing higher than Europe, mainly for the fact of the base because in Europe, we are much more penetrated. That was the first area that we have extended 2 in the past, and U.S. and Asia is relatively -- I would say we have been there for a decade now for more than many years also the penetration to clients and the size of the markets, it's a bit different. So because of the base effect, you see a bit more higher growth, but not because of the market, more because of our own franchise.

I would also like to add on the question of Colombia and Argentina. So the two elements that Onur mentioned. I would also add to that the asset quality trends that we're seeing, which have improved significantly. As you know, we saw these trends peak already over a year ago. And I think these quality trends continue to improve the underlying asset quality is supportive as well. So I think that also embeds the positivity into the guidance.

On the CIE business breakdown growth.

I mentioned it ....

So thank you very much, Onur. Thank you, Luisa. It's been a real pleasure for me, working close to you over the last year. Thank you all of you for joining today's call. And as always, the IR team is at the disposal for any further questions or clarifications. Thank you again, and have a wonderful summer break.

Good afternoon, and welcome, everyone, to this new edition of BBVA Strategic talks, which today will be focused on BBVA Research views on the global macro environment and the outlook for our core markets.

It's my pleasure to be joined today by Jorge Sicilia, BBVA's Chief Economist, together with Miguel Cardoso, Carlos Serrano and Seda Güler, Chief Economist for BBVA of Spain, Mexico and Turkey. Here with me in Madrid are Jorge and Miguel and connected from Mexico and Turkey, we have Carlos and Seda as well.

Today, the team will start sharing their views on the latest economic developments and key challenges and opportunities in our core markets. After the presentations, we will open the line to take your questions in a live Q&A session. As we are currently in our blackout period, I will kindly request you to limit your questions to macro and financial system-related topics. Unfortunately, we will not be able today to address any topic related to the bank's performance. So thank you in advance for your understanding.

In any case, I hope you will find this session useful and I strongly encourage you to participate and make the most of it given the expertise and on-the-ground knowledge of BBVA economic team on our core markets.

With that, without further delay, Jorge, the floor is yours.

Thank you, Patricia, for the invitation, and thank you for those of you that are attending this call. The idea here today is not to give a comprehensive discussion on how we see the global outlook on our footprint countries, but rather to tackle the main issues that you have commented to the IR team that you're interested in, basically in the 3 areas of Spain, Mexico and Turkey.

I will just give a short introduction on global issues, but only on the ones that I think are relevant for some of the elements that we're going to share with you in each of the 3 geographies. In any case, if we miss in this presentation issues that you're concerned about, be it about these countries or others in which we're based, happy to answer your questions.

So let me start with the economic outlook for this year and 2027. And with a very simple framework in which we all need to analyze what's going on. There are 2 tectonic forces that right now are significantly affecting the economic outlook, and they're doing it across different horizons. And so they are having an impact not only on the very short term, but also on the forces that shape our views about trend potential growth, for example, but also how we think in terms of the changing of economic regimes that we might be seeing in different parts of the world.

Of course, those 2 tectonic forces are related to geopolitical concerns, there are many elements that fall under this definition, but we are focusing on conflicts, on strategic rivalry on tariffs, protectionism, the use of choke points, strategic autonomy, defense and those are gaining importance in the economic analysis.

On the other hand, we have the transformation that the AI is injecting into many economies. The channels are better understood probably, but the extent of the impact, the scale and scope of what might mean for different countries and sectors is far from certain. At the same time, we do know that when we go to longer horizons, demographic migrations play a role as they do climate events. But in any case, the main point here is that many of the elements that we are trying to understand in terms of building scenarios and doing projections are very much related to these long-term issues.

Now together with the Russia invasion of Ukraine, the main visible geo-event, of course, these days or this month is related to the attacks on Iran by the U.S. and Israel. And this is changing the dynamics on a daily basis in terms of the geopolitical tensions and in terms of the impact on oil and other prices on the supply chain. We're now in, again, a complicated period to understand. But to put it in perspective, we still are geopolitical risk that we consider lower than the ones we have been witnessing over the previous months.

And on the other hand, when we look at oil prices and gas prices, we're not only below the levels that we have been seeing over the previous months. But in any case, those relatively high levels were, in any case, lower than the ones we had in the Russia-Ukraine invasion, especially if you looked at them in real terms. This is something that can change very, very quickly. It is complex. But in any case, we build our projections in the baseline scenario with the idea that although many elements remain in place as the agreement between the 2 countries doesn't incorporate a clear road map on many of the issues where they still have differences, the conditions are still set in place for -- to expect a decline in oil prices going forward, which is what we have.

Now our path is or has been higher than the path that we have been having over the past 3 or 4 weeks. It can be higher than what we have in our projections if things turn sour from where we are today. But in any case, we have this ingrained in our model. So this baseline scenario of oil prices is what we use to do the projections.

Now with all this in mind, we have a relatively benign outlook for growth given the shocks that we are getting. The U.S. will grow over the next 2 years over 2%. The eurozone is going to suffer a little bit more, and we have recently revised down our forecast on account of having a larger impact of what is happening in the closure of Hormuz, but also because we have now some issues of high volatility growth in Ireland that is also changing the number in the eurozone.

On China, we are relatively comfortable with the projection. The weakness that we have seen in the latest data is overall in line with -- not only with what we expected, but what the government expected and is unlikely to trigger any type of measures that for now that will change that forecast. Many of what is happening depends on the AI boom, as you probably know. This has become even more salient in the recent revision of Q1 data in the U.S. as consumption has been revised down and basically investment mainly related to AI is supporting growth.

But that support of growth is also having spillovers beyond the U.S., not only because this is something that other countries are also investing in, the AI boom. But as you can see on the right-hand chart, there is a lot of imports that the U.S. needs in order to feed all the investments that they are undertaking in this sector, right? And what you see on the chart on the right is how many points of growth it adds or it subtracts in terms of exports and imports.

The other issue that very much related to geopolitics that in Europe is playing a significant role. And in the U.S., it will as well, but the expenditure is already significant. So when the margin is not going to be so much is on defense, right? And when we -- what we see when we analyze the impact of all the shocks that we have been having on the euro area, many of the revisions have been to the downside in terms of uncertainty, tariffs for the time and strength of the euro, et cetera, but fiscal expenditure, which is mainly related to defense has been supporting growth significantly.

And by the exercises that we have made on multipliers in Europe on defense spending, this -- it has long lags, but it's relatively easy to see multipliers that should be larger than one. And in some cases, over the short-term period, significantly higher than -- or slightly higher than 1.5.

The variable where we're seeing more impact in terms of what is happening in Iran is related, of course, with inflation. So we have had to increase the forecast inflation due to increase in oil prices. But beyond that, we are seeing very little second round effects, not even very clear effects on transportation costs of other goods, including agriculture. So for now, we're relatively comfortable to -- not to speak about wages or inflation expectations, which are very contained. So for now, we're relatively comfortable with core inflation that are going to be between 2% and 3% in the U.S. and Europe.

On HICP, of course, whatever happened with oil prices is going to be very, very significant. Now this generates, of course, a difficult environment for central banks. It's very difficult to deal with negative supply shocks, so consecutive negative supply shocks. They are starting to communicate in their own ways how they want to address this type of shocks. But we still think that there is sufficient room to think that the baseline scenario for the Fed is still to wait throughout the next months and probably until the end of this year and then see how things settle down.

In the case of Europe, similarly, they increased interest rates as they perceive that this was a robust move in the context of being an adequate move in all the scenarios. But let me remind you that inflation right now is lower than even the lowest scenario. So probably in the realm of views of what the ECB is going to discuss in the next few months is that probably this increase in interest rates, absent second round effect is probably going to be enough.

Having said that, we are all -- I mean, all very conscious that in this world where we have this long-term tectonic forces playing the ground -- at the same time, the likelihood that we have to attach to a particular scenario is especially low. It's probably lower than the ones that we have been able to build since the global financial crisis and since the pandemic. So we are, again, in a period where we have to understand that many elements can change the scenarios. And in this regard, it's not only that the probability of the baseline is lower, but it is that many different scenarios on the positive or the negative side depending on demand or supply shocks, which could be positive or negative. And here, we pencil in for you some of the ones that we're following in terms of attaching probabilities is very relevant for the analysis.

And to finalize my part before I give the floor to Miguel, just a couple of issues on geostrategy that I have not touched upon in this presentation. But as I said, I think it might be relevant for -- it will be relevant for some of the analysis in our footprint. I mean, the first is that tariffs are having an impact on trade. But at the same time, growth is sufficiently large and the needs of different countries continue to exist that what is happening is that global growth continues to increase at a relatively solid pace.

U.S. imports are booming, especially in the AI, as you can see here, but the composition of imports is changing. And due to tariffs and due to concerns about geostrategic issues and many others, what we're seeing is a change in the import dynamic pattern in the U.S. It's not only that they import more of certain AI-related projects, but also that they import more from countries that have less tariffs than others. And in this regard, in addition, of course, of South Korea, Vietnam and Taiwan, Mexico is one of the countries that has been able to gain significant market share in Europe.

The second element is that geopolitics is not only something that we look in vacuum. I mean, we do think, as I said before, that this has been going on for -- I didn't say it, but it has been going on for some time, and that is why we think it is from -- it has a structural nature, as you can see, basically, since the global financial crisis, all indicators that we can build in terms of internal geopolitical risk, external risks.

So we put them together in this global structural geopolitical risk index has been increasing since the global financial crisis. And we see that when we run the appropriate regressions, it does have an impact on trade and certainly on FDI. So even though there's a lot of sectoral noise, there is an impact of all these elements in how the world is changing.

Turning to my last 2 comments and going back to the short term. So the conflict in Iran is already having an impact on portfolio flows. You see it every day. There seems to be -- there is preference for the U.S. and rather than the euro area when we looked among developed economies, when we looked in emerging economies, taking away China, there is a preference to Latam, including Mexico and Central America and emerging markets ex Asia.

There seems to be a trend to continue pumping flows into these countries south of the U.S. In part, this is related to the fact that there is an idea which accompanies the boom in AI in terms of minerals, certainly and energy-related concerns, but there's also an issue of being away from the conflict, right? And this is another way in which using short-term data, we try to analyze the impact of geopolitical analysis or conflicts on CDSs in real time. Of course, those are mainly driven by what happens in short-term interest rates and the VIX volatility and economic conditions.

But when we cluster together all the short-term geopolitical indexes, they do have an impact. And what we find is that they have a special impact when combined with other effects. So financial markets and geopolitical, it generates nonlinearities in the reaction of financial markets. But all this to say, when you look to the right-hand side, and this has happened with the Russia invasion of Ukraine, with the attack from Hamas, the terrorist attack on Israel and the Israel conflict, the distance that Latin America has from this conflict basically explain the reason why the market seem to be validating the chart that I put before, which is that this area is an area where flows typically have gone in the recent past. So that would be it on my side for the introduction. Miguel, please.

Thank you, Jorge, and thank you all for listening. And from my side, regarding the Spanish economy, what we see is an extension of the current expansion that we are seeing in terms of GDP growth, in terms of employment growth. Our current forecasts are for GDP to grow 2.4% in 2026. 2.1% in 2027. Now this is based on the fact that currently, what we are seeing is a relatively strong economy.

Quarter-on-quarter growth currently, we estimated at 0.7%. So in an annualized growth rate, we are seeing that growth remains between 2.5% and 3%. As you can see in this graph, this real estimation compares to first quarter growth that stayed at 0.6%. And this improves in our forecast from the first quarter where we were expecting growth to slow down over the second quarter. So we haven't seen a slowdown related to all this foreign uncertainty, the increase in oil prices.

And on the contrary, what we're seeing is that at least the job creation data and any real-time indicator is pointing towards at most a stabilization in terms of growth in the economy. So -- and this, as I said, is despite the fact that the external environment is not very favorable for the Spanish economy, specifically. This comes as we were revising downward our GDP growth forecast for the eurozone, as you can see in the left-hand side of the slide, we revised our growth forecast for Europe from 1.1% this year to 0.7% as incoming data was disappointing and as the impact of this higher energy prices was expected to be negative on the European economy.

We not only revised downwards our 2026 GDP growth forecast, but we also revised our 2027 GDP growth forecast to the downside. And this is having a negative impact on our perception of how exports, specifically exports of goods are going to perform or are performing at this moment in Spanish exports of goods. As you can see from our forecast, we're thinking that this is pulling down the ability of the industry to grow. Spanish exports are expected to drop this year by 1.2%. And then to recover as we get more favorable scenario for the Spanish economy in 2027. But for at least the short term, what we're seeing is that this is affecting negatively a part of the Spanish economy, basically the industry, along with what is happening in terms of the impact, for example, of Chinese exports towards the eurozone and the effect that is having specifically in the automobile sector.

But despite this, what we are seeing is this strong recovery, specifically as a result of a relatively dynamic sector, the exports of services, which are performing relatively well. What you have here in the left-hand side of the slide is exports of tourism services, consumption of nonresidents. We see the number that the National Institute of Statistics published and then the data that we get from the expenditure that foreigners do on point-of-sale terminals owned by BBVA, you can see that even as we are having this relatively high uncertainty in the world scenario, what we are seeing is an acceleration of this kind of expenditures.

We expect this to continue as geopolitical risk is probably going to deviate or is already deviating. There is some evidence that this is happening. It's already deviating visitors from other -- that would have gone to other destinations that they are now coming to Spain. And as you can see, year-on-year terms, we are seeing growth of this type of consumption around 10%, double digits. And what we think is that this is going to translate on is that, as you can see, the resiliency of nonresident consumption is going to remain and it's going to post a growth that is going to remain above GDP growth the next following 2 years.

But it's not only exports of tourism services. As important is what is happening to the exports of non-tourism services. You can see here on the left-hand side, the average growth rate between 2025 and 2026 of this kind of exports, around 7%, a yearly average growth, and that has increased towards a 14% average growth between the years 2021 and 2025. You can see that this is more or less evenly distributed between what is happening in information and communication technologies, transport services, business services that includes engineering services, financial services, trade-related services. All of these are sectors that have relatively high value added.

And as you can see, we are also thinking that there is capacity to keep growing and to -- and therefore, for growth in this part of the economy to again exceed GDP growth. Third, a big part of why we're seeing this growth in export services in -- specifically in tourism and non-tourism services is the impact that immigration is having and it's not slowing down. As you can see in the left-hand side of the slide, what you get is several indicators related to tourism. If they remain above 0, they are normalized. So if they remain above 0, it means that immigration is continuing to grow. And therefore, what we are seeing in 2026 is that this immigration push is continuing.

As you know, there is this policy announced by the government, an ongoing process of regularizing immigrants in Spain, and this is going to probably add to the impact in employment. We are thinking that in 2026 and 2027, job creation is going to remain between 450,000 to 550,000 jobs per year, which is quite an extraordinary number for Spain.

Fourth, what we think is that given the scenario, what we are experiencing is strengthening on the growth of domestic supply, specifically in consumption. Consumption remains a key driver of growth. What you see here is different factors are supporting consumption spending by households. As you can see in real terms, gross disposable income is growing at a rate around between 2% to 2.5%. Housing wealth, I'm going to talk a little bit about the problems in the housing sector, but a big majority of Spanish households are real estate owners. So as long as prices keep increasing, that's also adding a strength to their willingness to spend.

Interest rates remain relatively below what we would have on a historical average. So this would be a level that is attractive for households to take on credit. And therefore, what we are, again, thinking of is an average growth rate in consumption that would surpass historical average and remain between 2% to 3% on a year-on-year basis. And this is also going to be a particularly favorable environment for investment growth. Specifically, one kind of investment is residential investment, which we think that is going to increase because all the key variables that normally support residential construction are going to remain favorable.

Household formation is going to remain around 200,000 as in the previous years. Home prices are going to keep going up. There you have our forecast for 2026 and 2027. So this is going to increase the profitability of projects. Interest rates are going to remain again, relatively low by historical standards. And therefore, as you can see, we expect residential investment to accelerate over the short term, and this is going to also be accompanied by other type of investment. I haven't mentioned the ending of NGEU funds, but this is going to also increase investment in Spain, but also what we have is this increase in defense expenditure that we're seeing in the left-hand side of the slide, what you see is this commitments that the government has announced regarding a specific defense-related projects that amount to between EUR 20 billion to EUR 25 billion.

And it is true that Spain does not have a relatively big defense industry. As you can see on the right-hand side, what you would expect to be directly affected, what we would expect to be traditional defense represents a relatively small share of value added. But if you go and try to follow which other sectors can benefit from this increase in defense expenditure, what you get is that around industries that represent around 2% to 3% of value added in the Spanish economy could benefit. And if you extend that to services that could also potentially benefit from this higher spending in defense, you could get to even around 15% of the value added of the Spanish economy.

Finally, fiscal policy is being relatively expansionary. You can see here that since 2022, the discretionary fiscal impulse has amounted to between 1.5% to 2% of GDP. This is going to support the economy in 2026. Unfortunately, going towards 2027, this is going to also explain why we see this slowdown going towards 2027 as some of these measures are going to expire. And therefore, this is going to subtract from part of growth.

Another advantage of the Spanish economy is all this investment that has been made and that has increased, as you can see in the left-hand side of the slide, the share of the participation of renewable energy in the production of electricity. And this is implying, as you can also see, that there is a favorable differential in the price of electricity in the wholesale market. Unfortunately, there are some structural issues regarding infrastructure that are not supporting the translation of this favorable gap that we see in the wholesale electricity prices towards inflation and this is, again, a structural challenge towards the future remains elevated when compared to the eurozone.

What we see is that the difference between domestic inflation and the eurozone inflation right now is expected to remain between 0.5 percentage point to 1 percentage point. And talking about the structural challenges, the one related to housing is very important. We estimate that what you see here is that the housing deficit in Spain, and this measured by the difference between household creation and the number of units that are being built in Spain could reach around 800,000 by 2027, 2028. And it's going to -- even with this acceleration that we have in investment in the housing sector, that would be just enough to stabilize the deficit that we are witnessing.

It would take an acceleration towards levels of investment in housing close to 10% of GDP levels that we only saw in 2007, 2008 at the peak of the bubble in order to reduce that deficit that we are seeing. And finally, in terms also of structural challenges going forward, we are seeing a strong recovery of the Spanish economy. GDP could go to amount to somewhere around between 15% to 20% or to reach levels 15% to 20% above what we had in 2019. But this is a growth explained mostly by the increase in employment, as you can see in this graph.

But then when you begin to scratch and try to measure the impact, for example, in wages, you see that growth does not even reach 10% since 2019 and that productivity remains relatively stagnant. And this is basically one of the main challenges of the Spanish economy. And with that, I'll finish.

Thank you, Miguel. Let's cross the Atlantic, and let's go to the Mexican economy. Carlos, please?

Thank you, Patricia and Jorge, and hi, everyone. We're going to go now over the slides of the Mexican economy. Can we go over the next slide, please?

Okay. So first thing to convey to you is that the Mexican economy is going through a phase of low growth. Growth in 2025 was 0.7%. We have data on the first quarter of this year where there was a contraction on a quarter-on-quarter basis of 0.6%. And in general, the last years in the previous administration and this administration, we have seen a period of slower than usual growth, closer to 1% rather than the historical 2% of the last 3 decades.

The main reason why the Mexican economy has been slowing down, especially last year and this year is what you see on the right-hand side, which is that investment is declining. This year, we have data on the first quarter. Investment declined 3% over the -- in comparison with the first quarter of last year. And in that quarter, growth had already declined 6.5%. Overall, investment since July 2024 has declined around 8%. And one of the main reasons of this decline is some uncertainty around institutional issues, in particular, companies do not know well how the new judicial system is going to work.

But also this deceleration in the past 2 years has to do with the fact that the Mexican government has been undergoing a fiscal consolidation process. And as a result, public investment has been declining. So this is one of the reasons of the slowdown. If we go to next one, however, one positive news on this front is that the government has announced that it will award 37 contracts to private companies to generate clean electricity. And we think this is a very positive development first because it marks a sharp contrast with the previous administration where basically private participation in general on energy was completely shut down.

Now this government has been saying that they need private investment in energy. And these contracts, I mean, they have not been signed. They have been awarded. We have yet to know how the contracts will look like. But it's very positive that among the winners, we see some developers that have a very good reputation and history, not all of them, but the majority of them have that. And again, the fact that the government is willing to open the sector to private participation, we think is a positive signal and not only because this means higher investment in this sector, but also because this was one of the main bottlenecks that prevented Mexico to attract higher investment across many sectors to take advantage of near-shoring opportunities, which we think are opportunities that are still there as we will see shortly.

If we go to the next one, please. So as I was saying, the deceleration is explained mainly by a decline in investment. That decline in investment has meant a deceleration in job creation, which has meant a deceleration in consumption, which has been somewhat resilient but has decelerated. But on the components on aggregate demand, what is having a very good performance is exports. Exports, we have data until May, they have been growing at 28%. And the main reason is that despite all the noise, Mexico has much better access in terms of tariffs to the U.S. market than basically all the rest of the countries, except probably with Canada.

So exports have been growing at, as I was telling you, at a very strong pace. That being said, there has been a recomposition on the Mexican export base where exports of automobiles are flat and declining a little bit. They have been declining 0.5% in part because demand in the U.S. has been flat, but also because, in particular, that sector has been hit with a 25% tariff, basically a tariff that has been applied to every country, except some countries that have been able to negotiate better tariffs such as Japan, Korea and the European Union that faced 15% tariffs.

Mexico is still in the process of negotiating that. If Mexico is able to get also a 15% tariff, we think it will remain competitive. But so far, these 2 factors are resulting in the fact that auto exports are flat. But on the other hand, the rest of exports are doing quite well. And in particular, exports of computer equipment have been doing really well. They have been growing in the period January to May, they've been growing at 73%. And the main reason is that Mexico has been able to insert itself in boom of AI investment that Jorge was mentioning. And as a result, exports in that sector are doing quite well.

We think overall, the fact that Mexico is able to export 82% of total exports tariff-free to the U.S. is one of the main reasons that explain that the external sector is having this very good performance.

If we go to next one, please. So with all this, we are expecting the economy to gradually recover. Our estimate for this year is 1.2%. We think it will go to 1.8% next year. So a gradual recovery as some of the uncertainty is fade, and we see more investment, in particular, this private investment in energy.

If we go to next one, please. Now on inflation, just I will mention that inflation is behaving quite well. There was a significant increase in inflation in the first quarter, where general inflation reached 4.6%. But basically, that was explained by some temporary supply shocks, some special taxes that were introduced at the beginning of the year, some weather issues that resulted in a significant increase in agricultural products. Both those shocks as was expected, had been fading. And now inflation in Mexico is at levels at the historical levels before the post-pandemic inflation surge. Inflation is at 3.4%.

Within the next couple of months, we're going to see some negative base effects and probably it can go up to 4%. But basically, we are seeing a situation where inflation is behaving the same way that before the post-pandemic inflation surge. And as a result, as you know, the Central Bank cut interest rates 2x this year. You can see here the behavior of monetary policy rate. And what we think is that we're going to see a long pause in monetary policy. We think these rates of 6.5% will stay there for the remainder of this year and most likely during all 2027.

Just to mention something, some analysts were worried about the fact that the Central Bank was easing monetary policy while the Fed was in a pause. And that has resulted, of course, in a decrease in the differential between monetary policy rates in Mexico and the U.S. You can see -- if we can go back just one -- just for a second, you can see the green line, that differential has been, of course, declining and is now at a low level. But now if we go to the next one, we think it is warranted to have this lower differential because if we compare that with previous periods, we see that inflation relative to the U.S. and Mexico is lower, that the exchange rate is stronger than volatility is lower. And in general, country risk indicators are performing better.

And not only that, probably one of the main reasons why a lower differential is warranted is the fact that because of a pension reform in 2020, a local capital markets are growing at a very fast pace. And that means that Mexico now is a country that is much less dependent on foreign inflows. And basically, the government can now could even finance its entire as of next year, debt issuance program within local markets.

If we go to next one, please. And this issue of better fundamentals in terms of what's going on with local capital markets. The fact that the government has been ongoing a fiscal consolidation program and the fact that despite all the noise, Mexico appears to be more integrated with the U.S. and that Mexico has had this preferential treatment to export to the U.S. have resulted in that basically all relevant country risk indicators have been improving for Mexico. They had a bad period when the conflict in the Middle East began. But after that, they have been behaving well.

If we go to next one, please. Talking about USMCA. First, as you can see on the left-hand side, Mexico and Canada are facing the lower levels of relative protectionism in terms of weighted average tariffs to export to the U.S. As I was telling you, last year, 82% of Mexican exports to the U.S. were tariff-free because, as you know, there's a provision that not taking into account 232 tariffs, mainly on autos, steel and aluminum, whatever goes through USMCA goes tariff-free. And that is a very big advantage. Not only that, if you see on the right-hand side, the Chinese content on Mexican exports is way lower, for example, to what you see in Vietnam.

So we think that Mexico is in a good position to gain comparative advantage to export to the U.S., not only vis-a-vis China, but also vis-a-vis other East Asian countries that are facing higher tariffs. And not only that, these are countries that have much larger content of Chinese inputs, and that should result in a better treatment for Mexico.

If we go to the next one page, just to mention what's going on with USMCA. As you know, USMCA is set to expire in 2036. But beginning this year, there are going to be annual revisions to the agreement. And at any point from now until 2036, the agreement can be extended and can be extended for 16 years. A few weeks ago, the U.S., the USTR announced that they were not going to renew the agreement. That was completely expected. That was our base case scenario, but also the market was expecting that the date of the announcement, nothing happened with the CDS spread, nothing happened with the exchange rate. And the reason is we think that the U.S. will maintain some leverage with the possibility of extending the agreement.

That being said, our base case scenario is that the agreement will go forward. And the main reason why we think this is that on this, the U.S. government has been consistent. Last year, when the tariffs on Liberation Day were imposed, to basically all countries. That's when the U.S. said whatever comes through USMCA will be tariff-free. And that was again the case this year when the Supreme Court declared those tariffs illegal and the U.S. used another section of a trade code. Again, there was an exception for USMCA goods. And we think that explained by the fact that there's an acknowledgment in the U.S. that Mexico helps the U.S. to be more competitive through complex value chains and in particular, helps the U.S. to be more competitive vis-a-vis China.

So our base case is that we will go on annual revisions. And at some point, the agreement will be renewed. But as long as we are in this equilibrium, we think it's a positive equilibrium for Mexico where most goods can be exported tariff-free.

If we go to next one, just to finish one last section on the financial sector. Just to begin with, we think that there's still scope for credit to increase above GDP growth for several reasons. One is that you can see in this chart, the level of credit to GDP in Mexico has not yet recovered the level that it had before the 1994 crisis. It was, as you know, a very significant crisis that resulted in the insolvency of most banks. And as a result, bank credit declined for several years, and we are still not there at that level.

If we go to next one, please. Not only that, Mexico is well below in terms of credit over GDP, not only, of course, in comparison to advanced country, but in comparison with most of its peers. So just a normal process of convergence to have credit penetration similar to other Latin American countries will mean that credit can keep on growing above what the economy is doing.

And if we go to next one, please. And this issue with low credit penetration that is a result of informality that was the result of the banking crisis in '94 has meant that in the last couple of decades, as you can see on the right-hand side, credit to the private sector has been growing significantly above GDP. And we think that now we have some conditions that will allow this to continue to happen, in particular, the fact that we are seeing a digitalization program by the Mexican government. So as long as we see this progress in bank penetration, we think this is a banking system that can grow above GDP in the years to come.

And with that, I will stop the Mexican section. Thank you for your attention.

Thank you, Carlos. Let's now turn to Turkey. Seda, please. The floor is yours.

Thank you very much, Jorge, Patricia and the team. So you present, share the presentation. Okay.

Okay. Thank you, everyone. I will start with the general perspective that we basically keep as an assumption to understand the cyclical part of the story. So we are now in the third year of this inflation program. But if you remember the approach, we see the political preference remains to be taking the path for just a moderation in the GDP growth rates.

As you see, we see still about 2% growth rates compared to the potential of 4.5% according to our estimates. So that has been the choice. And compared to the previous years, that moderation has also been in the domestic demand composition, but the trade-off has been to keep the growth rates at just modest levels. As you see, the sacrifice ratio remains to be too low. And we continue to see the revisions in the Central Bank projections because in the beginning, we were observing very deep negative output gaps in the inflation report presentations. But later in every report, there had been the upward revisions.

And at the end of the day, we see this is a repetition of the situation that the sensitivity remains to be seen over the GDP growth rates. Of course, this year, we have another external shock. And given the uncertainties and the low growth rates especially from the European side, of course, we have the lower growth forecast for this year as 3%. But given the very fast decline in the oil prices just after the efforts for the ceasefire and plus the [indiscernible] of the Central Bank, we can see maybe slightly above 3% growth rate this year. But again, the story is not changing. The sensitivity is staying there to keep that as a benchmark, especially for the economic policy mix.

So in the next slide, since this has been the choice, this inflation is continuing, but the process is also gradually happening. As of June, the year-over-year CPI had reached 32% and we forecast 30% inflation for the end of this year. Of course, we have a slight limited downward bias for the end of this year, which could be maybe around 29% given the fast decline in the oil prices, but it is still high. And if you remember, the real appreciation of the currency has been the main anchor to keep this inflation process on track. And we think maybe that gap has already closed.

If we take, for example, the PPI adjusted effective exchange rate adjustment, you see that convergence has already happened. And we see the stickiness over the headline CPI trend. Yes, it is again converging towards 2% monthly trend. But if you check the previous episode, I mean, by half year, it has been hovering above 2%.

So the stickiness is continuing, but the good point is the commitment to keep the program alive is still there. I didn't mention about it, but our main assumption is having an early election later next year, not a sooner election. So that commitment could still be alive, and we can see a further gain over the inflation outlook before reaching the election cycle.

And at the end of the day, again, if we come back to the previous slides, there will be the need to keep the real rates high in order to have that anchor over the currency to keep that disinflation process on track. So in the next slide, if we continue with that, we need to think about a broader picture over the monetary stance. It's not just the policy rate with that 5 to 6 percentage point rerates. We need to think about the mix of both the credit rules and the deposit rules in the banking sector.

And on the left-hand side, you see how the Turkish lira deposit rates are hovering above the Central Bank cost of funding, which has been, again, the other strategy of the Central Bank to keep dollarization under control below 40% levels you will see in the next slides. And on the other hand, the Central Bank is also managing the credit growth in order to keep it below the inflation trend. And lately, they restricted further the monthly growth caps and they also narrowed the incentives and the exceptions over the rules. And right now, the control is further restricted. And this is making the monetary stance more restrictive than the policy rate is implying. So this could be, again, the strategy going forward ahead of the election according to our view.

In the next slide, and with that, with this background, we see increasing demand for the Turkish lira assets. Of course, the Central Bank's motivation to keep the managed currency -- you see there has been a calibration, but it is just a calibration according to the new inflation path, new inflation targets. So the story has not changed. And with that, we again see increasing demand for Turkish lira assets, particularly for the Turkish lira swaps. Again, you see the fast decline in the offshore Turkish lira rates. And the market has also become relatively more dovish after the Central Bank communication. Of course, this week, we had seen a slight uptick in the oil prices.

We now question whether next week's MPC could be the starting point for the normalization towards the policy rate. Maybe there could be a few weeks delay compared to what we had talked before. But in any case, the perspective, the motivation is there to find a way to start the easing in the cost of funding as soon as possible. Of course, this is conditional to the inflation outlook and of course, the financial stability regarding the dollarization tendency of the residents.

So in the next slide, in that perspective, if I start with the residence part, on the right-hand side, you see the dollarization stays under control, but this is again the main pillar of the general story that I'm trying to explain. Of course, we are closely watching the foreign currency flows, how the foreigners are behaving, how the residents are reacting. On that front, you see the foreigners increasing again, exposure.

During March, the outflow was significant. But later, as of the start of maybe April, around $25 billion came back till the start of July. But again, the exposure is very short term. We see again a higher inflow towards the carry trade. But other than that, we also see inflows into eurobonds and also the equity market. These are the good news, of course, to see. But as long as the managed currency is there with the gain, the guaranteed gain, we see this flow to continue to support the residents, again, motivation to stay in Turkish lira assets. So this is a circle that we need to check.

So in the next slide, this is, of course, particularly important for the Central Bank reserves. We understand the Central Bank wants to keep the reserves strong as strong as possible. Of course, the higher share of gold is an important pillar to check, but they show themselves that they can be able to use the gold swaps if something happens to support the foreign currency liquidity in the market. And if we check the high quality liquid foreign assets, it's also improving towards $40 billion. Today, we had the additional week data, and it has improved about $40 billion in terms of that high-quality liquid foreign assets.

So things are improving in terms of the flows. And as of June, as you see in the middle of the chart, the inflows to the Central Bank reserves have been the case. And finally, as of the end of last week, the gross amount, the gross reserves has reached above $160 billion. So we understand this will be the main, again, anchor for the Central Bank to keep that story, as I tried to explain in the previous slide on track.

So in the next slide, we were also questioning whether the tourism season could be one of the factors that we can see at track, but it's not happening. We are closely watching our big data, our POS machines transactions of the foreigners to understand how their spending is changing on a daily basis. And as of June, we realized a similar level compared to last year. And if we make a forecast for the high season for the third quarter, you see relatively stable outlook for this quarter.

So it means maybe this year's tourism revenue targets could be achievable. And this is, of course, a strong buffer, which is also confirmed by the Central Bank reserves, as I tried to show in the previous slide. This is also supporting the activity -- we now cast, for example, as of June, close to 2.5% year-over-year growth, which was very similar -- which is very similar to what we had seen in the first quarter. So in the first half, the growth will reach 2.5% year-over-year.

We, of course, expect a slight recovery in the second half, which we finally reached 3% on average for this year. We are also closely watching how the external balance is reacting because this is particularly important again for the Central Bank reserves and the motivation for both the foreigners and the residents motivation for the Turkish lira savings. And on that front, risks are coming down with the decline, with the ceasefire negotiations with the decline in oil prices. But this is still a delicate balance of risk. So we need to closely watch how the flows are happening. But regarding the financing, we do not see any risk. So this is one thing to highlight. We continuously see above 100% rollover ratios, a higher demand for the treasuries, external borrowings. So things are relatively fine in terms of the financing story.

So in the next slide, on the fiscal front, this is, of course, again, important to understand the policy mix. We think ahead of the next election, monetary policy will stay as the guard to the system, but we can see maybe some selective easing over the fiscal policy and income policies. And before that, of course, the current performance is important to understand the room available. And we see relatively good performance in the revenues. Of course, the tax collection shifts because of the time -- the calendar effects and the, again, shifts in the collection time compared to last year had affected the revenue performance year-over-year.

But in terms of the trend, we do not see a much worse outlook as we observed in the first quarter of the year. And in terms of the noninterest spending, you see a controlled manner, which is moving parallel to the inflation. And you see finally the primary cash balance, it is still above 0. So we still generate surplus in the primary balance, which is good to say. So it seems since last year's April, the fiscal stance has been relatively restrictive. But as of this year, we see relatively a stable outlook, but we are closely watching the noninterest spending manner. They are trying to keep it under control.

And finally, on the employment outlook, the headline unemployment rate is hovering around 8%, which is historically low. Of course, it doesn't mean the labor market is too tight. Instead, if we think about the broader picture, the underutilization rate is about 30%, which is showing that the impact from this moderation growth rates have been seen. But of course, the headline figure is particularly sensitive, and it seems it is relatively low, and this is basically keeping that commitment there with the program. So it's all from my side. I can stop here.

Okay. Thank you very much, Seda. Thank you, Jorge, and the whole team for your presentation and insightful perspectives on the different markets. We are ready to move now on to the Q&A session. I don't know if there is any questions online.

Operator, please, the first question.

[Operator Instructions] Our first question today comes from Marta Sánchez Romero from JPMorgan.

I've got 2 on Spain. The first one, if you could share with us the -- in your view that the 2, 3 most urgent key policy changes we need to see in Spain? And what's the likelihood if a new government and parliament managed to get the working majority that we may have them?

And the second question is how worried we should be about the growth that we've seen low-income households taking more leverage, how vulnerable could the balance sheet of banks be to a change in cycle given how the speed of growth that we've seen in the past few years from this segment that is more vulnerable to a turn in the cycle?

Yes. Thank you for your questions. Regarding the 2 or 3 key policy changes, probably I mean, obviously, there are lots of challenges for Spain, but currently, the housing problem is something that will, if not resolved relatively quickly, it could affect not only the macroeconomic outlook, consumption by households, but also, it could be a bottleneck for attracting human capital. So there is a land development law proposal that needs to gather consensus in order to unlock homebuilding and therefore, to tackle this very important issue as prices are increasing and are, again, having a negative impact on expenditure and on the perception of households regarding the current recovery.

Second, I would mention anything that would try to unlock also the -- and try to foster investment in the renewable sector. I mean the distribution of electricity, the network is overcrowded, and we need further investment there in order for all this investment that has already been done to really push prices down and to reap the benefits of all the effort that has been done in order to transform the energy metrics in Spain.

And finally, I would say one of the key challenges going forward is going to be how to reduce the relatively high structural fiscal deficit that the Spanish government has right now is somewhere around 3% of GDP, a little above that. And with the current challenges that we have on -- or the future challenges that we're going to have in terms of health expenditure, in terms of pension expenditure. This is one of the things that the next government should tackle relatively soon going forward. Obviously, there are some long-term reforms that should also accompany this like improving education, specifically for the unemployed and to improve the education also for the immigrants for them to reach the same kind of human capital that domestic residents have. But I would say those are the 3 most important reforms ahead of the next government.

And in terms of leverage, one of the things that we're seeing is that actually what we keep saying is that credit in terms of GDP for households is relatively below what we see in the rest of the Eurozone. We don't see -- we are not seeing any signal -- any negative signal, for example, in nonperforming loans. It's not -- in fact, it keeps going down. So at least for the moment, it doesn't seem to be a problem this growth -- this incipient growth that we are seeing in terms of credit.

Thank you very much. Next question please.

Our next question comes from Britta Schmidt from Autonomous Research.

Yes. I've got 3, please, 2 on Mexico and 1 on Turkey. With regards to Mexico, what is your view on the productive capacity in Mexico and the risk of replacing it within the U.S.? Or do you have a view on how Mexico can move products higher up the value chain? The second one would be whether you've quantified the impact of uncertainty and the lack of planning ability around the USMCA annual revision process in terms of GDP growth. And then on Turkey, I mean in your view, what would need to happen to derail the normalization path, what are the largest realistic risks to the current situation?

Thank you. Can you please take the first 2, Carlos and then Seda?

Absolutely. Yes. Well, on the issue of productive capacity, I would mention that probably main bottleneck in this issue is in terms of energy. Many of -- we have been talking with our clients in their industrial parks, and they say that the main reason why they are not building more parks is that they do not have enough supply of electricity at competitive prices. And on that aspect, I think the announcement that I was mentioning of prior participation to develop electricity generation, I think, is quite positive.

Apart from that, I will mention that in terms of productive capacity of firms, you still have some spare capacity. So that means firms can increase production without building more plants. So we still have some room over there. Again, I think the main issues in Mexico are more than with the capacity of firms and more with infrastructure, in particular, energy.

On your second point, on the uncertainty around USMCA, we think -- and not only we think our impression by talking with clients is that, that has not been a significant source of uncertainty because, as I was saying, despite the fact that we have these review processes, all the signals that are coming is that USMCA will go forward. It's true that the negotiations are going to be complex. It's true that some things are going to be changed. But there have been no signals that USMCA will not go forward. It's true that it will not -- it's not going to be renewed soon. But as long as we continue on the existing equilibrium, that's a positive equilibrium.

And again, no one I think expected that the agreement was going to be renewed. So I think that local uncertainty is more binding constraint. Again, firms are waiting to see how the new judicial is going to operate. And we think that, that has played a more significant factor explaining the decline in investment than USMCA uncertainty. And in fact, you can see -- you see a time series, investment began to decline when the judicial reform was announced well before the uncertainty on trades came. And in fact, there was not an inflection point when trade uncertainty began. So I think domestic reasons, domestic uncertainty is playing a larger role. I will stop it there, Jorge.

Seda, please.

Okay. Let me continue with the question. Yes, we do not see that kind of motivation from the ruling alliance from the President so far. Of course, if your question is about a preparation for the next election cycle, yes, we assume that kind of preparation. But it seems as they also communicate that way, they want to make it as a selective by a target approach to introduce that kind of populist measures because we also understand the path that we go to the election cycle will generate different tactics, and we already started to see that kind of tactics on the political front.

So if this is the case, the economic outlook, the economic policy mix should be keeping the guard for the system to sustain the regime. So in our view, that kind of commitments will be needed, and I understand our President also sees the picture that way. And so far, we see the full commitment, full support for the program for [indiscernible] management. Of course, there might be some pressures over the Central Bank reserves as we get closer to the time of the election. Of course, we don't know about the time of the election, but it seems we are getting closer to that, but it will not be that soon.

Even though it is the case, even though we see that pressure is growing, as we saw in the last 2 years, the current team -- the current economy team is ready to tighten the policy further in order to provide again that financial stability to the system. So we do not see -- we do not assume that kind of unorthodox policies attached to the picture. Instead, we can see some selective easing in a targeted way and the commitment will still be there.

Yes. Just one comment on the Mexican issue. If should you be interested in our website, we do follow in real-time indicators of the geopolitical nature. We have economic policy uncertainty, trade uncertainty. What you see in Mexico going to your question is that although economic policy uncertainty typically goes between minus 1 and 1, which means that it's within the normal range, but it has been increasing. In trade policy uncertainty, it has been decreasing and is very close to minus 1, kind of showing or supporting what Carlos is saying and also pointing to you something that you can look at if you're interested.

Thank you very much, Britta, for your questions. Next question, please.

Our next question comes from Hugo Cruz from KBW.

So I have 4 questions, if I may. So first of all, in Spain, I think there have been some government measures to mitigate the impact of the higher oil prices in GDP. Could you quantify that, have been material. So if you could quantify what's the impact on GDP and in government measure -- expenditures?

Second question, Spain, the next election probably will have more routine in government. Do you think that could lead to a change in immigration trends? And the third question on Spain. Where do you see the bottom in unemployment rate? Italy now, I think, has a 5 angle. Do you think Spain could ever go down towards such low unemployment rates, is that? And then finally, you didn't talk about some of your other geographies, but I wonder if you could briefly talk about how you see the Colombian and Argentinian economies going forward.

Thank you. Miguel, please?

Sure. Regarding the government measures, the first number that they gave was around EUR 5 billion, but the update that they gave before when they announced that they were ending those measures was somewhere around EUR 3.5 billion to EUR 4 billion. There is going to be -- some of the measures are going to remain and could come back if the scenario worsens. So what we think is that the final bill is going to be between EUR 4 billion to EUR 5 billion. So that's going to be somewhere around 0.2%, 0.3% of GDP.

Certainly, it could be one of the reasons why we are not seeing more of a slowdown in GDP over the second quarter. And almost for sure, it also explains why we are not seeing more inflation. Inflation surprised to the downside in June, and it was not only headline inflation, core inflation. And if you go and see industrial goods or food items, processed foods, I mean, there are no signs that the shock has been transferred to prices. And it can be as a result of measures that the government introduced, but that's 0.2%, 0.3% of GDP.

Immigration trends, we're not seeing any changes right now. We are -- I mean, the trend is for probably to have the foreign population to increase by around 300,000 to 400,000 this year, relatively in line with what we are seeing in the last couple of years and relatively in line with the increase that we are expecting for the active population and a little below job creation. So what can a new government can bring when they announce which measures they implement, then we evaluate. But at this point in time, what we're seeing -- we're not seeing neither an acceleration not that slowdown. We are seeing that the trends continue relatively at that pace.

Bottoming of the unemployment rate, what we have is the unemployment bottoming around just below 10%. It's something that it's going to -- I mean, how much the unemployment rate is going to go down will depend on how the active population is going to follow. But on average, what we have is unemployment rate of 9.9% this year, 9.6% next year, with increases of the active population, as I said, between 350,000 to 450,000 persons per year. I mean, it's not going to go further down as long as immigration remains relatively strong if immigration slows down, but demand for -- or the supply of jobs keeps increasing, then we could have a stronger decrease in the unemployment rate.

But for the time being, what we are seeing in terms of immigration, but we're seeing also the attraction, the increase in labor participation by residents in Spain is relatively strong. So in terms of the unemployment rate, we don't see it going further than 9%.

I will take the questions on Colombia and Argentina. Colombia is a country that was facing significant challenges, mainly related to significant increase in inflation that needed a very strong reaction by the Central Bank, but also by important fiscal challenges because they have not been following the fiscal rule. And let's say that the political decisions taken by the government did not help much. The Central Bank felt under pressure, due to dramatic increases in minimum wage at a time where productivity was not increasing. Fiscal expenditure was very high.

And in this context, the victory of [indiscernible], at least it has taken away dramatically the pressure on the Central bank that now feels that has more room of maneuver to follow whatever policies they need to bring inflation down. And in that regard, the outlook is relatively benign. We're expecting that growth is going to decelerate mildly. We have it at 2.6% this year. We will go down to 2.1% in 2027. With those monetary policy decisions that we expect the interest rates are going to continue increasing and they're going to remain high in the foreseeable future. Inflation is likely to go down to levels slightly below 6% in 2027. Still, it is a country that has fiscal challenges. We're still waiting to see which are the decisions that are taking in that realm.

And on Argentina, as they have been very consistently following a path in which the sustained fiscal consolidation is the main anchor of the system that is the element through which other policies rotate around, and that means they are not -- they're following kind of a view of monetary aggregates and the buildup of reserves, which in turn allow them to keep a very -- I mean, a real appreciation of the exchange rate that also helps contain inflation. It is very likely that growth can stay at levels around 3% this year and next, and inflation is likely to go slightly to 30% this year and below -- between 15% and 20%. I think we have it at 18% in 2027.

The main challenge in Argentina is how they match the 2-tier economy that they have where there's a huge growth in sectors that are related to primary and service sectors, while the sectors in which there are more people employed, which are manufacturing are suffering for a variety of things, including the real appreciation, but not only there's other issues that are playing a significant role. But still, I think that the chances that these policies can continue throughout the next government have been increasing. And in that regard, they are likely to have the time to finalize this process of normalization in which Argentina is now engaged.

Thank you very much for your questions. I think there is another question in line. Operator, please.

Our next question is the last question, a follow-up from Britta Schmidt from Autonomous Research.

Back to Mexico. Do you have any views on [indiscernible] policies regarding digitalization of the economy. We've see in other countries, especially in Brazil, make significant progress here. And what impact on longer-term growth do you think stronger financial inclusion could trigger?

Carlos, please?

Yes. We have been following closely [indiscernible] digitalization process and not only following closely, we have been in close contact with her team to advance that agenda. I will tell you, overall, we are quite positive about this agenda. We think this is the first time in decades that we see a serious effort on this front. As you know, [indiscernible] appointed a very close person to lead this effort. So there's an agency for digitalization. We have been working closely with them.

And among other things, for example, they just announced some weeks ago that they're going to start with a program where payments in cash at gas stations and toll roads are going to be forbidden. And now everything has to be digital payments on those fronts. We think that will create the incentives for people to open banking accounts and to use more digitalization, just the fact that you're not going to be able to buy gas without cash, that should be important but just a signal that the [indiscernible] is going to take this measure to forbid these cash payments, I think, is very strong.

Not only that, they have been changing financial regulation to make it way easier to open completely digital banking account. So we think that -- again, we are quite positive about these efforts, and we think one of the main reasons why we think that credit to individuals will keep on outpacing GDP is this one because we think that the digitalization, one of the main consequences is going to be a further increase in banking penetration, which, as you know, has a way to go in Mexico, which is because it's quite low compared with its peers.

Thank you very much, Carlos. There are no more questions in the queue currently. Let me turn now to a couple of questions that have been submitted through the platform. We have a question from Joshua Studholme from Egerton Capital. He's asking about how the Mexican GDP downgrade impacts our views on credit growth in the Mexican economy this year. Also related to credit growth in Mexico, Isabella also from Egerton is asking about the dynamics that we should be thinking about in individual versus corporate lending in Mexico over the next year.

Sure. Okay. Patricia, I will tackle both. They're quite similar and they are complementary questions. I will tackle them together. So yes, we think that credit will decelerate this year as a result of this deceleration in GDP. We think that overall credit in the system. And again, what we're following in research is created at the system level. We don't know the particulars of the bank or any other institution.

But according to our models, within credit this year overall will decelerate and will grow at levels of around 5% to 6%. Now there's a big difference on what's going on between corporates and individuals. Individuals, we think will continue to be quite resilient. We think it will grow a double digit, something close to 10%. First, because we are seeing some recovery in job creation. Second, because, as you know, the real wage mass has been growing at a very significant basis over the last 4 years, so that means more demand for credit.

On the other hand, we think rate for corporate will decelerate to 4%, which is quite low. This is not long ago this was growing at double digits. And the main reason is this decline in investment. So the fact that we're seeing lower CapEx means lower demand for credit, we're still seeing demand for credit for working capital. And now that rates have been declining. We are seeing a lot of refinancing activity. But overall, yes, lower credit for corporate. We're expecting in 2027 to see a recovery as we are forecasting higher GDP growth. We and in general, the IMF and the consensus, so we think that we can see credit to corporate recovering to 6% or 7% in '27 and credit to individuals growing at 11% or 12% in 2027. So we are seeing a quite different dynamics between credit to individuals and corporates.

Thank you Carlos. And then a final question from Paco Riquel from Alantra. It is also related to how our macro scenario translates into loan growth expectations for the sector. In the case of Spain, Mexican and Turkey, we have already tackled Mexico, perhaps we can answer also our views for loan growth at the system level in Spain and Turkey.

Let's start with Spain.

Yes. Thank you for your question. What we're seeing is the end of 2025 ended with 2-digit growth in consumption and credit to -- for consumption purposes in Spain. We think that along with the relative slowdown that we are seeing in Spain, what we should see is also relatively more moderate growth over the next couple of years in consumption credit, more towards what you would get along the nominal GDP growth over the next couple of years.

Regarding mortgage growth, what we're seeing is growth around 4%, and we think that it should stay along those lines over the next couple of years, basically supported by this strong demand that we're going to see on -- that we are still seeing on home purchases and a relatively high price that right now, people are facing on the rental market. And as I said, relatively favorable conditions for households to take advantage of credit growth.

And regarding credit to firms, what we're seeing right now is that growth remains around 3%, and we are expecting it to remain along those lines, credit growth to firms. Nonetheless, there is an upward bias on credit, specifically towards the construction sector and specifically real estate sector as we think that there is going to be a strong push over the next couple of years to try to increase the supply of housing. So that should support the sector towards asking for more credit. So there, we should see higher credit growth.

Seda, you may also want to touch when answering these questions, the caps in place, limiting credit growth and how that might affect whatever we say as the authorities are active on that front.

Yes. Of course, the [indiscernible] binding in the case of Turkey. If I think about the Turkish lira and the foreign currency components, in the case of the tertiary component. So I would say maybe parallel to inflation this year, we can see a figure. And for the foreign currency lending, it could be low single digits year-over-year. But in the case of, of course, next year, things could have started to change as I try to explain as we get closer to the election cycle. Even though we assume those caps will still be important. They can start easing a little bit, maybe starting from semi Turkish lira lending.

So we can see in total terms, a real year-over-year growth rates next year with those easing items selectively. So this year, it is relatively more restrictive. Next year, we can see that kind of selective easing and we think the commercial lending, particularly semi Turkish lira lending could be the items that we can see that easing bias. But in terms of the individual lending, the retail lending, we think those caps will still be there in order not to generate any risk, especially for dollarization motivation.

Thank you. Thank you very much. This was the last question. Thank you very much to the BBVA research team, and thank you all of you for joining us today. We appreciate your participation, and we look forward to seeing you on our Q2 results presentation. Have a great afternoon. Thank you.

So good morning, and thank you for joining this session with BBVA. We are really delighted to have Luisa Gomez Bravo here this morning. She's CFO of BBVA, a role that she has held since 2023. Luisa joined BBVA more than 2 decades ago, and she has had several leadership positions within BBVA, including the Global Head of CIB.

So maybe with that, we just start with the first question around your strategy. So you had a return on tangible equity at almost 22% in the first quarter of '26. You target EUR 48 billion of net income between 2025 and '28. So maybe if you could just talk about the levers that will allow BBVA to sustain an average return on tangible equity of around 22%. And how do you kind of think about the potential upside risk to your targets? And what would kind of potentially drive any upgrades to your medium-term targets?

Okay. Well, thank you very much, Sofie, for your questions and for having me here in the conference. First of all, maybe let me start by saying that we are very confident in the trends that we're seeing in terms of our performance, and we feel very committed to being able to deliver on our midterm goals, as you mentioned, the 22% average RoTE at the end of '28 for the 4 years. And we're seeing, as you mentioned, good performance, obviously, on the back of 2025, but also a very strong performance in the first quarter, which allowed us to increase our guidance in terms of profitability for the year from the circa 22%, above 20%, which is, I think, also relevant considering the uncertain scenarios that we live in. So we definitely think that the sustainability of the bank's profitability is there.

But maybe going underneath that and how do we foresee or see that sustainability RoTE going forward. I think it's basically on the back of several -- 4 levers that are structural, I think, for BBVA. The first one has to do with activity growth. So we've always mentioned that BBVA is a growth bank. We grew our activity in the first quarter of the year by 17% year-on-year in constant terms, 15.5% in currency terms. So definitely, that versus European peers, which grew their books around 5%, 6%, is definitely something quite significant in terms of supporting profitability.

But we have always also been very disciplined in terms of where we are growing. And as you know, we favor those portfolios where we see that there's more advantages in terms of risk-reward profiles like the SME businesses or some retail portfolios as we continue to be very disciplined in terms of growth. So we obviously look at profitable growth going forward, and we are seeing good dynamics overall, not just in the first quarter, but also what we're seeing today. So I think that's going to be a very relevant, I would say, the key relevant item in terms of sustainability is activity growth for BBVA.

The second thing that I think is relevant is that going forward, we also see margins becoming more resilient. As you know, in our core markets like Spain and Mexico, even this year, 2026 could be considered somewhat of a transition year because we are still expecting that overall, the average customer spread this year versus last year, it will still be lower. So activity growth is compensating part of that still compression in margins on average. But what we're seeing going forward, again, with our rate environment and purview is that, that margin is going to be stabilizing. And therefore, going forward, we will see that activity growth flowing directly into revenues much better. So the second thing is the resilience and stability of margins going forward will be supportive of continued growth.

I would say that the third thing that we're focusing a lot on is diversifying our revenue sources. We've been very vocal in our latest strategic plan in making sure that we prioritize fee-generating and capital-light businesses. We've seen that already in the first quarter already from last year, where we've seen growth in fees coming from CIB, from payments. I think asset management and insurance are 2 areas where I think that we do have untapped potential. And we're putting a lot of focus, management focus on developing these areas in order to diversify those revenues.

And fourth lever, which I think is at the core also of the DNA of BBVA is operational excellence. As you know, we are one of the banks that has the best efficiency ratio amongst European players, below 38% this year. We've guided in our midterm goals for that 35% goal, which is for a bank our scale and our size, I think, quite significant. And we are committed to delivering that cost-to-income ratio on the back of operational leverage. So that means that it's not just about being disciplined on costs. Really, it's about investing, continue to invest to ensure that we have the right leverage. We focus a lot on positive jaws structurally when we look at our businesses and how we prioritize capital and investments. And this is part of the way we allocate resources to investments is ensuring that they are going to be delivering operational leverage going forward.

So I think that, that is, in conclusion, the supporting evidence regarding the sustainability of the RoTE going forward. And I think with regards to the guidance, as you know, we haven't changed the guidance, neither on the midterm goals. We had a macro view last year when we delivered our guidance. Despite the uncertainty that we're seeing on the macro side today, and it's still uncertain today because it's still not fully resolved, I would say, we do continue to be confident in being able to achieve those midterm goals.

Excellent. And you touched on the operational excellence. And BBVA has also been one of the kind of banks talking the longest potentially about kind of technology and digitalization. So can you maybe just talk a little bit about your AI and what your kind of priorities here are when it comes to AI? And how do you plan to scale these gains across the organization? And should we see, in the medium term, any tangible benefits to your cost base from AI? And also maybe longer term, how should we think about the 35% cost-to-income ratio? Can it go any down?

It's like a 5-minute AI topic. So we do believe that AI is going to be very disruptive for banking, but in a positive way. We think that it is going to be really truly an engine of innovation and better value for our customers. And we obviously do believe that it's going to be a source of significant value for our shareholders as well. So we think the disruption from AI in banking is going to be very big. I think nobody now has any doubts that it is going to be disruptive. The question is how deep and how fast it will be and how quickly you can adapt to this AI transformation. And in this regard, we have really a positive view about AI, because we do believe that it is going to be significantly better for our customers.

We think that banking clients are going to benefit significantly from the AI disruption, because you're going to be able to deliver a better understanding of the clients, going to be able to anticipate better their needs, personalize better the offer that you have. And actually, going forward, looking ahead, you're going to have an intelligent financial assistant embedded in your life, allowing you to make better decisions regarding money and regarding your life choices. So I think the future is, in that regard, very positive for banking.

And the question, to your point, is who will win in this transformation. And with a lot of humility on our side, we do believe that BBVA is going to be one of the winners in the AI transformation. We do think that AI is going to be really a critical lever enabling us to strengthen our long-term competitive position in the market. And this is on the back of the work that we've been doing, very specifically, I would say, on 3 areas.

The first one is adoption. It is very difficult to face a very relevant, significant and fast-paced transformation if your people don't believe in your vision. And in order for people to believe in the vision on a group-wide basis, and we have 127,000 employees, we do believe that it is very important that all our employees, all our colleagues understand these tools, understand what AI is about. And today, we have over 100,000 employees in the bank that are regular users of AI. So that is, again, very important when you're talking about not just a technology transformation, but overall, a cultural change in the bank. So the first topic is adoption.

The second topic is the agenda. What is the agenda? What is the AI agenda? And in this regard, over a year ago, we already determined what we call The Eight, which is not a very fancy creative name, but it's called The Eight. And it basically touches base on 8 transversal areas where we are deploying AI in the group, basically centering around 3 topics. The first one is customer experience. So customer-facing AI, what does that mean? What do we do? That's one of the content topics of our Eight strategy.

Then we have what we call the augmented employee. This is very relevant, because a lot of our employees, the employees that are commercial employees, that are sales-driven, still spend a lot of time bogged down in admin work. And so if you can really augment the sales productivity of these employees, the scope, again, on the revenue side, I think it can be significantly relevant in terms of the potential it has.

And the third thing obviously has to do with operations, processes, things ranging from risk and risk underwriting, to claims management, to fraud, compliance, obviously, internal ops teams. So there's a lot of, obviously, work done on that side. So we're already seeing some interesting proof points, which I think are very common to other institutions talking about these things. We've seen, in some engineering teams, savings of around 50% in terms of coding and testing that they do.

Also on the claims side, we've seen significant reductions of almost 80% reduction in claims registrations and management. We've seen some pilot cases that we have with our customer support services, where we are seeing that 60% of certain of these instances can be dealt directly by an AI assistant that the client chooses to speak with. So these things are early green shoots of what AI could mean on the back of the agenda.

But if you ask me what really differentiates the winners from the losers, and why BBVA is going to be one of those winners, it's not just about the adoption, which is important; it's not just about the agenda, which again is important; it's really about how do you scale AI across the entire organization. And this is something that BBVA has already done with digital banking. And that's why we think that the playbook that we had is very applicable to this type of transformation, which is broader and faster.

But in specific terms, scaling AI throughout the organization means going beyond The Eight. It means really industrializing at scale how you create, how do you deploy, how do you manage, how do you govern the agents across the board. And this is something that we already started doing with our partners, and we're building those capabilities out. And we think that in that regard, we have also started to change the organization. We've created a new area called AI transformation at the group. This is an area that integrates data, which is the main gold. What's the gold for AI? It's data, really that's the gold, and the challenge, by the way, it's data. So we integrated all data capabilities, some of the engineering and technology capabilities all under one roof to drive forward the AI transformation for the group.

So what does that mean, to your point, in terms of impact? It's too early to say. I think it's very difficult, because just as we had in the digital banking transformation, a lot of investors asked us at the beginning of the time, what is going to be the impact, what's going to be the impact on cost and whatever. Obviously, there are going to be impacts. And within the 35% cost-to-income guidance that we gave, there were some back-ended productivity gains coming, partly on the AI discussion, although it was very early to pinpoint specifically. But I think really the potential of AI goes beyond the '28 number, and it really has to leverage more on the revenue side where we think that's going to be much more compelling for BBVA as a whole, aside from the cost efficiencies that are obviously going to be there as well. So we're very positive on the AI discussion, and we hope that we'll be, again, leading the way for banking industry as a whole.

No, that sounds very exciting. But maybe with that, we move to the countries and we start with Spain. You have seen very strong client acquisition in Spain. You also have one of the best cost-to-income ratios in Spain, around 34%. So how do you plan to sustain this profitability in Spain and at the same time, also grow volumes? And how do you see the competition, especially in mortgages and deposits, where it seems that it's quite intense?

Yes. Well, competition in Spain has always been pretty intense. But to your point, I think, yes, the BBVA Spain is quite, I would say, again, unique in the sense that it's a relevant bank in Spain that combines the ability to continue to grow and gain market share with a cost-to-income ratio that is below 34%, and one of the highest profitable banks in Spain as well. And this is, again, on the back of the strategy that we have for BBVA in Spain, a strategy that basically relies on the first thing very relevant is client acquisition.

So we always talk about in Spain about mortgages and whatever, but really at the core of our strategy is acquiring clients. And this is different acquiring clients than in Mexico, where it's underbanked and you have low leverage. But in Spain, actually, the deleveraging that took place in Spain also has been significant. So really, it's about client acquisition. Over the past 2 years, since 2023, we've increased 2.8 million our client base. Last year alone, we grew around 1 million clients. So why is this relevant for us? And 60% of those were done digitally.

And it's relevant for the short term and the long term. For the short term, it's relevant because what we see is that 6 months after we onboard clients, 70% of those clients become what we call highly engaged clients. And as a matter of fact, around 30% of those onboarded clients, after 6 months, bring either their pension or their payroll. So in the short term, it means that the capacity to grow our deposit base with an adequate very low cost of funding is very relevant. And that is a significant source of value for BBVA and profitability in Spain. So the focus on client acquisition on the short term has these impacts that are positive with regards to our margins.

But the second thing I think more relevant, going to your question about long-term sustainability of profitability, is that what we see with these clients that we acquire, and we already have the history, is that 5 years down the road, they will be generating nearly 4x the income that we have today. So think about it, we grew 2.8 million clients. These clients are going to be generating increased revenues down the line as we further deepen the relationship with them. So it's a significant source of value, not just in the short term, but in the long term. And that's why the key focus of the strategy in Spain is client acquisition.

The second focus, as you mentioned, is targeted and disciplined growth. As I mentioned before, we've been growing significantly in SMEs and consumer loans. In SMEs, we gained over the past 5 years, 260 basis points of market share, which is not a minor number, in especially a competitive market like Spain. Or in consumer loans, we grew 240 basis points. So those are key focus areas for us and will continue to be. We see a lot of value in those segments.

On the mortgages, as you know, we don't see a lot of value. The mortgage market is intensifying, I would say, competitively. Over the last weeks, I was seeing that there are players that are becoming even more competitive than what they were just a month or 2 months ago. And there, we have a selective view on growth. We continue to grow, but we really look through the mortgage product to the client relationship and the value of that client relationship. And that's why we are being selective in growth on the mortgage side whilst the competitive dynamics remain in place.

And on the deposit side, as you know, and I think this is across the franchises, we don't compete in chasing promotions or pricing campaigns. We really look through again on the client relationship. And what I can assure you is that we do compete on preserving the relationships that we care about in a targeted and personalized way to make sure that we keep those relationships within the bank. And that is a strategy that we've maintained going forward. So we are very positive in the dynamics in Spain, both in terms of growth and profitability going forward.

Great. And maybe with that, we can move to Mexico, which is one of your cornerstones in the investment case for BBVA with very high growth and returns. So maybe if you could start by elaborating on the key drivers behind the upside risk to the high single-digit loan growth guidance that you have given for Mexico? And also if you could talk a little bit about your structural funding benefit in Mexico? And how do you see competition both from the incumbent banks, but also the neobanks, and what you're doing to defend your market shares in Mexico?

Yes. Well, as you know, we are very positive in Mexico, and we continue to be so. The reason why we increased the bias in Mexico towards that double-digit number in terms of loan growth is that we have been really seeing quite positive dynamics at the beginning of the year in Mexico, especially, I would say, on the retail side. So we were quite positively surprised about the resilience of demand in consumer side. We've seen double-digit growth in lending in all consumer portfolios. And therefore, we were quite positively supported. We grew our loan book in the first quarter, 8.4%. If you exclude the FX embedded in the dollar portfolios, the growth was above 10%. And so we see this dynamic of retail portfolios being quite resilient on the back of real wage growth primarily, that supports consumption and demand from retail clients.

On the enterprise side, we were expecting an improvement in the enterprise growth going forward. The enterprise sector was slower to start off in the year, although the pipelines are still quite positive and they're still there. But really, we think that there's going to be 2 catalysts that are relevant and support the confidence in the growth in the enterprise segment. The first one is obviously clarity on the USMCA. As you know, discussions are taking place. Our base case scenario is that the USMCA will be renewed probably on an annual basis. And with that view in mind, which is primarily what we've seen in the past, is that the integration of Mexican and U.S. companies has not decreased. It has increased. The U.S. businesses advocate and support the USMCA within the U.S. government and talks with the trade administration. And therefore, if that's the case, I think that will support confidence in the SMEs and the enterprise sectors investing in Mexico going forward.

And then the second topic aside from the USMCA is the Plan Mexico that Claudia Sheinbaum announced at the beginning of the year. Mexico, I think, recognizes and acknowledges that they need private investments. The fiscal situation in the country means that they need private public investments, especially they've announced significant efforts and investments on the energy infrastructure side, also to promote that nearshoring in the future in Mexico. And we do see that there is pipeline being built on the back of this Plan Mexico hopefully towards the second half of the year coming through. So despite a slower GDP growth in Mexico, we saw Banxico reducing GDP targets to 1.1% this year.

Still, those growth rates are going to be higher than last year when Mexico last year grew at 0.8%. So even within that context, we do feel that the activity growth will be there in Mexico, and we've been able to grow market share again in March. For the first time, we were at 26.1% market share. For a bank of our scale, it's very significant. And so therefore, we do see that if Mexico grows and the leverage in the country is still very low, structurally speaking, you have a bank of that scale at BBVA being able to grow even at the same market share consistently on the back of growth of Mexico and bankarization of the population. So quite positive in that regard.

With regards to the competitive dynamics, as you mentioned, especially there are 2 types of competitive dynamics, the incumbents and the neobanks. I think incumbents, we compete with them all across the board, in all products and segments, and different players are more aggressive on one side or the other. But typically, again, as I was mentioning, we've been growing market share both on the wholesale and the retail side. Specifically within neobanks, I think here, we've always said that the key structural strength of BBVA is its position and transactionality. It's the capability to have lower cost of funds versus our peers. We have 2.19% cost of funds. The peers have 3.4%, the incumbents. So the neobanks obviously have higher cost of funds. And in that segment, we've been able to preserve and gain also market share on the deposit side. Why? Again, on the back of the transactionality efforts that we have, the market shares in payrolls, and the client acquisition, which is quite significant in Mexico as well.

We have always said that we are not going to chase pricing campaigns on the deposit side. It doesn't make sense for us. And what we do is very consciously and targetedly defend those kind of relationships, again, that we want to maintain in Mexico as a bank. And that has been quite successful. And what we've seen that as rates have come down from 11.25% in Mexico 2 years ago to 6.5% today, some of the neobanks have actually lost market share in deposits, which is something that we also anticipated as well. So the deposit side is something that we have no interest in competing. Again, we are the largest bank in terms of deposits, very granular deposits, and we will continue to address competition in a targeted way.

On the asset side, however, we do compete head on. Neobanks especially have very attractive value props, very attractive customer experience. And we need to stay top of the game. We are the best fintech in Mexico. Over 80% of our clients are acquired end-to-end, and we continue to gain market share in credit cards, which is the main focus of products for some of the neobanks. So that is also a source of competitive dynamics that we are putting a lot of focus on. And we've been seeing that we're able to recapture clients that perhaps go and put balances on neobanks credit cards. 12 months later, we've regained back those balances from a targeted approach to defending our client base.

Okay. And one final question for me before we open up for Q&A. So maybe if you could talk a little bit about your capital base. So you have the EUR 4 billion share buyback, which is ongoing. And you have also said that you plan to distribute all excess capital above 12%. Within what time frame would you like to reach a 12% core equity Tier 1? And also, if you could maybe discuss a little bit capital efficiency tools, how you think about regulation, M&A, any potential bolt-ons that you would consider?

Okay. Yes, very important question. So I think that, I would say, again, uniqueness of BBVA is that we can, on the back of the strong profitability, generate capital and what are the uses of that capital. So the first thing is obviously, capital generation is very important. But the first priority is to fund growth, fund our organic growth. We see our franchisees growing. We see the franchisees demanding capital for backing that growth. And again, at these levels of profitability, we're more than happy to continue to allocate capital to that profitable growth.

The second question regarding M&A or not? Obviously, we don't discuss M&A. M&A is something that, as a bank of our size, we always look at, because it's in our responsibility, fiduciary responsibility to see if there are opportunities ahead. But we've also made very clear that we don't see any relevant tangible opportunities in M&A in our footprint. And therefore, there's nothing really relevant. Again, if there are things that make sense, bolt-on acquisitions or things like that, that is something that's always there. But structurally speaking, I would say, the growth of capital generation will be devoted to organic growth and will be devoted to returning capital to shareholders and continue to return capital, because we will be able to deploy capital in our franchises, and there's going to be plenty of capital to be returned to our shareholders above that 12% target that we have.

In terms of timing, as you know, we are finalizing the last tranche of our close to EUR 4 billion share buyback that we announced last year. When that gets done and over with, we'll have the appropriate discussions at the Board as to how to continue with returning capital to shareholders. But I don't think there's a specific date in mind because, again, what we need to do is gradually see how the franchisees demand growth, how we generate that growth, demand growth, and then return growth on a gradual and recurring way, I would say. So this is going to be a recurring story of capital generation, organic growth deployment, and return of capital to shareholders.

That's very clear. And with that, we have a few minutes left. So if there are any questions in the audience, please raise your hand. I think we have a question in the back. It looks like there are no questions unless I'm missing anyone. So maybe then a final question for me. Maybe we could talk about Turkey, which both represents some upside and downside risk. So how do you balance the short-term volatility in Turkey? And how do you think about the longer-term strategic value of the franchise?

Right. So I do think that, and we've been, I think, saying this before, is that Garanti in Turkey is still an optional value for the group. The economy, we mentioned before, needs to normalize. It needs to continue on the disinflation trend. And as that normalization takes place, we will reap further value from the Turkish bank for BBVA shareholders. And that is a path that needs to continue in that regard. I think that, obviously, the Middle Eastern conflict, the Iran war has meant that Turkey is negatively impacted in terms of inflation, because it imports oil. So therefore, we do see that the disinflationary trend that we had expected to continue this year and going forward is going to be probably on pause during the year.

We're now expecting inflation at the end of the year to be around 30%, which is a similar number of inflation that we had last year. And that's why, in the last quarter, we said that we were putting a negative bias on the EUR 1 billion bottom line profit that we had initially expected at the beginning of the year without the geopolitical situation. I think that in this context, as always, what we've been trying to do is preserve the value of the franchise in Turkey. Garanti is the best bank in the country, has a market share of close to 20%, and it has an outstanding profitability. It's achieved a 30% return on average equity and the peers are at 20%, very client focused, very innovative as well.

And I think the best thing that we can do is continue to preserve value in the franchise and continue to see and expect that normalization trend to hopefully continue going forward in the country. The economic team, I think, has done everything that it needs to do to continue on the disinflationary path. They did the right things when the conflict broke out. They're very orthodox and disciplined, and that's what we need to continue to see, I think, in Turkey going forward.

Excellent. Thank you so much, Luisa, for a very good fireside chat.

Thank you very much.

Thank you, everyone, for joining.

Thank you.

Good morning, and thank you all for joining BBVA's first quarter earnings call. As in previous quarters, I'm joined today by our CEO, Onur Genc; and the Group CFO, Luisa Gomez Bravo. First, they will walk you through quarterly figures, after which we will open the line for the live Q&A session. With that, I hand it over to Onur.

Thank you, Patricia. Good morning to everyone. Welcome, and thank you for joining BBVA's First Quarter 2026 Earnings Webcast. Starting with Slide #3, and as always, beginning with value creation. On the left-hand side of the page, you can see the strong evolution of tangible book value per share plus dividends growing 5% in the quarter and 14.7% year-on-year, driven by our excellent results, as we will see in the following slides.

It's also worth highlighting here that excluding the impact of the share buyback programs, the year-on-year growth would have been 18.1%. And on this one, as you know, in the fourth quarter of 2025, we executed EUR 993 million share buyback program. And at the moment, we are currently executing the nearly EUR 4 billion program announced in December 2025, of which EUR 2.5 billion has already been completed across 2 tranches.

As you all know and as these buybacks have been carried out at a premium to book value, they clearly create value for our shareholders, but they have a negative impact on tangible book value per share. On the right-hand side of the slide, our profitability ratios have further improved, reaching an industry-leading return on tangible equity of 21.7% and return on equity of 20.7%.

On Page 4, on the left-hand side, we delivered another very strong quarter in terms of net attributable profit, reaching almost EUR 3 billion, as you can see. This represents a 10.8% increase year-on-year and 18% growth versus the previous quarter. These results at the bottom of the right -- left-hand side, it brings our earnings per share up to EUR 0.51, an increase of 12.5% year-over-year, higher than the growth of the net attributable profit, thanks to the share buyback programs.

On the right-hand side of the page, our CET1 capital ratio, it improved by 13 basis points during the quarter, reaching 12.83%. A strong quarter in capital generation, placing our capital ratio well above our target range and obviously, regulatory requirements. Moving to Page #5, and as an introduction to the following pages, the key drivers of our performance this quarter. First, at the top, net interest income, it grew by 20.2% year-over-year, driven by very strong business activity, loan growth at 17%.

Second, net fees and commissions also showed an excellent evolution, increasing by 15.5%. Third, in the page, our industry-leading efficiency ratio, it continued to improve, reaching 38%. Fourth, in the page, sound asset quality metrics with the cost of risk at 154 basis points, showing relative stability in the current geopolitical context. And finally, at the bottom of the page, as mentioned, we maintain a solid capital position showing further improvement in the quarter.

Slide #6, as always, the summarized P&L of the quarter. You can see the year-over-year quarterly evolution in the second column from the left in constant and next to it in the third column in current terms. If I highlight something, I would highlight the strong performance of core revenues with excellent growth in net interest income, excellent growth in fees, leading to a gross income growth of 18.3% in constant euros and 14.2% in current euros.

Moving to Slide #7 and talking more about the gross income growth with more details on the quarterly progress in the last 5 quarters. As you can see, net interest income growth remains very strong, increasing 20% (sic) [ 20.2% ] year-over-year and 2.9% quarter-over-quarter, supported by, again, robust activity growth, increase in lending. Worth mentioning, there is always a seasonality to take into account here in the first quarter, also due to the day count.

Net fees and commissions continued their excellent trajectory, as I mentioned, up 15.5% versus the same quarter last year, driven by payments, asset management, and we increasingly see a higher contribution from insurance and especially from CIB. And despite the seasonality also here, it has grown 0.9% compared to the previous quarter. Finally, net trading income delivered a very good performance, supported by positive momentum in our Global Markets business. All of the above leads to excellent gross income growth, 18.3%, as mentioned, year-on-year and 4.3% quarter-on-quarter.

Moving to Slide #8. We want to share some perspectives on the evolution of our net interest income, the critical part of our revenues in our core geographies you would see in the page, Spain and Mexico. On the left side of the page, loan growth, it remains very strong in both Spain and Mexico with growth rates of 6.3% and 8.4%, respectively. In the center of the page, customer spreads. As we mentioned in the past, our results are positively correlated to interest rates in both countries. And as a result, customer spreads have declined in the last years in both countries, but as you can see on the page, at a much slower pace than the reduction observed in the interest rates due to effective price management.

And on the right side of the page, as a result of both activity and spreads, NII has grown by 3.6% in Spain and 8.3% in Mexico year-over-year. On a quarter-over-quarter basis, although not shown on the page, NII shows a slight decline, mainly due to aforementioned seasonality effects. And looking forward, it's important to mention that we are already seeing the bottom of the rate cycle in both countries. We have discussed it multiple times in the previous calls. But if the rates have reached their bottom more or less in both countries, this implies continued NII growth, obviously, with sustained activity levels.

In conclusion, in short, despite rate compression, our strong loan growth and proactive price management continued to support net interest income growth and with stabilizing rates, we are very positive for the future.

Moving to Slide #9. On the left-hand side of the slide, we continue to deliver positive jaws at the group level, supported by the strong performance of gross income, which grew, as I mentioned, 18.3% year-over-year, while operating expenses increased by 17.5%, reflecting continued investment in organic growth according to our strategic plan. It is important to note that expenses growth rate is impacted by the voluntary redundancies implemented in the first quarter with a one-off restructuring charge of approximately EUR 125 million, mainly impacting Spain and Corporate Center. Excluding this effect, cost growth would have been 13.9%.

On the right side -- on the right-hand side, our efficiency ratio, it stands at 38%, improving 24 basis points versus last year. Excluding the voluntary redundancy program, the ratio would have been 36.8%, clearly better than our guidance for the year. Turning to Slide #10. This page shows the evolution of our sound asset quality metrics in a context of strong activity growth, again, especially in the most profitable segments. On the left-hand side, at the bottom of the page, we see the evolution of cost of risk shown on a quarterly basis to allow for direct comparison between quarters.

As you can see, cost of risk stands at 154 basis points in the first quarter, broadly in line with the previous quarter. It's worth highlighting here that due to the current macroeconomic uncertainty and aligned with our prudent risk management approach, we have included a post-model adjustment of around EUR 100 million in our results this first quarter, of which the majority affects our impairment figures primarily in Spain and in Turkey. Excluding this impact, cost of risk would have been 147 basis points. And on the bottom right-hand side, both our nonperforming loan ratio and coverage ratio, they continue to improve year-over-year and also quarter-over-quarter.

Slide 11 on capital and shareholder remuneration. Starting on the left-hand side of the slide, you can see the quarter-on-quarter evolution on our CET1 ratio, which increased by 13 basis points to 12.83%. This is comfortably above our target range of 11.5% to 12%. But if you focus on the waterfall, our strong results that contributes 75 basis points to the ratio. Second, the accrual of the dividend and AT1 coupon payments deducting 40 basis points. Third, on the page, 34 basis points due to the RWAs growth. And this figure once again reflects our ability to reinvest part of our capital generation into profitable growth, while we also benefited this quarter and as in previous quarters from several risk transfer transactions, SRTs, which contributed 12 basis points to the ratio in the quarter.

And lastly, on the page, a bucket of others of 12 basis points, which comprises as in other quarters, the market-related impacts and the credit in OCI that accounting-wise neutralizes the deduction in the P&L due to hyperinflationary accounting. Then moving to the right side of the page on the nearly EUR 4 billion share buyback program that started in late December. As mentioned, we have completed the first and the second tranches, and we still have nearly EUR 1.5 billion spending on which we plan to start the execution early next week, and the date is the 6th of May.

Needless to say, again, we remain beyond the share buyback programs. We still have excess capital, and we remain fully committed to distributing our excess capital above the upper end of our CET1 target range. Moving to Page 12. We continue to make strong progress in the execution of our transformation strategy. Today, we wanted to particularly update you on AI, one of our priorities in the strategic plan, as you know. I mean, BBVA has always harnessed innovation as a critical lever to differentiate itself from competitors. We have proven it in our view, through digitalization in the last decade, and we are committed to do it again through AI.

AI, a disruptive technology in our view that has the potential to transform banking even faster and even deeper than previous technological disruptions. As you can see on the left-hand side, we are pursuing this across 8 very tangible initiatives from the personal adviser for every client, which we call Blue in the bank and the AI for the banker to other areas, to risk, to operations, software development, embedding intelligence across the entire organization. And beyond the 8, which are again very tangible initiatives, we are evolving towards a truly AI-driven bank, revamping our operating system by industrializing the creation, the governance and the operation of AI agents at scale across the bank.

This transformation is already reshaping how we serve clients, run our processes and it also empowers our people. We are seeing some very early but very promising results to that end, and we will keep updating you, as outcomes grow and consolidate in terms of what this means. But beyond these early results, once again, what truly will differentiate BBVA is our ability to scale AI across the group, similar to what we did in digital transformation.

And moving to Page #13, before handing it over to Luisa regarding our ambitious financial goals for the 2025-2028 period that we announced last year in June, I will not read each of them, but we are performing. I can very clearly confirm to you that we are performing in line or better than our original expectations in all of the metrics that you see on the page. And now for the business areas, I'll turn it to Luisa.

Thank you very much, Onur, and good morning, everyone. On Slide 15, let me start with Spain, which has delivered an excellent first quarter with net profit once again exceeding the EUR 1 billion mark. This strong performance was supported by solid revenue dynamics with gross income growing by 5.4% year-over-year and 4.3% quarter-over-quarter. Strong loan growth continues to support NII, up 3.6% year-on-year with customer spread broadly stable in the quarter.

On a quarterly basis, NII is affected by a day count effect. Adjusting for this, it would have remained largely stable. On fees, as is typical in the first quarter, they are impacted by the seasonality of asset management success fees booked in the fourth quarter. Excluding this, fees grew 5.5% quarter-on-quarter, showing healthy underlying momentum, supported by strong CIB performance and an increasing contribution from insurance.

As Onur mentioned, costs are impacted by the voluntary redundancies implemented early in the year. Excluding the one-off restructuring charge, cost growth remains well under control at 4.8% year-on-year. The expected savings will be largely realized in 2026 and are already reflected in our guidance. On asset quality, trends remain very sound.

As previously mentioned and following a prudent approach in a highly uncertain macroeconomic context, we applied a PMA, post-model adjustment, in the quarter, which led to a higher reported cost of risk. On an underlying basis, however, the cost of risk stands in line with our low 30s guidance, which we reiterate. Overall, Spain has delivered a very strong start to the year, giving us confidence in our ability to deliver on our full year guidance.

Turning to Mexico on Slide 16. BBVA Mexico once again has delivered outstanding results, with net profit reaching EUR 1.45 billion in the quarter, up 4.5% year-on-year in constant euros. This performance is driven by strong top line dynamics with gross income increasing by 10.3% year-over-year, supported by strength across all revenue lines. Net interest income increased by 8.3% year-on-year, supported by a strong loan growth, over 10%, excluding FX and resilient margins despite a declining rate environment.

As shown on this slide, customer spreads show strong resilience even as the reference rate has declined by 225 basis points since March of last year. We expect rates to bottom out this year at 6.5% from 6.75% currently. As in Spain, NII is also impacted by a typical first quarter seasonality, in this case, also affecting the credit card activity, which is very strong and typically is in the fourth quarter and also the calendar day effect.

Excluding the latter, NII would have grown above 1% quarter-on-quarter. Fees remained solid despite seasonality, again on the credit card and payment fees following the commercial campaigns of the fourth quarter. Revenues are also underpinned by strong net trading income and good performance from the insurance business reported on the other income line. Overall, strong gross revenues performance continued to drive positive jaws, while we continue to invest in future growth and maintain best-in-class efficiency with a cost-to-income ratio of 30.8%.

Asset quality remains solid with stable underlying trends across portfolios. Cost of risk stood at 345 basis points, flat quarter-on-quarter and in line with guidance. Looking ahead, we maintain our guidance for the year now with an upward bias to loan growth, supported by the strong momentum in activity across both retail and wholesale segments.

Now moving to Turkey. BBVA Turkey delivered a strong net profit of EUR 263 million, mainly driven by net interest income growth and overall robust revenue dynamics. Let me just highlight a few key points. Net interest income remained strong, supported by selective loan growth and wider TL customer spread, as lower TL deposit costs more than offset declining loan yields in a falling rate environment. Fees also showed good momentum, supported by payments, asset management and CIB fees, while net trading income also contributed positively.

Hyperinflation adjustment, however, was somewhat higher this quarter due to higher inflation metrics. And finally, on asset quality, cost of risk stood at 253 basis points, broadly stable quarter-on-quarter, reflecting elevated but manageable provisioning needs in retail portfolios. The quarter includes a PMA for macro uncertainty. Excluding this, cost of risk would have been 238 basis points, above full year guidance as anticipated in the first half, but expected to converge over the year. Overall, Turkey delivered a strong quarter. However, given the uncertain environment, we now see a downward bias to our guidance.

The Central Bank is expected to remain tight until conditions allow for a gradual resumption of the easing cycle, presumably in the second half of the year. As a result, NIM improvement could be more gradual than previously anticipated. Recall that Garanti BBVA has positive sensitivity to lower rates.

Let's turn now to South America. On Slide 18, the region delivered a very strong performance quarter with net profit close to EUR 250 million, up 16% year-on-year in current euros. These strong results were driven by solid core revenue growth across all geographies. Net interest income grew by close to 14% quarter-on-quarter, supported by healthy loan growth and customer spread expansion, particularly in Argentina and Peru. Fees also performed strongly, reflecting our continued focus on strengthening this revenue line.

Solid gross income growth supports positive jaws and efficiency gains with cost-to-income ratio improving to 41.6%. On asset quality, cost of risk stood at 276 basis points, somewhat elevated due to still high provisioning needs in Argentina's retail portfolios, where we expect a gradual improvement only towards the second half of 2026. Trends remain supportive, both in Peru and Colombia. Overall, we confirm our full year guidance for cost of risk in the region below 250 basis points. The strong start to the year reinforces our confidence to deliver on our full year guidance, also both for activity and revenue growth.

Finally, let's move to Rest of Business. As you know, rest of businesses houses -- just a reminder, houses the CIB business carried out by the branches and the digital bank's activity. In the quarter, net profit reached EUR 236 million, driven by solid revenue growth supported by strong activity momentum. Loan growth remained robust and well balanced across geographies, mainly driven by corporate lending, which represents 77% of the total book and grew by 10% quarter-over-quarter.

Activity growth translated into solid revenue growth with solid NII, remarkable evolution of fees across the board and higher net trading income supported by client activity. On cost, expense evolution continues to reflect the rollout of our strategic plan to support future growth and is in line with our guidance. Risk metrics remain very solid. Cost of risk rose to 30 basis points in the quarter, driven by higher provisioning linked to some specific exposures. Finally, given the strong performance in the quarter, we are upgrading our 2026 guidance, loan and gross revenue growth now above 30% year-on-year while maintaining cost of risk guidance at around 20 basis points.

And now back to Onur for the takeaways.

Thank you, Luisa. And lastly, for the main takeaways on Page 20, let me not take time by repeating all of the key messages. But in short, excellent results in the quarter, driven by the strength in core revenue evolution, further reinforcing our industry-leading growth, profitability and efficiency ratios. Given our positive momentum at the bottom of the page, you can also see that we have upgraded our 2026 outlook for group return on tangible equity and the rest of business reflecting improved expectations basically.

And in terms of bias, we are also more optimistic about Mexico, activity in Mexico, while remaining due to macro parameters, prudent in Turkey in a highly uncertain macroeconomic context. Very well, we can move on to Q&A. We typically finish at the hour, but let's do a positive surprise to the ones who joined at the hour. So let's start right away. Patricia?

Yes. Thank you very much. So we are ready now to start with the Q&A session. Operator, please.

[Operator Instructions] The first question goes to Francisco Riquel of Alantra.

I want to start with Mexico. Santander warned yesterday about asset quality in credit cards. So I wonder if you can please comment on asset quality trends in your credit cards business, in particular, and overall in Mexico, an update on your cost of risk guidance for the year? And then you also mentioned upside risk to loan growth forecast. I wonder if you can update on your revenue guidance as well.

NII is growing in line with loan growth in Q1. So I wonder what shall we expect for the rest of the year? And in particular, the cost of deposits is picking up in a lower interest rate environment, if you can comment on that?

The second question was also for Mexico? No?

Yes.

Okay.

Yes. Yes. Sorry, everything for Mexico.

Very good. So Paco, on the cost of risk, we feel quite confident on our guidance. It was -- we gave 3.40%. You see in the documentation that this quarter, it's 3.45%, which is exactly the same amount of the last quarter on a quarterly basis. And as we did mention, in this quarter, we took EUR 98 million, close to EUR 100 million of a post-model adjustment in all the geographies, affecting mainly Spain and Turkey, but also slightly Mexico. So the number would have been actually even better, if that post-model adjustment wasn't there.

And as you know, Mexico is least affected from all what's going on geopolitically in the world these days. So they are actually, in certain cases, positively affected from it. So -- but the underlying dynamics, and you asked specifically credit cards, we don't see any deterioration whatsoever. On the second topic on the overall -- the upside on the overall NII and loans, as you can see again on the page that we shared regarding Mexico, in the first quarter, year-over-year growth in lending is 8.4%. And more importantly, what we have seen, especially in March, you can see also the market figures, because they publish -- the regulator in Mexico published all the -- figures of all the banks, but with a monthly delay.

So the latest that you have publicly is February, but March was even better. And when we look into the pipelines, especially on the corporate side, we are seeing some positive momentum there in the pipelines as well. The first quarter macroeconomically, in terms of GDP growth, will come a bit soft in Mexico. In that environment, if we have delivered what we have delivered, which is 8.4% year-over-year, but let me focus on the quarter, quarterly growth in the lending balances is 2.6% in Mexico for the quarter only.

If you analyze it, it's actually even better than the year-over-year growth. In a relatively soft macro context, if we delivered 2.6%, if we see very positive momentum in March, if we see very positive momentum in the pipelines. And that topic of the pipeline is important because what we are seeing after a long while actually in Mexico is that also the long-term funding needs are picking up a bit. So USMCA negotiations, it's going to be marking the second quarter, but we are seeing some momentum in the country, mainly driven by this Plan Mexico of the government. So there is a lot of infrastructure and energy-related build being promoted by the government in the country. And we are seeing it in some of the projects that are coming in line, and we are seeing it in the pipelines. In short, the first quarter, even in a relatively soft macroeconomic context, was very good.

In the new context that we would be seeing triggered partially by Plan Mexico, we are quite confident that we will be delivering what we have guided you and the positive bias on the activity, which then would be reflected in the NII. The spread component of NII, you see a slight decline in the quarter, but it's 19 basis points decline in customer spread. 7 basis points of that was driven purely by mix because we have grown in the quarter more in the enterprise side versus retail. That will normalize. It's pure seasonality.

Credit cards do not grow as much in the first quarter after a very strong fourth quarter typically. So it's purely driven by mix. In the context of rates not coming down much more, again, as Luisa mentioned, our expectation for the year is 6.5%. It's going to get to 6.5%, the Central Bank rates and will stay there. In that context, again, the spreads will be supportive. All combined, we are quite positive on Mexico in short.

The next question goes to Maks Mishyn of JB Capital.

Two from my side. The first one is on Spain. Loan growth has slowed down slightly. It seems mainly due to fewer corporate loans. I was just wondering what you expect in terms of growth for 2026 and how you see demand evolving per segment? And the second one is on Turkey. You are now slightly more negative for 2026. How do you see the 2028 targets in the current macro context, please?

Luisa, do you want to take the Spain?

Yes, sure. I mean what we've been seeing in the market, as you've mentioned, is resilient and improving dynamics in growth. The market was growing around 4% last data, Bank of Spain of February. And we think that, that could be accelerating somewhat throughout the year. And so we stick to our mid-single-digit guidance of activity growth in the year. And we have been focusing, as you know, consistently in growing the areas where we feel that there's more value.

We've been focusing and growth has been structured as you see, especially in consumer and credit cards, but also across the different segments in midsized companies, in corporates and public sector as well. I think that there's seasonality in terms of the corporate growth quarter-on-quarter on the CIB because the fourth quarter was quite strong. But I think it has been offset with a good strong growth in the midsized company sector. So in general, we're seeing good dynamics.

New loan production is also positive year-on-year with growth of 5%, especially on the consumer side, 11% and the CIB sector, 12%. So new loan production is in line to achieve the guidance that we've given. Just to mention that on the mortgage side, however, we have been losing market share in the quarter and in the year. It's been -- it's down 27 basis points in the year. We do believe that the market continues to be priced inadequately.

We have been able to see more rationality in the last few months, but still our new loan production share of the market is below our natural share. And for the time being, we will continue to be selective in the mortgage growth. So this is what is reflected in the 6.3% growth and the quarter-on-quarter dynamics as well.

Maks, a very quick add-on to this. And quarter-over-quarter, again, the loan book in Spain has grown 1.2%. And in the midsized company segment, it grew 2.7%. You see the annual numbers in the presentation. But if you go to the quarterly, you can deduce the quarterly figures, but they are quite strong, 1.2% quarter-over-quarter growth. If you annualize it, again, it's quite nice.

Coming back to your second question on Turkey. First of all, what I should say is that given all what's happening in the world geopolitically and all the conflicts that we see, the war in Iran and everything, Turkey is, in our view, withstanding quite well. But the number is not because of anything else, but what we already told you. We were very clear in the fourth quarter results presentation, basically telling you that we are expecting EUR 1 billion with clear assumptions behind that on the macro parameters.

You might remember this, but we told you that, that number, around EUR 1 billion guidance, was driven by 2 very important macro parameters, 25% inflation, 32% December 2026 interest rate and 19% depreciation of the Turkish lira versus euro. Based on those assumptions was the guidance. And even at that time, I remember it very clearly that we have even provided you some sensitivities around this. Every single percentage interest rate point implies EUR 40 million. Every single inflation, which -- there are correlations in between, but every single inflation by itself independently is EUR 15 million to EUR 20 million negative impact and every single depreciation is around again, EUR 20 million.

Given the macro parameters has changed, and you might have seen it, we recently increased our inflation expectation in Turkey from 25% to 28.5%. Given the change in the macro parameters, it's a reflection of that basically, nothing more. But in the context that we are in, that's why we are saying it's a negative bias rather than a pure very clear downgrade. In the context that we are seeing, what we see is that Turkey is withstanding quite nicely. The economy management is also doing the right things in our view. So in the context that we are in, we are relatively positive, but we have to reflect those macro parameter changes into our guidance. That's the reason for the negative bias.

The next question goes to Antonio Reale of Bank of America.

It's Antonio from Bank of America. Just 2 questions for me, please. The first one on Turkey. The macro outlook for the region has changed now with inflation going the other way and rate expectations suggesting we might have a higher for longer rate environment. So my question is, how should we think about your net interest margins and cost of risk going forward? I heard your guidance. I've heard your color. But if you can give us a little bit more context as to how we should think about particularly these 2 line items in Turkey?

And maybe related to that, your costs in Turkey have been running somewhat higher than peers. And so I'm wondering if you have any initiatives that we should keep in mind when it comes to sort of targeting further efficiency gains in the region? And the second one is just really an update on capital distribution. You're about to launch the third tranche of your buyback program for EUR 1.5 billion. That's the EUR 4 billion total that you already accrued. But if I look at your CET1 ratio, you're still running well ahead of your target range, 1.5% (sic) [ 11.5% ] to 12%. So if you could give us an update as to what's coming next when it comes to distribution.

Thank you, Antonio. Let me start with the second one, which is an easy one. As we mentioned many times, and I also mentioned today during the presentation, we will start the third tranche of the EUR 4 billion, which is around EUR 1.5 billion next Wednesday. Is it, Luisa?

Yes.

On the 6th of May. That will last until the end of June, June-July period. And at that point, we will continue on our commitment, which is to deliver excess capital above the end -- the top end of our range of 12%. Above the 12%, we will return it back to the shareholders. Very simple, very clear. On Turkey, our guidance, you asked different components around this, but our guidance on Turkey, if you remember in the fourth quarter call, was around 200 basis points. But at the time, if you remember it very well, I think it's also registered in the document that it's going to be higher in the first half, and then it's going to be converging to 200 for the year. But in the first half, it's going to be higher.

And Luisa has given you the numbers already. So in the first quarter 2026, the cost of risk is -- how much was it? 2.53%. But if you isolate for the PMA that we did, if you take out the PMA impact, it's 2.38%, no?

Yes.

2.38%, which is completely in line with what we have guided you, higher in first half and converging in -- for the year to 200 with improvements in the second half. So Antonio, we have to be cautious on what we say on what's going to happen with the war. We are quite cautious in terms of the impact because we don't know. It's a different story every day. And Turkey, together with Spain, maybe a bit, but much more in Turkey, will be the ones who would be affected more from the war than anyone else.

As I mentioned, as a response to the previous question, what we have seen so far, we are in the war since February 28. What we've seen so far in Turkey is that the country is withstanding quite nicely to what's happening, again, relatively speaking. The government has taken the right reactions. They increased the interest rates. As you know, there are -- there's kind of a band in Turkey. They raised interest rates effectively from 37% to 40%. They are supporting also some of the sectors. They are supporting the inflation through fuel price management mechanism and so on.

So they are doing the right things, and it seems like they're less affected than they could have been. In that context, we are -- again, as compared to an otherwise scenario, we are relatively positive on what we have seen. But we have to see how the world evolves in the next few weeks and months. If the war continues for a long duration, which we don't discard as a scenario, but which we feel is a less likely scenario because we do think also given the political situation in the U.S. and the midterm elections in November and so on, it's not to the benefit of anyone to continue the war, but it can happen. It can continue.

In that scenario -- let's assume that the scenario that we don't discard, but we see less likely, which is an extended duration of the war. In that scenario, Turkey will be affected and cost of risk might go up. At the moment, we stick to our guidance, and that's why we have given you the numbers that we have given for the first quarter, and we are, again, maintaining our guidance. But we have to be cautious, and we have to see how the whole situation evolves in the coming quarters, in the coming months.

You asked about the NII dynamics as well. When interest rates go up, it's a negative on the margin, as also Luisa mentioned. So the 3 percentage point hike in the effective interest rate is going to be affecting in the second quarter, the NII negatively. But again, it's a relatively small hit that we can absorb. And we are activating other levers. You mentioned one of them, cost. We are activating other levers to basically tell you that we have a negative bias on Turkey because we don't know how the situation will evolve in Iran. But overall, we have been quite resilient in absorbing all the shocks that's coming as a bank in Turkey.

The next question goes to Cecilia Romero of Barclays.

My first one is on the USMCA you touched on before very lightly, but there is obviously uncertainty around renegotiation. What is your current expectation on timing and likely outcomes? Is this potential increase in volatility already reflected in your business plan assumptions for Mexico? Or are your targets still based on a relatively benign macro and trade backdrop?

And then also amid heightened geopolitical uncertainty, do you see any early signs of credit pressure anywhere? Is there any segments where you are becoming more cautious relatively to what you had assumed for the beginning of the year? And you mentioned about the worsening macro scenario and that you have done some PMA updates. Could you discuss how have your macro assumptions that you had in your business plan changed in this update?

Very good. Maybe I take the USMCA and Luisa will take the overall more related risk appetite question more broadly. So on USMCA -- Cecilia, thank you for the question. On USMCA, for the context of everyone, as you all know, it was signed in 2000, this agreement. It's a 16-year agreement. And every 6 years, it's -- sorry in 2026, there will be a revision of the situation and the parties will decide whether to keep the original 16-year arrangement, which takes the agreement to 2042. That's the context.

So this year, until July, there will be a decision on whether they extended another 6 years, but overall 16-year contract to 2042. If the parties do not agree on the full terms and this and that, what happens is that there is going to be an annual periodic review without the extension of additional 6 years, okay? That's also a possibility without the full extension every year, you continue with the contract, you continue with the agreement, but an annual review is then the base case in that second scenario.

And then there is a third scenario where the contract is basically discarded. They cancel the contract. We don't think that the third scenario of canceling the agreement is on the table at all. We do think either the first or the second one would happen, most likely the second one. And even on the second one, what we do see is that it's the continuation of what we have at the moment. And what do we have at the moment? We have basically an effective tariff of 7.2% from all the goods exported from Mexico to U.S., 7.2%. This compares very well with 18% for the rest of the world. Again, exports to U.S., rest of the world, the blended tariff is 18%. And it compares very well to China, which is 45%.

And as a result of all of this, what we have seen is that the exports of Mexico is actually up 6% in 2025, and it continues the trend in the first 2 months of the year. Exports are up, and Mexico is gaining market share. If you take the exports to U.S. or imports to U.S. from a U.S. perspective, as a market, Mexico has gained market share, while Canada and China, which are the 2 other large competitors in that market, let's say, they are losing market share. So Mexico has been gaining position in that positioning.

Why did I say all of this? Well I said all of this because in the second scenario that I mentioned, which is an annual review scenario, we do think it's the continuation of what we have. There might be certain different dimensions added to what we have currently, but that scenario is not a bad scenario at all in our view. Why is that the case that there is the intention either the first or the second scenario would happen?

I think the key important thing, I'm not sure that you have seen it, some of you might have read it, but the U.S. businesses -- Mexican businesses, for sure, but the businesses of U.S., companies of U.S.A., they basically -- predominantly in a very, very strong way, they have indicated their support for this agreement. And they said, if this agreement is not there, as the U.S. businesses, we cannot compete, very strong words in the reports of the Trade Commissioner.

In short, we expect either an extension of the contract or continuation of the status quo. There might be some changes here and there, but it doesn't fundamentally change the underlying dynamics because of a vehement support with a very strong support coming from the U.S. businesses on the contract. And as a result, we are not changing and putting a negative tune to what we see already in the first quarter, and we expect the situation to continue as such. Then the macro or the war impact.

Yes. Well, we haven't seen in the cost of risk numbers that we provided any signs of distress or pressure in terms of the outstanding credit. The PMA that we've done of around EUR 100 million is more on the cautionary side. We have very limited exposure to -- direct exposure to Middle East. So the exposure more would be to potential second round effects derived from the conflict.

And there, there are some sectors that we're monitoring closely. We've identified 12 subsectors that are most exposed, electric power supply, transportation, steel, cement, your typical sectors that would be more exposed to the context of elevated energy costs and weaker demand and higher rates. And we have conducted a detailed analysis of these clients in these sectors, and we have already started to strengthen risk analysis and new origination, assessing the potential impact of the conflict on relevant new transactions and limit renewals with particular focus on anything related to the interest rate sensitivity analysis and energy shocks.

We've developed enhanced monitoring of what we call vulnerable clients, clients that are with more leverage in some of these sectors. And we are doing forward-looking risk assessments, stress testing ratings in negatively could be affected subsector. So I think that we're doing the right thing in terms of being cautious and being disciplined in terms of risk, but we haven't seen anything specifically yet. That's why we maintain our cost of risk guidance across the footprint, and we don't currently anticipate any downturn in the asset quality cycle so far with the news that we have on the table.

The next question goes to Alvaro Serrano of Morgan Stanley.

One on Mexico and the deposit yield. It's up 3 bps in the quarter from what I can see your slide despite rates -- the average rates are down -- Central Bank rates are down in Q1. I know there's a bit of a change in mix and time deposits are up, but it seems like it's -- even so it's more of an increase than I would have guessed. Can you talk us through what's -- update us to what might be going on? And if you've had any campaign outstanding remuneration savings, in turn? Any color would be much appreciated.

And the second question is around the redundancy plan -- the voluntary redundancy plan. Can you give us a bit more color how many employees have left the firm? And do you expect more of these further down the line? I'm conscious that you're automating a lot of processes. So there might be more down the line. And just to confirm, the -- this restructuring charge is included in your full year guidance of costs in Spain.

Very well, thank you, Alvaro, as always. So regarding cost of deposits in Mexico, if you see the page that we have provided as part of the presentation, the answer is hidden in the increase in time deposits. If you also look on the right-hand side of that page, you see that the time deposits have grown by 26% year-over-year. And also in the quarter, it has gone up. We have been basically pulling in some deposits, especially from the corporate side.

We said it before. I think we were very clear on this in the previous calls, saying that we would rather -- when interest rates are quite high, we would rather fund ourselves from wholesale funding from the market rather than pure deposits because we don't want to be triggering too much of deposit price competition in the market. But when rates come down, which is the case at the moment, as you know, in 2 years -- nearly 2 years, the interest rates in Mexico have come down from 11.25% the Central Bank rate to 6.75% at the moment. And we do think the bottom of that curve is going to be 6.50% or something around that. So we are already close to the very bottom.

When we are in this environment of relatively low interest rates in Mexican standards, we told you before that we would be a bit more competitive and get more deposits because we can afford the increase of prices in the market in that sense. As such, in the last 6 months -- in the last 3 months, a bit more, we wanted to get more deposits, and we were very selective, especially on the corporate side -- corporate or midsized companies side. And we pulled in some time deposits, which then reflected in the cost of funding to 2.12% versus 2.09% of the previous quarter. But in the same time, you would see that our market funding, wholesale funding is much less than what it would have been otherwise. So that's the reason for the deposit cost in Mexico. Restructuring topic, Luisa?

Yes. On the restructuring topic, the restructuring has affected around 750 employees group-wide. The restructuring charges have been mainly booked in Corporate Center and Spain, where the payback is around 3 years. So it's a very attractive investment. And all the charges and the savings were already accounted in the guidance that we gave at the beginning of the year. That's one of the reasons why the guidance in Spain was high to -- sorry, mid- to high single-digit growth in expenses. We were already including in the guidance this voluntary redundancy charge.

The next question goes to Benjamin Toms of RBC.

The first one on Slide 9, you show group cost growth in Q1 was 14% year-on-year ex-redundancies. That's above the weighted average inflation footprint of 9%. Are you comfortable in operating with that gap over an extended period as long as you have the positive jaws? And then secondly, you upgraded your ROTE guidance this morning for '26. Your '25 to '28 guidance is for an average ROTE of 22%. Can you just remind us of the expected shape of your ROTE through '26 to 2028? Should we expect an improvement in each year of the plan? It's just interesting to know where the exit rate might be.

Very good. Thank you, Benjamin. Very quickly, just to pick up some speed. On the second question, 22% is the average of the 4 years. As we said before, we don't foresee a hockey shape there, but we do see a continuous -- relatively continuous improvement with higher return on tangible equity every year. Again, we don't have many more years to count on that period. So last year, it was 19.3%. This quarter, we did really well. 2026, in our view, would be better than 2025 as we are guiding. 2027 and '28 would be even better. But not a hockey shape, not like -- coming at the last quarter or last quarters, it's going to be continuous improvement.

And we said it before many times that the key driver of the numbers and the strategic plan is the fact that we do expect rates will be bottoming out in Europe and Mexico in the 4-year period. And once rates bottom out, as we were expecting at the end of 2025 in early 2026 for Mexico, then spreads will not be declining anymore. Activity growth will be directly flowing to the bottom line, helping us on profitability. That's the key driver of the strategic plan. And given that, we see a continuous improvement every year.

Then on the cost, our key focus has always been the jaws. If you exclude the restructuring charges, Luisa has mentioned it, but EUR 125 million in total, EUR 100 million of that is basically in the Spain geography, EUR 60 million roughly in the holding corporate center and EUR 40 million in Spain. If you exclude those, there is -- practically all the areas have positive jaws, even the smaller countries. We do have this jaw notion as a management discipline in BBVA.

If you grow, you have to deliver that growth. You might be increasing your costs, but you have to deliver that cost increase by having more revenues. And we are not very short-term oriented. We can wait, but that has to happen. And every growth should lead to capital -- organic capital generation. That's the mindset that we have. And as you can see, again, the jaws, we have this page every single quarter in -- I don't know how many years. That's the clear management discipline. So comparison with the revenue growth is very clear to us. Comparison with inflation, obviously, is less relevant as long as you, again, drive that growth with the organic capital generation that comes with it.

The next question goes to Marta Sanchez Romero of JPMorgan.

My first question is on capital allocation. We've read headlines about potential disposal of Atom Bank. You've recently announced the disposal of Garanti Romania. So that -- does this all mean that you are taking a harder look at the footprint? And have you identified how much capital you could release from the disposal of noncore assets?

And then I've got a second question on NII in Spain. Your deposit growth on an annual basis is quite impressive, 8%, year-on-year. So you are gaining market share. Can you explain what is driving that? Is just -- is that corporate deposits? Or is it more evenly split between retail, corporate, public sector? And with that, what is the balance of risk of NII in Spain? Because it looks like with a steeper yield curve with rates are today, I think we probably -- your current guidance is a bit short of what we could see.

Very good. On deposit growth, maybe Luisa, you can take it. On the capital allocation, you mentioned names, Marta, the ones that are not public or already happened. We don't comment on any of those, as you know well. But we can comment on Romania. It's -- you said it's the harder look, it's a new exercise. To us, it's an ongoing exercise. We keep doing it all the time. If you don't feel that we have the competitive power to be able to deliver above our cost of equity in any market, we always look into it. It's not a one-off exercise to us, but it's an ongoing exercise.

And in that sense, Romania, it's very consistent with what we have been saying to you all along. We do believe local scale in the traditional business model that we have, which is we have all the segments, we have all the channels, branches and so on. In that traditional business model, we do think scale is important -- local scale is important. In Romania, we do have 2% market share. It's subscale. And as a result, it doesn't deliver the cost of equity for us. We actually tried a process. It was public at the time, so I can mention it back in 2020. And now we tried again.

When the situation arises, when the market allows for it, we go for it. Otherwise, we are not also very -- we also take our time, and we are patient in these decisions. But in short, it's an ongoing exercise for us, and we always deploy capital where we do have a competitive edge to deliver above cost of equity returns. And if not, we always look into alternatives. On the deposits?

Yes. Indeed, we've been growing quite strongly on deposits year-on-year. That 7.9% number is driven by demand deposits growing 5.6%. And this is supported really by customer growth. You know that we always talk about these numbers. Last year, we grew close to 1 million clients. This year, we've, in the first quarter, grown around 250,000 clients. What we see is that when we onboard clients, 30% of the onboarded clients after 6 months bring either a payroll or pension product. These clients become active clients, more valued clients, 70% of them after 6 months.

So really, this goes back to our bread and butter of customer acquisition, where we are #2 bank in Spain in client acquisition also this year and last year. So strong growth on the back of customer acquisition and the time deposits, where we have also grown significantly year-on-year. This has been more driven by our wholesale segment, both commercial banking, corporate banking, CIB, where you know that we've been also very active and that has spurred the growth on the time deposit side.

Very good. I think there's also this question on NII guidance at the end for Spain. Marta, that page is very important to us. That page we put at the end typically in the fourth quarter, which is the guidance page and then if we do an update on it, whatever that page that we put. We discussed a lot whether in the guidance upgrade page, we should include something also related to Spain NII. We decided at the end not for a reason because at the moment, that upside would come from rates, from customer spreads.

And we do see at the moment that there is that upside, but that upside is completely driven by what's going on in the world. In the case of Mexico, we put it there as a clear upside for a reason because it's more activity driven, which is within our control. We can manage that. And we do see very clear signals again in our pipeline and in the activity in March and so on. So we felt comfortable and we put it there. But given the fact that whatever we put there, we feel obliged more or less to deliver. Obviously, we will always do the right thing, but we will deliver those numbers.

Depending -- given the situation -- that the situation in Spain is dependent on the market developments and whether the situation changes or not, we felt uncomfortable to do it at the moment. But we do have that, obviously, relatively positive outlook. If rates stay as such -- if Euribor levels stay as such, we do have the upside. We don't know how -- whether that's going to be the case, and we don't know whether the Euribor levels will be sustained or improved. So given that dependency, we decided not to put anything into the page.

The next question goes to Ignacio Ulargui of BNP Paribas.

I just have 2 questions, one on capital. Just wanted to get a bit of your thoughts on how much SRT or risk transfer usage you think you can do into the year and whether the performance of the quarter can be extrapolated for the next 3 quarters? And the second question is on rest of businesses. I mean I've seen a very strong loan growth growing -- accelerating a lot in the first quarter, 50% year-on-year. Just wanted to see whether you will prioritize NII or fees on that because I mean I have seen -- I think NII is growing slightly below that level. Just wanted to see how should we think about revenue growth in that 30% growth that you have given above 30% growth that you have given? How should we think between NII and fees?

Very good. SRTs, do you want to take it, Luisa?

Yes. Well, I think that you've seen that we've done 30 basis -- 12 basis points of SRTs this quarter. Last quarter -- the first quarter of last year, we did around 13 basis points. We are not changing the guidance that we gave to the market, which is to do between 30 and 40 basis points this year, and that's what we are on track to do. We're seeing the deals being very well received by the market. We've done -- we've closed very good deals in the quarter with improved levels on the levels that we saw last year. So we will move forward with our SRT and asset mobilization plan throughout the year and in line with the guidance that we've given to the market.

And on the rest of business, I would give you a very conceptual response and apologies for that, Maria, but would we prioritize NII or fees, really, we would prioritize the client. And whatever the client needs are, in some cases, it's like debt issuances, which we are very active in many of the geographies. It's very much fee driven, but we also bank with the client in many other ways. So NII is also going to be very strong.

The numbers that you see in the page, it's very obvious that fees are growing much higher than NII. It is not because of the rest of business or the CIB business that is underneath. As you know, rest of business, that page covers 2 main areas: CIB beyond the footprint plus the digital banks. And digital banks affects the NII evolution in a negative way. In that sense, NII is not growing as much as fees because of the digital bank impact. You should be -- we should acknowledge that fact to you first.

But beyond that, we are expecting -- we have a clear fee bias. As much as possible, we would like to increase the fee percentage of that business, but it's going to be across the board. In the pure CIB business, it's going to be coming NII and fees, both of them.

The next question goes to Sofie Peterzens of Goldman Sachs.

Here is Sofie from Goldman Sachs. So my first question would be if you could -- it's going back a little bit to the previous question, but if you could elaborate a little bit on your performance in Italy and Germany? And would you consider kind of expanding into any other European countries? And then my second question would be, could you just remind us how much of your net income and capital is hedged in Mexico and Turkey?

Very good. Hedges, we know the numbers by heart, but Luisa, why don't you take that one. On performance of Italy and Germany, Sofie, we only provide at the moment the customer numbers. In Italy, we are at 900,000 customers. We launched it in 2021, practically. So 900,000 customers in this period, in our view, is very good, much better than our business plan. And then in Germany, we launched in July -- June, July 2025, 9 months ago, and we are already above 100,000 customers, again, much better than our business plan.

I did mention this to you before, the digital bank proposition, it's going much better than what we originally thought. It's better than business plan in both countries, but these are relatively long-term plays. Typically, digital banks in a certain market, not only us, but others, it takes them 9, 10 years to break even. In our case, it's going to be much earlier than that in the countries that we are in. We are seeing so positive numbers that it's going to be earlier than that. But at the moment, they are still obviously posting losses. And once we have some maturity in these businesses, we will start also making it transparent to all of you on what the underlying numbers are. On the second question, Luisa?

Yes. So, with regards to Turkey -- starting with Turkey, we maintain at the capital level hedges of around 43%, which is flattish quarter-on-quarter. We maintain a sensitivity of around 2 basis points negative to a 10% depreciation of the Turkish lira. And here, just to remind you, the cost of hedging is around 0.5 basis points per month. And on the P&L side, we usually in Turkey have a level of coverage of around 33%.

In Mexico, the capital -- excess capital that we are hedging is around 44%. It's slightly lower than the number that we had at December of '25. We had a 57% -- 55%, 57% number. But the sensitivity to a 10% depreciation remains the same. Why? Because what we've been doing is basically putting on more option structure into the hedges in order to achieve more optimization on the cost side, which means that the sensitivity to a 10% depreciation of the Mexican peso would still be around 15 basis points, the same as last quarter. But the cost of the hedges now instead of being 0.5 is around 0.2 basis points per month. So we think it's a better strategy in terms of cost optimization of the hedges, while protecting the capital in the same level. And as for the P&L, in Mexico, we are hedging around 37% of expected next 12-month results in Mexico.

The next question goes to Britta Schmidt of Autonomous Research.

Two questions on Mexico, please. With the positive bias on the loan growth outlook, should we also read that across to the net interest income where previously guided to NII growth slightly below loan growth, also considering that you're still growing quite strongly in consumer finance? And then secondly, on Mexico, the jaws here are flat. They were flat this quarter year-on-year, partly thanks to stronger trading income, but the cost growth still remains very high. Maybe you can comment a little bit on the cost drivers here, what the outlook is and whether you expect flat jaws for the year as well or whether that could deteriorate a little bit?

Very good. On the -- thank you, Britta, for the questions. On NII, slightly below loan growth still holds because as you can imagine, the average customer spreads last year versus this year would be a slight decline in any case. So it's going to be lower than the activity growth. But given the fact that we are positive on activity growth, that's going to be reflected obviously into the NII as well. We don't have now more negative view on the spread at all. The only thing is last year versus this year, as we were guiding in the previous quarter, it's going to be a bit lower. That's why it's going to be lower than the activity growth.

On the jaws, you said it's slightly positive, but it's very important to us. It's a dialogue that I have with all of my country managers all the time. It is positive. It is positive. It might be a small positive, but it is positive, and we will keep that discipline of -- management discipline of jaws in that geography as well.

The next question goes to Andrea Filtri of Mediobanca.

Could you please provide a recap of the breakdown in each unit in this quarter for the PMAs you have taken and the restructuring charges that you have booked? And the second question is, do you foresee any improvement in the EU regulation for banks, given the ongoing revisions and reassessments? And when do you expect the approval of the Danish compromise from ECB for BBVA?

Very good. Thank you, Andrea, for the questions. On the PMA, we don't provide the full detailed breakdown, but what we have already said is more than half is basically 2 countries, Turkey and Spain, the 2 of them. Spain because of the size, Turkey because of the sensitivity to the crisis much more than other geographies. And then the second question, the Danish compromise, as you might have seen, EBA, European Banking Authority, has published the list, and we already have the financial conglomerate. Now it has to be reflected into Danish compromise by an authorization from the ECB. That process is ongoing, and we expect -- it's ongoing as part of a normal procedure. We expect in the second quarter to have the full qualification.

The next question goes to Borja Ramirez of Citi.

I have 2. Firstly, on LatAm macro, yesterday, one of your competitors indicated that LatAm economies should be relatively better shielded, as they are oil producing and around 50% of your net profit last year came from LatAm. So I would like to ask if you could provide more details. And linked to this, I think the Mexican peso has performed better than your business plan expectations. So maybe there could be some upside to your ROTE target for this year.

And then secondly, on Spain NII, following up on the point on the deposits, where I think there was actually a decline in cost of deposits in the quarter, despite your market share gains. I saw that the ALCO also increased in Spain. And your -- I think your NII sensitivity to higher rates in Spain is higher than your peers at 4% to 5% of NII for every 100 bps rate. So maybe you're better positioned in case of higher rates in Europe.

Very good. Thank you, Borja, for the questions. The first one, you are 100% right. I mean we keep saying it all the time. So sometimes I feel like I'm repeating myself and some of you have been in this job for so long. So sorry for the repetition, but there are 2 strengths of BBVA that is not very easy to replicate. Actually, we call them the 3 of them, but -- let me count all 3 of them. Number one is the diversification, diversification being in different countries and being in countries where the leverage ratios are relatively low, which means there is room for growth in lending, in banking, in those geographies that we are present.

The second thing that we always say, which is very different from other banks in our view and which makes a big difference in banking, which is we are very large wherever we are. We have the best ROEs in the countries that we are in. Having the best bank, having the largest bank in the countries that you are in always, always is the best thing that you can have in banking.

And then the third one is we think we are great in embracing innovation. We have done it in digitalization. And as a result of that, our customer acquisition engines, our sales engines work much better because we are, in our humble view, better than competitors in digital. And you touched upon the first point of this, which is the diversification. So the macro situation, there is a lot of uncertainty still out there. Again, every day is a new day. But when we look into the potential impact of an extended duration crisis in the Middle East, what we see is that in terms of different geographies, Latin American geographies are either neutral or positive.

Argentina and Colombia would be positively affected because they are, in general, oil exporters. Obviously, there are going to be other transmission mechanisms that might be hurting them. Inflation might go up, consumer sentiment might go down and so on. But we still think they would be relatively well protected and even positively may be impacted from this. And Mexico and Peru also. So Latin American geographies are relatively isolated from this.

And they might benefit in terms of tourism flows. They might benefit from supply chain redirections. They might benefit from the fact that, again, they are exporters in general of commodities. In short, LatAm, we have a relatively positive perspective from the impact of the crisis on those geographies, which is again talking to the strength of our diversification. You asked similarly related to this, whether the Mexican peso will stay at these appreciated levels. We don't know. Obviously, we have had -- in our plan, we still see some more depreciation to come along. But if it continues at these levels, that's an additional upside that you can put into your models. And then the second topic about interest NII and interest rate sensitivity, Luisa, do you want to comment?

Yes. Well, first, on the NII, on the customer spread topic and the evolution of yields and costs, I would say that -- and I think Onur has mentioned this as well that we expect quarter-on-quarter spreads to remain stable in the year, perhaps picking up at the end of the year. And this is because primarily most of the mortgage book has already repriced. As you know, we -- different to other players in Spain, we tend to reprice quite quickly our mortgage book and 2/3 of it reprices every 6 months. So that yield compression is on the floating rate part of our mortgages, which is around 46%, is already mostly achieved.

So on the NII, customer spread side, more or less stable unless, to Onur's point, interest rates change. That's more or less what we have in the guidance contemplated. Now with regards to the ALCO portfolio, the ALCO portfolio is contributing positively on the quarter with the NII. We have increased the ALCO book in the quarter by EUR 1.7 billion. We were actually able to purchase bonds at yields above 3.2%. I think it was a very successful strategy. But nevertheless, I think that we're maintaining our interest rate sensitivity within the same levels that we had at the end of the year between 4% and 5%.

As you know, typically, our balance sheet, if we don't do anything, generates through time, a higher sensitivity because of the weight of our site deposits. So what we're doing now basically is maintaining this sensitivity of 4% to 5% and we will see, depending on what the policy rate environment and the Euribor does, whether we decide or when we decide, if we decide to increase the rate sensitivity of the book or not.

But as compared to our Spanish peers, we have a better higher sensitivity, and it might help us if rates continue to go up, for example. Very good.

The final question goes to Ignacio Cerezo of UBS.

The first one is on trading. I know it's probably a difficult one to answer, but if you can give us a bit of a breakdown basically of why the figure has been so strong across most geographies, where that strength is coming from? And kind of any comment you can make around recurrence and sustainability, seasonality? I mean, just a bit of color basically on how recurring that number might be?

And then the second one, a follow-up actually to what Britta was asking about the cost growth in Mexico and the jaws. I mean do you think there is part of the cost growth today, which is based on kind of front-loading investments and the jaws actually can start improving over time? Or do you think it's the cost growth you need to incur to generate the revenue in Mexico?

Jaws in Mexico and trading income. I take the trading income, you take the jaws, Luisa, if that's okay. Trading income, it's mainly global markets, Ignacio. Mainly global markets. We have been mentioning this. We do think we can create value by increasing our size in the CIB business in a very cautious way, in a risk-conscious way, but also in the way that we do it, which is cross-border focused, sustainability focused, banking on our clients in their business outside our core geographies.

We mentioned it in this strategic talks that we did with most of you a few months ago, 40% of our business in the CIB business now, 40% is coming from cross-border, basically deals, things that we do for our clients beyond their own geography, but they are our clients in their core geography. And 40% of our business in CIB is global transaction banking, as we call it, which is transaction banking focused.

So our CIB growth is basically focused on corporate banking rather than pure investment banking, and that is helping us. And that is also helping us in the net trading income because in this first quarter, our clients, not only it's the leverage but it is the topic of our clients, trading and that is helping us as we grow that business. And one number there in the trading number, 40% of the global markets revenue that we have in -- roughly -- I'm giving you the rough numbers, 40% of the global markets revenue that is booked under NTI is basically the FX business.

Given the volatility in the market, our clients have traded, especially on the FX side. We are in many geographies. We are an emerging markets bank as well, and that has helped big time on the Global Markets business. There's also one other component, which is a smaller component, but an important one, given the steepening of the curves in some geographies, especially Spain and Mexico, we have extended the duration. You can see it also in the presentation, in the appendix that in the ALCO book, we have extended the duration a bit, which meant we sold short end of the curve, which was NTI, and we bought long end of the curve. NII would not be affected that much because of the steepening of the curve, but that also brought some NTI. But the core driver was the Global Markets business. On the jaws in Mexico, Luisa?

Well, what I would say is that, I mean, there's -- we always invest at different horizon period. So there are some investments that we do now that we expect the payback will be this year, next year or even sometimes 2 or 3 years. So I think that more than specifically how much is front-loading or not, I would just say that our commitment is to that efficiency level in Mexico that we have at low 30s. Efficiency is 30.8%. And that's the guidance that we've given also for our midterm and long-term goals, and I think that's what we're committed to delivering.

Yes. So thank you very much, Ignacio. Thank you, all of you for participating in today's call. As always, the Investor Relations team remains at your disposal for any additional questions or clarifications. Have a great day. Thank you.

Thank you to all of you.

Thank you.

Great. Thank you, everybody, for coming to this session with BBVA. I'm delighted to welcome one more year, Luisa Gomez Bravo, CFO of the -- of BBVA. Thanks for coming one more year, Luisa.

Thank you, Alvaro, for having me.

As usual, we're going to start with a polling question to set the scene.

I'm nervous now with the polling.

It's not oil related. What's the primary catalyst of BBVA stock to outperform over the next 12 months? #1, further buybacks on top of the EUR 4 billion announced in December. #2, margins in Mexico to prove more resilient in 2026.

#3, positive outcome of the USMCA negotiations between Mexico and the U.S. Four, Spain outperforming operating trends; and #5, Turkey making more progress towards the end of hyperinflation accounting.

I don't get to vote.

I'm going to ask you now. Margins in Mexico. That's not a complete surprise, but what would you have voted?

I would say that Mexico probably is a good supporting story for BBVA in terms of performance, especially because last year was quite challenging, but we'll get to that.

I'm sure -- yes, we're definitely going to touch on that. Why don't we start with the overall guidance? You gave the full year results. It was seen as cautious. We can start with how you see the overall outlook of the bank. Not an easy environment, of course, at the moment. How impactful do you think the sort of Middle East instability will be on your business do you think? How are you seeing things today with the complexities of the current environment?

Yes. Well, obviously, let's start with that, now with the geopolitical risk. I mean the dimensions to geopolitical risk are numerous. It's -- now you can talk about Venezuela, Ukraine war, now the Middle East. And even within the Middle East, there are a lot of angles to the geopolitical risk situation. But the central scenario that we have at BBVA is that this is more of a short-term duration situation than a long-term duration situation.

We can qualify that in a minute. But within that context of this being a short-lived conflict, short-lived, meaning weeks, not months. And we haven't fundamentally changed our outlook in terms of the macro impacts on our footprint. We remain quite positive in that outlook even with a complicated first quarter of the year with in terms of energy prices as we're seeing.

In that context, I would say that Turkey is the geography in our footprint that is more exposed to energy shocks and prices, especially on the pass-through to inflation. And as you know, the important and the commitment of the government has been to decreasing inflation. So that's the geography within our footprint that will be more negatively affected.

But in general, I think that we don't see even in that case, in the short-lived situation, a scenario that derails very much from the view that we had on the macro side of Turkey of decreasing inflation towards the end of the year and decreasing rates. Now if the conflict is longer, you would see a little bit more of a slowdown in the economies. Again, Turkey then would probably see a level of inflation that doesn't decrease and a situation in rates that doesn't decrease as well.

Spain is a geography that is also exposed to energy because it's an importer of crude. But Spain has buffers that could cushion that in the sense the energy mix in Spain has significantly changed over the past few years. And then as you know, the service economy versus the European Union, it would still be, I think, a positive performer in that context, and you have tourism as well that we think could be a positive catalyst for Spain as well in terms of GDP growth this year.

And I think the rest of the footprint is not that significantly impacted even in a prolonged conflict because Mexico, and we'll talk about Mexico now, Mexico dynamics are more driven by the U.S., the negotiation of the USMCA and the dynamics, internal dynamics of Mexico than the energy shock or the conflict, which is very far away.

I think in the context of what we're seeing in that kind of scenario where we don't see a significant change in terms of our outlook or in an alternative risk scenario, BBVA, I think, will perform very well versus the peers because I think we have 3 basic structural advantages. The first one is the diversification. As we're talking now, the economies and the footprint behave differently.

We saw that in the price crisis. We saw that in the Ukraine war as well. The diversification of the footprint is a point of resilience for BBVA and outperformance in these scenarios. And in addition to that, we are in low leverage economies. So the economies in the private credit is low, and that has been a support for continued growth going forward, and that is what we are expecting as well.

So the first structural advantage is the diversification of the BBVA in low leveraged economies that promote growth with an adequate asset quality. The second structural advantage, I think, when we talked about this very many times is that we have leading franchises in the countries where we operate. Having local scale is very important to ensure sustainability of profits going forward.

And we have the adequate scale in all the countries, and we have superior ROEs versus the average of the system as well, sometimes in a very significant fashion. Again, going back to Mexico, we have an ROE of around 26% and the average of the system is around 16%, but you take that to Turkey, you take that to Spain, and that outperformance is still there. So I think that's a very relevant part of our equity story is having leading franchises and adequate scale in the countries where we operate.

And the third structural advantage has to do with our strategy. It has to do with the strategy that we've been developing around sustainability and the business opportunities that provides. It has to do with the digitization strategy that we've been investing and deploying and leading all along. It has to do with the innovation mindset of BBVA and how it is embracing now the challenge of AI in a very positive fashion.

And I think that is also a structural advantage. That allows us to be, I think, very positive even with this uncertain outlook in the capacity of BBVA to continue to deliver, outperforming the peers with growth superior profitability with that guidance that we gave around 20% of RoTE this year and continue to deliver shareholder remuneration to our investors. So very -- in that sense, quite positive.

Resilience sounds like it. Another obviously, very big topic and even greater than last year is everything around artificial intelligence. From an operational point of view, how is BBVA thinking about it? And we had a polling question in the morning where this audience sees it as a net benefit. But of course, the market has doubted around disruption and even asset quality. How does BBVA think about it?

Well, first of all, we do believe that this is going to be a tremendous disruption for all of the sectors, not just banking. I think that we definitely perceive that it's going to be disruptive and a very significant transformation. And I think the difference to prior transformation is the speed of change. And that generates more tension because generally, sectors need time to adapt to changes in transformation, and this is happening at a very quick speed.

Within that transformation, I think the bank as a sector is probably going to be not the first in line to be disruptive, probably when people manage their money, they tend to be cautious of giving an agent complete capacity to manage your money versus, for example, buying sneakers through an agent, right? So having said that, I think that the banks in itself are going to be very much disrupted.

And there is a question, again, of finding the winners of the losers, right, across the sectors and BBVA intends to be a winner. The situation, we definitely believe that this is an opportunity for us. And I think the winners are going to be characterized, I think, by 3 things. First of all, do you have a trusted client relationship? It's very important when clients manage their money to put the trust in the right agent, bank, financial services provider.

Do you have a brand that acknowledges and represents that trust and do you -- have you put your clients first in terms of relationship building? Have you been -- how far ahead are you in your digitization strategy because that allows you to be able to leapfrog a lot with AI. And the second thing is, have you been investing in data? And have you been doing your homework with regards to data.

And in that sense, BBVA, again, sees this is a tremendous opportunity on the back of our experience in digital banking. And it's true that sometimes the questions that we get asked are very specific in terms of impact, et cetera, and it's very difficult and we don't know. But what we do know from being leaders in the digitization in the past is that fast forward 10 years down the line, we've been able to scale the bank significantly.

We're acquiring 11 million clients, 2/3 of that is done end-to-end digitally, and we have the capacity to deliver on the customer experience. And we are following -- this is my name, an AAA strategy, AAA, but this is my name. It's not how we call it internally, but it's basically based on the agenda. You have -- we've talked about the focused agenda. The second thing has to do with adoption, especially employee adoption.

And the third thing has to do with allocation of resources. So let me be a little bit more explicit in that sense. And this, again, follows on the playbook that we followed with digital banking. The agenda is very important because it has to be, as we are driving it top down, the management of the bank is very significantly involved in this top-down agenda with regards to AI.

We have monthly meetings where we look at the review, and this is a holistic agenda for the whole group. In that context, we have been working on a 3-pronged strategy that has to do with customer and how we're seeing the agentic relationship of our customers with the bank. The second thing has to do with employees and how we can support our employees to leverage on the commercial relationships much faster and better.

And the third thing has to do with productivity and productivity gains, which are probably the sooner to capture in that regard. But it's that 3-pronged strategy with a very focused agenda driven top down that I think is the first part of our very much driven strategy. The second thing has to do with adoption. So when we started the digital strategy and transformation of the group, there were a lot of trial and errors as within any journey.

But one of the things that we decided very early in the beginning is that we didn't want to have a separate online bank ,which I respect very much the peers that do. But at the beginning, we did have an online bank, you may remember, [indiscernible]. Yes. So we decided that in order to capture the transformation, especially with regards to clients and client relationships and putting the client at the center, you have to transform the whole bank.

And that means transforming the branch relationship model and the way you are interacting with your clients. So adoption for us is very important. We have 75,000 of our employees. We are 127,000 employee bank. 75,000 of our employees are using Gemini. We also have ChatGPT licenses, which are -- we are also rolling out. I would say 60% of our employees, 60% are using these tools on a daily basis.

And this is very important because you need to build on that to be able to provide that capacity to roll out and embrace the opportunity in a much larger way. So that is, I think, very important adoption. From adoption, you go, and you move on to best scaling best practices and so on and so forth. So that is the second point, I would say, that is important. And the third thing that is important for us is allocation of resources.

And this doesn't mean multiplying by x the investments that we do. It means that we need to allocate resources to this priority. Now we -- again, taking on the playbook of digital, we developed something that we call the single development agenda, which is the way we allocate resources globally within the group. Our cash out is driven by the strategic priorities that we have on a global level.

If you don't have a tool that allows you to deploy the cash out adequately in a focused and targeted way, what tends to happen in general, and I know this from experience, is that the initiatives that are starting never get to move on because there are so many other pressing issues that you want to invest in on a day-to-day basis that people tend not to have that focus.

So we have -- the single development agenda has allowed us and allows us to prioritize resources in an efficient way to allocate them now to what we're doing in AI. So I think that, that is the strategy that we have. Again, we are exactly very, very excited about this opportunity because we think it's going to be a source of more scale, more client engagement with the BBVA and more business opportunities and profitability going forward.

I got a few questions on the regions. Let's start with Mexico. You guided to mid- to high single-digit NII growth. What assumptions are you factoring in, given the strong loan growth -- sorry, the strong growth we saw in 2025, at least we think that looks very conservative. I don't know to what extent fintech competition is part of that. How do you see that playing out?

Okay. So 2 questions in one, but I'll piecemeal the first. I think it's important always to start with the macro backdrop, which again is -- I think, is important. Mexico is the only geography in the footprint that we've upgraded in terms of macro-GDP dynamics this year. We started the year thinking that GDP growth is going to be 1.2% higher than last year. We've upgraded that to 1.8%.

We're seeing quite positive macro dynamics in Mexico stemming from salary and minimum wage increases that continue to support private demand. We're also seeing investments in the country being quite more positive this year, contributing to GDP around 7% versus last year, it was a negative number. This is on the back of the plan in Mexico that was announced and tangibilize by Sheinbaum recently.

So we're quite positive in the dynamics that we're seeing in the market on the macro side. But also, this is coming from last year, and I want to remember last year was so complicated on that front because remember, we had Sheinbaum, who was the new President. We had a peso that had depreciated significantly in '24. We had obviously the tariff discussion and disruption.

And on the back of that, you had Mexico actually delivering not only with a better macro performance that we were expecting at the beginning of the year, but with FDI increasing by almost 14% in the year, right, record numbers of foreign direct investment in Mexico at around EUR 41 billion. We saw exports increasing close to 7%. We saw an effective tariff rate below 8%, obviously, much better in relative terms than any others, including obviously, the main competitor to Mexico, which is China.

We saw an increased share of imports from the U.S. into the [ U.S. ] at 15.8%, the largest trading partner increasing its market share into imports. And that has been in a year that was very volatile for Mexico. So we are quite positive on what we're seeing now. And obviously, we're now geared towards the USMCA discussions.

And we're seeing in the conversations that we're having with the Mexican government officials, with Mexican business owners and business people, quite a constructive mood regarding the USMCA. And this is not just on the back of Mexico; it's on the back of the U.S. sectors lobbying the Trump administration to renew the USMCA with a recent letter signed by 69 lobbying associations to Trump promoting the discussions and the further improvements.

And of course, you never know with how things could go. But I think today, we are seeing quite a constructive mood around the USMCA. So the backdrop in terms of the macro is important. But also, we always say with regards to BBVA in Mexico, how important it is to be in a country where the leverage ratio is 35%, which is one of the lowest in the emerging market economies and how that can support and sustain growth in a structural way going forward.

And as I was saying before, even in the context of a situation where there is a prolonged conflict in the Middle East, Mexico is more driven by what's going on in the U.S. and what's going on with the USMCA and what's going on with the Mexico and an internal dynamics than today by this situation. So that's the macro backdrop, which I think is important, and it took a little bit longer, but I think it sets the answer to the first question that you were saying about our guidance with regards to Mexico.

So when you look at the NII, we did give guidance of mid- to high single-digit growth. And why is that? So on the activity side, we are seeing positive dynamics. The beginning of the year has been quite positive, very similar to what we saw at the end of the year, double-digit growth in retail portfolios, slower wholesale portfolios, but also driven by, I think, something that has been a positive surprise to me, which has been the performance of the Mexican peso.

The Mexican peso has appreciated 3% year-to-date. We, in our guidance, had expected the Mexican peso to depreciate. So that's a factor that also weighs down the evolution of the wholesale portfolios because of the dollar loans in Mexico. But overall, I would say that positive views on the beginning of the year of the dynamics that we're seeing in Mexico. Rates is the second bucket in the NII.

And that's what more conditions are high to single -- sorry, mid- to high single-digit growth in NII because remember, we had a high single-digit growth in activity. Why is that? Because rates came down 300 basis points last year. So obviously, you still have some average margin compression that needs to feed through the customer spreads this year. And that's why we gave that guidance.

On the back of that, I would also say there's a third component in NII, which is the ALCO portfolios. We have been managing the ALCO book to extend durations in Mexico, and that has also been the case at the beginning of the year. So obviously, as rates come down, the positive contribution from the ALCO is also embedded in that guidance. So that explains a little bit the mid- to high single-digit guidance on NII.

And last but not least, on the neobank discussion, I think we've said these many times. I think BBVA Mexico is definitely the best bank in Mexico. It's one of the best banks, I think, in the world, but it is the best fintech in Mexico. And I think that it is obviously not just us saying that, I think it's the data that walks the talk. And you see that we have been acquiring clients around 4.7 million clients acquired last year. 81% of that was done end-to-end digitally.

We are selling around 58% of value on digital as well. So we are competing head on the digital front. But not just that, also with the UX. Obviously, we have a value prop in terms of UX, frictionless access to the bank that supports an NPS score of 70%, 7-0%. That is the highest NPS score in the bank in the country, actually better than the neobank which are monoliners and we are a universal bank. So achieving those high scores is not by accident.

It's about over 10 years of investment in digital and the UX experience of our clients on the digital side. And third, I would say, also highlighting the capacity that we have to compete against the neobanks, especially on the monoliners and the credit card side, where last year, we remain the largest player in the market with a 31.4% market share, including the neobanks and gaining 50 basis points market share also on the back of a previous year when we also gained market share.

So very focused on defending the overlapping clients that we have with the neobanks. What we've seen and we monitor the cohorts, and we see that 12 months forward, when we start to see a client moving their transactionality on the card, let's say, to the neobanks, we put focus on that.

And 12 months later, we're recapturing and regaining that expenditure on cards. So very focused competition there. on the bank, again, on a very significant cost advantages, which is being in the transactionality to the clients, which ensures funding growth for the future.

We have a cost of funds that is 2.5% comparing to 4% of the average of the sector, not even within the -- considering the neobanks with that 44% market share in payrolls and 38% acquiring market share, which supports again the scope of growth going forward to support and fuel the opportunities that we're seeing and continued growth on the lending side as the economy formalizes and we're able to capture that growth with sustained low levels of cost to income even better than some of the neobanks at 30s, low 30s, which is our guidance for our midterm goal. So very positive across the board with Mexico.

Maybe switching regions, Spain. In Spain, your loan growth has been pretty impressive last year, 8% growth. How do you see the outlook from here? And is that growth driving part of the cost evolution that was very much debated for the full year's results?

Yes. Well, again, 2 seconds, not 2 minutes on the macro backdrop because Spain -- again, the performance of Spain has been surprisingly positive versus the European Union with that delta quite supportive today. We have a view of GDP growth of 2.4% for this year in Spain, the same number for next year. And what we see is that the dynamic is supported by private internal demand, good job employment dynamics.

Obviously, immigration has helped as well in this regard and improvement in investments also in the country, especially as construction of housing continues to add to the GDP growth going forward. So in that sense, I think positive macro backdrop to Spain. And in addition, again, I talk about leverage because Spain has been deleveraging for over 15 years. It's true that last year, we started to grow. We've been growing above the market in -- for the past few years.

But structurally speaking, you're starting from a point of low leverage in the economy, definitely lower leverage in the private side on the households and corporates than our European Union partners. So I think positive macro fundamentals also with a good backdrop in Spain. In that context, we have been focusing on growth in specific pockets of where we see value. The first one is the enterprise segment.

In the enterprise segment, we have been working over the past few years in growing our share of the enterprise segment. We have seen that, that is an area of profitability and profitable growth for us. Last year, we grew our market share around 58 basis points. But on the back of the past 5 years, we've been growing around 260 basis points all in. So really a focused strategy that hinges on ensuring that we are the primary bank to our enterprise clients.

When you are the primary bank to an enterprise client, you get twice the level of gross revenues than when you are not a primary bank. Primary bank means that you have to be in the transactionality of those clients. And we put a lot of focus on segmentation, putting focus and RM devoted to midsize -- especially midsized companies. We put a lot of focus on digital, preapproved loans, time to cash. Time to cash is important.

We're able to make sure that the approval process of our credit is more frictionless. So it all ties in sector-driven approach. It all ties into being able, again, to deliver on growth. And we do expect this year, we started the year, I think, again, similar to Mexico with very good activity dynamics in Spain. And we expect the same similar behavior into this year with our guidance of mid-single-digit growth in activity, supporting by increase in enterprise, but also increase in consumer loans.

In consumer loans, we have a 60% market share above our 14% market share overall. And this is, again, a focus of many years of work, again, digital back with preapproved loans and instant cash. And I think that has allowed us again to grow in a profitable segment that is not very material overall in the lending books of the banks in Spain, but we've put a lot of focus on that side.

So in that sense, I think we're very comfortable with the dynamics that we're seeing, supporting our guidance again, this year of that low-to-single to mid-single-digit growth in NII. And with regards to the cost, I think we are going to continue to be very cost disciplined in Spain, again, on the back of the best efficiency levels in Spain against the rest of the banks.

The guidance that we gave this year, which was mid- to high single-digit growth on cost is basically driven by the last year's impact, one-off impact that we had on our VAT impact. We had an inspection on VAT as a result of that inspection, we were -- we recognized a new criterion in the way we were looking at VAT, and that meant that we had lower expenses and that --

It is like back in Q2 last year.

Yes, in Q2 last year, and that's why with a comparison basis, we had to ensure that the guidance we gave was taken that into account. But overall, I'd say you can expect the bank in Spain too, excluding that impact, grow its expenses around 3% to 4%, which I think is reasonable with the context of investments that we need to continue to do and with the efficiency levels that we want to target to, which, as you know, in our midterm plan is around low 30s. So I think that's pretty consistent as well.

Right. I've got a couple of more questions. I want to leave time for the audience. But on Turkey, at the beginning, you touched on the impacts from the energy situation. How do you see the inflation -- disinflation path in the country? You're aiming for EUR 1 billion profits this year. Maybe you can discuss the underlying sort of margin revenue dynamics there and what's the longer-term earnings power?

Yes. Well, again, the macro, I would say that in general, I mean, the macro is always important when you're in the banking industry. But I think in Turkey, especially so because we have been looking at the normalization of the economy on the back of lowering inflation rates.

And I think we've been, I think, very vocal in saying that we do believe that the current economic team in place, both at the Central Bank and at the administration has been very supportive and committed to decreasing those inflation levels. And I think they have been delivering on that over the past couple of years in a complicated scenario as well. So this year, again, with the short-term duration cycle, we do expect Turkey to continue to lower its inflation targets and lower its interest rates.

But again, this is a macro scenario that is very sensitive to the current dynamics, again, on the energy prices/tourism, right? So the situation there, as you know, is that for us, it's very important that inflation continues to come down. You may remember that I think it was a couple of years ago, 2023, the impact that we had from our hyperinflationary impact in our accounts was above EUR 2 billion.

Last year, it came down to EUR 0.9 billion. So even with hyperinflationary accounting, the decrease in inflation will be supportive for improvement in Garanti's earnings. But to your question, we need to see that inflation continues to come down. That is important for the contribution of guarantee to BBVA. And again, the commitment is there from the government to act.

What we saw actually at the beginning of the crisis when the situation started to develop. We saw Turkey put forward an increase of overnight rates from 37% to 40%. It ensured that also intervening in the market in terms of stabilizing the lira, which has a very strong pass-through to inflation. The energy prices, it was only translating 25% of the increase in energy to the population.

So it's been quite quick to react, and we expect Turkey to be able to quickly react to the situation. But you were asking about the underlying trends. And I think there, what is more relevant for us on the underlying side is that you see Turkey outperforming its peers in terms of profitability. It had a local ROE of 30% versus the average of its peers of 20% last year.

And it has been very focused on the management of spreads, which has been quite complicated, I would say, because of the macro prudential policy in place in Turkey. In that context, what we're seeing at the beginning of the year, again, are adequate good activity dynamics. As you know, there are caps on activity in Turkey, but a very good management of the spread.

So I think that -- especially on the cost of funding, I think that's the critical element to see in Turkey. And so that has been quite supportive at the beginning of the year, I would say. And then you have the asset quality dynamics. And as you know, asset quality had been increasing in terms of cost of risk, but still in a normalized level.

We did guide this year to a higher cost of risk at the beginning of the first half of the year as rates continue to be high, and we need to see those rates come down to be supportive of asset quality, improved asset quality dynamics, which we're expecting to be better in the second half of the year, and that's where we are today with the context of the information that we're seeing.

Last one for me, and then I'll open up. Obviously, you announced -- in December, you announced the EUR 4 billion buyback, you reduced the CET1 to 12.7%, and you've been very firm that you can run the bank with 12%. And that also you made it clear that it won't take you very long to get there, I think, were the words more or less that I heard during last year. Should we expect further buybacks then later this year? Because with your level of profitability, you can comfortably fund organic growth. So you're going to still be building capital.

Yes. So I think that -- well, first up, on the current share buyback, as you know, we completed the first tranche. We expect to move on with the next tranches. We need to explain or present the execution of the next level of share buyback to the government bodies. So hopefully, that will move quite quickly in the next few days. But moving on from then on, we do see that, as you were saying, with the capacity of the bank to generate profits is significant. We are guiding, as you know, this year for a 20% RoTE.

The average that was committed to the market over the 4 years when we started the midterm goals was a 22% RoTE. So with that consideration, investing organically in our footprint is going to be obviously the first priority because we're able to generate capital on the back of that. But we've also stated on the back of that, by the way, the contribution of earnings, just when you look at just the P&L contribution of capital was 255 basis points last year.

So first and foremost is deploying capital to grow organically at those levels of profitability, but we've also been very clear about not wanting to structurally hold any excess capital. And we are committed to delivering shareholder returns on the back of that capital generation going forward above the 12%, which is, as you know, the high end of our target ratio. So that's what we're focused on.

That will be obviously a dynamic process as we're seeing how our footprint grows, and we determine we capital -- we do our capital planning exercise. We will be obviously returning capital as we go along in that gradual way towards the 12% target, which is our commitment. So yes, we are definitely committed.

As you know, we guided in our midterm goals that we were going to be able to, in that period of time over the 4 years, we generating around EUR 49 billion of capital. And we said that around EUR 13 billion is going to be devoted to growing organically our franchises and the rest of EUR 36 billion would be money that would be available to distribution. And we still see that environment going forward.

Great. I'll open it up for questions. We've got a question from the audience. I have more questions. I just don't want to monopolize the debate in a quiet room. Don't take it personally.

I see. Maybe, much, I don't know.

There's a question at the back there.

One question on Spain on your lending growth there, which has been impressive. How are you managing to reach such level of growth? What does it mean in terms of your pricing policy on spread management?

Yes, it's a very good question. Well, I think that, again, when we are growing market share and growing, it's because we have a targeted approach to the areas where we want to grow. The competition dynamics in Spain are very intense, I would say, in general, it's a very competitive -- I know, it's a very competitive market. But the ability that we've had to grow in these areas, again, is because of the sustained investment that we've had on the different strategies in the segments.

I was highlighting before, the enterprise segment where we've been developing preapproved loans in a significant broadening the scope of preapproved loans, targeting better the segments, deploying relationship managers, improved relationship managers to the segment. So it's a holistic view and especially promoting transactional services, which is at the core, again, of the management of spreads.

When you look at the evolution of our customer spread, and again, it depends on the mix of the business and comparability with our peers, we saw spreads that have been compressing. And despite the Euribor rate still following through with compression this year. Now, what we're seeing is that the customer spread should be stable from the fourth quarter's customer spread point of view. We have -- our mortgage book reprices quite fast versus our peers, for example, 2/3 of our mortgage reprice every 6 months.

So we are seeing that level of the floor of customer spreads having been reached. And I think probably it will take a few more quarters to see spreads coming up. Obviously, it depends on the rate situation. We didn't expect Euribor to be at 2.5% on a 12-month basis. We'll see how that evolves.

But generally speaking, I would say that the ability to grow our market share has been driven by the strategy behind each of the segments and again, on the consumer side as well, very much driven by digital and open market strategies with an adequate risk approach rather than pricing advantages in themselves because that is short-lasting in terms of market share gains.

The polling question this morning also suggests that there's not a lot of conviction in the room around the 2.5% sort of around ECB. Next question, please. Maybe I'll take it -- I'll follow on from my last question around.

But that was Euribor.

Yes. On distribution capital allocation, and we've seen plenty of sort of further M&A announcements in the sector even sort of a bit this week. With Sabadell in the rearview mirror, how do you think about M&A in the future? You don't have any obvious sort of gaps in your businesses. So how are you thinking about that?

Well, I think that -- so the first thing is what do we need in terms of the equity story we are -- I started at the beginning saying how important it is to have leading franchises where we operate. So scale is very important. So when you're looking at opportunities, for example, out of footprint that we don't see anything that is relevant because, again, you would need to go to a large country with a large scale.

And we think that it's better to, for example, in Europe, as you know, go into markets through our digital bank strategy like we did in Italy or like we've done in Germany, which we think is a better long-term strategy than deploying capital in markets that are out of our footprint. But then looking into our footprint, as again, we mentioned scale was important and the deal with Sabadell last year had to do with that scale and how relevant scale is.

We go market by market, as you say, Spain, the deal that made sense for us was Sabadell. It was strategically the adequate fit for us, and it has the adequate size doing M&A for smaller targets is a very significant disruption. Why this is important? Because it's not about execution risk, which you may have. It's -- actually, we are a bank that's continuously, I mentioned before, investing in its digital and it's AI.

And when you're doing M&A, you have to freeze that because you have to integrate IT. So there's a cost of opportunity embedded in doing M&A in the view that we have of, again, delivery of organic growth and investments in data, AI and technology. So it has to make sense to do M&A with the right size. And again, in Spain, we don't see that -- any targets in that sense occupying or willing to take that cost of opportunity in terms of doing M&A and therefore, we don't see any space there.

When you look at Mexico or Peru, countries where we have significant market shares, we wouldn't be able to do any M&A deals just because of the size that we have already in those markets. And Turkey, it's too early. We need to see Turkey normalize. We need to see Turkey deliver on its inflation commitments. So that is still not the case or Argentina for that matter.

And then Colombia is the place where we would, I think, appreciate more scale. The scale that we have built today in Colombia allows us to generate profitable growth going forward. And we haven't seen any reasonable opportunities in Colombia as well. So I would say, overall, M&A is always something that the bank will look at because things come to our table.

But I would say, generally speaking, our story is about organic growth, where we do continue to believe that we have opportunities ahead. And again, leveraging on digitization, now AI, we think that there are opportunities to scale the bank in a very profitable manner aside from deploying M&A or capital for M&A.

We can squeeze one last question everybody, if somebody has got one.

My question is about CIB, and you've recently hosted strategic talks on that matter. And you've indicated your ambition to grow in certain regions in North America, the U.K. You talked about several growth opportunities there. What are some of these growth opportunities that you can share with us? Is it, for example, I know like Latin American investors and entrepreneurs that are willing to invest in these geographies? How do you see the flow of capital? And how would you be best to serve the position of your clients in that matter?

Right. Thank you. No, it's a very good question because when we have a reporting so -- reporting angle, you see only a part of it, which is the rest of the business, but the CIB business is a broader business that we are investing in because it's a strategic priority. And there, our focus -- our strategy is very much driven by client relationships. So -- and within that, there are basically 2 relevant specific investment opportunities.

One is the one that you signaled the cross-border opportunity. When you look at our CIB business, 40% of our revenues come from transactional banking. So we're connected to dots to franchises in a much more focused way. And that means that we find clients that have interest in the countries where we operate.

Having a local bank there means that you're not only good on payments, but collections and this is a distinctive factor from other peers or competitors that do transactional banking that don't have those collection capabilities on the ground and allow us to compete more effectively.

And again, a relevant source of our CIB revenues comes from transactional banking, which is at the core of our cross-border revenues. And 40% of the revenues, again, 40% is the magic number, 40% of our revenues come from cross-border in CIB that was around EUR 2 billion last year, growing at around 24% CAGR. So again, very focused on accompanying our clients.

And obviously, when we're looking at the activities in order to accompany our clients, having branches in the U.S. or in Continental Europe or in the U.K. allow us to serve those clients better that want to operate in our franchises, the U.S. doing business in Mexico, the Latin Americans wanting to go to the market in the U.S., institutional investors wanting to buy Mexican pesos.

So on the back of our right to compete, on the back of our strength, we are trying to cover more space than we had in the past. And then the second thing has to do with sustainability. And I know that in some geographies, it is not as relevant topic as in the past, but we are very committed to our sustainability efforts, not just because it's good for the world, which we believe it is, and we have this responsibility towards the actual numbers and what's going on, but actually, it's because it's a business opportunity.

And we see this regarding energy. We've been focusing on accompanying those clients in their energy transition because their business models are at risk. So first of all, it's a business opportunity, but it's important from a risk management perspective. So the sustainability topic has allowed us to grow on energy, on infra, on hard asset financing, which we were very good at before, and we continue to develop in a more specific structured way.

So I would say that it's a very focused growth in CIB, and we're seeing it grow more because the base was lower. And that's why we're -- we think that, that's a good opportunity. And last but not least, we -- I can assure you allocate capital on the back of profitability.

The profitability levels of CIB, excluding the hyperinflationary economies is around 19.4% of the CIB business for the group, again, because it's a lot of its transactional banking business. So we're allocating capital if we ensure that we can get good levels of returns on that capital as well in the CIB.

Great. Thank you very much. It's a very interesting session, and thanks again for coming one more year.

Thank you.

Good morning, and thank you for joining us for BBVA's fourth quarter results presentation. As every quarter, I'm pleased to be joined by our CEO, Onur Genc; and the Group CFO, Luisa Gomez Bravo. We will begin with Onur reviewing the group's performance and key strategic developments during the year, followed by Luisa, who will walk you through business unit results. After their remarks, we will open the call to take your questions.

With that, I now turn the call over to Onur.

Thank you. Thank you, Patricia. Good morning to everyone. Welcome, and thank you for joining BBVA's 2025 Full Year Results Audio Webcast. I will start with Page 3 right away. So I'm happy to say that in 2025, we achieved outstanding results across critical dimensions, value creation, as you see on the page, growth, profitability, strategic execution and shareholder remuneration.

First, I would like to highlight the excellent value creation achieved during the year, which is rooted in our outstanding profit evolution. Despite falling interest rates in our core markets, we still managed to increase our net attributable profit, which reached a record EUR 10.5 billion, 4.5% higher than last year in current euros.

Secondly, as we have emphasized in previous results presentations, BBVA offers a unique combination of profitability and growth, which was further reinforced in 2025. Our loan portfolio increased by an exceptional 16.2% at constant euros and 11.7% in current euros, an exceptional figure, while our return on tangible equity remained at industry-leading 19.3%.

Third, in the page, we are advancing consistently in the execution of our strategy. First of all, we are transforming the bank with a radical customer perspective, leveraging the power of AI and innovation and also growing the bank, especially in areas where we believe we have an opportunity of superior return.

And finally, all of this is enabling us to significantly increase distributions to our shareholders with a regular payout of EUR 5.2 billion from 2025 results, while at the same time, our CET1 ratio remains comfortably above our target.

As you can see on the page, the regular payout against 2025 results will be paid entirely in cash through a total cash dividend of EUR 0.92 per share, being the highest cash dividend ever by BBVA. And additionally, we continue with the execution of the first EUR 1.5 billion tranche of the extraordinary share buyback program amounting to EUR 4 billion. These are the key highlights that I will expand in the following pages. But as you see, in my humble view, 2025 has been a remarkable year for BBVA, and we are on track to achieve our ambitious 2025-2028 long-term goals.

Moving to Slide #4. On the left-hand side, our tangible book value per share plus dividends continued to show an excellent performance with a growth rate of 12.8% at face value. But it is worth highlighting, however, here the number, excluding the impact of share buybacks, that is 15.2%. As you all know, through the share buyback programs launched in 2025, the EUR 993 million already executed and the existing tranche of EUR 1.5 billion currently in execution, we have been buying our shares at higher value than the book value, which then leads to some negative impact on tangible book value per share creation.

On the right-hand side of the page, you can see the very positive evolution of our net attributable profit, which continues its upward trend, reaching a new record, as we discussed, exceeding EUR 10.5 billion, again, despite the negative impact of falling interest rates in our core markets, especially in Spain and Mexico. At the same time, our earnings per share, it reached EUR 1.78, representing a 5.8% year-over-year increase. And if you look into a larger time frame, a compounded annual growth rate of 26% in the last 5 years.

Slide #5, I want to underscore the truly unique positioning of BBVA within the European banking sectors, combining growth and profitability at the same time. You have seen this page before in other presentations of ours, but the situation has improved even further in our view in 2025. But the page -- just to explain the page, on the x-axis, we show the return on tangible equity as a profitability metric. While on the y-axis, we present loan growth in current euros for equal footing of all large European players. And as an indicator of future value creation, in our view, because growth and profitability, those are the 2 core dimensions of future value, BBVA clearly stands out, positioned in the top right quadrant, by far the highest loan growth in current euros and best profitability metrics among our peers.

On return on tangible equity, as the measure of profitability, we should also underscore the fact that this number is partially negatively influenced by the excess capital that we have held throughout the year because at the denominator of this ratio, as you all know, it's the average equity throughout the year.

Moving to Page #6, new customer acquisition. As we have reiterated consistently, again, we put this page also in every single analyst presentation, expanding our customer base is a key driver of healthy and profitable growth. In 2025, we reached a new record in customer acquisitions with 11.5 million gross new customers. Maintaining this space year after year is particularly remarkable in our view because we are already one of the largest banks in the markets in which we operate, and it's always a smaller pool to look for new clients. But despite that, a record number in 2025. And the value of this growth -- on the right-hand side of the page, there are 2 factoids there, but they're very important in our view. The value of this growth becomes clear when we look at the monetization of new clients over time. For example, in Spain, revenue per customer increases by 3.7x between the first and the fifth year of that relationship. And in Mexico, it's very important this number, 75% of the new credit cards sold in 2025 are to the customers acquired in the last 5 years. With such focus on cross-sell in place, we believe our future business in the coming years is already hatched with the customer acquisition activity over the past few years.

Moving to Page #7. All the great results of the past few pages are due to our relentless focus on executing our strategy. You all know our new strategic plan. Our new strategic plan announced in 2025 has outlined a few critical priorities to sustain and improve our delivery. The plan foresees the continued need for the transformation of our business. That transformation, in our view, has to start with the customer, which we call radical customer perspective. Putting ourselves in the shoes of our customers, we are adopting a radical approach to understand and analyze every single customer interaction with the bank so that we act on these insights to improve customer service and eliminate frictions, eliminate frictions with agility and empathy. And this is reinforcing our NPS leading positions in most of our geographies and is leading to a significant reduction of negative experiences with our customers related to events like fraud, claims or service waiting times, improving, obviously, quality of service across geographies, as you see on the left-hand side of the page.

As part of this new wave of transformation, we also have started to maximize the potential of AI and innovation within BBVA. We will pursue this across 8 initiatives listed there in the page, including our digital adviser, the Blue, the AI assistant for bankers and injecting efficiency and effectiveness in different processes across the bank in different areas like the software development. In addition, AI is increasingly being embedded across our organization. Our 127,000 employees all around the world, they have now access to OpenAI and Gemini. We are still at the early innings on this, but we are already starting to see the positive impact from all of our AI work, and we will update you on this further in the coming quarters.

On Page 8, as part of our strategic plan also, you see certain businesses that we have prioritized to grow faster than average. We have achieved that superior growth in 2025 in all selected areas, enterprises, sustainability and capital-light businesses. On the left-hand side of the page, you see the levers through which we grow our enterprise business, cross-border, a natural lever for a global bank like us to serve our multinational enterprise clients beyond their home geography and sustainability also mainly on the enterprise side, a strategic priority for us to accompany our clients in their transition, all yielding excellent results in 2025, again, as you see in the growth rates. And if you can compare those growth rates with the rest of the bank, which is on the right-hand side.

But in the middle and the right-hand side of the page also, you see the prioritized capital-light fee-generating businesses, again, displaying excellent growth performance in insurance, in payments, in wealth management, where again, we grew much better than the average of the bank in all of those areas.

Slide #9. From this slide on, I'm going to walk you through the financials, but let me not -- and also to save time, let me not spend too much time on this page as it is a summary of the following pages. So let's jump into Page #10.

In the annual P&L, a similar story as in the recent years, but I would like to highlight the very strong performance of core revenues, which drove gross income growth to 16.3% year-over-year in constant euros with 13.9% in NII growth and 14.6% in fee income. I mean this solid growth in gross income, together with positive jaws, as you see on the page, contained impairment charges, it resulted again in the record net attributable profit of EUR 10.5 billion.

Slide 11, the P&L for the fourth quarter. Again, I will not stop long here, but just to remark on the strong quarterly performance with a net attributable profit above EUR 2.5 billion once again, despite some negative one-offs like a tax code change in Turkey at the final days of the year. You might have seen it on Christmas Day actually. The continued and accelerating delivery at the core revenue lines, net interest income and fee income is worth highlighting again on this page. Core revenue, especially in Spain, in Mexico, is behaving exceptionally well.

Then talking about that maybe on Page #12, talking about Spain and Mexico, our 2 core geographies. First of all, before the countries at the group level, on the left-hand side of the page, one of the clear highlights of the quarter was the growth in activity. Loan growth maintained an excellent pace, increasing 16.2% year-over-year, which is translating into that strong net interest income performance. And then talking about the countries within that, in Spain, loan growth further accelerated to 8% year-over-year, while Mexico maintained a solid 7.5% year-over-year growth. In the case of Mexico, excluding the impact of the U.S. dollar affecting the value of our U.S. dollar-denominated loan book in Mexico, if you isolate for that impact, loan growth would have reached 9.9%, fully in line with our 2025 guidance.

And on the right-hand side of the page also, you see how all of this is supported by strong loan growth and proactive price management in a declining rate environment, how we translated this into growth in core revenues in both Spain and Mexico year-over-year, but also look into the quarterly evolution with an acceleration in the last quarter if you annualize those quarterly figures.

Moving now to Slide #13, again, talking about growth. Our strong activity growth is not only due to the overall industry growth, but also due to our clear outperformance versus competitors. As shown on the page, we have been gaining loan market share in all of our markets in the past few years. And in 2025, specifically, we continued that trend in practically all of our markets, again, with meaningful gains across the board. We have to be careful here. Market share by itself is not an isolated goal for the bank as the underlying growth has to be profitable. We are not here for the sake of growth. But as we monitor and manage the profitability of any granted loan in any country of the bank, we take pride in the consistent track record of market share gains across the board.

Moving to Slide #14 on costs. I would first highlight that once again and in line with our DNA, we closed the year with positive jaws with gross income growing by 16%, clearly outpacing the growth in costs. And as a result, on the right-hand side of the page, our efficiency ratio continues to be one of the best among the European peers, and it improved to 38.8%.

Again, picking up some speed. Slide #15, the evolution of our asset quality. It remains in line with our expectations, even in a context of strong activity growth in our most profitable segments. And starting on the left-hand side, at the bottom of the page, our cost of risk stands at 139 basis points year-to-date, improving versus 2024 and delivering a better performance versus guidance in most of the countries. At the same time, on the bottom right-hand side, both our nonperforming loan ratio and coverage ratio, they continue to improve year-over-year and quarter-over-quarter.

Slide #16 on capital. Quarter-over-quarter evolution clearly illustrates both the underlying growth dynamics of the business that I just talked to you about and the one-off timing effects at year-end. First, results remain at the core driver of capital generation. Strong earnings contributed 64 basis points to CET1, then with the accrual of the dividends and AT1 coupons deducting 34 basis points.

Then RWAs, turning to RWAs, activity-driven growth implied an impact of around 57 basis points. Overall, we saw a higher pace of RWA consumption compared with previous quarters. Again, this reflects very strong and exceptional business dynamics across all geographies with an acceleration in the loan portfolio growth, explaining the majority of the increase in RWAs. In addition, the thing that I mentioned about the fourth quarter exceptional number, the quarter includes also the year-end operational risk calculation which in the context of higher revenues and higher activity also came slightly higher than usual.

Importantly, this capital consumption for the right reason, as it is driven by profitable growth, we would like to underscore this. I mean it's 57 basis points, much higher than usual because we have grown much higher than usual, and that's good as long as the growth is a profitable growth. And on that one, again, we remain highly disciplined in the use of capital as it is a scarce resource. I shared with you before, we have developed this concept of micro capital management framework, which ensures that at the most granular level, at the level of every single loan, again, I'm repeating, but it's important, granted at any part of the world, capital is deployed profitably above the respective cost of equity in that respective market.

In the page, other impacts, marginally positive, adding around 4 basis points as negative market-related impacts were more than offset by the positive credit in OCI from hyperinflationary countries and higher minority interests. Regulatory impacts, we have basically advanced this a few -- I think, 2 quarters ago, but we added 56 basis points, somewhat above the original expectations that we shared with you during the -- again, July presentation, I think it was. These effects are technical in nature and mainly reflect the reversion of some portfolios to standard and to foundation in Spain and in Mexico.

As a result, CET1 reached 13.75% in December 2025 before capital distributions. Then you deduct the EUR 4 billion of extraordinary share buyback program, a clear demonstration of our commitment to shareholder returns and to get back to our capital target, but this reduced the CET1 by 105 basis points, taking us to 12.70%.

Slide 17 on shareholder distributions. In line with our payout policy, I'm very pleased to announce that the proposal to be submitted to the governing bodies contemplates a total regular distribution of EUR 5.2 billion for 2025, equivalent to a 50% payout, the upper end of our distribution policy. The distribution will be fully paid in cash, amounting to EUR 0.92 per share, which represents a 31% increase versus the 2024 cash dividend, and this implies a final dividend of EUR 0.60 per share to be paid in April 2026, complementing the EUR 0.32 per share that we have distributed back in November. In short, I mean, by far, the highest dividend of our history.

And in addition, we continue to execute the extraordinary share buyback program, EUR 4 billion announced last December, of which the first tranche of EUR 1.5 billion is already being executed, again, as a share buyback program.

Then Page #19. As you know, in the second quarter of 2025 in July, we set our ambitious financial goals for the 2025-2028 period. We are completely in track of those numbers. We are still in the first year of the program, but as compared to the numbers we had in the plan for 2025, we are performing in line with our original expectations and some better, but overall in line with our original expectations in all of the metrics that you see on the page.

And with this, I pass over to Luisa for the business areas.

Thank you very much, Onur, and good morning, everyone. Let's start with Spain, which has delivered outstanding results in 2025. Net profit grew at a double-digit number, reaching EUR 4.1 billion for the year, driven by strong business dynamics with loans up 8% year-on-year, more than offsetting some margin pressure in a declining rate environment. This was further supported by robust fees, contained costs and improving asset quality trends. The fourth quarter was particularly solid with net profit exceeding the EUR 1 billion mark.

Looking to quarterly dynamics, net interest income remained highly resilient, supported by continued commercial momentum. Loan growth remained very solid, supported by strong new production, up 9% quarter-on-quarter. Loan balances evolved positively across the board, with particularly strength in consumer and across the enterprise segments. This translated into further market share gains in the most profitable segments.

To highlight the evolution in the enterprise segment, where we have successfully closed the gap with the overall loan market share, gaining 60 basis points of market share in the year. Robust fee income driven by sustained growth in asset management and insurance fees, along with the recognition in the quarter of asset management success fees.

On costs, expenses remained well contained, growing by 1.9% if we exclude the positive one-off related to VAT calculations recorded in the second quarter. The quarterly increase mainly reflects year-end adjustments of variable compensation accrual according to the strong performance in the year. Overall, efficiency remained best-in-class with cost-to-income ratio at 33.1%.

Finally, we continue to see positive trends in asset quality. The NPL ratio declined, coverage increased and the cost of risk improved to 34 basis points, in line with guidance.

Turning to Mexico. 2025 was a remarkable year for Mexico with a very strong performance despite a challenging macro environment. On a full year basis, earnings were supported by robust core revenue growth, up by 8% year-over-year, driven by strong activity momentum outpacing peers, leading to continued market share gains. Total market share reached 25.6%, increasing by close to 30 basis points over the year, while total deposit market share also increased by close to 70 basis points.

Looking into the fourth quarter, net profit reached EUR 1.4 billion, up close to 5% quarter-on-quarter, supported by very solid activity dynamics. Loan book growth accelerated in the final quarter, increasing by 4%, excluding the FX impact, with sound performance both in the Retail and Enterprise segments. Total deposits grew by 5.4% quarter-on-quarter, outpacing loan growth, driven by strong inflows in retail deposits, particularly the band deposits. Cost of deposits declined further in the quarter, supported by lower interest rates and an improved deposit mix. All in, this translated into strong gross income growth of close to 6% quarter-on-quarter.

Turning to costs. The increase in expenses during the quarter as in Spain and by the way, in the other geographies as well, mainly reflects year-end adjustments in the variable compensation accrual. Efficiency levels remain outstanding with a cost-to-income ratio stable at 30% in the year and in line with guidance. Finally, asset quality remains solid with a flattish NPL ratio in the year, higher coverage levels and broadly stable cost of risk.

Moving now to Turkey. The franchise delivered a net profit of EUR 805 million in the year, representing a significant improvement compared to 2024. The improvement in earnings is mainly supported by a strong increase in net interest income, underpinned by higher activity levels and a significant recovery in the TL customer spread in Turkish lira in the context of declining interest rates. Fee income remained robust, supported by growing activity. In addition, the negative impact from hyperinflation adjustment continued to decline, reflecting the ongoing disinflation process in the country.

Cost of risk stood at 194 basis points in 2025, reflecting still elevated provisioning needs in the retail portfolios following a long period of negative real interest rates. Finally, the effective tax rate increased significantly in the fourth quarter by the full year impact of the recently announced tax code change, which Onur already mentioned and weighed on guaranteed BBVA earnings at the end of the year.

Let's turn now to South America. The region delivered a strong performance in 2025. Net profit reached EUR 726 million, growing by 14.3% year-on-year, mainly supported by earnings improvement in both Peru and Colombia as well as lower negative impact of hyperinflation adjustment in Argentina as this inflation process continues.

Core revenues dynamics were very positive in Peru and Colombia, growing at mid-single digit year-on-year in current euros, supported by solid loan growth and wider spreads. Net interest income in the year is affected by Argentina, reflecting a lower contribution from the securities portfolio and some compression in customer spread over the year despite the recovery observed in the fourth quarter.

Robust fee income across the region, supported by the rollout of new initiatives aimed at reinforcing fee generation and improving efficiency, the cost-to-income ratio improved to 43.9% in 2025.

Turning to asset quality. Trends continue to improve in Peru and Colombia, while in Argentina, provisioning requirements in the retail portfolio remained high, leading to adjustments in the risk appetite for this segment. Overall, risk indicators improved across the region with the NPL ratio declining to 4%, coverage increasing to above 90% and the cost of risk improving to 250 basis points. All in all, South America continues to show increasingly positive dynamics, reinforcing our confidence in the region's outlook going forward.

Going now to rest of business. In 2025, rest of business delivered strong net profit of EUR 627 million compared to EUR 485 million in 2024. The strong performance was driven by solid activity across geographies. Loan growth remained healthy with important contributions in corporate lending, transactional banking, project finance. Funding dynamics were also positive across the board. The strong momentum translated into robust revenue growth. Net interest income increased by 15.9% year-over-year, supported by higher volumes and disciplined price management. Fee income also showed remarkable growth with positive trends across countries, driven by both investment banking and global transactional banking. On cost, expense evolution reflects the rollout of our strategic growth plans, including continued investments to reinforce our capabilities and growth plans going forward. Risk metrics remain very solid. Cost of risk stood at 16 basis points in 2025, broadly stable year-on-year. Overall, rest of the business continues to show very positive momentum.

Back to you, Onur.

Thank you. Thank you, Luisa. Let me finish with the takeaways and the outlook and the guidance, but we have a commitment to you that we always finish by the hour. So on the takeaways, let me not go through all the bullet points that we have on Page #26. In short, I do think we have had one of our best years ever in 2025.

Then guidance, Page #27, completely aligned with the midterm goals of our strategic plan. We are expecting strong business momentum to continue, solid loan growth across the board, supporting net interest income and overall revenue growth. On expenses, we maintain our clear commitment to cost discipline. The expected evolution in Spain and Corporate Center is impacted by some -- as you remember, in the second quarter, there were some VAT-related topics there, some base effects. But if you exclude the base effects, completely in line with our also original plan.

Cost of risk is expected to remain broadly aligned with the 2025 levels. And overall, as a result of all of this, our expectation across the different business units, it translates into a group return on tangible equity goal of around 20%, better than 2025 is our expectation and the cost-to-income ratio of below 40%.

And finally, on Page 28, to deliver on our ambitious long-term objectives and the 2026 guidance that I just talked to you about, we will continue to focus and execute on our strategic priorities. We again announced them at the beginning of 2025. We will devote time in 2026 to further discussing these strategic priorities with you through a series of what we call BBVA strategic talks and obviously, with the involvement of our senior management. These sessions would include country and certain business deep dives, and we are going to start them in March 10 with Mexico and the Enterprises segment.

With this, I conclude the presentation. Now I give the floor to Patricia for the Q&A. We are at 9:58 in Spain, so 2 minutes. Perfect. We are right on time.

Thank you. Thank you very much, Onur and Luisa. We are ready to start the Q&A session. So operator, please, the first question.

[Operator Instructions] And the first question is from Maks Mishyn with JB Capital.

Two questions from me, please. The first is on Spain. You target mid- to high single-digit growth in -- above mid-single-digit growth in loans, and you grew 8% in 2025, but the NII guidance is low to mid-single digit. Can you walk us through the key assumptions there on rates?

And then the second is on Mexico. Looking at sector data, and please correct me if I'm wrong, but it looks like the gap in deposit costs you had historically is reducing. You also seem to be growing faster in term deposits. Can you please discuss competition in deposits? And how do you see your customer spread evolving in the coming quarters?

Thank you, Maks. On Spain, our Euribor expectation that we have, for example, Euribor 12 months is basically flat, but the average spreads that we would be having average 2025, average 2026 shows a slight decline. As a result, you see a different guidance between the activity growth and also the overall NII and revenue growth. That's the core reason. But the Euribor levels, we do think today, we are at 2.22%, 12-month Euribor. It's going to be around these levels. The average that we expect for the year is at 2.25%.

On Mexico, the deposit pricing, we discuss this every quarter. I mean our Mexican peso funding is at 2.5% at the end of November for comparison reasons. In the backup, you also see the end of December. But comparison, the markets authority announces these numbers. When our competitors, they are at 4.11% -- 2.5% for us, 4.11% for the industry. We maintain that very positive gap with the rest in terms of cost of funding and deposits, going back to the same dynamics that we repeat every quarter here, but they are important. We are in transactional deposits. I did mention this to you before, but I would repeat it, given our very high market share in payrolls, 1/3 of our deposits, 1/3 is in this bucket of EUR 0 to EUR 30,000, the lowest bucket. And the average of that bucket, 1/3 is in that bucket, EUR 0 to EUR 30,000. And the average of that bucket is EUR 790. So we have millions of customers and their transactional relationship is with BBVA. That's the best insurance policy against any cost of funding challenges or deposit challenges. You have seen that our loan-to-deposit ratio is basically flat throughout the year also in Mexico. I did mention to you in the last call that we would be a bit more aggressive in deposits now that the prices are lower. We didn't want to be very aggressive in deposits, and we have chosen to do wholesale funding when interest rates were very high because we didn't want to trigger that market too much. But now that the interest rates are at relatively low levels, we are also gaining market share in the last quarter, and it's mainly coming from the Enterprise segment, which is then leading to those dynamics. But overall, we feel very comfortable with our deposit positioning and cost of funding positioning in Mexico.

Just to add on to Onur's comment also on the rate side in Mexico. We do expect Banxico to continue to lower rates this year. So we're expecting Banxico rates to be at around 6.5% around mid of the year. So that is also implying somewhat compression of spreads in 2026 in Mexico on average versus also 2025, just as in Spain.

And when we announced our long-term strategic plan, we said that the core driver of the strategic plan numbers that we announced again in July was the fact that the rates would stabilize. And once rates stabilize, the activity growth will translate into bottom line, right away into profits. And that stabilization has already happened in Spain and is very close to be happening, finalizing in Mexico.

Next question please.

Next question is from Francisco Riquel from Alantra.

I have two questions. First one is, Spain customer spread fell 50 basis points in '25. Local peers are reporting falls of just 20, 30 bps. You're growing faster in loans, 8%, however. So how can you reassure that market share gains are not coming at the expense of profitability? And if you can comment on customer spread dynamics that we should expect in '26 and '27.

And my second question is on capital generation. Net profit, well, results in '25 and '26 guidance is in line with expectations, but you are getting there more capital intensive that I thought in view of the negative organic generation in Q4. So I wonder if you can update on the strategic -- on the goals of the '28 plans in terms of the -- do you feel that the EUR 45 billion of CET1 generation is still achievable? How much through SRTs? And the mix, how much do you plan to devote between growth and distributions that you guided at the time?

Thank you, Paco. Luisa, do you want to take the first one, customer spread dynamics?

Yes. I think the customer spread dynamics have been quite positive in the quarter, to be honest. I think that -- first of all, I think that we need to also remember that the repricing of our mortgage loan portfolio is faster than our peers. We repriced 2/3 of our mortgage book every 6 months and 1/3 every year. So this pricing dynamics, obviously, you see it feeding into the loan yields quarter-on-quarter.

And in the cost of deposits, this quarter, we had a slight uptick of 2 basis points of cost of funds, and this was driven primarily by a mix effect because in the quarter, we gained market share in transactional banking deposits in the corporate side, and that's what affected a little bit the cost of deposits. Going forward, as we mentioned, we think that we will see quarter-on-quarter pretty stable customer spreads in the first half of the year and perhaps slightly picking up at the end of the year depending on that Euribor rate performance that Onur mentioned. So all in all, I think that we are quite comfortable with the evolution of the spreads going forward. And going to profitability, I think that our profitability, as you can see by the dynamics of core revenues in BBVA this year in Spain, which have been quite positive with over 3% year-on-year in NII and over 3% year-on-year in fees compared to our peers, I think, showcase the profitability outlook of our growth.

Just to add on this one, Paco. On Page 38, you see the customer spreads, average customer spreads by geography in the appendix. The average spread has declined by 41 basis points, just to be very precise on the figure. And that 41 basis points, as you mentioned, is slightly higher than the competition. For a good reason, if you look into the growth of our lending book, you would see that we are growing very profitably, to be fair, but still at a different margin or a different spread level versus retail in the Enterprise segment. We are growing very nicely in the Enterprise segment. That has an implication. Obviously, the mix effect comes into that play. But that 41 basis points, again, is excellent in our view.

And finally, I would say that the final spread that you see in Spain at the end of the -- in the fourth quarter, but at the end of the quarter as well, 280, we expect that number to remain -- we have touched bottom basically in short. We expect that number not to go any further down. Slight maybe changes, but not too much. From here on, if the rate policy evolves as we are expecting, it's going to be going up.

Then the second question, the broader question on the growth being capital intensive and the implications of that. You were asking implications of that in terms of goals. We do have our, again, midterm strategic plan and the associated figures. There are 2 numbers there that are very important to us and that are very easy to remember. EUR 48 billion profits and EUR 36 billion capital distribution back to our shareholders, okay? Those 2 numbers. And then there are many others underneath, but I am giving you the 2 figures that is like -- I put them into a post note and I put them next to my bed so that I look into them when I wake up in the morning. They are important numbers. I mean we have a very solid competent team. If things happen that are beyond our control and if it doesn't happen, fine.

But at the moment, we are completely on track to reach those figures. The thing that you mentioned, be growing in capital-intensive areas, as long as it's above your cost of equity, that growth, we love it. We want to do more of it because we are going to be creating capital more than our cost of equity. The thing that you mentioned might create a bit more different dynamics in terms of some of the buckets underneath the capital flow. But at the moment, it's completely in line with our plan. But if it continues like this, meaning we grow a lot in, as you say, capital-heavy areas, then we have an opportunity to do more SRTs, for example.

I'll give you the growth dynamics here because you mentioned it's capital intensive. If you look into the quarter-over-quarter growth, you see that in Spain in the quarter, we grew 2.5% in loans when the average annual growth was 8%. So if you annualize the quarterly growth, we have grown much more in the fourth quarter versus the rest of the year.

If you look into Mexico, the fourth quarter number growth is 3.7%, then the overall annual growth was 7.5%. Again, if you annualize Mexico, 3.7%, it was a much stronger quarterly growth than the previous quarters. And rest of business -- as also Luisa explained, rest of business is basically CIB business. We also delivered amazing growth in that area. All of this growth, again, is happening above cost of equity. If we grow like this, again, we will have a higher pool, for example, to do more SRTs. There will be different dimensions. But in short, coming back to your simple question, we are fully committed, and we are completely on track of our midterm goals.

Next question, please.

Next question is from Benjamin Toms from RBC.

The first one is on costs. At a group level, costs grew 10.5% in 2025, above weighted average inflation of 9.6%. I roughly calculate the weighted average inflation is expected to be 7% in 2026. Is that 7% roughly in line with your expectations? And is 7% the right way to think about group cost growth for this year? I appreciate you have a cost-to-income ratio.

And secondly, one of the reasons that Mexico is a great geography to operate in is because the population is young and underbanked. From a strategic point of view, I'm interested that when we're talking about new entrants coming to the market, and coming to a market like Mexico and disturbing the status quo, does that young and underbanked population actually represent a disadvantage? I imagine younger customers are less sticky. And if your parents never had a bank account, you'll have no brand aspiration or allegiance. Basically, conceptually, do you think that it's easier for a new entrant to come to a market like Mexico relative to a market like Spain?

Perfect. On costs, Luisa, do you want to take?

Yes. Well, I think on costs, what we see is that this year, the performance on cost has been basically affected as well by the VAT one-offs in Spain and Corporate Center, in line in Mexico, and Turkey affected by inflation and rest of business in line with our expectations according to our investment plan. So all in all, I think, as I mentioned, very much with what we expected. Going forward, I think the guidance is very clear that we continue and remain investing in our footprint. Spain and -- guidance for Spain and the Corporate Center is affected by the one-offs on the base case. I think that in both cases, if you strip out the one-offs, we will be growing in Spain around circa between 3% and 4% on the average of the both years, which is in line with the growth that we see for Spain.

And in Mexico, again, very consistent growth in Mexico, a market where we continue to believe that investment gives a lot of return going forward. So I think that the group costs this year are going to be, in that sense, higher than inflation because of these one-off trends and the continued investments in the growth franchises that we see in the group. As you mentioned, profitability is very relevant for us. And as long as we see cost-to-income trends performing the way that we expect below 40% for the group in 2026 and with our midterm goals going into the 35% aim, which is what we still stand by, I think we're perfectly fine investing in our footprint at these return levels.

And on your second question, Benjamin, which is a very good question. Our experience in banking, Benjamin, is that different segments of the society and population, young, mid-age, old or different segments, whatever metric and whatever dimension that you pick as a segmentation dimension, they really don't care whether it's the neobank or the incumbent bank and so on. What they care about is the service. They want to get the best from their bank. Very simple concept, but very important.

Different segments prioritize different areas of service. As you say, the young segment, for example, the digital experience has to be really good because that's the piece that they care about. But if that digital experience is being provided by an incumbent bank versus a neobank, they don't care about that tag, about that label. They go for the service. In that context, our claim, and there are many numbers that we can take offline and feed you with, but there are many numbers that tell us that our digital experience in Mexico is amazing because as compared to those neobanks as well, we do this constant. I'm personally involved in those exercises.

We look into what do they have in digital experiences, what do we have? Do we have a gap? If it's positive, perfect. We further build on that. If it's negative, we close that gap right away. If we do that, why would the young segment prefer a certain bank versus another? In that context, I mean, again, the numbers speak for themselves. Those neobanks that you are mentioning, and some of them have been there for many years now. There are newcomers, but there are also very entrenched now players in Mexico on the neobank side. They have been there for quite a long time. But despite that, we have 4.7 million new customer acquisition in Mexico in 2025, 4.7 million.

A good part of them are very young customers. 81% of this acquisition are done through pure digital channels. So they don't go to a branch, they don't go anywhere, and they basically become a customer through pure end-to-end digital channels, which is one of our core competitive advantages in Mexico and beyond. That's why we are providing that service to them. That's why we are getting those numbers. On top, we have certain things that, in our view, neobanks cannot replicate that easily. We can do what they do because of the digital channel. We are really focused on that. But the things that we have, our infrastructure in the country. Mexico is still a very cash-heavy country. More than 90% of the population says they deal with cash on a daily basis.

We have, by far, the largest ATM infrastructure. We have the branch network, if the customer needs it for a problem -- for the young segment, it's only for problem areas, but it does happen. They care about that infrastructure as well. And also, even if you are young, if you are working in a place, we do have a relationship with your company so that your payroll comes to BBVA, which is not very easy for, again, neobanks to replicate. In short, I think the numbers are very clear that we see that challenge, but we are matching that challenge, and we are going to compete really hard.

Next question please.

Next question is from Cecilia Romero with Barclays.

The first one is on Spain. Spain volumes are strong and you're gaining market share in SME and corporates while deliberately giving up share in mortgages. Is this pushing the cost of deposits up as you compete for clients, clients that you're not gaining through mortgages? You mentioned before on risk-weighted asset growth was larger than expected in this quarter. Can you clarify whether any large SRT transactions have slipped into Q1 and how we should think about risk-weighted asset growth and further SRT benefits for next year?

My final question, the final dividend was entirely in cash. Is this structural going forward? Or are you planning to keep flexibility to do a final dividend in 2026 with a share buyback component?

Perfect. SRTs, the architect and the leader of SRTs is Luisa, so I'll leave it to you on the second one. On the first one, the cost of deposits may be going up, if I understood you correctly, Cecilia, because we are less aggressive on mortgages, does it have an implication on deposits? Was that the question? But the deposit, you would see it in the numbers as well. Again, in the appendix, you will see it. Our loan-to-deposit ratio in Spain is now 87%, 87%. So we do have so much liquidity and so much deposits that the tension that you might be implying that would be coming from not having that mortgage relationship with customer and hence, lower deposits is not there at all because we do have, again, abundant deposit space. SRTs, Luisa?

Yes. So on the SRTs, we generated 35 basis points of capital this year. In 2025, it was around EUR 11 billion of RWA release. We did front-load the deals in the year where they were more biased. We did like 23 basis points in the first half. We do see that the trend in the market is for deals to concentrate at the end of the year. And so we planned our SRTs in a different way. We expect this year to be able to deliver more or less in line with the guidance that we gave last year of around 30 to 40 basis points and pretty much in a similar fashion. We are also expecting to start doing some deals in some of our other core geographies such as Mexico and also potentially Turkey. We're working on those type of deals as well in order to try and mobilize the balance sheet further. So in that context, we do expect RWA growth to be below the loan growth as we complete our SRT planning going ahead.

Okay. On the first answer that I gave on deposits in Spain, Patricia here is alerting me that I didn't give a proper answer. But I do think what I said was critical, which is the 87% is the number to look into. But she's also highlighting a very good number, which is one of the clear reasons of our deposits are growing in Spain is also the retail franchise that we are building. Last year, we continued to acquire, I go back to the same topic, but it's very important, 1 million new customers in Spain, 1 million new customers. Excluding the neobanks, we are #1 among incumbent banks in terms of customer acquisition. That brings a lot of deposits as well. Patricia, I added your point as well. So I think you should be happy.

Then the dividend topic, you said, I think, Cecilia, that 2026, can there be share buyback instead of cash. Of course. Of course, as we have done in the past, I mean, this year, it's 50% full in cash because we are running a share buyback program already. There is an ongoing extraordinary share buyback program running in parallel. That's why we said, okay, let's go with cash on the other side. You might remember, 2024, 2023, we did a piece of the payout -- regular payout in share buyback, EUR 40 million last year in cash and EUR 10 million in share buyback, if you remember. So we have that flexibility in our payout policy as we have announced to the market. We typically tend to pay a good part of the regular payout in cash because we do think it's important the cash dividends continue for our shareholders in a nice way. So a good part of that will always be coming in cash dividends, but there is the possibility and the flexibility, obviously, to do the 2026 regular payout, also some of it in share buyback.

Next question please.

Next question is from Alvaro Serrano from Morgan Stanley.

Can I ask a couple of questions around the guidance in -- first of all, in Mexico and then I have got one on cost in Spain. In Mexico, the mid- to high single-digit NII growth, if I look at the momentum you had in 2025, it was very good. And sort of in the second half of the year, you had 3% sequential growth in NII in pesos and the mid-single-digit -- sort of mid- to high single-digit NII growth implies very modest sequential growth over the fourth quarter base. And you're not going to get -- Luisa, you mentioned 50 basis points rate cut that you're putting in. Can you -- are you being conservative? Is there anything to -- I don't want to go to the cliche of the deposit competition, but is there anything we're missing? Are you being conservative? Just if you could qualify that guidance a bit, that would be very helpful.

And then on Spain, even -- the cost income is 33%, which is obviously very good. That goes without saying. But if I think about the 2026, you're discussing low to mid-single-digit sort of NII fees and expenses underlying around 4%, I think, Luisa, you said. Is that -- I'm just thinking that doesn't imply -- potentially implies negative jaws or stable jaws. How are you thinking about costs from here on given this good starting point in cost income? Should we expect a bit more investment, maybe some negative jaws at some point? Is this the best you can do, which is very good. I don't mean in a bad way, 33% is obviously best-in-class.

Okay. So maybe take the second one, Luisa. On the first one, Alvaro, congratulations because in that chart of outlook and guidance, there are many bullet points on the page. The one that we discussed extensively and we said, are we being too conservative on this number or on this line was the one that you picked. But I mean you know our style. That page, again, is very important to us. When we say a number that we want to deliver, we deliver. And maybe a bit on the conservative side, that number, we are very positive in Mexico, very positive. I mean, if we have delivered what we delivered in 2005 (sic) [ 2025 ], despite all the complexities of the year in Mexico, in 2026, based on what we also see at the beginning of the year, we are quite positive. But we put a number and we always deliver and maybe that's one of the reasons why you have that guidance in there. Luisa, on the cost?

Yes. Well, on the cost side, I think that with the current guidance and in this year, we do expect some slight negative jaws in Spain if factoring for that circa 4% on average for the last 2 years. But that would still leave us with a very positive cost-to-income ratio for the year in Spain as we guided for.

And again, we continue to, by the way, invest a lot in efficiency and productivity by no means are we standing still, where actually part of the investments and the growth in investments and expenses are to achieve further productivity gains throughout the year in '27 and '28 primarily. So we are very committed to ensuring that we have a very good solid cost discipline in Spain and the rest of the geographies, but Spain is, I think, a poster child of cost discipline in the past, and we will continue to do so throughout the year and going forward. So yes, slightly negative jaws this year, but again, very positive growth for Spain going forward in results, I mean...

And Luisa, maybe we also quantify EBIT. I mean in terms of the number that you see on the page for 2025, Alvaro, you see that the costs in Spain have decreased by 0.7%, decreased. It was because of that one-off that Luisa also mentioned in previous calls and also today, this VAT one-off. If you exclude that one-off, the growth in 2025 would have been around 3% and the guidance for next year would have been around that as well. So it's not any different. It's the base effect mainly affecting that figure. And we are going to be in the first quarter running an efficiency initiative, a voluntary efficiency initiative in Spain, and that might have a little impact on that number also, especially in the first quarter. But the guidance is there in that sense, mainly because of the base effect.

Next question, please.

Next question is from Marta Sanchez Romero with JPMorgan.

My first question is a follow-up on cost. We've seen some slippage in the Corporate Center. Is there space to do something more ambitious in terms of restructurings? It's been a number of years since you did anything meaningful in terms of early retirements. Could we see some capital allocated there?

My second question is also on capital allocation. Some may say that your buyback, your current extraordinary buyback was somewhat stingy. And at the current execution pace, you will be done and dusted by July. Is there a chance that you reload that buyback? Or we are not going to see anything in terms of capital returns beyond the interim dividend this year in 2026?

And just a quick question on the rest of business. So your loan book there is growing like a weed, EUR 16 billion this year, almost EUR 30 billion over the past 2 years. We're seeing market investors a bit jittery about underwriting generally, private markets, et cetera. Can you give us some sense of the quality of your underwriting, what you're doing?

Perfect. Maybe last one, you take Luisa, if you like. On the first question, Marta, thank you for the questions. On the Corporate Center, as I just mentioned to Alvaro's question, in Spain and in Corporate Center, we don't want to -- it's not a restructuring program at all. It's something that we do in an ongoing basis. But in the first quarter of this year, we will have an efficiency initiative, as we call it, which is a voluntary initiative for some of our colleagues to benefit from if they want. It's a targeted voluntary initiative that we would be doing.

But I would highlight to you that if you go back to the Corporate Center expenses in the last 5 years, 5 years, you would see that those expenses are always growing less than inflation, always. And except the one-offs, and we can talk about the one-offs, but it has been a commitment that we have had -- even in these calls, we have voiced those commitments, and we are on track with those commitments.

The buyback strategy, and you're saying we wouldn't -- should we expect something more or less or nothing? We have been very clear, very vocal and I do think we have built the credibility around this fully. We do have this commitment that we have a capital target of 11.5% to 12%, that we will distribute all the excess capital above 12%.

Our commitment on that is full. If you look into our capital number and the evolution of the capital, you would see that we would have excess capital. So obviously, you should expect something more, when the time comes we will announce it, additional extraordinary distribution back to our shareholders. Then rest of the business, Luisa?

Yes. No, I think that the growth that we are seeing is a strong growth, but this is on the back of plans that have been developed over quite a number of years already and that have gained momentum now. So these are very thought-out plans that basically are trying to gear and leverage the global footprint that we have. We put our clients in connection to our emerging markets, and we're doing business with large corporates that are growing the strategy in traditional corporate banking with that growth of 21% that we saw in the year-end cross-border business.

I think that in terms of underwriting criteria, we are quite conservative as in the rest of the group. And 40% of our business is booked in the U.S., and we are, I think, overall very focused in growth in corporates. That's where we're seeing the main growth, Marta, we're not seeing growth in other types of -- I mean, we're seeing growth, but not as relevant growth as in the corporate book. Again, corporate banking, transactional banking, regional banking model across the footprint is what we are focusing on developing.

I would double down on this comment, and I'm glad that Luisa has picked up on that dimension. It's on Page 8 of the presentation on the left-hand side at the top, it says enterprise cross-border. Our growth in rest of the business in general, but our growth in CIB is based on a model that we want to accompany our clients wherever they are. We have this global footprint. Many of our clients do exist in our footprint with different subsidiaries and so on. It's more trade finance, multinational client, corporate banking focused growth that we are after. And in that one, you see the evolution in that page on Page 8 that the growth is coming from there, from those clients. It's basically a cross-sell to our clients that we have in Spain. For example, we have a business in Mexico, we go after that. Our big clients in Spain who have a business in the U.S., we go after that. That's the focus of our growth in CIB.

And the capital allocation that we do in these clients in the rest of business and -- we see that profitability going into our subsidiaries in Mexico, in Latin America, in Spain. So that capital that gets allocated there have the profitability driven by the growth that you're seeing in our business in fees and margins across the group.

Next question, please.

Next question is from Carlos Peixoto from CaixaBank.

So the first one would be a bit on the medium-term targets. So basically, the 42% -- sorry, 22% return on tangible equity average that you had guided to for 2025-'28, considering that 2025 was slightly below 20%. This year, you're guiding towards 20%. So this basically means that over the coming years, the average ROTE would actually have to be around 22% or more, whether you stick to that or you see some downside? And the same rationale more or less would apply to net profit or areas to -- looking at what is implied in the guidance this year, it seems as though in 2027 and in 2028, you need to have post a net profit above EUR 13 million to fulfill those goals. What will be the drivers for the improvement in the net profit?

Then the second question would actually be on Mexico. Just the cost of risk guidance of 340 basis points implies a small deterioration vis-a-vis 2025. Are you just being cautious on this? Or do you see here any kind of concern? Is it related with loan mix? Just trying to understand a bit there, the rationale.

Very good. Thank you, Carlos. Maybe on the cost of risk, Luisa, you help me out. On the first one, the long-term -- midterm goals, Carlos, what I can confirm to you or let me say it first in a very clear way. We are fully committed, and we are still on track, as we have highlighted on Page 18 of the presentation to those goals. But you are asking a very fair and a very good question, saying that you did 19.3% in 2025, how come you can get to 22%. You have to look into the plan. And in the plan, the only thing I can guarantee you or I can tell you is the year for 2025, what we had in the plan, we delivered above that.

The 2026, our guidance that we are giving to you, we are going to -- if we deliver the guidance, we are going to be delivering above what we have in the plan. So in the third and fourth year, it's obviously a bit better years than the first 2. And you're asking this is related to profits as well. What is the driver of that? I do think we talked about this in the past, but it's a very important -- relatively simple, but very important dynamic as we have talked to you about. We are growing very nicely in our core geographies, especially in Spain, everywhere, but in Spain and Mexico as well. That activity growth -- in 2025 and at the beginning of 2026 also, that activity growth is being consumed by the decline in the customer spreads. Why?

Because in those 2 geographies, we are very rate sensitive. When rates come down, we lose in customer spread. So we grew very nicely in 2025, and this compensated the negative coming from the customer spread decline. Starting from 2026, our expectation, again, it's based on a macro assumption that the rates will not go down any further in Europe and in Spain and Mexico, it's going to go down to 6.5%. Today, we are at 7%, but then stay at 6.5%. If those assumptions are correct, if that those macro assumptions are delivered, the driver of the better profits in the coming years is the fact that the activity growth will not be anymore consuming the decline in the customer spreads and will be flowing directly to the bottom line. With those assumptions, again, our midterm goals we are on track, and we feel very comfortable with the numbers that we have put forward some time ago. On the Mexico cost of risk, Luisa?

Yes. Well, I think as you mentioned, it's more driven by a mix effect. As you know, we have been growing in the past years, our retail portfolios faster than our wholesale portfolios. This year, our retail portfolio has grown close to 12%. Our wholesale portfolio is growing at 3% at the end of the year, factored by the U.S. dollar also depreciation. But in general, that mix effect is driving that guidance in terms of cost of risk. Remember that we're growing 14% credit cards, 14% consumer loans, 14% SMEs. So it's a mix effect. The underlying quality trends are supportive, and we don't see any issues other than the mix effect feeding into that cost of risk guidance for Mexico this year.

Next question please.

The next question is from Sofie Peterzens from Goldman Sachs.

Sofie from Goldman Sachs. So my first question would be on AI and tech. You guided for below 40% cost-to-income ratio in '26 and around 35% in 2028. But how do you think about kind of AI and the kind of cost-to-income ratio in the longer term? How much cost reduction do you expect AI potentially could help BBVA?

And then my second question would be on Turkey. Revenues are strong, but net income was a little bit lower than expected. Also guidance for 2026 is slightly lower than expected by consensus. How should we think about the kind of upside risk to Turkey, but also Argentina from potentially exiting hyperinflation in 2028 and what that could mean for BBVA?

Very good. Thank you, Sofie. In the AI, we are still at the early innings. So we don't know exactly how the efficiency savings that we see, and they are really promising. And we are quite positive on what we have been seeing in the areas that we are applying it at the moment. But we need time. We need time to measure and see the direct impact and so on. But in the plan, we have given you this 35% in 2028 with the idea that in 2027, 2028, there will be some efficiency savings coming from AI that will be reflected into the figures. But exactly AI or other things, we haven't disclosed it. We haven't broken it down. And I think it is too early to quantify it at the moment. But we do have that intention to have some efficiency savings in those 2 years due to the programs that we are executing at the moment.

On Turkey, how should we evaluate the upside risk, as you say? First of all, on the 2025 figure also you asked about -- you said that it came a bit lower than planned than the consensus. Actually, that's the miss consensus versus the group numbers in Turkey for 2 reasons. Number one, and as I mentioned, there was a change in the tax code. I'm not sure whether you all have followed it, but there was a change in the tax code in the final days of December, which has created around EUR 50 million, EUR 42 million to be precise, impact in the tax number that has created a bit of a dent in again, final days.

And then the impairments are coming a bit higher in Turkey. Because in Turkey, the minimum wage increase happens only once in a year at the beginning of the year. And towards the end of the year, basically, the minimum wage is not adjusted, but inflation is there. And you see a bit higher inflows in retail, in credit cards and the consumer lending books. That's what we have seen. I mean the vintages, when we look into the vintages, we see nothing extraordinary, nothing different than what we expect. By the way, what we have seen in 2025 is more or less in line with the guidance that we have given to you.

So given the vintages are already stabilizing, are already improving actually, maybe in the first quarter or so, similar to fourth quarter numbers, you would see some provisioning. But beyond that, we are not worried about the provisioning levels.

You were asking in general about the upside, both Argentina and Turkey as well. On that one, what we can tell you, as you also look into the guidance, I need to highlight that thing in the guidance page, there's a footnote to the Turkish guidance, which is based on inflation, interest rates and depreciation of the currency. Those 3 things drive the guidance. We do think we have some fair assumptions in the footnote. As a result, we are guiding accordingly. But Sofie, your question of, do we have upside in those 2 countries? In our view, yes. But it depends on whether the countries improve on inflation and interest rates come down or not. If in Turkey, for example, inflation improves and interest rates come down, we do have a very high upside. If that happens, we have -- at some point, we have raised it in these calls as well. I mean, the fair value that we should have in Turkey is more than EUR 2 billion in profits. Today, we are less than EUR 1 billion. That upside is there, but it depends on the macro evolution of the country.

Finally, you asked about also hyperinflation. As you know, the rule there is relatively clear. It's not the only rule. It's not sufficient. But if the last 3-year inflation cumulative number is less than 100, you get out of hyperinflation. That's why in our strategic plan, we put in 2028 for 2 countries get out of hyperinflation. But again, it depends on the macro evolution of those geographies.

Next question please.

Next question is from Andrea Filtri with Mediobanca.

And sorry for drilling down on capital and its implications, but they are just one number answers. First, how much capital generation can you absorb if you push volume growth further? How much was the op risk revision in Q4 impacting your risk-weighted assets? And you refer repeatedly to internal cost of equity reference your Northern Star for new loan generation. Can you share with us the cost of equity you're applying to your networks in Spain and Mexico for the different loan categories, please?

Finally, digital euro. Given the geopolitical evolutions, do you agree that the digital euro is likely to be a reality at this point? And how are you preparing to deal with this and turn it to your advantage?

Thank you, Andrea. Very specific questions. I appreciate all the questions. And I'm going to be very specific to you, too. In the volume growth and capital generation, the thing I can guide you or tell you is that we still expect in the coming years that every year, this year, we created 31 basis points pure organic capital generation even after growth, after regulation, after growth, after any other extraordinary thing, we created 31 basis points. In the capital plan, we expect every year to create 30 to 40 basis points.

The operational risk. In the fourth quarter, operational risk consumption was 16 basis points. Typically, it's 4 to 5 basis points in a quarter. We do this calculation, as you know, at the end of the year. So fourth quarter always has an adjustment that the number was 16 basis points for operational risk in the final quarter of the year.

Cost of equity of the bank for different franchises, we never disclose it. Thank you for asking the question. Digital euro, it has pros and cons. It has to be done in a proper way in our view. I do think for the sovereignty topic that many people talk about, it can be helpful. There is a pro there. We see that angle. We see that point and appreciate it, but it has to be done in the proper way, in our view. And there are certain dimensions that we hope that we can continue to dialogue with the regulators and the politicians on this topic, given the fact that we are pushing private solutions as the banking sector in Europe, you might have seen this, the solution of [indiscernible], the Spain, Italy and Portugal, we are now in the same umbrella. We just concluded an agreement with EPI, which is basically Netherlands, Belgium, Germany and so on. So all of these countries, we will have already a private solution developed. We hope that in the digital euro discussions that politicians and supervisors and regulators understand the complexity, the costs and everything else required for the payment solution to be developed. In that context, we hope that the existing private solutions are integrated into that dialogue and discussion.

Next question, please.

Next question is from Ignacio Cerezo from UBS.

I've got three. The first one is on distribution and capital. If you can confirm that this is the year where the CET1 goes much closer to the 12% threshold or that's going to be a multiyear process? The second one is in Mexico, we're seeing a significant slowdown of remittances in the country. Does that have any impact in terms of deposit growth and asset quality, you think? And then third, if you can give us a few numbers in terms of balance sheet and P&L for the 2 digital banks in Italy and Germany, how have they been evolving basically in 2025?

Very good. I'll do it very quick, if that's okay, Luisa. This Is -- I mean, I mentioned multiple times, but our commitment to go back to the upper end of our capital target is absolute. In that sense, you should expect this year also that we get close to 12% as well, exactly, which implies that extraordinary distributions in the year.

In the remittances question, Ignacio. We have also reported this back to authorities also in Mexico because there are channels that are not fully captured in our view in that number. So there's a 5% decline in remittances, but you don't see that in many other geographies where there is a remittance flow between U.S. and Honduras and Guatemala and so on. You don't see that in other countries and only in Mexico because we do think it doesn't fully capture the figure. So the reliability of that number, we have some doubts. But we do think that including those informal channels that are not included in the figure, the number has not come down actually.

But in any case, we are quite positive for the Mexican franchise and Mexican economy better than 2025, we do think next year, and the remittances is an important part of this. Even in the official numbers that are being published, you will see a pickup in RV in 2026.

The balance sheet and P&L of digital banks. We started reporting this to you as if you can see in the rest of business line item. Rest of business is basically CIB beyond the geographies that we report a geographical account, so U.S., U.K. and so on, all in there, plus the digital banks. You do see that in that page of 24 customer funds, the digital bank deposits is EUR 12.2 billion at the moment. It's basically roughly a bit more than half coming from Italy and the other part coming from Germany. We will continue to report on the balance sheet numbers. As you would see in this page, you will keep seeing the update in the figure. The P&L numbers will be published when we see the maturity of those businesses. At the moment, we are not publishing them separately.

Next question, please.

Next question is from Borja Ramirez with Citi.

I have two. Firstly, on Mexico, I understand that recent macro indicators show improving GDP growth trends. So I would like to ask if you could provide some details. And then also you're gearing to the appreciation in the Mexican peso versus the euro in recent weeks. I think it's around 4% appreciation. And then my second question would be on Spain NII. If I take your Q4 NII for Spain and I analyze and I add a bit of growth, I get towards the upper end of your guidance for NII. So it seems your guidance is conservative for Spain. And also, I saw that you had a very strong deposit growth in Spain, which -- so it seems you're gaining market share there. So I think it's also thanks to your stronger digital capabilities. So if you could kindly provide some details, please?

Thank you, Borja, for the questions. Maybe Spain question, you take Luisa. On the Mexican side, again, I mentioned the overall positivity that we have for 2026 for Mexico, but you're asking about the depreciation effect. In the plan that we have and in the guidance that we have, we are basically expecting a depreciation of Mexican peso versus euro, depreciation. In the first days of the year, it's the other way around, which is amazing news for us, which is very good news, which is a positive upside potential. But we live with this currency topic day in and day out everywhere. We wouldn't jump into conclusions too quickly. If it turns out to be as such, perfect. But again, our plan basically foresees a depreciation of the Mexican currency versus euro. On the Spain NII number, we have to pick up some speed as well.

Yes. I mean, I think on the Spain NII number, as we mentioned before, we expect activity growth to feed into NII with average customer spreads slightly lower than last year, but stable from quarter-on-quarter numbers, and with a positive contribution -- continued positive contribution from the ALCO portfolios because we did increase ALCO portfolios in the end of the quarter by EUR 3 billion, and that should be also supportive to NII dynamics, which are all embedded into our guidance. And with deposit growth, I think it's primarily a strong growth in the fourth quarter, driven by demand deposits. Obviously, seasonal effects go into play in the retail side with Christmas salary bonus and so on and so forth, public sector, but also a strong growth, again, as I mentioned before, in Global Transactional banking with specific clients that have supported that growth in the quarter. And we hope to see that going into next year as well on the back of, again, that growth of almost 1 million clients retail, that also will help support deposit dynamics going forward. Deposit dynamics in the market overall are going to be also quite supportive as well.

Next question, please.

The next question is from Britta Schmidt with Autonomous Research.

I've got three fairly quick ones. Could you remind us what the cost-income ratio in 2025 would have been excluding the one-offs? And maybe comment on how much of the expected cost growth this year above inflation is, let's say, upfront investment versus ongoing cost drivers?

The second one would be on macro assumptions in Turkey. The rate and inflation assumptions do look a little bit of conservative. Maybe you can expand on why that is and perhaps also give us a bit of a sensitivity of the fee income to lower rates?

And then thirdly, just on capital, your SREP benefits from the fact that there's no countercyclical or systemic buffer in Mexico primarily. How do you think about the simplification suggestions that the ECB has put forward with changing potentially how they think about releasable buffers? I mean is that a potential risk to your SREP requirements in the long term?

Very good. The cost-to-income number, Luisa?

In the group, it would have been 39.3%, excluding the VAT topic from the 38.8% published in 2025.

And the Spain number would be rather than 33%, 34%.

34%.

Yes. On Turkey, I didn't get the full question. Turkey, are we conservative?

On the macro assumptions.

On the macro assumptions, we have to see -- maybe we are taking it a bit with a grain of salt, Britta really, because in 2025, if you go back to our first quarter 2025 presentation, we were expecting better macro in Turkey in 2025, but the rates didn't come down as much and inflation didn't come down as much. And you have seen the number in January. The inflation came 4.84%, monthly inflation. So we want to be a bit on the safe side to be fair. But the macro assumption that we put into the guidance is in the footnote of that page.

If you believe those macro assumptions would be better, perfect, you will have a better number in Turkey. If you believe it's going to be worse, it's going to be a slightly worse number. The sensitivity is also more or less clear. Every 1% inflation has a EUR 15 million to EUR 20 million impact on net attributable profit. Every 1% interest rate has a EUR 40 million impact on the P&L. And every 1% additional depreciation has, again, another EUR 20 million impact on the number. That sensitivity is relatively clear. There are some overlaps.

So you have to -- it's not directly, but not that far away from what I just talked to you about. If you have other macro assumptions, then the number would change. Then the simplification topic, Britta, it will take 2 hours to discuss this really because we spent a lot of time thinking about this. At the moment, I think the proposals are still not clear or not finalized, we wouldn't want to comment on them until we see something more certain and more clear on the page.

Next question please.

Next question is from Hugo Cruz with KBW.

So two questions. One on Mexico, perhaps you already gave the detail, but if you could remind us what guidance you expect for loan spreads and deposit spreads to evolve during the year? And I think you gave a comment of ALCO should support the NII in Mexico. So what are the assumptions there? It's more like the size of ALCO? Or is it repricing? So if you could give a bit more detail.

And then the second question is, you said that buybacks are starting to slow down your tangible book value per share growth. So related to that, I was curious if you think buybacks still have a return above your cost of equity. And basically, I was wondering if it makes sense at some point to stop the buybacks because organic growth or M&A could have a better return.

Very good, Hugo. Mexico question, Luisa.

Yes. On Mexico, well, we don't give guidance on specific customer spreads. What we've mentioned is that our guidance for NII is going to be mid- to high single digits. And we mentioned that we expect a compression of average spreads in the market this year versus last year, reflecting the strong decrease in rates in 2025, which is around 300 basis points in the reference rate and also in the slide as well. So that's what we mentioned in Mexico. With regards to the ALCO book in Mexico, what we have primarily been doing is extending durations. We did some exchanges of short-term bonds for long-term bonds in the quarter. And we have extended that duration. The book is right now at EUR 16.8 billion. It's grown around EUR 1.2 billion, pretty stable in the year. And again, the most relevant effect has been that extension of durations with yields at around 8.6%.

Very good. On the share buyback question, Hugo, maybe it's a repetition of some of the things that I always say and I also partially said today. But in terms of principles, very clear, we are value focused. Any capital action that we do, it looks into the return of that capital deployment for our shareholders and compare that also to other alternative uses of that capital.

So you mentioned, for example, the negative impact on tangible book value per share number. So because of that, maybe no, that's not how we look into it. We look into it from a value perspective. If we create value for our shareholders, then it's still a good investment of that capital. That is why we always look into the intrinsic value of the share, not the tangible book value per share. So it might have a negative impact on the tangible book value per share, but that's not a criteria for the bank to decide on these. You have to look into the intrinsic value.

It is true that given the appreciation of the share price, the attractiveness of share buyback has come down. But in our view, as compared to the intrinsic value, still there's value. That's why the program continues.

And then also, I would once again highlight that our commitment to returning the excess capital above 12% is full. So when the time comes, when the capital distribution decisions are due, we will look into the situation, compare that with the intrinsic value, get the feedback of investors in general and decide. Then we have to wrap up, no. We have to leave in 5 minutes, okay?

So we have to leave it here. No, we can continue. So next question, please.

Next question is from [indiscernible].

I have just three questions, please, all on Turkey. Can I just clarify one thing? The EUR 40 million you mentioned on the sensitivity to lower rates, is that excluding the hyperinflation adjustment? Or is that including the hyperinflation adjustment? I just want to make sure I understand, so is the impact 4% or 2% in general.

Second question, clearly, we're running positive real rates now in the region, and we will get an uptick in NPLs. But I just want to try and understand the relative effect of both in your PBT. So I suppose the NII impact is obviously much more sensitive given the fact the country is delivered -- delevered by 50 points of GDP over the last 5 years and household loans are only 9% of GDP. So I just want to try and understand, like obviously, a lot of it is credit cards, just in terms of the relative effect of both, that real rate policy.

And lastly, kind of more a strategic question. Can you chat about what you would need to see to buy out the minorities in Garanti as soon as you can? I mean, surely, it's a perfect opportunity now to buy the balance given an enormous return on invested capital that would be delivered to BBVA shareholders, assuming that the Turkish real rate policy persists, which obviously you do expect in your presentation. And so I just want to try and understand how you're thinking about the buyout of the minorities.

Very good, very quickly because we don't have time. The number that I gave is including the hyperinflation adjustment, meaning it's the perspective of BBVA looking into it from here, consolidated in a hyperinflationary accounting included way. The cost of risk, again, just to pick up some time. [indiscernible], it's in the guidance. We are expecting around 200 basis points of cost of risk in 2026, which is more or less in line with 2025. No more deterioration, not much deterioration in the first quarter. In the first half, what we have seen in the fourth quarter might continue a bit, but vintages have improved. That's why you have the guidance of around 200 basis points. About the minority shares, we are happy with what we have. We have no plans at the moment. We have no plans to change that shareholding structure that we have there. So we will -- again, we continue with what we have.

Next question please.

Next question is from [indiscernible] from Jefferies.

I just had a follow-up regarding some of your previous comments about the fact that in 2025, you delivered better than what you had budgeted for at H1 '25 in the strategic plan. And I just wanted to make sure that I get that right, and that is a comment regarding profits rather than the return on tangible equity. I think at that point, you were guiding for '25 ROTE to be around 20%. That came in slightly lower. Is the reason behind that slight miss the excess of equity that you've been operating on versus what you were expecting back then? And then also, if '25 profits came in better, '26 is expected to come in better as well. Why shouldn't we see some upside to your previous EUR 48 billion guidance for profits cumulatively?

And then if I just can ask a more thematic one as well. Just a few days ago, you joined the banking consortium to develop an euro-backed stablecoin. Could you please tell us what are your intentions and ambitions there and how you think about tokenized money more broadly in the coming years?

Very good. Thank you, [indiscernible]. Again, we are too late, so I'm going to go very quickly, apologies. And if you want to follow up with us, we are always open to the follow-up. But on the 2025 plan versus reality, as you exactly said, we delivered above plan in profits, but the average equity in the denominator of the return on tangible equity has been relatively high because we only started the share buyback programs because we have our commitment to go back to 12% all the time when we have excess. We started those share buybacks later in the year due to the Sabadell transaction and the fact that we weren't doing share buybacks throughout that process. But you're right, it was a beat on the profits.

Then 2026, given what you see, shouldn't we update EUR 48 billion, [indiscernible], we are too early in the game. We are only in the first year. I do think EUR 48 billion is a very good number, and we are on track to deliver that figure.

Then the stablecoin consortium. We do think it's a technological topic that needs to be watched very closely. There are certain use cases in our view that would benefit from those developments. And we are an innovation-focused bank. We always led the drive in digitalization now in AI and stablecoins is part of that dynamic as well. That's why we wanted to be part of a consortium to work through this and to basically stay up to date on all the developments around that. And then the final question we can take.

This is the final question. Next question, please.

Next question is from Fernando Gil de Santivanes from Intesa Sanpaolo.

Very quick one. What has changed over the FX hedges in the Mexican peso? Because I'm seeing higher volatility expected in this presentation versus the previous one?

The RWA is -- very quickly Fernando. The RWAs has come down because, as you know, again, we have done this regulatory -- you have seen it in the capital chart. We went to standard in some portfolios, and we went to foundation in some other portfolios, which has led us into the -- and then the equity, the sensitivity.

Yes, on hedges. Sensitivity to currency as we have reduced the capital, the sensitivity to hedges.

Very good. So you have the answer from Patricia. And if you want to follow up with her, she is always available for all of you. Apologies for this because we have an immediate program right after this in the same room with the press. Thank you so much for the questions. For any follow-ups, the team is happy to help you out.

Absolutely. We are at your disposal for any further questions or clarifications. Thank you very much.

Bye-bye.

Thank you.

To have the group CFO, Luisa Gomez Bravo, with us. Luisa, welcome.

Thank you.

It's been very interesting times for you.

I'm a little bit tired but it's okay. Christmas holiday is hopefully soon.

So perhaps if we start with the balance between developed and emerging earnings, how do you see things? If Sabadell has joined the group, you would have had more hard currency earnings, which are very welcome. So my question is, is management actively aiming for a more balanced footprint and more balanced mix between emerging and developed. I mean, if that is the case, what are you doing to get to that point?

Right. Well, really the balance between emerging markets and developed markets, not just now, but in general, it's more an output than an input of the strategy. And the strategy really has focused on, especially in the past over the past 5 to 10 years, really on having very quality -- high-quality franchises in the countries that we want to be in, countries where we find that there is potential for growth with, in general, low leverage ratios, which allows us to grow with the adequate asset quality profiles.

And that has been really the main drive of the strategy is ensuring that the curtailing of the footprint or how we see it really is driven by, can we have scale in those countries, the adequate scale to compete and get a competitive advantage in sustainable profitability versus the peers and to allow us to be top 3 player in the market to ensure that, that is, again, sustainable going forward. So really that drives the strategy.

And the exercise that we've done in the past, really, it's been about more exiting markets than entering or doing deals that were different because we really wanted to make sure that we have that high-quality very large-scale franchises in the country, and that's why we exited the U.S., Chile, many other countries, Paraguay, Puerto Rico, Panama, a lot of things to ensure that the footprint that we have is the right one because we have those franchises in place.

When you overlay on top of those high-quality franchises with adequate scale and capacity to compete, a global strategy regarding digital banking that ensures that we are gaining -- acquiring clients around EUR 11 million over the past few years, 2/3 of those are done digitally. And you overlay as well a strategy regarding sustainability and sustainable finance, not because it's a good thing to do. It's actually really business driven because we do see a shift on the commercial side in terms of transition to more efficient sources of energy and how that drives your manufacturing processes. Those global strategies overlaying under the -- or on top of the high-quality franchises is driving a strategy that is allowing us to deliver today the 19.7% ROTE, it's allowing us to deliver that 16% growth of lending in constant terms.

And it's been allowing us to deliver that 17% growth in tangible value per share plus dividends, which I think is really more the metric to follow in a bank that has this type of footprint. And that is why we are very confident going forward when we communicated our planned in the summer to maintain in those ambitious targets in terms of being really a unique story within the European banking system that combines profitability that circa 22% ROTE on a pro forma 12% CET1 ratio, highly profitable business, tangible book value per share plus dividends in this new cycle growing mid-teens.

But in addition, it provides continued growth versus the peers in Europe in terms of activity growth. And on top of that, I think this is another 3 of the triangle of the uniqueness of the BBVA is a consistent capital return story to shareholders. As you know that we've stated to the market that over the next 4-year cycle, we have -- we expect to have around EUR 36 million of capital available for distribution. And this is something that is also adding an ongoing capital return story on top of the profitability story, on top of the growth story. So that is why I think that we are quite comfortable in that basis.

Okay. Perhaps moving to Spain. You've been growing much faster than the market for a number of quarters. I mean, in Q3, your loan book was up 6%, the market was 3%. How are you getting there? Is that through prices? How do you describe your offer in terms of competitiveness? Any insights that you may have on margins, how you see the competitive landscape in Spain would be?

Okay. So let's unpack a little bit the framing of the situation in Spain and why, again, we think that we have really the best franchise in Spain because Spain I think, is overall sort of a darling banking market now. But I think that within that, if you look through that, you definitely see BBVA being, I think, the most profitable and most efficient bank in the market today. And that is really not so much on a specific spur of the moment growth in terms of price. I think we are very disciplined on price. It shows that precisely, we are losing market share on the mortgage side because we don't think there's value in the mortgage market right now at the current prices.

So it's more a focus again of strategy and how we've been able to grow in the Spanish market and how we think we're going to be growing consistently going forward and outperforming the market. And this has to do again with the transformation of your balance sheet. We've been consistently over the past 5, 6 years, focusing on growing on the segments that we think are more profitable. And that means that we've had a very strong focus on consumer loans. We have a 16.6% market share in consumer loans. Our average lending market share in Spain is 14%.

So above our natural market share, we used to have a loan book of consumer loans that used to weigh around 5%. Now it's 10%. Consumer loans in Spain are not that significant, but still, it's a significant change of mix in that proportion, and this is a very profitable segment. Over the past 5 years since December 2019, we've grown consumer loans market share, 350 basis points. So again, it's not a one-off quarter this year. It's really a consistent strategy on the back of that. And then also, I would highlight our effort on the SME side, as everybody knows, it's a segment that we are very keen to grow in and again, this has been a consistent effort over the past, again, since December of 2019, where we've grown 230 basis points, our market share in SMEs.

And this year, we're growing above 50 basis points. So it's a very focused strategy of growing in the most profitable segments. And this activity growth really, again, when you look, deep dive what we're doing that we think is different than differential, it has to do with 3 things. One, the first one is client acquisition. It goes back to acquiring clients. Since 2022, we've gained 3 million clients in Spain. This year, for the first 9 months, we're growing at around 730,000 clients. We've gained 100,000 new SME clients. And what we're seeing is that we are #1, #2 bank in acquiring clients in the market over the past 2 years.

And what we're seeing is that when I onboard a new client, that client within the next 12 months becomes an engaged client. And the focus of doing this end-to-end digitally where over 50% of my clients, I am onboarding digitally is allowing me to see that 5 years down the road, the clients that I'm onboarding now are going to be 3x more profitable, right, in terms of product origination, in terms of cross-selling opportunities.

So the best way to ensure sustainable growth in the future, for us, it's not through price. It's actually client acquisition, very focused strategies on client acquisition and engagement. The second thing that I think is also very important for us -- and maybe this is more like a silent revolution, which is your distribution model. So everybody has digital banking apps. But how does that tie in to really reshaping your distribution and relationship model with your clients, the branch networks and the sizing of that.

And what you've been seeing and what we've been seeing is that we've been increasing productivity of our relationship managers in the branches. Why? Because as we push out our digital banking strategy, our client acquisition strategy, we've been able to have today, over 50% of the roles in the branches are specialized roles. So we've been able to self-fund growth in private bankers. We've been able to fund growth in insurance specialists. We've been able to fund growth in deploying product specialists for the SMEs and that productivity growth is ensuring as you're seeing that output in outperformance in market share gains.

And last but not least, sorry for the long answer, it's about risk, and it's about risk management, it's about your risk models and it's about how you can deploy preapproved loans fast, quick and digitally as well. So I think that ties into a story where we are very comfortable and comfortable, it's ambitious in ensuring that over the next 4 years, we have stated that we're going to be growing mid-single digit above the market, so still continue to outperform the market with efficiency ratios that are going to be in the low 30s and adequate cost of risk.

So I think the story for Spain for BBVA is going to be a story again of outperformance and consistent profitability going forward. And on the margin side, I haven't forgotten your question. I think what we're seeing is stability of policy rates going forward, slight uptick on the EURIBOR rates. We -- our balance sheet still on the mortgage side is -- above 50% is floating rate. So we need to manage that interest rate exposure. But with stable interest rates, you're going to have, I think, the positive effect of activity driving down to margins. I think that we're going to be seeing perhaps a slight compression still on the customer spread and going into the fourth quarter. But going on from then is going to be more stable customer spreads in the future and activity growth feeding through supporting growth, and the ALCO management, which is also very important and another source of competitive advantage, I think, for BBVA and the way we manage our ALCO book is continue to be supportive of that NII evolution.

Okay. Following up on your point on customer spreads, is it too optimistic to expect customer spread expansion, given that you are focusing on growing in consumer and SME. So that mix should add to your margin or you're going to keep things more or less stable and that would allow you to...

No, I mean I think that obviously, there's a slight mix component in terms of the customer spread. I think really the most relevant driver of customer spread is how you manage your cost of deposits. And I think that we have currently a cost of deposits of 66 basis points. It's been coming down. So I think the important thing is to continue to, again, acquire clients, transactionality and ensuring that we can have that cost of funding advantage going forward.

Our expectation is, again, overall, and we will give guidance next year. So -- but I think the important thing is that customer spend should be more or less stable, maybe at the end of next year, you will see a little bit of expansion perhaps but again, it's all going to be depending also on competitive dynamics. If things turn like the mortgage side, and we'll may be -- Feb will be even better.

True. Sounds pretty amazing, but now Mexico's turn...

It's even more amazing.

You've been gaining market share across all products for a number of years. Over the past year alone, you've picked up, what, 60 basis points both in loans and deposits. Do you think that momentum should continue? How are you placing yourself on both sides of the balance sheet and within the different loan books. And as we get closer to the end, USMCA renegotiation, what's the mood amongst corporate clients?

Right. Well, I think that we have been and we continue to be structurally positive on Mexico and the growth in Mexico. The banking sector as a whole and obviously on the capacity of BBVA in Mexico to outperform that growth. And it really goes back to 2 basic concepts that I think are very relevant. One is obviously the macro. You're seeing, I think, this year, quite a macro -- quite a resilient macro despite all the tariff noise, and I was here last year in San Carlos and Patricia, Head of IR, the mood with Mexico was challenging, logically so, okay, because of the noise on the tariffs and not just the noise, actually, the deployment of tariffs in Mexico and Canada before anybody else, before the reciprocal tariffs.

So -- but when you look back to today, you're seeing a macro that we have, and everybody else is upgraded. So GDP forecast this year, we actually were negative 0.4% in the second quarter. We've upgraded those forecasts to 0.7% this year, growing to 1% next year and from then on, slightly growing ahead. Remember that the growth potential of Mexico is on the -- around the 2% level. So still positive evolution in terms of the GDP side in Mexico.

And what's I think very important and more precise there is that when you look at the exports, exports have grown in Mexico, 4% since the data out of this summer. So within this context of tariff discussion, you're able to still grow your exports, which I think nobody assumes was going to be the case at the beginning of the year. And sure, there's some front-loading of that because there was front-loading of exports in Mexico. But I think also important is the fact that the FDI in Mexico is growing 8% this year. So that coupled with a strong peso is an outlook that I think has turned more positive than the one that we had initially speaking. And I said, going forward, we're still structurally positive on those macro dynamics being more supportive going ahead into next year.

The second factor that's important and why we've always been structurally positive in Mexico with the volatility of the noise, but structurally speaking, has to be done -- it has to do with the leverage ratio in Mexico. Again, leverage ratios, when looking at the footprint are important, the leverage ratio in Mexico, the indebtedness of the private sector is around 34.7%, 35%. That has allowed the banking system in Mexico over the past 20 years to grow at around 1.2x nominal GDP rate.

And BBVA in Mexico, as you mentioned before, within that period of 20 years, we've been able to grow 1.4x nominal GDP. I think that we were talking about this the other day, I think that there's only been 2 years where BBVA Mexico has not been able to grow its lending book, which one was the GFC and the other one was COVID. So structurally speaking, we're able to grow because as the economy, it formalizes and gets formal jobs and job employment, wage dynamics are positive. That is a source of growth, structural growth in an economy like Mexico for the banking sector and BBVA hopefully outperforming that.

So that's the structural side. On what's going on with the current dynamics today is the -- in fact, that if you ask me whether the positive surprise has been the retail dynamics because going again on a macro practice of a slowdown in the year, job employment concerns, et cetera. I didn't expect the retail portfolio to be growing at 12.5% year-on-year, again, gaining market share, to your point, over the -- over a good solid growth in the market as well. So I think that's been positive. We've been growing 13.5%, our credit cards, 14.5% of personal loans. We've been growing 16.5% our SME loan book and that is allowing us to deliver that growth while gaining market share, for example, on the SME side, 200 basis points of market share year-on-year, again, an area of focus for the whole group.

So on the wholesale side, has been a deceleration of growth but one of the most relevant dynamics to that is that -- and I think it's important to remember that 1/3 of our wholesale loan book in Mexico is U.S. dollar-denominated. So when we started the year, we were comparing a Mexico peso that had depreciated within the year versus the first half of last year where the Mexican peso was actually appreciated. So when you translate that into local currency that overweighted growth.

As we knew and that's why we guided for the year, remember, we started guiding high single digit. Now our guidance is to end the year at circa 10%. We were already incorporating the convergence because of the FX rate. And even the FX, it's even better today because as I mentioned before, it's appreciating. So that means that when you look at the growth book in the corporate side, we have grown around 6.7% year-on-year as of September. When you factor in FX, the loan book in the wholesale side is growing around 9.2%, 9.5%. So I think that's an element that's relevant.

And going forward, with these dynamics in place, we do believe that BBVA Mexico will continue to outperform the market. We will continue to grow in the pockets of business that we think are most profitable for us, and we will be able to maintain a high single-digit growth rate over the next 4 years in that context.

And on the funding side, I think the lowering of rates, the rates are coming down, I don't know, most of you know that rates were at 11.25% now they're at 7 -- over a year ago, now they're at 7.25%, we expect policy rates to come down to 7% this year, 6.5% next year. As those rates come down, it's allowing us to also manage more effectively our deposits and deposits are growing also at 10% year-on-year on balance sheet deposits. While at the same time, being able to provide interesting investment alternatives through asset management and asset management is growing around 18.5% year-on-year, and we are the largest asset manager in the country.

So I think the expectation that we have in Mexico is, again, high single-digit growth in activity, feeding that with customers, again, customer spreads stabilizing as rates stabilize, and allowing that with a macro environment where the cycle in terms of asset quality is supportive and efficiency ratios of circa 30%, we think that Mexico is going to be a strong contributor to that road map going forward.

Just a quick follow-up on that. In terms of funding, are you thinking about keeping the loan-to-deposit ratio stable? Do you work within a range? How do you feel...

I think that right now, the loan deposit stable is around 105%. I think that the way we ensure good profitability is that we demand profitability on top of what is your marginal cost of funding. So I think that, that ensures that as long as we have that place and as long as we're originating having loan-to-deposit ratios of around 105%, even slightly higher than that is something that I think is feasible and actually something that we think makes sense from a profitability point of view because there is no issue, especially for BBVA Mexico of liquidity.

I can pay tomorrow and I'm going to have the liquidity I need. It's really about price management and ensuring that we are not contaminating our significant cost advantage that we have on transactionality with pricing that could put that at risk. So that's more the balance of how we manage pricing on the deposit side and with regards to the wholesale funding costs.

Very clear. So Turkey's turn. I think your strategic plan suggests that Turkey will move past hyperinflation accounting by 2028. How much do you expect Turkey to contribute to the group's earnings by then? I think consensus -- at least Bloomberg consensus has something like EUR 1.6 billion by 2028. Do you feel comfortable with that number? And more short term, how would you describe the dynamics in the country for the next few quarters?

Yes. Well, I mean the -- so Turkey, talking about Turkey, unfortunately, means that we had to talk about hyperinflationary accounting, which is not easy, but it's important because the macro variables impact, obviously, the contribution of the Turkey franchise. And I think in that sense, what has been very clear and that's the communication that we've had is that as Turkey continues, it's disinflationary road map, that is going to be positive for the contribution of Turkey no matter what, even if it doesn't -- even if in the next few years, you're not exiting hyperinflation.

You don't need to wait for that to have Turkey contribute more to the group because of the macro dynamics. So the macro, we are expecting inflation to come down this year to around 32.7%. It was around 44% last year. Going into next year, the current scenarios that we have, we expect inflation to come down to 30% -- sorry, 23%, 25%, and the rates also coming down from the 38.5% this year down to around 30%. If those 2 things happen with an FX that is again depreciating, but depreciating below the forward rate. I think that macro scenario is going to be supportive of contribution from Turkey because inflation coming down means that the drag that I have from inflationary accounting is going to be coming down as well.

And the rates coming down because if you see the duration of my assets and liabilities, I have deposits that are in the market significantly term deposits that are maturing every 28 days. So as decreased -- asset rates decrease significantly, it supports better customer spreads and overall better NIMs. So going forward, the macro variables are important. And that we expect to be feeding into better customer spreads in the next quarters. And also better NIMs in general as well. I think that aside from the macro, which is very important, sometimes and that's maybe on me and us, to really highlight the quality of Garanti's franchise in the country.

And obviously, it's been shadowed by obviously a franchise that needs to deliver much more. But when you look at the Garanti's performance in local in the market against its peers, it's really amazing what they've been able to deliver in the past 2 years. You look at Garanti, Garanti in the first 9 months of the year has delivered TRY 84 billion. The next player -- I'm talking about the private banks. The next player has made TRY 44 million. When you look at the NIM of Garanti, it's around 5%, the next player is 2.4%. So we are focusing not only obviously ensuring that we can manage the process of the contribution of Turkey to the group, but specifically ensuring that Garanti remains being a high-quality franchise.

So as the normalization of the economy comes through, we have the best-in-class player to be able to compete and deliver the value that we expect from the franchise, which is still today not there. And to your point, as to the expectations of the bottom line profits for us, again, whether it comes out of hyperinflation or not, our assumption is that it does in 2028. But I think what's relevant is that Garanti pre-hyperinflation accounting that is in 2022 was already making EUR 1.5 billion. So whether I think that, that number that you gave is short on our expectations, it is short on our expectations in 2028.

Okay. Fantastic. So let's move on to capital, which is a big focus at the moment. You've got roughly EUR 8 billion of service capital if you consider the approval of models that is coming in Q4. How quickly is that coming back to shareholders? And is it realistic to expect that you're going to be running the bank with a 12% fully loaded core equity Tier 1 ratio as soon as -- I don't know, Q1 or Q2 2026?

I sense a nervous laugh around that question. So let me start by the last question, okay? The 12% CET1 target, I think that we've been -- and Onur has been quite vocal in trying to explain why we do think and we continue to believe that's the right target for the group. And it's -- this is a process that is not just improvised. It's very much thoroughly analyzed within definitely my responsibility and Onur's responsibility in the bank. So I think it's -- the CET1 target and we keep on saying this, it shouldn't be measured on an absolute term.

It really is important to understand what the requirement of capital for the bank is and that relative gap that we have against that capital requirement. Our SREP requirement in the third quarter was around 9.16%. We had 284 basis points of the difference between our capital target and that number. When you look at that number, this 284 basis points versus the peers, the peer -- the average peers, which means, banks that are below that, the average is around 240. I am one of the top 3 banks in terms of distance between my CET target and what the regulator requires of me. So the regulator does their models, they do their analysis, and why is that because the diversification of my footprint allows me to have resilience in terms of profitability to absorb cycles, shocks, adverse scenarios and the requirement that I have is lower than other peers, which gives me that distance in terms of CET1 capital.

And not only that, the SREP requirement going to next year is coming down for BBVA. It's going to be 8.97% at the start of the year, because of the O-SII buffer from Bank of Spain coming down. So that's very important. And I think I encourage you all to look at the SREP requirements of European banks and measure that gap to the capital targets. But on top of that, I think that is also, again, on the back of the regulator, and the regulator has a say obviously in this. I know that we've all forgotten about ECB stress tests. They're still out there, and they still do them. It's a lot of work for the banks, by the way. You may agree or not with the methodology. I don't particularly think that the methodology is great, good or bad.

But there's a beauty aspect of this, which is puts all the banks in Europe at the level playing field in terms of the scenario, they're looking to stress. And BBVA, in the last ECB stress test scenario, in the current ECB stress test scenario comes out on top of most of the banks in Europe. We are the second-best bank in terms of depletion in this scenario. When you look at fully loaded ratio, the fourth best bank with the CET1 ratio over the scenario that is above 11%. So we're one of the best banks in terms of stress testing from the ECB, I don't say it. I have my own stress test. I have my ICAAPs, no, the ECB. Every 2 years, they do this. Again, BBVA comes out on top.

Third thing, if we had concerns from the regulator about the capital, would they've been allowing us to then allow us to recognize 40 to 50 basis points increase of CET1 from a review of models in the bank. So I think that really, it's about the capital requirements versus the CET1 target and the consistency of how we measure that going forward. But the second thing that I think is also important has to do with the type of bank that we are, the business model that we have. We are not very sophisticated. We do plain vanilla banking. We have 2/3 of our funds, funding comes from customer deposits. And that means that we have an RWA density that is 48%, 49%, very much highly above the reference to the peers, which is at 28%, 29%.

And another thing that nobody -- nobody, I don't want to see, nobody I'm sure you do, that people often, I think, encouraged to look at is the leverage ratios. BBVA's leverage ratio is 6.7%. The quality of capital as much as the distance to your SREP requirement matters. And I think on that topic, we feel, again, very comfortable at 12%. And moving on to your question, we will return capital to shareholders above that CET1 target. As to the how and when, it is something that as you know is ongoing now with the recent requirement that we've done to the ECB and the approval of the significant share buyback that we've requested.

And I think that what's important here is maybe to also understand that this is not going to be an exercise where you're going to see a one-off, boom, down to 12% immediately. But I can say that, that exercise of returning excess capital to shareholders is going to be a matter of months, not years. And then again, this is a process that we need to not only get approval from, but then go and execute. More importantly for me is that commitment to deliver capital returns over 12% and not just the excess capital today that I have but this bank is going to generate further capital.

The profitability of the franchise will generate further capital and that capital will be returned consistently to shareholders over the next few years. So it's a story about returning excess capital today, but ongoing capital returns going forward.

It sounds good. I think we've got a few minutes. I'm sure the audience -- I've got lot of questions, but I'm sure the audience will have some questions. Very shy. So I think I'm going to keep going then. Going back to the balance between hard currency, soft currency earnings. I know you probably think I'm a bit of pain there, but investors care. You've been growing fast and what you call your -- the rest of business area. You've got 2 legs or 75% is CIB. The other side is your new digital franchises in Europe. Can you talk us through on your strategy on both sides. I think on the CIB, in particular, you've been growing very fast over the past couple of years.

Can you explain a bit what's in there, whether we need to start worrying about exposure to private credit and things like that? And yes, how you envision your footprint in Europe through your digital platforms and if there are any other countries where you think that there is good opportunities to get in?

No, yes, I think that's -- we will probably be talking more about the CIB business going forward. I think that's one of the other areas where we've consistently published information on a pro forma basis in our management report, and then you can see the trends that we've been having there. The CIB business and the bottom line today is around EUR 2.1 billion. And I would say CIB and wholesale banking is 1 of the 6 strategic priorities of investments going forward because we do think that -- we need to reshape the investments, not just on the retail side, but actually focus as well on the wholesale side on the CIB business, particularly.

The rest of the business because our reporting is a geographic reporting you tend to see rest of business and you identify that with CIB. Again, CIB is much broader. The bottom line of the rest of business is significant because in the 9 months, it's around EUR 480 million. But again, the CIB business overall is much more relevant. What is the strategy behind that? So in the rest of the business side, to be more specific, we have the branches of the SA. So CIB, you have CIB businesses in our footprint in Mexico CIB and Spain CIB. And then we have CIB business that is done out of branches in Asia, in Continental Europe, in the U.K. and in the U.S.

And this was already the case before. It's nothing different. This footprint was already there. So the strategy going forward really is a strategy that is not aimed at competing against JPMorgan, whatsoever. It's really about expanding the scope of what we do well into a larger set of clients, first of all, connecting the footprint. We are very much client driven. We have clients that do a lot of cross-border business. We've been growing our cross-border business double digit in the mid-teens area over the past few years, and we intend to expand that. Most of the revenues that we achieved in our CIB business has to do with transactional banking.

And again, cross-border business there is important. So connecting the footprint in a better way for our clients, it's important. That's why we invest in these branches because there are important points or hubs of connection. For example, New York, it's an important hub of connection with our Latin America and Mexican clients and also with our Spanish clients as well. So it's about focus on clients and focus of expanding that relationship.

In addition, I would also add that there are certain areas of expertise that we have which we can also scope out better. And particularly, this has to do also with institutional investors, but more of the things that we know how to do. So what are we good at? We're good at periphery securities. If you want to buy Spanish bonds, you should come to BBVA to buy Spanish bonds or Portuguese or Southern European or for example, if you're PIMCO and you want to buy Mexican currency, you should come to BBVA to buy your pesos or we're the best bank and the largest bank in the bond trading. So it's really connecting those dots for institutional clients and for corporate clients, that's the basis of the growth.

So that means that we need to invest because the base of investment was quite low. So you will see continued investments in that franchise, and we've committed to grow high teens, the revenues in this aspect and provide good profitability for the business going forward. So I would say that's the CIB value prop. On the digital bank side, the digital banks, I think that it's been a story really of trying to, at the beginning, test the hypothesis of whether it made sense to scale our tech stack in Spain.

So again, it's all about scale, Marta, it's about adding scale to your current tech stack. And we -- and the approach was with the passport licensing system, we were able to, from our tech stack in Spain, invest tens of millions of euros, not hundreds of millions of euros in setting up a business in Italy that doesn't aim to be the largest market share in -- because that's not the purpose. It's really about scale, driving profitable scale onto our tech stack in Spain.

We started operations in Italy back in the end of 2021. And I think the expectations have been surprised on the positive side. We have close to 800,000 clients. You've seen the data on the deposit gathering, it's still a journey. These digital bank initiatives have long breakeven period. We have been able to accelerate the breakeven maybe by 2 or 3 years, but still it's something that will be not material in this cycle, it may be material from the bottom line from the perspective.

And Germany, I think what we've seen is an acceleration of that, actually surprised to the positive. We launched in Germany this year. And we've seen a very -- first of all, on the deployment timing much shorter, obviously, I mean, it's logical. But also we've been able to launch with a boarder set of scope and the reception has been very important. Why are these digital initiatives important? First of all, because of that scale and incorporating that scale into our platform.

But in addition, because -- and you've seen this playing out, the neobanks are very much a relevant force in the competitive markets where we're operating, understanding how we operate as a new entrant in these markets allows us also to feed in because we have a digital banks unit, allows us also to feed in those learnings in markets like Mexico, where we have a very interesting landscape with neobanks, but also in Spain. You've seen the interest in Revolut, the Trade Republic and MyInvestor, and that's also important for us in trying to deliver lessons learned and have a value prop that is different than other digital banks, where we are trying to be a fully universal digital bank, different than other neobanks, which are more monoliners.

Why? Because the cost of acquisition is high, the more products that I have to be able to monetize that, the better, and I have the tech stack. So that's what we're trying to do. We'll see how that development goes. We don't rule out obviously taking that to other markets. But for now, we need to, again, settle the initiatives, especially now in Germany, and then we'll see from then on.

Well, thank you for those insights. I'm afraid we've run out of time. It's been wonderful to have you. Very insightful as always and see you next year.

Thank you.

Thank you very much.

Good morning, and thank you for joining us for BBVA's third quarter results presentation. As every quarter, I'm pleased to be joined by our CEO, Onur Genc and our Group CFO, Luisa Gomez Bravo. We will start with a review of the key figures for the quarter, and then we will open the floor for your questions. So without further delay, let me hand it over to Onur.

Thank you, Patricia. Good morning to everyone. Welcome, and thank you for joining BBVA's Third Quarter 2025 Earnings Webcast. As always, let's jump into the slides, starting with Slide #3. And as always, starting with the value creation numbers on the left-hand side of the page, you can see the strong evolution of tangible book value per share plus dividends, which increased by 17% year-over-year and 4.5% in the quarter, in my view, excellent figures. On the right-hand side, you see the profitability ratios. They are sustained at very high levels with an industry-leading return on tangible equity of 19.7% and ROE of 18.8% in the first 9 months of 2025.

On Page #4, on the left-hand side, we delivered another strong quarter in terms of net attributable profit once again exceeding the EUR 2.5 billion mark even in the context of a much lower rate environment, obviously. The net attributable profit decreased compared to the previous quarter, mainly to 2 things: higher inflation in Turkey, which impacts obviously the other income line item. And mostly due to the one-off positive impacts registered in the second quarter. If you remember more specifically, the release of some fiscal provisions affecting the tax rate and the review of value-added tax, VAT, the payment calculations around this and an effect which then affected the operating expenses.

The net attributable profit is also slightly below last year's figure for a good reason, we think, because Mexican peso has been appreciating lately versus a depreciation in the same period last year. This had a negative effect on the FX hedges of the net trading income line of the Corporate Center this quarter, but we will benefit from this from an appreciated Mexican peso in the coming quarters. We take this any day. On the right-hand side of the page, you can see our CET1 capital ratio, which improved by 8 basis points during the quarter reaching 13.42%. This solid capital position, obviously provides us with the capacity to increase our shareholder remuneration, which I will explain later.

Page #5 on the left-hand side, our cumulative profits for the first 9 months. They continued their upward trend to a record level, reaching almost EUR 8 billion in the first 9 months of 2025, a 4.7% increase year-over-year in current euros. And on the right-hand side of the page are profitability metrics compared to European peers. Once again, our 19.7% return on tangible equity, it remains unmatched, and we are clearly one of the most profitable banks in the industry.

Moving to Page #6. This page is summary of the pages to follow. So allow me to directly move to the next slide, Slide #7. As always, the summarized P&L of the quarter. I would highlight the outstanding evolution of the core revenues, especially in the last quarter with net interest income and fees growing 18% and 15% year-over-year, respectively. And in my view, an impressive 7% and 6% quarter-over-quarter, respectively, again, in constant euros.

Slide #8, the summarized P&L over the first 9 months of the year. I would once again highlight the very positive core revenues evolution leading to an increase in gross income of 16% in constant euros year-over-year. The strong gross income growth, coupled with the positive jaws and the contained growth in impairments, which we will discuss later, it led again to the record, as I mentioned, net attributable profit of almost EUR 8 billion.

Moving to Slide #9, which puts more light into the revenue breakdown evolution. Once again, we continue to deliver quarter-on-quarter on revenue growth, driven mainly by net interest income and net fees and commissions, as you can see on the page. This has been the story of BBVA in my view in the past few years. And as you can see on the page, this quarter, the performance is even more pronounced with NII growing 7.1% in the quarter and fees growing 5.8% in the quarter, leading to a quarterly growth rate of 4.4% in gross income despite an uncertain macro environment, despite declining interest rates, we keep delivering on core revenues.

Regarding on the page, the annual decline in the net trading income, I already mentioned it, but an important part of it is, again, due to the strong gains from the FX hedges linked to Mexican peso depreciation last year versus a negative FX hedge impact this quarter due to Mexican peso appreciation. But again, as I said, we can take this any time because it will help us in the coming quarters.

Moving to Slide #10. Let me focus a bit more on activity and loan growth, which has maintained its pace at an excellent 16% growth year-over-year, then leading to an excellent NII performance. As we claim, this is also very good news for the coming quarters since we delivered this loan growth in a very profitable manner.

In Spain, in the middle of the page, loan growth further accelerated to 7.8% year-over-year, while Mexico continues in line with our ambitious guidance at 9.8% year-over-year. In the case of Mexico, let me remark that if we exclude the U.S. dollar currency impact, the loan growth figure as of September 2025 would have been 10.9%. Now on the right-hand side of the page, thanks to the strong loan growth figures and obviously, our proactive price management. We continued expanding on our core revenues, some of NII and fee income in both Spain and Mexico, in both year-over-year and quarter-over-quarter comparisons.

And again, gaining pace in the last quarter, if you annualize the quarterly figures, of the core revenues, they are really good numbers in our view. And this is one of the most important messages of the presentation. Banks are generally rate sensitive as we also are in Spain and Mexico. But despite the rate compression, thanks to our unmatched loan growth, leading to in every single country, market share gains, and our proactive price management, we continue to grow our core revenues.

Now on Page #11, you see another reason for our optimism looking into the future. As I mentioned, we are quite rate sensitive in Spain and Mexico. The last 2 years, and especially the last year, we have seen interest rates decrease significantly in these markets. And the good news in our view is that we believe interest rates are already at or near the expected terminal rates in both Europe, Spain and also Mexico.

In the case of Europe, we expect the terminal rate to be around 2%, where interest rates already are compared to the 4% at the beginning of 2024. And in the case of Mexico, the policy rate was at 11.25% at the beginning of 2024, and is now at 7.5%, as you know, we estimate the terminal rate to be around 6.5%. So we are almost there as well in Mexico. We have proactively managed the impact of these rate declines, which by the way, happens quite fast in Mexico, the reset frequency is much faster in Mexico and with some months delay in Spain. Our customer spreads on the right-hand side of the page already reflect those impacts. And with limited room for further rate cuts, we expect relative stability in customer spreads going forward. In short, let's not take too much time on the page. But if spreads stay around these levels and with continued dynamism in activity and loan growth, we believe our revenues and profits will further strengthen in our core markets in the coming quarters and years.

Moving to Slide #12. On the left-hand side of the slide, we continue to show positive jaws at the group level, supported by the solid performance of the gross income, which grew 16.2% year-over-year while operating expenses increased by 11%, remaining below the average inflation across our footprint. And on the right-hand side of the slide, you can see our efficiency ratio, again, improving reaching 38.2% below last year's level, obviously.

Slide #13. This page shows the solid evolution of our asset quality metrics, which are performing better than expectations, better than our guidance at the beginning of the year in a context of strong activity growth, especially in the most profitable and typically higher cost of risk segments. On the left-hand side of the page at the bottom, our cost of risk stands at 135 basis points, again, better than guidance, slightly above last quarter's figure with the numbers already incorporating the negative impact coming from the annual risk model calibration process, partially compensated by the positive impact from the quarterly macro adjustment. Meanwhile, on the right bottom, you see that our NPL and coverage ratios, they continue improving.

Slide #14 on capital and shareholder remuneration. On the left-hand side of the slide, our capital waterfall for the quarter-over-quarter evolution, our CET1 ratio once again has increased 8 basis points to 13.42%. And following the waterfall, results 65 basis points, dividend accrual and AT1 coupons, minus 35 basis points, then 37 basis points due to the RWAs growth. This figure reflects, again, our ability to reinvest part of our capital generation into profitable growth. And as in other recent quarters, it also reflects the result of several risk transfer transactions, SRTs which positively contributed 5 basis points to the ratio this quarter, a bit lower than the previous quarters because of the summer seasonality. Then we have a bucket of others of 15 basis points, which comprises, among others, the market-related impacts, slightly positive. And then the credit in OC (sic)[ OCI ] for hyperinflationary countries.

Lastly, regarding the CET1 ratio. And as we announced last quarter, we expect a positive regulatory impact in the fourth quarter in the range of 40 to 50 basis points reinforcing our already very strong capital position. Then moving to the right side of the page, as the process of the Sabadell transaction has ended, we will resume our shareholder remuneration programs. First, we will begin our EUR 1 billion -- nearly EUR 1 billion share buyback program starting tomorrow. Second, we will distribute on November 7, a record interim dividend of EUR 0.32 per share. Then, and most importantly, as soon as we get the required ECB authorization for which the process has already been initiated, we will start another round of a significant share buyback. The details of this last piece will be announced, obviously, once we receive the authorization from ECB.

Moving to Page #15, with a quick review of our strategic progress and specifically on new customer acquisition. During the first 9 months of 2025, we have acquired a record 8.7 million new customers with 66% joining us through digital channels, a clear competitive advantage for BBVA.

Then on Slide 16, another pillar of our growth strategy, sustainability. We continue to deliver quarter after quarter, even above our own expectations. In the first 9 months of 2025, we have channeled a record EUR 97 billion in sustainable business with a significant increase in all segments.

And finally, moving to Page #17. As you know, last quarter, we set our ambitious financial goals for the 2025-2028 period. We will report back to you on the progress versus the established goals every quarter. In short, we are at the early innings, but as compared to the numbers we have in the plan for the first 9 months of 2025, we are performing better than our original expectations in all the metrics.

And now for the business areas update, I turn it to Luisa. Luisa?

Thank you very much, Onur, and good morning, everyone. In Slide #19, let's start with Spain, which has shown a strong momentum throughout the year and once again has delivered excellent results in the third quarter. Net profit reached EUR 3.1 billion in the first 9 months of 2025 with around EUR 1 billion generated in the third quarter alone. These results, in line with previous quarters, reflect solid business performance and outstanding NII evolution despite lower rates, robust fee income, strict cost discipline and continued strength in asset quality.

Starting with net interest income, it has continued to perform exceptionally well this quarter, up 3.2% quarter-on-quarter, driven by strong loan growth in our most profitable segments. As you can see, consumer lending and midsized company loans both grew by around 10% year-on-year, well above the overall loan growth of 7.8%. We also continue to benefit from the positive contribution of the ALCO portfolio fully aligned with our strategy to lock in higher rates. Based on this solid performance, we are raising our NII guidance for Spain to low single-digit growth in 2025, up from slightly positive previously.

Fee income this quarter was affected by the usual summer seasonality. Year-on-year, performance remains very solid, up 4.2%, mainly driven by strong growth in asset management fees, nearly 10% year-on-year higher together with increasing contributions from insurance and credit cards. On the cost side, the quarterly increase mainly reflects a one-off related to VAT payment calculations recorded last quarter, which you may remember. Excluding this impact, expenses were very well contained up only 1.3%, clearly showing our continued focus on cost control. Finally, asset quality remains very solid with both the NPL ratio and coverage ratio improving, cost of risk remained contained at 34 basis points in line with our guidance. Overall, a remarkable quarter in Spain with solid activity driving robust core revenue growth even in a low rate environment.

Moving now to Mexico on Slide 20. For another quarter and despite a challenging environment, BBVA Mexico delivered a very strong set of results with net profit of EUR 1.3 billion in the quarter, driven by core revenues growth. Net interest income grew by 3.3% quarter-on-quarter, supported by robust lending activity, especially in retail, where we continue to focus on the most profitable portfolios, consumer and SMEs, both growing 4% quarter-on-quarter. Corporate lending also remained strong, increasing by 9.1% year-on-year, excluding the FX derived from the Mexican peso appreciation.

Fee income performed very well, up 2.6% quarter-on-quarter with growth across the board, mainly driven by credit card payments and asset management fees. Moving to cost. The increase in expenses mainly reflects higher IT investments as we continue investing for future growth while personnel costs remained stable in the quarter. Overall, efficiency stands at close to 30% in the first 9 months.

Turning to asset quality. Impairments decreased in the quarter, driven by both a net positive impact from the IFRS macro adjustments and solid underlying asset quality trends. As you may know, BBVA Research has reviewed upwards its GDP growth forecast for Mexico now expecting positive growth of 0.7% in 2025 compared with a contraction of minus 0.4% in the previous GDP forecast. This revision reflects the resilience of Mexican economy even in a highly uncertain global environment.

All in all, the cumulative cost of risk stands at 327 basis points as of September, better than expected, leading us to also improve our guidance for the full year, we now expect the cost of risk in Mexico to remain below 340 basis points. Finally, net profit reached EUR 3.8 billion in the first 9 months of the year. That's a 4.5% increase in constant euros, confirming the strength, resilience and superior profitability of our Mexican franchise.

Moving now to Turkey on Slide 21. Turkey delivered net attributable profit of EUR 648 million in the first 9 months, a strong increase, close to 50% compared to the same period last year. This solid performance was driven by higher core revenues and lower impact from the hyperinflationary adjustment, supported by disinflation trend observed in the country. If we briefly look at the income statement in the first 9 months of the year, a few key points to highlight, first, we've seen a solid performance in NII, supported by strong activity growth, mainly driven by retail, significant year-on-year increase in the TL customer spread, but also an improved liquidity management during the quarter.

In a context of declining rates, we have benefited from lower cost of deposits, while also improving loan yields, supported both by our disciplined price management and our targeted loan growth strategy focused on the most profitable segments. As you know, in Turkey, our balance sheet shows a positive sensitivity to lower rates as deposits reprice faster than loans. This means we will continue to benefit from the current easing cycle. Second, fees continued to show a positive trend, underpinned by robust performance in payment systems and asset management fees as in previous quarters.

Finally, the cost of risk slightly increased to 176 basis points in the first 9 months in line with our expectations. Impairments increased this quarter is mainly explained by the higher provision releases related to big ticket exposures recorded last quarter, which you also may remember, provisioning needs remain high in retail, although we are starting to see stabilization in NPL inflows in this part of the portfolio.

Now let's turn to South America on Slide 22. The region continued to make strong contribution to the group's results, posting a net profit of EUR 585 million in the first 9 months, a 24% increase year-on-year in current terms. During the quarter, NII remained solid, supported by healthy loan growth across the region and customer spread expansion, particularly in Peru and Colombia. This positive evolution of margins was partly offset by Argentina where ahead of the legislative elections, we saw a sharp compression in spreads amid a highly volatile rate and currency environment. Fee income, on the other hand, showed a remarkable increase in this quarter with growth across all geographies, reflecting our continued effort and renewed focus on strengthening this revenue stream.

Turning to asset quality. We continue to see positive trends in Peru and Colombia, supported by a more favorable macroeconomic outlook and rate environment. Meanwhile, Argentina continues to show some deterioration in the context of strong loan growth and sharp increase in real rates. Overall, the stock of NPLs remained flattish this quarter, while the NPL ratio improved to 4.08% and the coverage level increased to 93%. The cumulative cost of risk stands at 243 basis points as of September, in line with our full year guidance.

And finally, let's move to the rest of business on Slide 23. It's an area that we haven't usually covered on these calls, but given the strategic plan focus on CIB business and commercial banking business, we have decided to also give you some indications of how this P&L is moving on because it's strong performance and growing contribution to group's overall results are already very worthwhile. Just as a reminder, this unit mainly includes our CIB business conducted through our BBVA branches outside our core geographies.

This activity accounts for more than 90% of the area's total loans and net profit. In addition, the digital banking operations in Italy and Germany are also reported under this business unit. This unit is already delivering around EUR 480 million in profits. This solid performance reflects robust business momentum across the board, supported by cross-border activity and sustainability. Higher activity levels have led to revenue growth of close to 25% year-on-year in the first 9 months, driven by a strong increase in NII, up 15% year-on-year, thanks to greater business volumes and disciplined price management and outstanding contribution from fee income showing very positive dynamics across all key geographies supported by both investment banking and global transactional banking fees. On costs, the increase reflects the rollout of our strategic growth plans, building the capabilities that will enable future growth.

Finally, risk metrics remain very solid in this segment. The NPL ratio improved to 18 basis points, and the cost of risk for the first 9 months stands at just 10 basis points. Overall, we see this as a very promising business area where we are leveraging our diversified footprint to support clients wherever they operate not only in our core markets, but also in other strategic geographies for them, such as the U.S., the U.K., continental Europe and Asia. And now back to Onur for the key takeaways.

For the main takeaways, it's on Page 24. Let me not take time because they are quite obvious on the page. But let me once again repeat the very high-level overall message, which is we are, once again, very happy with the performance in the quarter, especially the quarterly core revenue evolution, and we are very focused, very focused on creating organic capital and resuming our distributions to shareholders, which will be starting tomorrow morning.

And with that, we go to Q&A. Patricia?

Yes. Thank you very much, Onur, and Luisa. So we are ready now to start with the Q&A session. Operator, please?

[Operator Instructions] Our first question comes from Maks Mishyn from JB Capital.

I have 2 questions. The first one is on loan book growth in Spain. Can you please talk more about the type of demand you are seeing in corporate loans? And also why growth in mortgages is below the average for the sector? And the second one is on cost of risk in Mexico, even though you improved guidance, the new guidance implies a pickup in the fourth quarter, and I was wondering why.

Very good. Loan growth in Spain, the corporate loan growth, and you see it in the documentation, but the midsized companies, as we call them, the middle part of the corporate area, it is growing 11% and the corporate and CIB is growing 18%. Where is this coming from? It's coming across the board in all the sectors, actually, there is some investment drive.

As you know, the Spanish economy is doing really well. We upgraded our GDP growth rate forecast in Spain to 3% this year and 2.3% -- we also upgraded next year 2026 to 2.3%. So the economy does well for a few reasons. Number one, immigration, basically, there is a new flow of population into the geography. Number two, Spain is a very service-based economy, relatively speaking, obviously, and services sectors, in general, are doing really well. For Spain, tourism is very important, under that chapter, doing really well. Number three, next-generation EU funds, it is affecting in a positive way, the growth in Spain. And number four, there is an investment pickup in the country.

In multiple dimensions, we see 2 very clear strong areas. Number one, the energy and renewables, they continue to attract investment. And number two, the housing, there is a big demand in the market. You might know these numbers already Maks. But in Spain every year, basically around 300,000 new households are being formed -- 300,000 versus the new supply of homes is around 150,000. So there's a mismatch in terms of demand and supply. This 150,000 new houses being constructed every year used to be 100,000 2 years ago. So there is also some vibrant activity in the construction and the housing sector as well.

All combined is leading to the numbers that you see on the corporate segment. Why loan growth is not so good in mortgages? You know the answer. The pricing, we just don't see value in growing the mortgage book at these prices. Even if you incorporate the cross-sell additional income to those loans, we just don't see the value. That's why we are staying out. This is not new for us. From the beginning of this year, actually, we have been losing market share in mortgages, and we are completely fine with it if there is no return on the cartera, on the book.

Cost of risk in Mexico, we are actually upgrading our guidance to less than 340 basis points. Less than 340 basis points does that mean 340. The dynamics are very good. And as I mentioned in my part of the presentation, in the third quarter, in Mexico and in general, there was the impact -- positive impact from macro adjustment because we have upgraded the macro expectation for Mexico, but there was a larger negative impact coming from annual recalibration of the IFRS 9 modeling. That was the reason why it slightly went up versus the first 6 months of the year. It's lower than the second quarter. But the average of the first 6 months, it went up slightly. And the reason was that, basically. So we are quite positive, actually, what we are seeing in Mexico in terms of the growth dynamics and in terms of the cost of risk dynamics.

Luisa, do you want to add anything?

I would just only add to your point just in case we -- just be fully transparent the IFRS annual recalibration update that we do this year has taken place in the third quarter. Last year, it took place in the fourth quarter. This is done throughout the whole of our geographies, and it coincided also this quarter with a positive macro IFRS update in the geographies as well across the board.

Very good.

Thank you, Maks. Next question, please.

The next question comes from Antonio Reale from Bank of America.

It's Antonio from Bank of America. A couple of questions from my side, please. The first one, you forgive me if I go back to the Sabadell bid, but as a management team, you've put a lot of energy and resources into the project, which, for one reason or the other didn't work out. So looking back, is there anything you think you would have done differently or maybe just your takeaway, what do you walk away with? I mean we've seen 2 failed bids in Europe and not something we've seen very frequently in the past. So that's my first question.

My second question is more forward-looking and relates to sort of capital and your distribution outlook. Your 13.4% today and you flagged some additional capital tailwinds of 40 to 50 basis points coming through. And that's in Q4. Now you've confirmed also that your go-to capital target is at 11.5% to 12%. How quickly do you think you can go to that level. The market seems to be a bit skeptical about you running your business with that capital buffer. So maybe you can touch on that as well.

Very good. Thank you, Antonio. As always good questions. On the Sabadell topic, as you can see in the presentation today as well and as we have been operating since that day of Friday, we closed that chapter. We closed that chapter. We do think it's a missed opportunity, it's a missed opportunity for our shareholders, our clients, our employees, but definitely for Sabadell shareholders as well, Sabadell clients and Sabadell employees as well. For Spain, for Europe, for Catalunya, we do think it's a missed opportunity, but we closed that chapter. We closed the chapter for one very good reason because we always care about our own stakeholders, our shareholders, our clients, our employees and for the benefit of our own shareholders, our stakeholders, it's much better to move forward, to look into the future and to focus on what we do best, which is running our business.

And in that sense, again, we closed that chapter. The learnings, obviously, we are reflecting on the learnings, but the chapter is clearly closed for us. On the capital, 13.42%, as you mentioned, we are expecting another 40 basis points to 50 basis points in the fourth quarter only from a positive regulatory impacts. If you add that and if you also add the organic capital generation that we would be creating in the fourth quarter, fourth quarter is typically a better quarter in terms of SRT activity also. You would see that we have a lot of excess capital. And as we said many times before, we are fully committed to the target, 11.5% to 12%.

If you take the upper end of that range 12%, we are going to be basically distributing that capital back to our shareholders to get to that 12% level. That's why we said that we are waiting for ECB approval for this extraordinary significant share buyback. And we'll go from there. Now coming back to the question of, you said, I don't know what word you used, but the 12% is that the right target and so on. I repeat the same thing every quarter, but I will do the repetition once again. We have to look not at the absolute level of that number, but we have to look into the difference versus the requirement because that requirement that is set by the ECB, by the supervisor is basically set based on many things, based on the results of the stress test. Once again, we come as one of the best in the stress test results.

Based on return on tangible equity and the organic capital generation capacity, based on the volatility of your organic capital generation, based on multiple, multiple metrics. In all these metrics, not only we create much better levels of organic capital, if you take 5 years, 10 years, 15 years, you also see that the volatility around the trend line is one of the lowest in the European banking sector for us because we have these wonderful franchises in our view, in the different markets that we operate, one of the best franchises in every single country that we operate.

In short, as a result, our requirement is 9.13%. If you take the upper end of our capital target range, 12%, it's 287 basis points difference, okay? So the buffer that we have versus our requirement is 287 basis points. We have a peer group. We keep reporting our numbers against the peer group, 15 largest banks of Europe. If you take out the non-EU banks from that list because the list is European geography, which includes some U.K. banks and Swiss banks. If you take out those, the EU banks, for which the requirements are set by the same supervisor, ECB, the average of the buffer of the rest, which is the 10 other banks in our peer group is 240 basis points. So our buffer is actually one of the best and clearly above the average of our peers. And we feel very comfortable operating with 12%, and we are going to be distributing our excess capital back to our shareholders to get to that level.

Thank you very much, Antonio. Next question, please.

The next question comes from Francisco Riquel from Alantra.

I want to ask about margins. First in Spain, the customer spread has fallen below 2.9%. And I thought 3% was the trough of this interest rate cycle. So I wonder if you can share guidance on customer spread going forward. I have seen the loan yield falling 21 basis points Q-on-Q. So how much of the fall is mix related? You have mentioned fast growth in CIB and public sector. Price competition, already some banks have flagged about this, Euribor resets pending and then the cost of deposits falls very slowly, just 3 basis points and I see fast growth in time deposits. So you can explain the trends on the liability side as well.

And then my second question, margins on Mexico. They are proving, on the contrary, very resilient despite the sharp fall in interest rates that you have mentioned. So I wonder if this is just a timing issue, given the speed of the repricing between the assets and liability? And where do you see the 11% customer spread once the balance sheet is fully repriced to lower interest rates and how fast is the repricing?

Thank you, Paco, for the questions. I think for both, there is a common theme that I would put on the table first, and then I go into each one of the countries that you mentioned. The theme is, given the rate cycle is coming, again, as we have also put into the presentation, the rate cut cycle is coming to an end. There's some more to be done in Mexico. But in general, we are very closely in our view, to the marginal rate. We do think the spread that you see -- the customer spreads that you see in the pages that you indicated are relatively the levels that you would be seeing going forward. What does this mean? Let's go then country by country to be more specific.

For Spain, you mentioned 3% as the floor. I'm not sure whether we quoted that number at all, but I don't think so, the 2.88% that you see in the quarterly average, actually, the monthly figure, monthly average for September, if I'm not mistaken, it's 2.83%, we were basically expecting margins to stabilize around these levels. And we do think they are going to be stabilizing around these levels if ECB doesn't again start cutting rates. So the stability is already kicking in. You asked about the lending yields why it came down too much. It's a bit mixed, but more than the mix, it's because of the repricing. I'm sure you are aware, you know our book really well. But the reset frequency for corporate lending book is typically 1 month or 3 months and the reset frequency for the mortgage book is for 2/3 of the mortgage book is basically 6 months, but you take the Euribor 12 months or 2 months ago, so it's effectively 8 months and 1/3 is basically more than a year.

So there is some delay in the reflection of the rate cuts into the lending yield. The lending yield coming down is partially driven by mix, but more importantly, it was driven by the reflection of the rate declines that we have seen in the market in the last 2 years, in the last year. But we are quite positive on what we are seeing for a few reasons. Number one, the customer spread decline is as such, but the NIM in basically in Spain was basically flat in the quarter because we do have this more than EUR 50 billion ALCO book that we do think we did fix at the right time. So the average yield of that book is at 3%, that is helping obviously in the NIM overall.

But on the customer spread, specifically and on the lending specifically, what you see is that the front book yields are now better than the back book yields, which is also a signal that the curve is coming now to the end. And we are growing in some areas, especially consumer and SME, which typically will help us in terms of mix going forward and in terms of spread. In short, we do think we are basically very close to the bottom of the customer spreads in Spain.

Now going back to Mexico, as you said, slight increase. You also asked about deposits, sorry, in Spain in deposits because there was a large growth of wholesale deposits in the quarter and that has basically created a mix effect on the deposit costs. And as you know, our deposit prices as compared to other Spanish peers is much lower. So the decline versus a starting point much lower is going to be much less. That's the reason. But the key reason in the quarter was the mix. Mexico, again, the overall message is that we should be seeing some stabilization, slightly below around these levels. The reason that it has increased a bit in the quarter is, again, a bit mix because we have grown much more in the retail lending book versus the corporate lending book. But these levels, in our view, are relatively close to the levels that you would be seeing going forward as well. Luisa?

Yes. I would add to that on the Mexican front, Onur that, as you know and everybody knows, we maintain NII sensitivity in Mexico of around 2.5% to 100 basis points movement. That 2.5% is actually around 1.9% on the Mexican peso side. And as you know, rates in Mexico have come down very significantly since the rate peak at 11.25%. Now we're expecting rates to come down to 7% this year, moving on to what we think are going to be more terminal rates of 6.5% next year. With downward bias depending on how the strength of the peso and the macroeconomic policies go.

But in general, we see those rates stabilizing. And with -- I think the positive news is that, that significant rate decline with that sensitivity that I just mentioned of 1.9% to 100 basis point movement have been very much absorbed by the -- on the NII side by excellent, I think, price management, also on the cost of deposits, which keep on being quite resilient. And very much below our peers, which now have a cost of deposits of around 4.7%, more or less.

And maybe on Mexico, one final thing to remind, we mentioned it, I think in the past. In the 2020-2021 period, the interest rates in Mexico was around 4.25%, if I don't remember incorrectly. 4.25% was the Central Bank rate. Even in that environment, we had basically 10% margin. Since then, we have improved the mix of the loan book in such a way that you would see these double-digit more than 10% margins are quite resilient and quite expected in Mexico going forward.

Thank you very much Paco. Next question, please.

The next question comes from Benjamin Toms of RBC.

The first one is on group costs, which are running up about 11% year-over-year. That's broadly in line with your inflation footprint. But do you have any additional levers you can pull going into 2026. I appreciate your footprint is different, but your largest peer is guiding to flat to slightly down cost that just seems quite a large step in aspirations here, but maybe you feel the cost growth is a natural consequence of higher balance sheet growth.

And then secondly, you've broken out today some more details on the rest of the business division. Can you remind us what your ambitions are for your global CIB business? How fast do you think that business can grow by over the next 3 years?

Maybe you do costs, Luisa, and I do CIB.

Yes. Well, I think the group costs were also affected quarter-on-quarter by the impact that we had of the one-offs in the second -- in the second quarter. What I think is very important with regards to the cost is that we are containing the cost increase in the different geographies. I think it's important to highlight the Mexican efficiency plans that were carried out at the beginning of the year in terms of headcount reviews and revisions. Also in Colombia. Spain is containing costs, I think, very well with that 1.9% increase year-on-year.

I think what we need to really look at is with our strategic business plan going forward is that cost-to-income level. We are very much focusing on cost-to-income ensuring that we have the right operational level leverage, sorry, as long as we continue to invest in the franchises, which I think is very important for us. In this regard, we do think that the cost to income target of 35% at the end of our period, the 2028 number is very much our focus. We have, as you know, the low 30s in Spain, low 30s in Mexico, low 30s in Turkey, cost-to-income ratios, and that's the way we are managing our cost side investing, but at the same time, being disciplined and ensuring that those investments generate revenues and allow us to achieve best-in-class efficiency ratios.

Very good. On costs, I would just add, Benjamin, the topic of 2 principles that we -- it's really important for BBVA management. Number one, the concept of jaws, our costs should not be growing higher than our revenues. And the second thing is we should grow in general because of the efficiencies that we are baking into the business every single day, we should not grow higher than inflation. The numbers that you mentioned and also you compare with the competitors, I can judge who the competitor that you are comparing to is. You should look into the hyperinflationary countries and the customer -- the country mix in that growth rate.

But we stick with our 2 very important principles, positive jaws, less than inflation. On the CIB business, we already basically carved it out and then talked about it in the second quarter call. But if you remember in the second quarter call, we put some numbers, goals for this division as well. I would highlight only the 2 of them, which is revenue growth, we said would be around 20%. If you take -- if you compound this 20%, the real goal that we have is that in the 4-year period that we are looking into, we are going to double this business, that's the aspiration.

And then we are going to have an RoRWA. And as you might have seen in the country pages that Luisa went through, we are now reporting RoRWA and RoRWA will improve to more than 2% for that division, which then would yield, in our view, also very decent return on capital numbers. How are we going to do that? Basically, 2 things, 2 very important strategic levers. We will talk more about this maybe in the following calls. But number one, cross-border trade finance focused, basically plain vanilla corporate banking, corporate banking, transaction banking focused and basically entailing going with our clients into these geographies that they also operate. We did realize that there are many clients of us in Mexico, in Spain, in South America, Turkey, many clients of us who do business outside of their home geographies, and we are not fairly represented. We have amazing relationships with them in their domestic business. But beyond their core geography, we don't basically serve them as well as we would like it to be.

As such, we are going to be focusing on this multinational cross-border-related business that we can tap into, and that's going to be a differential point for us. The second topic is, again, a bit -- we have asked as we were planning and as we were creating that plan -- strategic plan on the CIB business, where we are different from others. And the second topic is the institutional business. There are many institutional clients, funds, asset managers, insurance companies and so on, which we believe can benefit from our presence once again across the globe. We are the market maker of Mexican peso securities, for example. If any institutional investor wants to buy a Mexican peso security, we are the bank and we have seen that many institutional clients were using our competitors. We are going to leverage our positioning and again, our footprint being in multiple geographies would lead us to do better in the CIB business and the observation or the aspiration is doubling in 4 years.

Thank you very much, Benjamin. Next question, please.

The next question comes from Sofie Peterzens from Goldman Sachs.

This is Sofie from Goldman Sachs. So my first question would be going back to Mexico. We have seen some press headlines that Revolut wants to be quite aggressive in Mexico. Nubank is already quite aggressive in terms of competition. How do you think about the competitive landscape? And do you feel competition has increased? And if you could just remind us BBVA's competitive strengths in Mexico?

And then the second question is on inorganic growth opportunities and maybe also organic growth opportunities. Given that your capital position is quite solid and you have 40 to 50 basis points of capital tailwinds coming in the fourth quarter, do you think it would make sense to consider growing or looking at something outside of Spain? And how do you think about kind of inorganic growth opportunities across Europe? Would you consider that? And also, if you could remind us how the Italian and German kind of digital banks are going?

Thank you, Sofie. Maybe I'll start with the second one. We are purely focused on organic growth from now on. I see what you're asking. But after the experience that we have had, I do think it's very fair that we will only focus on organic growth. We will always look into things. Obviously, that's our job as well. But our plan, our numbers, our commitments that you see in the second quarter when we announced them and today is purely based on organic growth. You mentioned about Germany and Italy. Again, our plan there is to grow through our digital banks. This is the first time that we are now putting numbers into that business. It is covered in the page that Luisa disclosed on rest of business, which is, again, mainly CIB business. But in that page, you do see under the customer funds, there is a breakdown now which says digital banks.

At the end of September, basically, we had EUR 10 billion of deposits in that unit, which is again, Italy and Germany. And we will continue to grow in those geographies. We are going much better than our original business plan. We are going faster than what we thought we would be doing at this point in time in both geographies. Germany even better actually as compared to Italy. Italy was an amazing experience, and Germany is doing even better. So we will continue to grow through that business model, which is pure digital banking, leveraging the infrastructure and leveraging the application and the technology base of Spain to grow in Italy and Germany with the digital banking proposition. That's going to be the plan there.

Regarding Mexico, and Luisa, please jump in as well. The only thing I would say is that I said it many times in the past, I keep repeating it, I do know, but I do think it is important. What we have in Mexico in my view, is just amazing. It's an amazing bank. And if you have not been to Mexico, you cover us very nicely, please do go there and then meet our management, meet our team there. It's an amazing bank. And I mentioned this every quarter, but it is important to highlight once again, we have 44% market share in payrolls, all the cash flow-related products, transactionality-related products, which is the bedrock of our business. We have amazing positioning in the country. We have the best talent. We have the best brand power. We have the best client franchise in the country. So let me not go more into it, but it's an amazing bank for multiple dimensions and not hard to replicate with -- not easy to replicate assets and infrastructure.

In that context, we take the newcomers, the neobanks very seriously. really very seriously in Mexico. They are amazing companies in our view, but we are going to compete, and we are going to compete hard. So what you see with these neobanks is that they are basically attacking 2 different markets. One is credit cards, typically. And on credit cards, again, the brand power and the scale benefit that we have is very tough to beat because we come up with campaigns, rewards and points for our customers because of our size, that's not very easy to be replicated by others.

So we are going to be fighting really hard in credit cards. You might have seen it in the figure you can come up with that also in the numbers that we provide, but also the markets authority in Mexico publishes it. We have been gaining market share. Even in this environment, we have been gaining market share, even including all these neobanks, we have been gaining market share in credit cards in Mexico. So we are going to compete hard and we have a scale benefit, and we have a program, which is very powerful that we think we will continue to gain market share independent of the newcomers.

And then the second thing is the deposit market that they are competing. On deposits, they are offering really very high rates. You might have seen it, but last a year ago, they were offering 15% to deposits when the interest rate in the market, the Central Bank rate was 11.25%. And what we have defended then when there was such a big difference is going to be, in our view, easier for us going forward because now all of them basically reduced their rates because they cannot sustain those rates anymore.

The latest that we see, most of these neobanks, now they are offering 7%, 8%, which we can compete even more easily. And on that one, again, hard to replicate asset. Basically, 1/3 of our deposits are within this band of less than EUR 30,000, 1/3. And 1/3, that bucket, the average deposit size is EUR 790. It's a very small ticket, transactionality driven, payroll account-driven, small ticket deposits. We will maintain that strength in our view going forward. But anything you want to add on the Mexican?

No, I would just end up saying that, as you know, the profitability of our Mexican franchise is well beyond the peers. We have a 28% ROE in Mexico versus the peers at 15%, and it's highlighting those strengths that Onur was mentioning. It's a universal bank with a #1 NPS score of 70, above also all their competitors, including the neobanks. And I think it's a very focused bank and doing exceptionally well. So nothing else to add.

Very good. We are going to pick up some speed. Otherwise, you're not going to be done.

Yes, next question, please.

The next question comes from Alvaro Serrano from Morgan Stanley.

Good to be back. On Mexico, maybe a follow-up on this latest question on Mexico. And look, I completely agree that you've got the best franchise in Mexico and very difficult to replicate anywhere in the world. My question is more to try to pick your brains on the medium term. Because if I look at -- is there a level of market share where some of the incumbents -- sort of the challengers, sorry, could get to where they start to be more of a scale competitor? Maybe not for you, but for others, sort of the second layer of competitors after you, I'm thinking Santander and some of the others, which could start to put more competition. Is there a level of market share, which we should be looking out for?

Because when I look at your deposits, it's true that you very successfully reduced the deposit yield, but the mix is slightly sort of increasing to more savings and time. And I wonder if that's reflective of competition. The second question is on delinquencies on Turkey and Argentina, in particular Turkey, they're ticking up as it was expected and you had guided for. Should we expect this for a few more quarters? Any color you can give on that as to when -- how many more quarters would you expect NPLs to continue to tick up there? Or any handholding there?

Very good. There was a noise. So if you don't capture all the questions that you asked, Alvaro, please let us know. But what strength do we have? We discussed about Mexico, but you're asking whether the second layer of competitors can come along and so on. I go back to the same thing. I mean, the strength that we have in Mexico is so unmatched in our view, the scale benefit, but also more the client franchise and the underlying business franchise. Of course, many others will come along, but we will maintain our position. And you see that in the last 5 years, in the last 3 years, we have been gaining market share. In this last year, only in the last year, we have gained 49 basis points market share in the lending market share with the profitabilities that Luisa just mentioned.

Once again, we think it's a unique franchise, and we'll continue to build upon that. And when others where they can go, I don't know. If you're asking about the neobanks, one of the competitors there in Mexico, obviously, is Nubank, which is originally from Brazil. And in Brazil, they do have a market share. But when you look into their market share evolution, what you would see is that they started well. They are now at 3.5% market share in credit cards. Again, a very credible competitor. We take them really seriously. But relatively speaking, their curve is now going lower than Brazil. So where they can get to? We don't know. We are going to fight hard and we are going to compete hard. But I don't think we will be the ones who would be losing market share. You asked about deposit savings and time. You said that the time has gone up slightly more in the quarter, true.

I mentioned this very clearly in the previous calls as well. Nacho kept asking me about this many times. But when the rates were much higher, 11.25% and the Central Bank rate was 11.25%, we decided to be a bit out of the deposit market. We wanted to fund ourselves through wholesale funding because when rates are very high, heating up, the competition doesn't help us, doesn't help doesn't help. When rates come down, and as you know, again, the latest Central Bank rate now is 7.5%, we now want to go back to the deposit market a bit. That's what we did, especially in the corporate segment, in the wholesale segment, company segment. We have acquired some deposits, and that's why you have seen the time deposits going up.

But that in our view, and you have seen that our loan-to-deposit ratio versus the changes that we have seen in a year ago and so on is now going to be not there. We're going to grow in deposits going forward in this context of a lower interest rate environment. That's the reason. It's not -- it was very purposeful, very clear part of the strategy that we have employed and now we are coming back a bit to the deposit market. That's the reason for the mix change. About asset quality in Turkey and Argentina, Luisa?

Yes. Well, in Turkey, I think that the numbers that we're seeing are very much within the guidance that we've given to the market at the beginning of the year, the 180 basis points. It's true that quarter-on-quarter, the comparisons are affected obviously by macro adjustments, but also by big ticket releases, especially that we had in the second quarter. What I would say with regards to underlying asset quality is that we are seeing the NPL ratios and the asset quality of the retail portfolio stabilizing at the current levels. So I think that, that is good news in the sense that we had an increase in rates at the beginning of the year and rates now should be coming down going forward into the next year.

Having said that, I think 180 basis points is a cost of risk that is not a normalized cost of risk within a country like Turkey. We've had higher cost of risk in the past. So I think that the positive news is that those retail portfolios are stabilizing in terms of cost of risk. And going forward, I think that the numbers we will see what they look like. But in general, when we guided, I think we guided for around 200 basis points to our midterm, long-term plan. And in Turkey, or should we move to Argentina?

Argentina.

Yes, Argentina.

So Argentina is a little bit of a different story. So Argentina, we had been seeing already in the second quarter, I would say, a sharp increase in Stage 3 and defaults in especially the retail portfolios. This is obviously due to inflation coming down quickly, but also very high real interest rates, which moved sharply in the third quarter, as you all know, we had rates touching the 60% in October versus inflation of around 31%. This has created a significant increase in deterioration in the asset quality, again, especially in the retail portfolios.

We are already deciding and taking decisions regarding the origination. You've seen in the third quarter that the quarter-on-quarter growth in Argentina slowed down significantly. We grew 10% versus the 21% in the second quarter. And specifically, we are curtailing our growth in credit cards and consumers, where loan production in the quarter fell 9%, focusing our growth towards more of the commercial segment, which we feel is better. But we'll see how the macro develops. We think that the continued focus on the macro policies and decreasing inflation and decreasing rates should be supportive for a better environment. But we still need to see, I think, there quarter-on-quarter, how things develop, again, especially on the retail portfolios.

On asset quality, Alvaro, I would finalize by saying that as compared to what we were thinking at the beginning of the year, in Spain, in Mexico, for sure, Colombia, Peru, we have done much better than what we thought we would do in asset quality. Turkey is completely in line. Argentina is worse than what we expected because the real rates in Mexico -- in Argentina, sorry, is so high now that it is creating a load on the Argentinian lending book. But overall, this has been, in my view, a positive highlight of the year, and we are quite positive going forward as well.

Very good. Thank you, Alvaro. Next question please.

The next question comes from Ignacio Ulargui from BNP Paribas Exane.

So I just have one question. When I just look to the capital, you have covered organic and inorganic growth, I just wanted to ask on the cost side, I mean, could be any chance that you do or launch another restructuring plan in any of your geographies, thinking probably about Spain or Mexico in terms of trying to control further cost growth or that will be ruled out at this stage?

Very good. Again, let's pick up some pace, Nacho. The plan that we have put forward that we are executing and that we will deliver on, does not incorporate any restructuring plan as they call it [indiscernible] in Spain, into the plan at all. But we always look for productivity. Luisa mentioned it in the second quarter call and also partially today. We are always looking for productivity improvements. You might remember this in the first quarter of this year, we actually -- it wasn't a very official program, but we have reduced our employee base in Mexico, for example. So we will always look for the productivity enhancement initiatives. And I wouldn't call them a program, but the restructuring program in the sense that you mean it is not incorporated into the plan.

Thank you, Nacho. Next question, please.

The next question comes from Carlos Peixoto from Caixa Bank.

The first one would actually be on the 20% ROE target that you had before -- that you had announced previously for 2025. Do you see that as still achievable? I reckon that the capital base is quite wide, given the current capital excess. But should we still see that as something doable? Or should we focus more on the actual bottom line number around EUR 12 billion?

Then on the second question regarding Turkey. In light of the ongoing evolution, I mean the previous target or the previous quarters, you had guided towards slightly below EUR 1 billion net profit target for Turkey. And do you see that still achievable? Or should we be thinking more of something below EUR 900 million as the 9-month annualized figure seem to suggest?

Very good. Thank you, Carlos. As always, 20% for the year. As you said, the excess capital has built up in the denominator of the ratio. Now that we are starting the share buybacks tomorrow morning, it will help as well, but we are still committing to that number, yes. About Turkey, we are not giving guidance for the coming year yet. The only thing I would tell you is that for this year, we said first EUR 1 billion, but it was very clear.

I remember it very, very clearly because there was even a footnote in that presentation in the first quarter presentation saying that, that EUR 1 billion was under the scenario, so I don't remember it incorrectly, but 26.5% inflation and 31% interest rate. And there was also an FX depreciation assumption. Under this scenario, it will be EUR 1 billion. And then once we realize in the second quarter that those assumptions would be very tough to achieve for the macro, we said somewhat below EUR 1 billion. And this year, we still stick with it. For next year, we will do it in the next quarterly call.

Very good. Thank you, Carlos. Next question, please.

The next question comes from gnacio Cerezo from UBS.

There's 2 quick ones, hopefully. First one is on the approval of the buyback process by the ECB. If you can give us some indication about the timing? And if it can be announced actually in the middle of the quarter when the approval is given or we need to wait for the full year results? And then the second one on Turkey. If you can give us a bit of a sense actually of how far are we from the customer spread you think you can achieve and the rates actually in the 20%, 25% region you're targeting? I mean, how quickly actually can we get there? And how far are we from the normalized customer spread in Turkey?

Very good. On the approval of the share buyback, we cannot -- as you have seen, we cannot disclose the specific amount that we ask for approval for and so on because there's a clear regulation or clear guidance on this from ECB saying that unless it's fully approved, it doesn't -- it cannot be announced and the amount cannot be known. But again, we initiated the process last week. It's in the process now. The legal maximum that they would use is 4 months actually. But as you might -- as you can imagine, given the excess capital that we have, given all the dialogue that we have with them, we do expect it to be much earlier than that time frame. But again, we are dependent on ECB for their approval to be done. And once we receive the approval, it can be tomorrow, it can be 2 months, it can be less. Once we receive the approval, we will announce it, yes.

Then on the Turkey customer spread, not sure, it goes back to, again, how fast the interest rates are going to come down. You might know this already, obviously, but 39.5% is the latest Central Bank rate, 39.5%. We were expecting it to be, as I said, at the beginning of the year at 31%. So it's coming down much slower than what everyone anticipated because inflation has turned out to be much more sticky than otherwise. But this country is still on, in our view, a very positive path. It is on a path of normalization. They stick with the clear aspiration to reduce inflation and as a result, also reduced interest rates. So once interest rates come down, and we will be giving you in the next call all the expectations for the coming year. But obviously, our expectation is that interest rates will continue to come down. Once that happens, the spread will normalize as well. But until that happens, it's going to be very challenged.

One other thing that I should mention is that the customer spread and NIM, the difference between the 2 is actually larger in Turkey than in all the other markets because in Turkey, there is a repo facility, again, at 39.5% for the Central Bank. You can fund yourself a bit with the repo and then also through swaps, 39.5%, but our cost of funding is higher because there are -- beyond the availability of funding mechanisms, there are certain regulatory ratios, one being very specific, the Turkish lira deposits divided by the total deposits. There are certain ratios that we have to satisfy every month, which is basically creating a deposit market at a higher price than other cheaper available funding opportunities.

So NIM, as much as we can use those other, and we cannot use them all the time and -- but the NIM would be better than the customer spread going forward because when you use the repo facility, we would be optimizing the cost of funding a bit for the whole bank. So in the quarter, for example, you haven't seen the spread in Turkey to improve too much, the customer spread, but you would realize that the NIM has improved by 65 basis points more or less, mainly because we tapped into a cheaper funding resource, which is the repo market as much as we can in the context of those regulatory restrictions that I talked to you about, and that has helped us improve NII in a very good way.

Next question, please.

Next question comes from Borja Ramirez from Citi.

I have 2. Firstly, on capital. You're showing a very strong capital position. And also, I think you mentioned there may be SRTs coming in Q4. So I would like to ask if you could provide some details. And linked to this, I see some upside to the EUR 13 billion of capital available for distribution in the short term. So this would be my first question. And my second question would be in Spain, you are gaining market share quite nicely. I would like to ask if there are any -- on this point, any learnings from when you're analyzing the Sabadell transaction in the Spanish market, maybe you've learned about new ways to gain share?

OK. The first one, SRTs, Luisa?

As Onur mentioned in the quarter, we did 5 basis points of SRTs. We've done a total of around EUR 8.2 billion RWA SRT transactions, SRT-able transactions. We also do and have engaged also this quarter on asset sales that you've also seen in the NPL ratios in Spain. I would say that the target that we had this year and going forward, by the way, is to generate around between 30 to 40 basis points of capital through SRTs. And obviously, in the first 9 months of the year, we're already at 28 basis points, and we'll be within that range comfortably in the fourth quarter.

Again, it depends on the deal flows and the approvals process. The quarter will be obviously higher than the third quarter. And will be above, obviously, very much above the 30 basis points in general in that context of the fourth quarter being better than the third quarter. But in general, I would say 30 basis points to 40 basis points is what we can expect from SRT's capital generation going forward.

Perfect. And then second question was on market share, any learnings from Sabadell and so on. I'll go to the market share directly. Borja, we are gaining market share everywhere except Peru actually because of the CIB, the large corporate lending book because of the pricing, we are a bit out of that market. And because of mortgages in Spain, because of the pricing there, we are a bit out. We are losing market share. But beyond that, basically, we are gaining market share everywhere. It goes back to the strength really of our people. I keep saying that in the bank also. We are a people-based business. Our people -- we have amazing people in the bank, and we will go for profitable growth, gaining market share. In the case of Spain, we don't -- I mean, you might not see it fully in the breakdown, but we are gaining market share 21 basis points in the year in total loans.

But it is basically negatively affected from mortgages, as I just mentioned, since the beginning of this year, given the lack of profitability in that market, we are out. So we lost 30 basis points in mortgages, but we are gaining market share, public sector, consumer. We gained 58 basis points in the company's segment in Spain, 58 basis points in a year. And we will keep doing what we know well, go after clients and provide our service because we have amazing people. In short, we already have our own medicine, and we will replicate what we have been doing in the past 5 years -- in the past 5 years, by the way, in the company segment, we gained 200 basis points. We will do what we know well, and you'll continue to gain market share.

Thank you very much, Borja. Next question, please.

Next question comes from Britta Schmidt from Autonomous Research.

A couple of clarifications, please. With regard to Turkey and the net interest income development, the repo financing that you mentioned, is that what Garanti talked about when you mentioned opportunistic liquidity management? And is that something that is quite sticky. So I'm kind of trying to figure out what the outlook here is for the net interest income going forward. Then secondly, could you just help us quantifying the net impact of the IFRS 9 calibration and the macro updates on the EUR 1.6 billion loan losses this quarter, i.e., what would have been the underlying cost of risk in the quarter? And would that underlying run rate be a good steer for not just Q4, but also the next couple of quarters? And then 2 questions related to capital and distributions very quickly. Can you give us any expected impact on operational risk RWA changes in Q4? And maybe also clarify what you mean with the pending approval from governing bodies for the significant new share buyback program?

Very good. Let me start with the last one, Britta, very quickly. I mean we only wait for the ECB approval. But then once we receive the approval, the specifics of how much, whether it's externalized and so on, it is also subject to obviously to the Board approval. But the real -- the only requirement that we have is ECB. On the first one, on the Turkish situation, it is in the context that I just explained, I gave some details. I don't want to go into too much detail, but you are now asking it again.

So maybe I do a bit more. But as I mentioned, the customer spread didn't improve too much in Turkey, but NIM has increased by 67 basis points. Why? Because in Turkey, we now have a situation where interest rate declines are not immediately being reflected in the customer spread. Rates come down, but the deposit rates do not come down as much. Why? Because of some of the restrictions that I mentioned to you. In Turkish lira deposits, the supervisor, Central Bank in this case, they have a certain ratio of TL deposits over total that needs to be satisfied. Otherwise, you are penalized.

As a result, there is a big competition in the deposit market to deliver those restrictions -- the requirements. And as a result, deposit prices are higher than wholesale funding opportunities. As long as those restrictions are as such, you might see that the customer spread doesn't improve as much, but you would see that the NII and NIM improves. So the rate declines would be converted into real value generation, value creation, maybe not completely through customer spread improvement, but through the NIM improvement, because we can be tapping into those. Obviously, we have our own restrictions and our risk management metrics and so on, but we can tap into those cheaper funding resources as long as the situation as such, okay?

But you're asking more the sustainability of this or can you expect more of this going forward? The answer is yes. If rates come down and that rate decline is not very much converted in the customer spread, you would see that NIM decline would be there. Not maybe as much, but would be there, but the customer spread would not be moving ahead too much. I hope I'm clear. And if not, we have many details on this, you can call the IR team to get more on this one.

On the provisions, the macro and so on, we don't disclose that. As you know, Britta. The only thing I would say to you is that the business as usual, if you incorporate all the 2 things, actually, the macro impact and also the annual recalibration impact, if you isolate for those, the business as usual would have been better, slightly better, not too much, but slightly better would have been. And there was another question, Luisa. The tough ones, you get them, so.

On the operational RWAs, we have adjusted a little bit the number already in the third quarter. And in the fourth quarter, we will update the operational RWAs with the actual related number, but we don't expect a significant impact from operational RWAs in the fourth quarter.

Thank you, Britta. Next question, please.

The next question comes from [ Marina Correa ] from Jefferies.

I just had 1 on your return on tangible equity guidance for this -- Hello?

Yes, we can hear you, [ Marina ], go ahead.

Can you hear me?

Yes, please, go ahead.

Perfect. Sorry. My question was around your 20 -- about your 20% return on tangible equity guidance for this year. Obviously, that implies quite a strong performance in Q4 versus Q3. So could you please just walk us through the moving parts in the increase in return on tangible equity quarter-on-quarter in Q4 that you're expecting to see hit the guidance?

I partially mentioned it in one of the previous questions, but you should also look into the denominator because we would be doing share buybacks. So the equity base would be coming down. So it's not just the numerator, which is the profit, but also the denominator that would be affected in the quarter. And then that number is for the full year. When we look into the numbers, we are at those levels, basically.

Thank you, [ Marina ]. Next question, please.

[Operator Instructions] The next question comes from Fernando Gil de Santiva es from Intesa Sanpaolo.

Two quick ones. One, regarding Spain, I see loan growth in the quarter being flat, mainly explained by public sector. Can you comment on these trends on the public sector, if there's anything I should be looking at? Second, regarding Spain and the litigation and the appeal that you guys presented against the Supreme Court and against the government measures due to the merger. Is the bank going to proceed with that? And finally, a short one, have you done any update on the hedging strategy regarding Argentina and the latest events after the elections and the intervention in FX markets?

Very good. Let me do it very quickly, if that's okay, Luisa. On the public sector, there are some one-offs in there. So you cannot expect 20% growth year-over-year every quarter. But you should see that the public sector is going to be quite positively reflected in the growth rate of Spain lending book going forward for one reason. The local governments in Spain for many years did not use bank financing because there was a central scheme that they could have been financing themselves from the central government.

Now the bank financing is coming into the play. So you would see decent growth going forward, not maybe at these levels because there were some one-offs here, but you would see good decent growth. Then the Supreme Court, we don't comment on the legal proceedings of the bank. Then the hedging strategy of Argentina, given the costs of hedging in Argentina, we have not been hedging and we will continue to be not hedging Argentina. It's so small also for the whole account that we can live with it without hedging.

Thank you very much, Fernando. Next question please.

We have no further questions at this time. So I'll hand the call back to you.

Okay. Thank you very much, everyone, for joining this call, and thank you for participating with your questions. So if you have any further questions or clarifications, please reach out the IR team. Thank you very much.

So we start. Please take a seat. We've got the big pleasure this year once again to be having live, we have two deals that are live this year at the conference. One of them is, of course, BBVA Sabadell. We've got the pleasure of hosting the Group CEO, Onur Genc. Thank you very much, Onur, to join us this year.

Thank you for having me.

So as always, we go through some questions, and then we'll open up for Q&A in the last 15 minutes or so, depending on how we get on. But why don't we start from where we left things, which is you posted almost 20% RoTE in the first half of the year. You've confirmed that this metric is going to be around 22% on average over the next 3 years, '25 to '28. And maybe we can start with your views on the outlook for the group, and you've presented a new outlook also on those points of strength that in your opinion, the market might still be dismissing when looking at BBVA story.

Yes. As you said, it's a 4-year plan. 2025 included 2025, 2028. And that plan is basically foreseeing this 22% return on equity, return on tangible equity. And you're asking where is our confidence coming from basically on that figure. A few things. Number one, it comes from our track record. As you just said, we just completed the previous 4-year numbers plan because in 2021, we launched the 2021, 2024 plan. At the end of that 4-year plan, we did deliver 20% return on tangible equity, as you said. And more importantly, even for us, we delivered 18% compounded annual growth rate in tangible book value per share plus dividends.

So very good numbers. And with this, we became the #1. We have a peer group of the 15 largest European banks, European geography, not EU only, European geography peer group banks. Within that 15 group bank, we are #1 in profitability in terms of return on tangible equity, and we are also #1 in terms of growth. And again, we delivered what we said we would have delivered by a wide margin more positively as compared to our original goals in 2021, 2024. So where is that -- why do we think that the new plan that we are putting forward is realizable and that we will deliver that as well.

First of all, our track record. We just, again, delivered a very good set of numbers in the last strategic cycle. But more important, looking forward, why do we think that those numbers are realizable and realistic figures? Maybe we discuss first a bit long-term and structural advantages of BBVA, and then we also talk a little about the short term. But on the long term, there are three things, and I'm in the job for 7 years now. So I keep repeating them. I'm sorry for the repetition for some of you who might have been following us quite closely.

But there are three things that I believe that makes us a bit different than others. Number one, we are diverse. We are a diversified bank being present in many countries. But one of the very important metric of those countries that we are in is the low leverage in those countries that we are in. And that low leverage is important in our view because it allows you to grow healthily without creating too much cost of risk. So this being diversified, being in low leverage countries, we do think it's differential. It's important. That's number one.

Number two, I keep repeating this, but I do think it is the most important differentiator of BBVA story. Our equity story is based on this which is wherever we are, we take claim in the fact that we own one of the best banks in that country and that typically comes with scale. I mean, in Mexico, we are by far the largest bank. In Peru, we are the second bank. In Turkey, we are the second bank. In Spain, we are the third bank. But in retail banking, we are the second bank.

So we do own these very unique franchises, large sizable franchises that typically delivers better return on tangible equity versus the rest of the banking industry. This positive gap versus the industry is a differentiator for us. And the best example, again, is Mexico. We have a return on equity of 27% when the rest of the industry, excluding BBVA is 16%. Why? Because we are large and we have prioritize the right things in the past in terms of execution, and we created this franchise strength, which is unbeatable in my view. So that's the second thing. We have very good franchises. We have one of the best, if not the best franchises in the countries that we are in.

And then the third thing I will put on that table in terms of the structural reasons why we think we will continue to be successful in those metrics that we outlined. We prioritized and we invested much more in this topic of digitalization, much earlier than others, much more than others. And we do think it did create some sort of a competitive advantage for us. So beyond servicing our clients through digital channels, beyond sales to our clients through digital channels, one of the things that we believe we do really well is we acquire new customers through digital channels.

I mean the best number is the percentage of new customer acquisition coming from digital channels. 2/3 of our new customers that we acquire every year is coming from digital channels, which is something that we have mastered that we have put a lot of effort in the past and yielding results. To cut the long story short, we have already delivered very good figures in the previous cycle. Given these structural strengths and also maybe on the short term, I did mention the short term, that's also important.

In the last 2 years, we are seeing very healthy levels of activity growth in all the markets that we are in. But those -- that activity growth is being used to absorb the customer spread decline that is happening because the rates are coming down. We are typically rate sensitive in Spain, in Mexico, in Peru, we are rate sensitive. So when rates come down, the activity growth that you have, the healthy growth that you have is being used to absorb that rate decline impact on the customer spreads.

In the short to medium term, what we see is that the activity growth will still be robust because rates are coming down, it helps on activity. And that activity growth in the absence of less rate cuts or does we expect the stability of the curves in Spain, in Mexico and Peru already it has happened. This year or next year max, we will reach stability. There will be no more rate declines in our assumptions.

In that context, activity growth will be flowing directly to the bottom line, to the profits. Based on all of this, we believe we will deliver those numbers that you mentioned. And you said what might the market be missing or dismissing we don't worry about that. I mean I have learned my lesson on this. Again, I'm in the job for 7 years now. Rather than complaining about what the market is missing, our job is to deliver as we discussed with the team. If we deliver the numbers, the market will always catch up.

You leave the market stuff to us. Okay. Now you've been a growth story, and you mentioned that, and I think I would say one of the few in Europe. In addition, with your new plan, you're expected to generate something like EUR 49 billion over the plan period. Now tell us how you get to that number? And how can you combine growth and shareholders' remuneration together?

Growth and shareholder remuneration together. Yes. Okay. But on the EUR 49 billion in the plan that we mentioned -- as we mentioned, we are growing much better than others. We are #1 among the 15 largest European banks in terms of growth. Our lending book last year, it was 14% growth in constant euros, 9% growth in current euros. This year, in the first half as of second quarter, end of second quarter, year-over-year growth is 16% in constant euros in lending book, 9% again in current euros after all the impacts of depreciation. Still 9% is by far the #1 highest growth among the European banks because of the footprint that we have. There's nothing magical there. And because, again, Spain is also doing well, but also all the countries that we are in emerging economies, we are seeing very nice growth.

But coming back to your EUR 49 billion, we call it sources of capital in our presentation. The core lever in that is profits. We are estimating -- we put forward an objective, a clear objective of EUR 48 billion of profits in the next 4 years. That EUR 48 billion after the impact of currency and the securities book and everything else in terms of tangible book value creation is EUR 39 billion. So the core profit would lead to EUR 39 billion of tangible book value creation, plus we already have an excess capital at the beginning of this period of EUR 4.5 billion, plus we would be using securitizations and SRTs as a capital creation, value creation tool more actively in the coming period.

We are already doing it. I mean, in the first half of this year, we already created 23 basis points in capital from SRTs. Banks like us, banks which have a very high RWA density, we have the highest RWA density, by the way, among our peer group. We have 50% RWA density when the rest of our peer group is 29%. So the SRTs securitizations. It helps us much more than the rest of the banking industry in Europe, which is going to give us another EUR 5 billion in capital release. Sum them up, EUR 4.5 billion excess capital at the beginning of the period, EUR 39 billion, which is coming from profits, EUR 5 billion from SRTs gives you the EUR 49 billion. So that's the breakdown that you were asking.

But that EUR 49 billion, how are we going to use this? EUR 13 billion will be used for growth, so new RWAs because of growth and EUR 36 billion we put into our plan as the capital -- excess capital that we would be accumulating that we would be paying out to our shareholders. You asked about how do you kind of balance growth and the shareholder remuneration. For us, there's no need to balance. They are actually self-reinforcing. It's actually a positive loop that they have. I think what we did in the last cycle, in the last 2021, 2024 period was exactly that.

If we grow as long as that growth is profitable, it has -- it actually gives you more ammunition to pay back more to your shareholders. So as much as possible and as long as it's profitable, we first want to grow. That's the EUR 13 billion capital allocated to growth. And again, if we do it well, we have established really strict mechanisms around this. Any part of BBVA, any part of the world, whatever growth that we do, whatever growth that consumes capital, even I see it in my desktop on what is the capital consumption, what is the return on that capital. So that micro planning, micro capital management is helping us on this growth being profitable. But then EUR 13 billion, even though we are gaining market share in the plan and so on, it's only EUR 13 billion.

We accumulate so much capital that the EUR 36 billion, then we will pay back, we will be back to our shareholders. In terms of that capital levers, again, all else being equal at the same return levels, we obviously prefer first growth because it gives you franchise value. It makes the long-term returns stable. So we first grow. Second, we prefer payout to shareholders directly like share buybacks because it's no execution risk, you immediately do it. And then all else being equal, then if there are any strategically it has to make sense, we might also consider M&A, but there are not opportunities out there. So it's going to be growth and then shareholder payout.

We'll definitely come to M&A as well. But talking about those numbers, which are big because we've talked about some organic capital generation numbers. Mexico accounts for a large part of that because almost 60% of your profits come from Mexico and BBVA there is the largest financial institution in the country, I would say, by far, and one of the biggest beneficiaries of the near-shoring trade that we've seen in the region over the years. Now the world took a big turn, of course, and we've seen at least 1/3 of global trade that was exposed in some shape or form to some degree of volatility. Now UMCA, so the trade agreement between U.S., Mexico and Canada seem to be up for renewal. Now what are you seeing on the ground in Mexico? And also, you make nearly double the ROE of your Mexican banking peers. How sustainable is this going forward?

Let me start with the last one. It's very sustainable, but maybe I go to order. So maybe we start with the macro and then we go to the bank. On the macro, what do we see on the ground, it's quite positive, what we have seen this year despite the fact that we had many uncertainties. And this year, we were not sure at the beginning of the year, but as it's coming out now, it's going to be a really good year for Mexico. Maybe a few numbers. We are very numbers oriented. So in the second quarter call, you might remember that we basically said we were also putting EBIT overlays in because of IFRS 9 provisioning into cost of risk because of the fact that we were expecting now in Mexico minus 0.4% growth -- recession -- sorry, decline in GDP. That minus 0.4% recession or decline in GDP, we are now thinking to upgrade that number to something positive.

The final numbers are not out, but it's going to be a decent number because the last numbers coming out of Mexico are quite positive. A few things, again, also related to this trade topic. Export volume, which is something that we watch very closely, 6 months this year versus 6 months 2024 is up 4.1%. And when you look into it monthly, every month, it is growing very nicely. So it's not like front-loaded because of tariffs, not every month, I mean, April, May, June coming out very strong. That's why we have this 4% growth.

FDI, foreign direct investment, which is again very important for Mexico, 6 months this year, 6 months last year is up 10%. Typically, the names that are already in Mexico. So not too many new names, which we would have appreciated more. But the ones who are already in Mexico, they are -- they keep investing. And as a result, we will shortly increase, upgrade our growth expectation for Mexico.

So on the ground and our pipelines are very strong. Our loan volumes are very strong. That's why we also upgraded in the second quarter call, the lending growth in Mexico to 10%. So overall, in the short term, quite positive. But you also asked about trade topic, USMCA and so maybe very little words on that one. The short term is very good. Again, we were expecting despite the uncertainty, it's very good. But in the medium, long term, we are even more positive. I mean, on the trade topic, we obviously have a lot of dialogue with Mexican authorities and also partially with the U.S. authorities. And obviously, U.S. authorities count more here in terms of what they want to do.

But we are seeing a quite positive dialogue. I mean the Mexican side is very, as you might have seen, quite constructive on this whole topic. And the American side, as we see it, it's in the best interest of America to keep Mexico as a stable, relatively decent growth country than otherwise. It's 130 million country right at the border, a stable Mexico, a growing Mexico is always beneficial to U.S. That's I think we view that and we see that they see this.

And then Mexico has a structural advantage, which is the cost -- labor cost manufacturing in the manufacturing industry. We compare the labor cost of Mexico versus any other low-cost state in the U.S. And this 1/7, 7 times cheaper to manufacture in Mexico than to manufacture in the U.S. And when you talk to U.S. colleagues, obviously, they don't like trade deficits, but their key concern is China. And if they want an ally against China or if they want an ally in this world or Chinese growing dominance in manufacturing, we do think that they see Mexico as a partner as an ally than otherwise. Again, it's in the best interest of U.S. to keep Mexico at bay and in relatively decent growth rates and so on.

But long story short, macro level, short term, quite positive. Medium to long term, the tariff discussion might play into it. But as we see it, it's going to be actually much more positive because it's going to be creating a relative advantage versus other countries that Mexico competes.

Then regarding our bank, you mentioned it, we do double what the rest of the industry does or close to double, not precisely, but close to because we have -- again, I'm here in this job for 7 years. Every year, I had some concerns about Mexico. And every year, they delivered positive surprises, our bank. And this year is another example. We are on a path of a very good year. For a few reasons, again, we are structurally, we have the best NPS. We have the best digital capabilities. We have the best scale. All of that best customer satisfaction is very important, by far, the best customer satisfaction because we are large, and we do have the scale and we invested properly in the right priorities in the country.

In that context, we sometimes quote these very few figures, which we do think is very important in a few businesses where it's very tough to replicate the bank's advantage, cash flow-based businesses, transactionality businesses, periodic relationship with the customer businesses like payrolls. We have 44% market share in payrolls, 44% of a country, public and private companies, they pay salaries and in Mexico, they pay it every 2 weeks.

We have BBVA accounts. That's a wonderful competitive advantage or in the acquiring business where you tap into the SMEs, where you tap into the companies, we have 39% market share. So our position in those relatively tough to replicate businesses is ensuring in our view that we will continue to deliver really well.

And I'm going to say on Mexico, you've been positive also when things looked a bit more likely than today. Another region where we've been positive and we're actually starting to see growth really pick up has been Spain, and it's been one of the fastest economies in developed markets this year. We're clearly seeing this growth across every line in your P&L, and you've been gaining market share. So targeting loan growth above mid-single digit, which is quite above the rest of the market. Now can you talk a little bit more about what you're seeing about business as well as the competitive dynamics in the market? And to what extent these market share gains can come without compromising pricing discipline?

Okay. So I'm watchful all the time. So maybe I focus more on the market share because overall, the market is doing well and everyone knows it. So let me not spend too much time on that one. But in terms of market share gain, you're right, we are gaining market share, but not everywhere. You might have seen it in the figures. Except mortgages, we are gaining market share everywhere. But in mortgages, we don't because there are certain parts of the business that we feel again, we are very capital return oriented. We look into every single loan, as I said, and we also look into it at the portfolio level, at the product level.

As it stands, the pricing levels, it's a very price-sensitive product. That price sensitivity, in my view, doesn't exist in any other part of the business because when you buy a home once or twice or maybe three times a lifetime, but you buy it very infrequently. And when you do that, you look around, you shop around, you have advisers to help you on that and so on. So price becomes a very relevant metric. And in that very price-sensitive product, some of our competitors, in our view, are very aggressive, and that's why we are a bit out of the market. But beyond that, we have gained market share, and our intention is to keep doing that.

On average, in total lending book, we gained in the last 4 years, 30 basis points every year. And we will keep doing that for a reason because, number one, we are growing especially in companies segment. In the Company segment, we were underrepresented. Our market share is lower than our fair or natural market share of the overall business. And we do think there are a few advantages that we have that we can tap into. A few advantages, number one, again, we are a technology-oriented, digital-oriented bank. We invested a lot in our capabilities and systems, including now lately the enterprise side as well. That is an advantage. Our cash management systems, our treasury management systems, in our view, are really good lately. We have invested so much money into them.

Number two, cross-border, we are in many countries. We have offices in 27 countries now. Any Spanish company who has a subsidiary in the rest of the world, they typically have a lot of subsidiaries in South America. We are a more natural bank to bank with them, and we weren't using that advantage. Again, we invested in our systems and products to make sure that anyone, any Spanish company who wants to do something outside. It's true also for other countries, but you asked me about Spain. That's why I'm focusing on Spain. We will leverage that advantage. If you have a subsidiary as a Spanish bank in Mexico, in Colombia, in Peru, we are the bank who can provide better services to you.

And then the third one, sustainability. Like digital, we wanted to prioritize this topic as an area that we would invest more, that we would develop better knowledge, better expertise. And I do think it is the case. When you combine them all, we are gaining market share in enterprises, in Company segment in a very good way, and we put a lot of focus into it, obviously, it helps in execution.

And then the second topic is consumer. In the consumer lending book, we are growing. For a very simple reason, again, because of digital. We acquire in our view, it's not very public some of this information, but we acquire very good new customers in Spain as well. And again, a good chunk of them are coming from pure digital acquisition because we invested so much into those capabilities.

As a result, we acquire new customers, we get their payroll and we give them consumer lending. 85% of our consumer lending book is unsecured lending, 85% is to our -- they are -- it's proactive lending to payroll clients. So that's the other piece that we are growing because of our digital capabilities, we believe we can do better on that one. Combining them all, we will continue to gain market share in Spain.

Right now conscious of time, I want to also cover the tender offer and maybe leave some time for questions from the audience. But let's cover Türkiye maybe quickly because direction of travel seems to be quite clear. Monetary policies turned more orthodox and inflation started to come down. Now you've guided to somewhat below EUR 1 billion net profit this year, which is a steep increase year-on-year. But more importantly, on your current forecast, you could come off hyperinflation accounting, which is a big deal for you. Now talk us through a little bit more about your expectations going forward and the moving parts?

I mean our -- in the past 1.5 years, in the past 2 years, our expectations have improved -- actually my personal expectations have improved dramatically because Türkiye is on a path of normalization. And the new economic team that there's a new minister, there's a new team, there's a new Central Bank management that has come into works has been -- in my view, they have been doing the right things, and you see it in the results. I mean, Türkiye has peaked at 72% inflation 1.5 years ago or so. Now we are at 33% at the end of August. The expectation of -- they just announced last week was it, I think, the medium-term plan. For this year, they are expecting 28.5% at the end of the year. We expect a bit more. But next year, they expect 16%. We expect a bit more, but still, it's the curve or the path is the right path.

So we are getting positive as long as the current team stays in place and as long as they deliver the plan that they said they would deliver. So we are positive on that side. But regarding the profits, I mean, Türkiye is a relatively large country. It's a $1.3 trillion economy. We are the best bank in the country. Again, best bank, it's not a subjective view. We are always numbers based and oriented. Our return on tangible equity is 30% and the return on tangible equity of the private banking sector is 20%. So we have a -- like in Mexico, we do have a very large positive difference versus the rest of the industry.

We have the best bank in the country. And if you look to the size of the economy, and if you have -- in this case, including state banks, we have 10% market share, excluding state banks, we have 17% and 18% market share. With that market share, you should be able to deliver at least EUR 2 billion, EUR 2 billion to EUR 3 billion. Otherwise, you don't cover your cost of equity as the system and as the bank. So that's why we said in the past that when normalization happens, you should expect much more from Türkiye. That's why we, at some point, we called it a large option value.

We are more and more in the auction, in our view, every single day. But we'll see how the path develops and how it all turns out. But we are, at the moment, quite positive. One thing that you mentioned, which is important, the hyperinflationary accounting obviously creates a hit, not in capital, but in P&L, in the profits. Hyperinflationary accounting is going to be left out. It's going to be taken out if the cumulative past 3-year inflation is less than 100%.

As it seems in 2027, Türkiye is going to get out of hyperinflationary accounting. Our expectation in the plan is that we wanted to be conservative and we put this 2028. But independent of whether Türkiye has or doesn't have hyperinflationary accounting, if inflation comes down, the negative impact coming from hyperinflationary accounting disappears in the P&L, if you know what I mean. So you don't need to wait for the accounting to change. You need to get inflation coming down. And if inflation comes down, hyperinflationary accounting per se doesn't create too much of a difference in the P&L.

In that context, 2028 is the date that we assumed hyperinflationary accounting will be taken out. But even before, if inflation comes down, Türkiye will continue to generate much better profits.

No, that's a big deal. And now let's talk about actually the tender offer because we are live now and when Sabadell's Board rejected your offer, they formalized a number of points as to why that was the case. I mean, three in particular. One, was the premium; two, BBVA's footprint; and three, Sabadell's dividend distribution on a stand-alone basis. Now I'm sure many of your shareholders are going to be in the audience as well as Sabadell's shareholders. What would you tell them here?

First of all, I mean you said Sabadell says these three things and so on. We never ever wanted to be confrontational with Sabadell in this whole process. So I don't want to be confrontational even now even more, I wouldn't want to. But you raised three topics. I will answer the three topics, not as a response to what they say, what we say. I don't think it's productive at all for no one. But I will talk to you about those three topics that you mentioned.

But to start with, before the three topics, this is a year ago or so, it has been a quite a long time now, 16 months to get the approvals. But I called it a very straightforward transaction. Maybe I studied and I worked in the U.S., maybe it's coming from that U.S. background, but it's an in-market consolidation. In other parts of the world, like in the U.S., nobody doubts about this transaction. It's a straightforward transaction in an industry, as we keep saying, where the fixed costs are going up because technology costs are going up and technology costs are mainly a fixed cost because they are software development.

When we gave some of these numbers, and so many numbers are floating these days because we are live in the transaction. But very basic things. And BBVA in Spain, we spend EUR 1.1 billion every year, only in Spain in technology, 1/3 of our cost is technology. You don't know the Sabadell number, but it's something similar because they are a very large bank as well, hundreds of millions of euros, EUR 1.1 billion, okay? Why do we have two different systems, two different applications to serve the same market? Why do we spend hundreds of millions of euros to develop two things to serve the same market. That is why we have estimated that the synergy of this transaction would be EUR 900 million per year, steady state. Is EUR 900 million a big number. This is pretax.

But Sabadell makes it a lot in their plan in the future, they claim that they will be making EUR 1.6 billion. EUR 900 million is very large as compared to that. Why? Because it's an in-market consolidation. So why wouldn't we create better value for both shareholders by tapping into something which is inefficient to start with. Why do we pay hundreds of millions of euros each of us to external vendors. It's not even internal spending. It's external vendors to IT vendors. Why do we spend hundreds of millions of euros for both of us. It just doesn't make sense. That's why the deal has a lot of synergy potential. That's why it has a lot of value for both shareholders.

But coming back to your three topics, premium. Given this large synergy value, we offered 42% premium on 1 month VWAP in this transaction, 42%. 42% as compared to the recent transactions that you know very well that has happened in Italy. It's like out in the sky. There were 5 since the day that we launched, there were 5, again, nonsolicited tender offers in another European market. 3 of the 5 have reached success. The ones who have reached success, they have increased their prices in the process. But the final prices that they ended up with is 19% premium, 14.8% premium and 13% premium. We started with 42%. And how does 42% compare with the rest?

So in terms of premium, I do think the numbers speak for themselves. Then BBVA's footprint, that was your second point. BBVA's footprint. On this one, I encourage because you said what do you say to the Sabadell shareholders, they should look into their own numbers. The most important thing in banking, in our view, most important metric to pay attention to is not even profits. It's the tangible book value creation, tangible book value creation, which incorporates everything. It takes profits as the core, but then it deducts currency depreciations, it deducts securities valuations and everything. So it's the key number to look into.

When you look into 15 years, 10 years, 5 years, in every single period that you pick, not only we beat Sabadell with a wide, wide margin in terms of tangible book value creation despite that footprint that you are talking about, we also have less volatility as compared to Sabadell and we beat the European banking peers as well. So on this topic, the notion that we are diversified, the notion that we are in low leverage countries and the notion that we have the best banks in the countries that we are in, I gave you all the numbers. We are #1 in Mexico, #2 in Peru, #2 in Türkiye, #2 in retail banking in Spain already. That has led us to deliver the benefit of this diversification because we have amazing banks wherever we are. So I don't buy that argumentation at all, wherever it's coming from, again, not being confrontational.

And then the third topic is the cash flow dividend. Yes, we give dividend. This is the one that I disagree the most. Dividend is not value creation. It's short term versus long term. If you get the dividend, what happens to your long-term cash flow. If you get the dividend now, if you sell TSV, you will have lower earnings in the future. You have to look into the full thing. You have to look into the intrinsic value. And what we claim is like, again, dividends is like money in the bank or money in your pocket, but it's your money. It doesn't matter. It's your money. If you really want cash because one of them is money in your pocket, you can tender your intrinsic value goes up. And then you can go sell your shares and get as much cash as you want rather than waiting for 6 to 9 months for TSV, you can do the deal, get the intrinsic value and then sell your shares to get as much cash as you want.

What matters is the intrinsic value. And on the intrinsic value, what is the value of your share? There is a 25% EPS upgrade for Sabadell shareholders. Even if you incorporate all the cash flows that you mentioned, TSV dividend and so on, it's a very significant EPS upgrade. We encourage all the Sabadell shareholders to do their own numbers for just numbers because if they do the numbers, forget our numbers, forget their numbers. They should do their own numbers. In the context of these huge synergies, they would see that they would be getting a lot of value from the transaction.

We'll have Cesar later on stage as well. Of course, we are very respectful of the process. But I'm going to ask you one more question, and then we'll open up for Q&A. Now you talked about industrial rationale, but I think that is, I think, clear and not in question with respect to the transaction. But when we're assessing sort of the economics of the deal, for good or bad, we are in Europe, and it's 16 months in, we're still talking about this. Investors may ask how should we think about sort of the financial merits of the transaction, especially following the conditions that the Spanish government has imposed. Now how should we think about that?

Meaning the government condition?

Correct.

First of all, the government condition is only one. It's not conditions. It's only one condition and the condition basically says that you have to keep Sabadell as a separate entity with a separate balance sheet which then has a derivative attached to it, which is as Sabadell management, you have to optimize the value of Sabadell. But the only condition is you have to keep them separate. It doesn't say anything about. Actually, it is very explicit in the government condition, and I hope everyone reads it in full that BBVA can appoint the Board, can appoint them -- I mean, there is no restriction whatsoever. Given the antitrust CNMC conditions and commitments that we also agreed, there's also no problem in terms of coordinating the business, managing the business together. As long as again, we keep them as separate and every entity optimizes their own value.

So this is what is written in the condition. But in terms of the kind of the condition, the merger ban that you might be referring to, which is you cannot merge in the next 3 years, we do have the clear conviction that it's a bit in our hands in 3 years for this to be done as such because there's a clear process outlined also in the government decision, which says that before the end of 3-year period, we will submit a report. There are many details in there, which is talking about how you have complied with this in the 3 years, what are you going to do for general interest for the coming year. It's a bit in our hands to be able to prove to the government that there is no general interest issues going forward, again, looking into also the 3-year period.

There is also a very important dynamic here that I would encourage everyone to look into. CRD VI, which needs to be transposed, this is an EU directive for the benefit of everyone. CRD VI, which needs to be transposed to the national legislation to the Spanish legislation in 2026 or maybe later, but there has to be a transposition that has to happen. And the latest EU infringement process around this topic basically implies that when the 3-year period comes, that merger plan will no longer hold.

Given that, June 24, the date was June 24 was the decision of the government. The clock started on June 24. So June 24, 3 years more, June 24, 2028. We put in 8 months on top December 24, 2028. And we said we will start getting the synergies in 2029, which we do think is a very fair assumption and a very fair planning. That's why whatever happened, you also referred to 16 months and so on, it's passed. We don't need to comment on this. It happens in life. You need to look forward and the synergy potential is clearly there, and the shareholders should benefit from this opportunity.

Super clear. We've got time for one question, but it needs a very quick answer. Anybody that wants to ask a question to Onur please.

There's one there, please.

When I look through the details of your business plan assumptions, the Mexico growth outlook looks to be, if I paraphrase, more of the same. Could you help me understand what a possible blue sky scenario in Mexico could look like if the U.S. trade deal is mildly satisfactory?

Very good. I mean you have all the details in the backup of that presentation that we are assuming in Mexico. This year, again, in the second quarter, we were expecting a recession. And for next years, we were expecting 1.4% growth, 1.7% growth and so on. As you say, this is lower than the clear potential of Mexico. The blue sky scenario would be the trade negotiations this realization or this conviction that we have that it's in the benefit of the U.S. for Mexico to have a stable and growing economy. If that is really embraced by the U.S. authorities, there will be positive dialogue on the tariff discussions. As you know, in USMCA, it has to be concluded in 2026. If that happens, the potential growth rate of Mexico is much more than 1.4% and 1.7%. If that happens, our Mexican business is going to deliver much more than what we have in the plan. But the blue sky scenario goes back to macro a bit and that macro is going to deliver very good results for BBVA.

Amazing. Thank you very much, Onur.

Thank you to you.

Thanks, everyone.

So good afternoon, everyone. Good afternoon. It's my pleasure to welcome Onur Genc, BBVA's CEO. Good afternoon, Onur.

Good afternoon.

Thank you very much for taking the time. We're delighted to host you today. So thanks very much.

So the agenda for today, we have about 25 minutes set aside to discuss the investment case. Afterwards, we will open the floor for a round of questions. And then we will end with an investor survey. You can use the devices you have in front of you to participate. So welcome to participate.

So if we start with the, I guess, the elephant in the room, the tender offer for Banco Sabadell. Can you walk us through the updated deal scenario? And what do you see as the strongest case for Sabadell shareholders to accept the deal?

The strongest case -- so what is our pitch to Sabadell shareholders, is what you are asking?

Correct.

Well, I mean, it's going to be a repetition for the ones who have been listening to us for 16 months, because it has taken 16 months from the launch of the offer to today where we opened the acceptation period yesterday, as you might know, the tender offer acceptation period.

But a few bullet points for the Sabadell shareholders. Number one, we do think it's a very straightforward transaction, because it's an in-market consolidation play. In-market consolidation is ultra relevant in our view, in an industry where the costs are going up in an area where it is mostly fixed cost, which is technology.

We mentioned it multiple times in the past. The cost of technology within the total BBVA, it used to be 20%, 5 years ago. Today, it's 26%. It keeps going up. In Spain only, it's 33%. So 1/3 of the cost of BBVA in Spain is technology, and it has been growing very, very -- in a very high way.

And given that it's fixed costs, larger scale helps. That is why, for example, again, in the context of Spain, our technology cost is 1/3, is EUR 1.1 billion. BBVA spends every year, EUR 1.1 billion to technology. We don't know the exact numbers in this categorization of Sabadell, but something similar, because they're also a very large bank.

Why are we spending hundreds of millions of euros, in our case, EUR 1.1 billion to technology? Two different banks serving the same market with two different systems, two different applications, two different brands, it just doesn't make sense.

As a result, there are a lot of synergy potential -- there's a lot of synergy potential in this transaction. And we estimated our presentation on Friday has explained this in detail, but EUR 900 million of synergies. Because we are consolidating within the market, EUR 900 million of synergies. Is this big? This is pretax, obviously, EUR 900 million as compared to the profit base of Sabadell, which is EUR 1.6 billion, they are expecting, EUR 900 million is a lot of money, a lot of money.

So in-market consolidation, very straightforward transaction, with a lot of synergy potential. And it's also a complementary business. They are very good in SMEs. We are very good in retail. We are very good in corporate business. So it's a good match. All combined, it makes sense.

What does this mean for the Sabadell shareholder, coming back to your question. Given this huge synergy potential, we have basically extended, in our view, a very attractive offer to Sabadell shareholders. You might have seen this with regards to the undisturbed price, we offered a 30% premium, 30% premium when we launched the offer. It was 42% premium versus the 1-month VWAP of the undisturbed price, 42% premium.

And if you compare this 42%, for example, to the deals announced afterwards, other tender offers like ours, unsolicited that happened mainly in Italy. And three of them have actually reached a success, three of the five offers launched after BBVA. This 42% compares very favorably as compared to 19% in one case, 14% in the other, 13%.

So when others are offering 13%, 14% premium after rounds of increase of the price upfront, we offered 42% premium unforeseen in these type of transactions. So for the Sabadell shareholder, a lot of synergies, which is then reflected into a very high premium. And as a result of this premium, our EPS earnings per share upgrade that we are estimating for a Sabadell shareholder, solitario and solo versus as part of BBVA, it's 25% EPS upgrade. So it's a great deal. It's a great deal.

And as we said many times before, a straightforward transaction, a lot of value. We do think it has to happen. It should happen. But if it doesn't happen, fine also. We also announced at the end of July our stand-alone plan, EUR 36 billion excess capital return in the next 4 years to our shareholders, amazing plan in our view. If it happens this deal, fine because it makes sense. But if it doesn't happen, we have a plan to deliver. We are very excited about that stand-alone plan ourselves as well. If it doesn't happen at these terms, we are very happy to move away and go into our own stand-alone plan and execute on that plan. I hope it was clear.

Yes, it was very clear. If we move on to capital, which I guess is another key pillar of your story, you're running at a 13.3% CET1 ratio and you're guiding, as you just said, to EUR 36 billion available for distribution between 2025 to 2028. That's a lot of money on a stand-alone basis. How do you think about deploying that capital between ordinary dividends, buyback, loan growth and potential M&A?

Again, we are very clear on this one also for a long time, but we have a few principles that we go really hard on. Number one, every organic growth opportunity has to deliver above cost of equity through the cycle in the long term. And we have established, in my view, a very good system. I mean, we spent a lot of energy on this as a team. But every single loan that BBVA gives in any geography, I was giving the example of any country actually you pick, but a loan that you give today in Peru in my desktop, I can go and I can check the return of that loan at the transaction level and at the client level for the return on capital of that client.

So the organic growth has to pass a certain return above cost of equity through the cycle. You can invest in a client, you have a pool of investment. But in the medium term, you have to make sure that, that client delivers returns. That's the first principle. All initiatives that consume capital has to deliver above cost of equity through the cycle.

The second principle, capital is scarce resource. They compete with each other, different initiatives who are basically demanding that capital. They have to compete with each other and whichever is delivering the best return should get that capital. That's the second principle that we have.

With those two principles in mind, all else being equal, meaning at the same return levels, though, we have a preference. First, we prefer organic growth, because organic growth, it builds franchise value. You basically ensure the stability and long-term consistency of your returns. So organic growth, all else being equal, I underline once again, organic growth comes number one. Then we go share buyback, because share buyback or any form of payout, but share buyback, because it has no execution risk. Again, all else being equal, you do share buyback.

And then, if it makes strategic sense and in that context, we like domestic consolidation as we are trying to do with Sabadell, but going into new markets and so on, very difficult on those. But in-market consolidation and if it makes sense also financially -- strategically and financially, then you can do M&A. But in that order, organic growth, share buyback with very limited execution risk or no execution risk and M&A as long as it makes strategic sense and financial sense. That's how we look into it.

And together with the execution that we have been doing, this capital discipline and this way of being very rigid about these concepts, which we think is a good thing, we have delivered one of the best in the European banking tangible book value growth as a bank. We have the highest return on tangible equity in Europe. Among the 15 largest European banks, BBVA is #1. And we do have the best TSR.

If you look into the EUR 100 that you put into BBVA stock, at the beginning of 2019, which is the date that the new management team of BBVA has started, since then the EUR 100 today is EUR 497. EUR 397 appreciation. That EUR 397 appreciation, European banking is EUR 220, around EUR 200 for the Spanish banks. So we are doing better than others because we execute well, and we have the clear ideas about the capital discipline.

So EUR 36 billion, grow as much as you can as long as it's profitable. Go back to share buybacks and deliver -- give it back to the shareholders if you cannot grow. That's kind of the motto.

That clarifies. Yes. If you look regionally, and we focus now on Spain. In Spain, volumes and deposits are still growing very strongly. They've been growing around 5% to 6% per year. So that's very impressive. As rates stabilize, should we expect NII to continue to grow like in a mid-single-digit pace?

In the medium-term plan, we have given guidance for every single geography. In Spain, we weren't specifying it at the NII level, but it's specified at the revenue level, which is mostly NII. But revenue growth -- we said it, low to mid-single digits. So along the lines that you mentioned.

And we think it's a very fair assumption that this happens. for a few reasons. Number one, Spain is doing really well as a country. So GDP growth is quite robust for three or four reasons. Number one, immigration. It is a very pro-immigration country, and it helps with growth in GDP, number one.

Number two, it's a service-based economy. What we have seen after COVID is that, if you are a service-based economy, we typically grew better than product or manufacturing-based economy. And Spain, tourism and again, people moving to Spain, because we have a lot of sun in the country. It's a wonderful place to live, to work from there and so on. So the service-based economies have grown in general better and Spain is clearly a service-based economy, relatively speaking.

And then the third one is, we have received a lot of funding from Europe. That's the third reason why Spain, because we have received EUR 165 billion in what we call next-generation EU funding. EU basically after COVID, decided to give a lot of money to southern countries. Spain was one of the benefactors. And we have received EUR 165 billion, and half of this was in grants, roughly half, which also helped the investment cycle in the country and so on.

It's got a long story short. Spain has grown really well. Last year was 3%. And this year, we are expecting 2.5% to 3%, again, in a context where Europe grows less than 1% because of these structural factors. If Spain grows as such, the banking sector, we think, is going to grow also quite healthily, because Spain has deleveraged, as you know very well. For many years, lending growth was negative. For 15 years, deleveraging in a consistent manner.

And since last year, we are turning back the curve in terms of growth. In this underleveraged economy, if GDP growth is there, the banking sector is going to grow healthily. And then within that, BBVA has been growing better than others. We have been gaining 30 basis point market share on average in the last 3 years. We expect that to continue. All combined, it will lead to mid-single-digit volume growth in Spain.

And if you take some margin potential decline, because of competition, the revenue growth, as you said, would be low to mid-single digit in that range, 3% to 5% range going forward. But quite positive, quite positive.

Okay. And if we go to the other important market for you, which is Mexico. Mexico remains a profit engine. There is no doubt about that, but faces FX volatility, lower rates and raising competition. Can you walk us through how resilient earnings are against these headwinds? What underpins your confidence in sustaining high single-digit loan and revenue growth with declining cost of risk? And could you give us your assessment of the risk and potential catalysts around the USMCA renegotiation -- as the renegotiation approaches?

USMCA. Okay. So maybe let's divide it into two, the bank and then maybe the economy, and let's start with the bank.

We were discussing it, Luisa, Patricia and Ricardo and I, this morning. I've been in the job for 7 years now in this job. For 7 years regarding BBVA Mexico, our bank in Mexico, it has always been -- and I would knock on wood, always been positive surprises over and over again many times, because BBVA Mexico and the banking sector in general, but particularly BBVA Mexico, we have some structural advantages that is going to -- you asked about resilience, that's going to ensure the resilience of our earnings.

And I would give you a few things. First of all, on the banking sector, we talk about it in the calls as well, Cecilia, as you know, but banking sector debt over GDP is 33% in Mexico. This is one of the lowest levels even in the emerging markets landscape. It is lower than Peru, lower than Colombia, lower than -- Brazil is 72% on that same metric, more than twice. 33% banking debt over GDP. It's lower than Nicaragua, although Nicaragua is a wonderful market, I'm sure, but it's lower than many other geographies in the footprint and in the emerging markets landscape. That helps banking sector to grow healthily without creating too much cost of risk. That is why we have always grown BBVA Mexico double digit or slightly low double digit many years because of this low penetration level.

This banking sector penetration, low banking sector level penetration is something to register when you think about Mexico. But more importantly, in my view, about, again, the resiliency of earnings, I've seen many banks in my life because I'm at BBVA for 14 years now. But before that, I've seen many other banks in many geographies.

What we have in Mexico is really unique. Because in banking, I measure the strength of the franchise with the cost of funding advantage versus competition and with the position in hard-to-compete cash flow transactional areas. But if you are in those areas good, you ensure the resiliency of the bank. In Mexico, we have 44% market share in payroll accounts, 44%. I mean a country like Mexico, 44% of the salaries paid in the country, private sector, public sector combined, 44% goes through BBVA.

Every month, you receive that salary in the account of those customers. We have 39% market share in acquiring in these POS machines, SMEs, companies, they do have POS machines, merchant traffic in the country, 39% goes through BBVA. And it's very tough to replicate this market advantage.

You only do this over time, and you only do this by accumulating knowledge and the IT systems and so on behind that is not that easy. So we have this unique bank. If leverage is going to continue to go up, the growth is going to be there. And if you have this really amazing bank, we have the best NPS, customer satisfaction. We have the best app. We measure it by far the best app. You will benefit from this. That's why you're asking about the resiliency of the earnings. I would encourage all of you on this to go back to the history of BBVA Mexico, you would see that you do have this great bank.

Then regarding the country and USMCA, first of all, again, resiliency of the country. In the short term, what we have seen was Mexico this year, we were expecting a lot of uncertainty, because of the tariff discussion, the uncertainty from the tariffs and also the discussions with the Trump administration and everything else. But even this year, which is a very tough year for Mexico, in the first 6 months of the year, exports have increased by 4% in dollars and FDI, foreign direct investment into Mexico, it has grown 8%, 6 months this year versus 6 months last year. It is still growing.

So in the short term, and we were expecting -- in the second quarter call, we said that we have -- we are expecting a negative growth rate in Mexico this year. The latest numbers that we see is, again, very exceptional, and we are most likely going to revise our forecast to growth, not so much, but to growth in Mexico versus an expectation of a recession.

So in the short term, it's going well, even better than what we would have expected in this very uncertain environment. But the thing that I would say regarding the medium to long term is -- and you asked about USMCA. I don't think it's -- or let me say it this way, it's in the best interest of U.S.A. to keep Mexico fine, to have Mexico in an okay situation. You wouldn't want a neighbor 130 million country, an unstable, not growing country right next to you when you complain about immigration. Because if things don't go well, the immediate outlay, the result of this would be immigration and so on to U.S. and so on.

You would want a stable, okay environment, you would want the benefit of Mexico. If I was the U.S., that's what I would have done. And more importantly, there are some structural advantages of Mexico that cannot be ignored. And the labor cost of Mexico on average versus the labor cost in a low-cost state in the U.S., Indiana, I think you did the comparison with Indiana. It's 1:7. 7 Indiana, 1 Mexico. 1, 7. It's not like a percentage. No, it's 7x.

So if as U.S. companies, if you want to compete with other competitors, if you want to compete with China, I do think U.S. needs in one form or another, Mexico, a stability right next to its border and a structural cost advantage that cannot be ignored.

But long story short, you never know what's going to happen out of these discussions. We have seen back and forth on the trade discussions many times in the recent past. We'll see what happens. But we expect normality and positivity out of this. And if Mexico does okay, not so good, okay, the average growth rate, GDP growth rate of Mexico in the last 15 years is only 2%. If you expect okay, Mexican economy, you would expect very good BBVA in Mexico.

And now moving on to Turkey. You've guided to a contribution of Turkey of 10% to 12% of group net profit.

In the medium-term plan.

Through 2020 to '28. Yes. 2028. But this depends a bit on macro stabilization. How do you derisk that guidance if inflation and rates don't fall as planned?

How do we derisk it? You cannot derisk it. If the country doesn't do well, it will obviously have an impact on you. The only thing I can tell you is that as you might know, I'm Turkish, I'm very close to that market. As long as the team, the minister and the team that is in charge of economy today, as long as they continue to do exactly what they have been doing, I see that possibility of Turkey going off rails much lower. I'm typically very negative on Turkey. People here know me around this. But in the last 2 years, what I've seen in terms of what they are doing, it has been the right things to do.

So I'm quite positive on the fact that, the possibility of that derailing is not going to happen. But let's assume, as you say, I mean, yesterday also, they announced the medium-term plan of the country. They are expecting 28.5% inflation this year, 16% next year, 9% 2027, 8% inflation in 2028. A bit optimistic, I would say, but still the intention and the strength that they put into their words -- how they will deliver this or this inflationary path is what counts, I think it's very positive.

So in general, as long as the team stays in there, I'm quite positive that it's going to be fine. But if it doesn't happen as such, as you say, going back to your question, let me not mutilate your question.

The thing that differentiates BBVA is, in wherever we are, we are either #1 or #2 bank in the big countries. We are #1 in Mexico. We are #2 in Turkey. We are #2 in Peru and so on. In Turkey, we have, in our view, the best bank in the country. The return on tangible equity of our bank in Turkey is much above than the average of the industry, the average of other private banks. If Turkey doesn't go on this path of normalization, but something else, the only thing I can tell you is that being the best bank in the country in terms of returns, the strength of the franchise, we will always deliver value in my view.

The best thing about banking is anyone can attack it. The good thing about banking is that the banking sector has to be alive for the economy to be alive, which means if you have a positive premium and in the case of Turkey, this positive premium is very large versus the average of the industry, whatever the conditions are, as long as, again, the country is not in a full crisis mode, whatever the conditions are, you will always deliver above the average of the industry.

And if the industry has to survive, the average has to survive. And if you are above, you will always be delivering above your cost of equity. So our focus is to make sure that we maintain this competitive advantage that we are the best bank in the country in terms of returns, in terms of franchise. If the situation turns out to be different than what we were expecting, what we are expecting at the moment, I still think we will deliver decent returns because of this, because we have the best bank -- by far, the best bank based on numbers. I'm quite objective, obviously, on these things based on numbers. If you have the best bank, you will still deliver.

Yes. And now to finish with profitability and I guess, valuation. You've guided to a quite impressive average RoTE of 22% for the midterm, obviously. This is an average in Europe that is around 14.5%. That said, the bank trades at a discount to the sector. What do you think the market is still underestimating in your story?

I should ask the people here or to you. Yes, we have, as you said, 22% goal of return on tangible equity. But more important than the goal, we have already delivered 20%, which is the #1 in Europe in terms of return on tangible equity. And despite that, why are we trading it? The market is the market. You cannot fight with the market, because you don't know what's really happening in the pipes of the market. Rather than thinking about why the market doesn't really understand us as a team, our focus has been and will continue to be, no, no, we deliver.

We deliver. If we deliver whatever the market might be thinking today, we'll be corrected tomorrow as long as you deliver. If you deliver what we said we would deliver, the EUR 36 billion excess capital, I mean, we have a EUR 90 billion market cap. If you deliver EUR 36 billion excess capital in 4 years, more than 40% of the market cap delivered to the shareholder in 4 years, it's quite a nice number.

So our focus is to deliver that number. Because if you deliver that, which means share buyback and so on, you will be buying our shares at cheap. Fine. No problems, whatsoever. So our focus is rather than complaining about, why does the market not see us and so on, no, no. We continue to deliver -- deliver the numbers, because the market will catch up if you do that delivery.

At the end of the day, what differentiates BBVA? What is our equity story different than any other bank out there? Number one, we are diversified. We are in many countries and every market helps you diversify. For some reason, there's less value attached to it, but I do think it's an important notion. And the shareholder can diversify itself, but having this portfolio also helps on multiple dimensions. That's number one. We are diversified, different than others.

Number two, I mentioned it partially, but it is very important, very important in the core countries that we operate. We are either #1 or #2. In Spain, we are #3. But in retail banking in Spain, we are #2 also. And again, Mexico, we are #1; Turkey, #2; Peru #2. All the large markets, we are #1 or #2. Having these leading banks with very large scale is an amazing advantage. Many others, basically, no one actually has this kind of 1 or 2 in many markets kind of a play. That's the second reason that we think we are going to be differential.

And number three, we are very good in digital, and now we added sustainability to our strategy. In digitalization, we claim, and this is proven by numbers, that we acquire more clients, relatively speaking, digitally than any other bank. We make our client franchise larger through digital capabilities. We put so much money, so much thinking into this, creating this advantage, in our view, was worth it, and it is now delivering results. If you combine them all, yes, I think we should be trading at a higher price, but fine, we'll deliver. We'll get the numbers. And when we do the numbers, the market will see it as well.

We still have some time. Maybe we can open the floor for a question or two.

So two questions, if I may. The first one relates to the medium-term targets that you gave with your second quarter results. So I'm interested in the profile. It looks like quite a significant pickup from where you were at the end of '24 net profit, EUR 10 billion to profitably growing to -- possibly growing to EUR 14 billion. So how should I think about the pickup? Is it going to be back-end loaded, '27, '28? How should I think about '26 in the context of getting from the starting point to the endpoint was the first question, please.

So let's do the first one then. There is not a hockey stick in these numbers. As you said, EUR 10 billion is what we delivered last year. But in the first half of this year, 6 months, we did EUR 5.44 billion, so close to EUR 5.5 billion already in the first 6 months.

So if you take the average of the 4 years in the medium-term plan, the average is EUR 12 billion. EUR 10 billion to EUR 12 billion, average EUR 12 billion, it's not going to be a hockey stick. You would see that especially starting next year, there is a very positive dynamic that we think we are going to be benefiting from, which is we have been growing very nicely, market share-wise, but also the countries that we are in are also growing in terms of banking sector.

But all that activity growth that was happening is being used to consume the decline in the rates. Because we are asset sensitive, rate sensitive when rates come down, we are being hurt.

In the case of Spain and Mexico, we have been growing very nicely in activity, but that activity growth was being used to absorb the decline in the customer spread, because of the rate decline. Starting next year, we assume maybe it's wrong, but based on the assumptions that we put into our presentation, the rate situation would normalize. So if you continue to grow as we are expecting to grow in activity rather than being used to absorb the customer spread decline, it's going to flow directly to the bottom line.

And as a result, starting from next year, and this year, again, in the first 6 months, we did EUR 5.44 billion, already above last year. It's going to be a good year this year, but starting from next year, it's going to be in these core markets of Mexico and Spain, you would continue to see a growth in the bottom line, which is then leading this average EUR 12 billion.

In short, it's not a hockey stick. It's not very different fourth year and so on. It's an increasing curve because of the dynamic that I just explained.

Okay. Very clear. And the second question relates to Mexico. So based on what you've been saying the last few months when I've listened to your presentation, you seem reasonably relaxed about the macro environment in Mexico. You've obviously got a fantastic franchise, which continues to deliver. Very specifically, therefore, from an asset quality perspective, you've got some reasonably significant overlays. So I mean, could we possibly expect to see some of those being released over the next several quarters?

Some, but it's less overlays that has been the story of cost of risk. I mean the cost of risk, we guided less than 350 basis points, you might have seen in the second quarter call for the cost of risk. The overlays or the beyond business as usual components in that is relatively small.

In the second quarter, we mentioned it in the call, in the second quarter, you might have seen that, because every quarter, we do it, when there is a decline in GDP growth expectations, you take a hit, forward-looking hit as an overlay. So we did take that negative hit from the macro assumptions that Mexico is going to be in recession this year.

Now we do think it's not going to be in recession. So in the third quarter, most likely, there will be some positive coming from this macro IFRS 9 provisioning. But it's a small amount. The core thing is business as usual, regular provisioning. And on that one, what we are seeing is that it's quite robust, quite positive, better than our guidance, better than our expectations for one single reason, which is -- again, the economy is not doing that bad, better than what we would have expected in this uncertain environment.

I gave you the numbers. FBI is up 8%. Export volume is up 4%. Labor market is still doing quite well. More importantly, the rates are coming down. When rates come down, it helps on the cost of risk. So cost of risk at the fundamental level is still quite positive.

Should we now move to the -- unless there is any other questions. Should we move to the investor survey, please?

Can I also vote? I can buy the sample size of one, I can buy the whole thing.

I won't read the answer, just the question. What would cause me to become more positive on BBVA shares?

Did you see the results, by the way. No? It's interesting, Okay.

Macro resilience and outperformance in Mexico and Turkey.

Mexico. Okay.

Okay. What are you most excited about at BBVA?

I hope it's not number 5.

Capital generation capacity. That's a good one.

Number three, how do you expect BBVA's RoTE to develop over the next few years by 2028 relative to 2025? Modestly higher.

Number four, how do you see potential risks to BBVA's capital and dividend? Okay. Overwhelming upside risk on better earnings and lower...

I think, you can cut it here. It doesn't seem very good.

Number five, which of BBVA's businesses do you think has the greatest potential to positively surprise consensus over the next 2, 3 years? Mexico, sustaining high growth despite lower rates.

I also agree with this one. Yes. Mexico. It depends on whatever happens, you'll do really good.

Well, I don't think there is a sixth one. I think we're done now. Thank you very much for taking the time.

Thank you all for joining.

Good morning, and thank you for joining this audio webcast on BBVA's offer to Sabadell shareholders, and apologies for the short notice.

I'm pleased to be joined today by our Chair, Carlos Torres Vila; our CEO, Onur Genc; the Group CFO, Luisa Gomez Bravo; and our Head of Strategy and M&A, Victoria del Castillo.

First, Carlos and Onur will provide an update on the transaction following the recent approval of the prospectus by the CNMV. After their remarks, we will move on to the Q&A session to take your questions.

And with that, let me now hand it over to Carlos. Carlos, please?

Thank you, Patricia, and thank you, everyone. Good morning to all, and welcome. Thanks for joining. And our apologies for the short notice. But as you've seen the CNMV, and just also Patricia mentioned, has approved our voluntary tender offer to Sabadell shareholders, has published the prospectus with all the details, and we wanted to update you immediately on the details on the reinforced strategic rationale of the transaction and the financial details underpinning our offer to the shareholders of Banco Sabadell, who now have a highly attractive offer and a unique opportunity in front of them.

And I will, before turning it over to Onur for the full explanation, highlight our key messages today, which are summarized in Page 4.

The transaction is very compelling for all stakeholders. First, the strong strategic rationale that it had from inception has been reinforced since then, since the announcement in May of last year. The attractiveness of the Spanish market has continued to grow. The need in Europe to consolidate banks, the recognition of that need has also grown. It's quite widespread, in order to support Europe's investment efforts, which are needed to improve competitiveness. Also, the investments in technology continue to grow given the disruption, AI, et cetera.

So together with the growth in digital and AI, we need to invest more in technology. This will not stop but continue, and this highlights the need for scale to do this efficiently.

Secondly, our track record and our prospects position us as a great partner for Banco Sabadell shareholders. We are leaders in both growth and profitability in Europe. And our 2028 goals, which we shared on July 31, are even stronger.

Third, the synergies associated with the transaction are substantial, implying significant value creation for all shareholders, including, of course, Banco Sabadell shareholders who will accrue this value through their stake in the combined entity. And we have, you will see upgraded annual synergies post-merger to EUR 900 million.

In fourth place, I would highlight that the offer itself is highly attractive for the shareholders of Sabadell. The premium at announcement, you might recall, was already very significant, much higher than those of subsequent unsolicited tender offers we've seen in banking. And since then, the value of the offer has significantly increased since it was presented. So it's current equivalent value represents the highest valuation for Sabadell in well more than a decade.

Finally, as a consequence of all of the above, the financial impacts are very positive for the shareholders of both banks. ROIC, return on invested capital above 20% with very limited capital consumption and more than 5% EPS accretion for the shareholders of BBVA and more than 25% EPS accretion for Sabadell shareholders.

Each one of them individually now has the opportunity to decide over the next 30 days, whether to accept our offer. We expect the acceptance period to begin next Monday, September 8, and to end on October 7.

And now I turn it over to Onur for a more thorough explanation, after which we will take your questions.

Thank you, Carlos. Following the summary and the flow of Carlos, I will start with the first chapter of the presentation on Page 5, the reinforced strategic rationale, which we believe is even more convincing now since the announcement of the offer.

On this page, first, at the top, we got engaged in this transaction because we wanted to consolidate the presence of two esteemed banks in a core European market, an attractive European market. This would enable us to serve our customers better as a more competitive bank in our home market of Spain.

Some of the latest contextual changes further improved the attractiveness of the Spanish market. Thanks to the -- as Carlos mentioned also, reignited focus of Europe and Spain in pushing for growth and in pushing for investments. There is also, as you see in some of the quotes on the page, a clear and growing consensus at European level that for Europe to grow larger, more efficient, more competitive banks are needed.

Second, on the page at the bottom, we have been insisting on this fact that the banking industry is in an era of accelerating technological disruption, particularly with digitalization, but now with AI and after new regulatory requirements for technological resilience for cybersecurity, for data protection, like the regulation DORA, that are elevating technological expenses even further.

For example, you see it on the page, our technology expenses in BBVA Spain, only in Spain -- only in Spain, have already increased by 11% from 2023 to 2024. And and have now exceeded the EUR 1.1 billion level.

As we also mentioned in the past, most of these costs are fixed costs, which implies that whether you have 100 customers or 1,000 customers, you have to incur these high and growing expenses more or less at the same level.

After this transaction, we don't need to spend such high amounts twice to create the same functionalities, same products as two different banks serving the same market.

Third, on Page 6, the next page, this transaction represents a combination of very complementary businesses. Sabadell, as you all know, is clearly overrepresented in the SME segment and BBVA in Retail and in Corporate.

During 2024, these market positions, they have further improved. Thus, this merger will create a stronger entity, combining the complementary strength of each resulting bank in a more balanced portfolio, especially for Sabadell.

Lastly, the fourth driver, BBVA's global reach. BBVA's global reach will mean an enhanced offer for Sabadell's SME and enterprise clients with a full product suite across a wider geographical network. BBVA is already a cross-border bank. In fact, as you can see on the page, we are creating more than EUR 2 billion in revenues from the overseas businesses of our clients beyond their home country.

And our new strategic plan, it puts further focus on the enterprise clients and the cross-border business, which will lead to higher value creation from Sabadell's client franchise.

On Page 7, from the first day, we also claimed that this is a transaction that benefits all the key stakeholders, clients with a better offer, the society with a larger lending capacity of an additional EUR 5.4 billion after the realization of full synergies due to the efficiency of the resulting entity and employees with opportunities in a leading global bank setting. Our conviction on the matter is further reinforced with the commitments we have put on the table as part of the regulatory clearance process and also and beyond.

I don't want to go into the details, as we have the full list of commitments in the link highlighted at the footnote of this page. But in short, for the protection of clients, we have put forward an unprecedented set of volume and price guarantees ensuring continued affordable access to credits for our clients.

And for territorial cohesion and support for communities, we reiterated our strong commitment with the key territories, Catalonia, Valencian, Asturias, where Banco Sabadell has a large presence. For example, by keeping the headquarters in Sant Cugat, further growing the hub in Barcelona for startups and maintaining all the social activity through Sabadell Foundations.

Now moving to Page #8 and to the second chapter where we claim that BBVA, as Carlos also mentioned, a great entity to partner with for Sabadell shareholders. Why do we claim so?

Page 8 shows that in growth on one axis -- and we have shown this page in the past, but it's an important page in our view, in growth on one axis and in profitability on the other, BBVA has a unique profile among the top European banks. This means that Sabadell shareholders who joined this project will become owners of a European bank with the highest growth and profitability ratios.

Our loan growth, which then drives our future earnings, far exceeds our competitors and our return on tangible equity ratio, measuring profitability was 20% in 2024, way ahead of anyone else in this map.

On Page 9, again, as you know, in the quarterly calls, we discussed this quite frequently, but beyond return on tangible equity as a measure of profitability, we care a lot about tangible book value creation, which incorporates everything -- which incorporates everything from depreciation of currencies to changes in the valuation of our securities portfolio.

This is a simple measure of how much real value is created for the shareholders. This number then enables dividend and share price growth as well.

Given the fact that we operate in many countries in a diversified way and given the fact that we own one of the best, if not the best, banks in the countries where we operate, whatever time frame that you pick, 15 years, 10 years or 5 years, BBVA has delivered much better value to its shareholders, and we are convinced that we will continue to do so.

And as a result of these facts, on Page 10, BBVA's unique profile and the delivery, may have been recognized by the market, implying an exceptional return to our shareholders as compared to competition.

It's a simple chart, but EUR 100 invested in BBVA shares at the beginning of 2019 is worth EUR 497 as of yesterday, a 397% depreciation. This 397% depreciation compares to 341% in the case of Sabadell or around 200% for European banks or for Spanish banks.

And on Page 11, as we recently showed to you in our second quarter results presentation, we claim that the exceptional track record of BBVA is here to stay with the announced goals of 2025 to 2028. For example, we have put forward a goal -- I don't want to go through all of them, because we have just recently revised it with you. But we have put forward a goal of 22% for our return on tangible equity, which will further enhance the leadership position of BBVA within the European banking sector.

It is worth mentioning here that after the transaction, the percentage-based goals here, the profitability, efficiency, tangible book value per share plus dividends growth, they will stay around these exceptional levels only at the larger and better scale.

Moving on to the third chapter on Page 12 and coming back to the transaction and to the critical question of why we think there's a significant value creation potential in this transaction, obviously, the important notion of synergies. After further review of the potential levers based on our previous experience, we now expect post-merger total pretax synergies of EUR 900 million per year, an increase of EUR 50 million versus the original plan.

These synergies, they are split between EUR 65 million in funding synergies, slightly reduced versus the original plan due to the recent refinancings in the wholesale funding portfolio of Sabadell and the changing spreads versus last year. And an improved EUR 835 million of cost synergies, of which EUR 510 million are general and administrative OpEx savings and EUR 325 million are personnel cost savings.

The cost synergies are equivalent to 13.5% of the combined cost base of BBVA Spain and Banco Sabadell, excluding TSB. And the restructuring costs would amount to EUR 1.45 billion pretax, of which nearly 96% will be booked in the year of the merger.

And moving to Page 13 on the expected timeline of these synergies. Although the amount of fully phased-in synergies increased, as I mentioned in the previous page, we now expect those synergies to come in with a delay due to the restriction imposed by the Council of Ministers. Despite this restriction, though, our expectation is such that the fully phased-in synergies would be delayed by 1 year only versus the original scenario.

In the original scenario, we were expecting the full synergies to kick-in in the third year, 2028, much later than the legal merger as we needed to prepare for the integration of systems technically.

In this current scenario, we are planning to do all the preparations before the legal merger takes place, allowing us to realize the full synergies in the year immediately after the merger. Therefore, as you see in the chart, in 2028.

Also, it's important to highlight here that in the years before the merger, we believe that some of the synergies can still be realized with levers such as obviously, the review of contractual terms with suppliers due to enhanced scale, improvements in banking operations and productivity with near-term savings in operations of Sabadell outside Spain and best practices implementation on selected functional areas. And to be more specific, we anticipate the materialization of EUR 175 million in cost synergies during the second year post transaction, which is expected to coincide with the calendar year 2027.

Funding synergies will be incrementally added to this, leading to EUR 235 million of synergies during the third year 2028. And once again, immediately after the merger, which is expected to take place at the end of 2028 or at the beginning of 2029, we expect to materialize the remaining annual synergies in the fourth year 2029, again, reaching EUR 900 million of total pretax annual synergies at steady state.

Moving to Page 14 and beginning the chapter on the highly attractive offer to Banco Sabadell shareholders. The significant synergies just explained, they allow us to present an extremely attractive offer to Banco Sabadell shareholders. Adjusting the initial offer after different dividends paid by both Sabadell and BBVA, the offer at the moment stands at 1 BBVA share and EUR 0.07 for each 5.5483 Sabadell shares.

Let me also remind you that the offer is conditioned on achieving a minimum acceptance of more than 50% of voting rights. It's very important. With the passage of time and as our offer is based mainly on BBVA share price, which has improved since the disclosure of the merger discussions, the value of our offer, as Carlos also mentioned, has significantly increased. In fact, since the end of April 29, 2024, the day of the undisturbed price, the value of the offer has increased by 43% from EUR 12.2 billion to EUR 17.4 billion.

On Page 15, you compare -- you can compare this with the historical value of Sabadell. You can see the historical evolution of Sabadell market cap since 2015 on this page. And as you can see, in the last two columns on the right, representing the value of our offer on 29th of April 2024 and at the closing price of yesterday, we are now offering the highest valuation for Sabadell in more than a decade.

This extraordinary value offered to Banco Sabadell shareholders, it goes back to the positive evolution of BBVA share price, together with the extraordinary premium we have offered to Banco Sabadell shareholders.

Again, on Page 16, you see that premium extended for Banco Sabadell shareholders significantly exceeds those observed in comparable recent tender offers within the European banking sector. This is evidenced by a 30% premium relative to undisturbed price and a 42% premium when measured against the average closing price of the month preceding April 29.

The recent banking tender offers highlighted here, and as all of you know, some of them are already finalized with success, they all happened with much lower premiums.

Moving to Page 17. As also Carlos mentioned at the beginning, we believe the opportunity for Banco Sabadell shareholders is now. By accepting this offer, Banco Sabadell shareholders will be tendering their shares at extraordinarily high price levels. And as you can see in the page as well, with an acceleration of price increases, especially in the very near past.

And why is that? We believe one of the core reasons for this near-term share price increase is that share prices of Sabadell are obviously affected by our offer. And you see a clear evidence of this on Page 18. On this page, we show how the correlation between BBVA's and Sabadell's share price has increased significantly after the announcement of the deal 16 months ago.

If those affected prices on Page 19, you can see that analysts, all of you, that you continue to forecast an upside for BBVA share price, while the contrary is true for Sabadell. With respect to the median of all target prices recently updated after the second quarter 2025 results presentations of each bank by you, by all of you, the independent analyst community, the upside for BBVA's share price is 8% above current levels. In contrast, for Sabadell, analysts' main target price for Sabadell stands below current pricing levels.

This theme is also evidenced on Page 20, when we look into the market multiples like fee, where we look into the price of the share as a multiple of its earnings, obviously. As you can see in the chart, before the merger discussions were disclosed on April 29, 2024, BBVA traded at a premium versus European banks, while Sabadell traded at a discount. However, since the disclosure of discussions on April 29, Sabadell is trading at a premium versus main European banks, while BBVA is trading at a discount, implying in the same sense as in the previous page, upside potential for BBVA, also for Sabadell shareholders who obviously tendered their shares and downward correction possibility for Sabadell share price.

These are just hypothesis. The market is the market and there are complicated dynamics, as you all know, around reading of the market figures. But we believe, in short, we have extended an unbeatable offer to Sabadell shareholders, which further improved with the passage of time into which positively supports Sabadell's share price at the moment.

Moving to the important, very important page of 21 and the positive financial impact for both BBVA and Sabadell shareholders. As we have said many times before, this combination is highly accretive for both BBVA and Sabadell shareholders with significant estimated EPS growth of post-merger 5% for BBVA shareholders and 25% for Sabadell shareholders. If Sabadell shareholders tender their shares, their future earnings capacity, which then drives the intrinsic value of their shares will be 25% higher.

On Page 22, coming to the end, there is a limited capital impact of the transaction with minus 34 basis points impact in CET1 ratio at closing and the positive 26 basis points impact after the TSB sale and the TSB extraordinary dividend payment, assuming obviously a 100% take-up.

All included, the return on the investment resulting from this transaction is about 20% for BBVA shareholders. And consistent, obviously, with our messaging all along, this deal compares favorably against the return of a share buyback, aligned with our discipline around capital allocation.

And finally, on Slide 23, the last page of the presentation, we have included a summary of the expected timeline of the offer based on the previous transactions. In the prospectus of the offer, you can find the maximum legally mandated date, but our estimate is for the acceptance period again to begin next Monday with a duration of 30 days, the publication of the results of the offer to happen on October 14, followed by the settlement of the offer on October 17 or October 20.

Now without further delay, we can move to the Q&A. Patricia?

Yes. Thank you very much, Carlos and Onur. We are ready now to start the Q&A. So operator, please, the first question.

[Operator Instructions] Our first question comes from Maks Mishyn from JB Capital. Please go ahead.

So one question for me. What was the reason for asking SEC to unify the rules with Spain? And have you reconsidered your intentions regarding reaching at least 50% stake in Sabadell? And as a follow-up here, theoretically, could you settle with the stake below 30%? Or are there any legal impediments to this?

All right. Thank you, Maks. There is really no change versus what the Spanish law establishes really in, in what the waiver represents. So the reason for the waiver request to the SEC that you referred to, and there were several of them, they seek to align for ease of operational purposes for the tender to proceed smoothly. The calendars and things like that, which are different in the two legislations. There's really nothing more than that.

As it regards the percentage, it's very clear that, as Onur mentioned, our offer is conditioned to reaching a 50% minimum acceptance level and that condition is there for a reason, which is that we want to do this transaction to control the bank.

And therefore, we do not intend to waive that minimum acceptance condition which is compatible with the waiver seeking compatibility, sort of, alignments, sorry, between the timelines in Spain and in the U.S.

Thank you very much, Maks. Next question, please.

Our next question comes from Francisco Riquel from Alantra.

Yes. My question is, why do you think the Sabadell opportunity needs to be captured now? I mean, in this context, I wonder what is the return on the invested capital of the transaction without synergies? And don't you think it is better buying back your own shares and then launch the full bid for Sabadell whenever conditions allow in 3 years or earlier. Don't you think that BBVA should outperform Sabadell in the next few years given your stand-alone strategic plan and that the offer would be more favorable later down the road?

Thank you, Francisco. Onur, do you want to answer this one?

I mean, there are different pieces in it. But Paco, in terms of the -- in terms of how does this compare to share buyback, I mentioned it during the presentation as well. We -- again, we repeat this quite often, but it is important to us as the management team which is, we compare capital is a scarce resource and everything that demands capital has to be ranked against each other.

We compare this to a share buyback and what our numbers are telling us. As we also mentioned here, the margin in ROIC is more than 20% is better than a share buyback opportunity. So it is a great opportunity in that sense. But also the strategic rationale that we have gone through.

I will only mention one simple thing. I mean, there are so many numbers around this and so on. But a very simple thing. We put it in the first few pages. BBVA spent EUR 1.1 billion in technology every year in Spain, EUR 1.1 billion. We don't know exactly the number of Sabadell, but something similar given their size and so on.

That EUR 1.1 billion, is it large enough? The profit potential of Sabadell is EUR 1.6 billion. The synergies that we are putting on the table is EUR 900 million as compared to that EUR 1.6 billion earnings capacity of Sabadell, quite large number.

Why are we serving the same market with two different systems, two different brands and everything? There is a huge, huge synergy potential here, which we think can benefit both shareholders. And it is benefiting our shareholders, as we mentioned to you in terms of the ROIC, and it is an amazing deal for the Sabadell shareholders.

So why not do it now? That's the whole rationale around this. We already have the deal up and running. It's a great offer with a lot of value creation potential. Let's get it done.

But in terms of timing, maybe, Carlos, Paco is basically asking why are you doing it now rather than later?

Well, I think you covered it very well. It's a very unique opportunity now with valuations at the highest level in well more than a decade. And two banks that are in their best moments, imagine what we can do together. So plus all the synergies that come. And it's -- yes, it's really an invitation to join a leading European banking project.

Yes. Paco, I will ask the question back to you. If it's great for our shareholders, if it's great for Banco Sabadell shareholders, why not do it now?

Thank you very much, Paco. Next question, please.

Our next question comes from Antonio Reale from Bank of America.

It's Antonio from Bank of America. I just have a quick one, and I'm sorry if it's a bit of a repetition. Because I think, you've addressed it to some extent. I mean, you talked about fundamentals and it's very clear, your position.

I then, look at the market and what the market is telling me today is, if I look at the spreads, BBVA and Sabadell, of course, they move daily and things may be affected by different factors. But as things stand, they still seem to be implying an improvement of the offer. Now you've increased the synergies. You've shown that your return investment is in excess of 20% for a deal that, as you've talked, is, of course, has an industrial logic and it's a domestic transaction.

I wonder where the frontier for value creation lies for you? And also, how does the disposal of TSB affect your rationale here? If I understood right, I think you're saying you will have a positive impact on capital. I was under the impression this would be overall neutral for you, but I just like to hear your thoughts.

Well, yes, the numbers on capital, I think, are quite clear. So at closing of the VTO, it will be at 34% and with 100% acceptance. And of course, the lower the acceptance, the impact rises proportionately. I think it's 34 basis points for 100%, 49% for a 50% take-up. And then later on, the impact is actually positive because of the disposal you mentioned.

Now regarding your comments on where the market stands. Yes, that has been the case for a while, and we have been quite consistent that we have presented a very attractive offer, a highly attractive offer. And it was very good at inception, and it's become even better now with the evolution of the share price.

And certainly, Sabadell has also had, as Onur went through the slides very clearly. It's trading at historical maximum, maximum or one more than a decade at least. But a big reason for that has to do with the fact that there is an offer outstanding. But the offer is the offer, and we expect Sabadell shareholders to see the attractiveness of the offer and the project that goes with it. So it's not just the premium today, but the participation they will have in the combined entity. And therefore, the synergies that will also accrue to them. And maybe the number that summarizes it all is the 25% EPS accretion.

Onur, I don't know if you want to add further.

I would like to highlight for 25% EPS upgrade. The 25% EPS upgrade for Sabadell shareholders, in our view, is the number to be looked into. And you asked whether the TSB sale effects, not TSB sale is part of the bank, whether it's in the form of cash or in the form of the asset, it's the same part of the bank. So it doesn't affect the rationale of the transaction. It doesn't affect the numbers. But the capital number you also asked, Antonio, the capital because there's -- if you take over TSB or the proceeds coming from TSB, it's positive. There's excess capital there, and it will be affecting the capital figures positive, obviously.

Thank you very much, Antonio. Next question, please.

Our next question comes from Benjamin Toms from RBC.

It actually comes back to that capital point. On an ex-TSB sale basis, the old CET1 day 1 expected impact was 51 basis points, I think. And now that's fallen to 34 basis points in both instances, that was assuming 100% take-up. Can you just give some color on why the CET1 impact has come down on an ex-TSB sale basis, please?

Benjamin, ex-TSB as compared to the original versions that you are referring to the 51 was the original number that you are referring to. You would see it in the waterfall that the restructuring charges are now delayed. So the restructuring charges will not be accounted in the upfront capital impact. Because they are going to be coming in, as we also mentioned in the presentation, in 2029. That's the base case that we have. That's the key difference, basically.

I would like to -- sorry, add a little bit of color on to the answer. I think the 51 basis points, as you mentioned correctly, is the last information that we provided in the S-4. And primarily, aside from what Onur was saying, there is an impact that we are not including in the numbers, the restructuring costs that we were including them because these will take place later on, and we're doing a fully loaded on back of the numbers.

Originally, it was 15, 16 basis points.

Correct. And so that is not there. And obviously, as well, I would highlight that primarily we've updated the numbers to the last June numbers, and we've been also updating the basis of the underlying sensitivities are different because obviously, our CET1 numbers are also higher. So I think that, that -- but basically, I would say, I would highlight that the main difference is against the restructuring cost and the basis of the underlying update on the numbers.

Thank you very much, Benjamin. Next question, please.

Our next question comes from Cecilia Romero from Barclays. Please go ahead.

If I'm not mistaken, BBVA's interim dividend usually goes ex date in early October. Should we expect this year payment to proceed on the same time table? And so will this trigger a revision of the offer terms or are Sabadell shareholders who tender expected to receive this on top? And could you refresh our memory on to when under Spanish takeover rules, are you able to change the terms of the offer? And if you were to revise the offer, how would that affect the length of timing of the acceptance period?

The interim dividend.

Maybe interim dividend, yes, Luisa?

Luisa, do you want to take it? Why not?

Well, okay. Thank you. I think that what we are estimating now is that with the calendar that we have on board, it is important that we have the VTO finalizes. If you've had the opportunity, I'm sure you have in detail read the prospectus that we are going to be waiting for the VTO to end and the deal to settle. And once the deal settles in terms of shares, we will proceed with the payment of the interim dividend, and we expect that timing to be now towards the end of October, during the second half of October.

And then on the other question, a bit detailed, and I wouldn't want to miss it. So we would need to revert to the lawyers. But I believe there is depending on which terms change, there's 3 or 5 days. I think it's 5 days, if I'm not mistaken, in the OPA, and in Royal Decree, 5 days for changing to the terms of the offer and then that would imply, I think, a suspension of the period for CNMV to analyze what the change has been.

And during that suspension, then the acceptance period would not -- the time would not run. And then, it would just continue to run afterwards. If I'm not mistaken, but take this, I don't know if you guys know better, Luisa or Onur or Viki.

Based on SEC, there might be -- we have to do the improvement 10 days.

Yes, but the question, I think it was Spanish law.

It's the 5 calendar days.

But both laws will apply here. But in any case, we don't consider it as a base case, and we don't need to do that. I mean, we mentioned it many times before, also in the second quarter call. We think this is a great deal. We talked about the synergies. We talked about value creation. We talked about technology costs. I don't know, many months ago, I called it a textbook transaction. It's a straightforward consolidation within market with the approval of the CNMC and the Competition Antitrust Authority, it's a textbook consolidation.

So it does create value for both shareholders as we also have shown today to you with numbers. But again, I would repeat what we said in the second quarter call, we respect Sabadell a lot. It's an amazing bank, and that's why we are trying to get the deal done.

But the total expected profits of Sabadell going forward is EUR 1.6 billion. If you remember, our stand-alone plan announced at the end of July, EUR 48 billion in 4 years on average EUR 12 billion, EUR 12 billion and EUR 1.6 billion. We would love to get the deal done, but if the deal doesn't happen for any reason, fine, we move on. We have a plan to deliver.

I consider it as a major liability for BBVA to deliver those numbers that we announced to you at the end of July. Again, if the deal happens, great for both shareholders, wonderful. If it doesn't happen, we have a job to deliver, to deliver those EUR 12 billion that we commit to the market. So as we say in Spanish, [Foreign Language] if it doesn't happen. If it doesn't happen, we move on.

Thank you very much, Cecilia. Next question, please.

Our next question comes from Carlos Peixoto from Caxia Bank.

Carlos Peixoto from Caixa Bank here. My question was actually may be on the -- what were the reasons behind the upgrade in synergies? Because I noticed that actually funding cost synergies are slightly down versus the initial announcement, but overall synergies are a bit higher. What were the main rationale behind that?

And the second part is basically given the improvement in the overall expected synergies, what was behind your decision not to share at least part of that improvement with Sabadell's shareholders through an improvement in the offer? Was it just because of the fact that the timeline for execution was delayed by a year? Just trying to understand that as well.

Onur, do you want to talk about the synergies?

On the first one, Carlos, as we mentioned, there are two sides of the synergies. Let's compare the original plan, initial plan and today, so the funding synergies used to be EUR 100 million, now they are EUR 65 million. Why is the change? Because there have been some -- 16 months have passed since the initial offer. So in this period, there have been some refinancings. So some of those securities have been refinanced already with a new price.

And more importantly, the spreads between the rating of Sabadell and the rating of BBVA, the spreads have been narrowing down, given its lower volume because of refinancings. And given the spread change, the EUR 100 million has become now EUR 65 million looking again into the depreciation schedule of these securities.

But we have increased the cost synergies, the cost savings from EUR 750 million to EUR 835 million. There are two sub reasons for this. Number one, the base has changed. If you go back to the May 2024 presentation, as a percent of the cost base, we were putting 13%, now it's 13.5%. Not major change as a percentage. The cost base of both banks have increased. As a result, there is a bit more coming from the base impact.

And second, we have relooked into all the different levers on how to get those numbers, which slightly in real terms have increased those synergies from EUR 750 million to EUR 835 million. EUR 835 million, more EUR 65 million funding, EUR 900 million in total.

Yes. And regarding the offer, I think we were quite clear already in prior answers and the latest one from Onur regarding the fact that the offer is very attractive over for the shareholders of Sabadell. It was already at the beginning and it continues to be with the evolution of values that we have seen in the market. And therefore, we stand with the offer that's on the table, which is the offer that we would like -- and we invite shareholders of Sabadell to accept. So, we see no reason to change that. And that is why it remains the same offer as in the beginning, which is valued at a higher -- much higher value now.

Thank you very much, Carlos. Next question, please.

Our next question comes from Britta Schmidt from Autonomous Research. Please go ahead.

It's back on the capital. There's a comment in the slide deck that the proceeds of the TSB deal are expected to be reinvested in shares of the combined entity. Does that mean that you would devote these proceeds to share buybacks and that the 60 basis points of TSB sale accretion would be paid out instead of accruing to capital and possibly generate a little bit more EPS accretion?

Well, I think you're referring to the slide in which we calculate the accretion in which we are using as an assumption.

Yes, that's essentially what do we do with it. Basically it's part of the excess capital that's going to accumulate on top of the excess capital that we will have, as we said also in July...

We'll return turn it back to the shareholders.

We'll return back to the shareholders.

Thank you, Britta. Next question please.

Sorry, maybe just to be clear. Maybe just to be clear, sorry. So the hypothesis behind the way we have calculated those accretion numbers, it's that the only buyback we are doing is the one coming from the dividend of TSB. But that's it, right? -- which does not mean that there will not be more buybacks. There will be. All the excess capital will be bought back. It's just that we're not including that number into the accretion number.

And the only other thing is the EUR 1 billion that you have already...

And the EUR 1 billion that has already been part of the distribution.

Approved and distribution to be done, yes.

Yes, the one that we have had to wait until the end of the acceptance period. So that EUR 1 billion, which has already been -- is part of the distributions of last year's profit actually. That one is already -- that one is already -- it's also included in the calculation.

Yes. You can find all these details, Britta, in the footnote of Page 21. You have it all, which what is included and what is not.

Thank you very much. So now, next question, please.

Our next question comes from Hugo Cruz from KBW.

The slide with the synergies, perhaps I misunderstood something, but is it realistic to assume a big increase between 2028 and 2029. It looks like you go from EUR 235 million to EUR 900 million of synergies. So that jump if I understood well in such -- in just 1 year, just seems to too high. So I was wondering if you could break out -- break up that jump into the various components.

I'm not sure that I got the full question. But in the time line, you see it. What we are seeing is the merger, the legal merger is expected to happen at the end of 2028 or at the beginning of 2029. Immediately after the merger, again, different from the original plan, given the fact that we have 3 years to prepare for that IT integration merger, especially immediately after the legal merger, we would be able to execute those merger plans that we were discussing even in the original plan, especially around technology. And in the immediate year, after the legal merger, which is 2029, we will be getting the EUR 900 million.

And that EUR 900 million, you're asking for the breakdown is, the EUR 65 million is the funding synergies and EUR 835 million is the cost synergies. This EUR 835 million and EUR 65 million, you would see in the previous years to the legal merger, again, it's on Page 20, EUR 235 million of the EUR 900 million. EUR 900 million is the total figure. The EUR 235 million of the EUR 900 million can still be, in our view, realized even before the legal merger in year #3. That's the detail, which is again explained on Page 20. I hope it's clear.

Sorry, if I can -- so for example, the staff costs, the EUR 325 million, I mean, can you basically cut them all in one go after the legal merger?

Yes, exactly. That's the plan. One year after the legal merger, 1 year -- throughout the 1 year after the legal merger in 2029, we believe we can get that EUR 900 million, EUR 825 million is -- EUR 825 million is the cost synergies. Within that EUR 325 million, as you said, is the personnel savings, which we believe we can be able to get, because we will be preparing for the program, for that restructuring 3 years before we execute it.

Yes. I think the key element is, the prep that happens in the years leading up to that point. So then, execution can be right after the merger.

Our next question from Ignacio Ulargui from BNP Paribas.

This is Ignacio Ulargui from BNP Exane. Yes. I have just one question. In your EPS calculation for '29, have you considered any impact from unwinding of the existing Sabadell JVs? And I mean, just I assume that, that will only take place when the merger happens. So then we shouldn't expect anything up until '29. Is that correct?

Unwinding of JV, it's all in the PPA. Do you want to take it, Luisa?

Yes. Well, as you know, as part of the capital impact and the exercise that we'll be carrying out, we haven't changed the assumptions that we had when we announced the tender offer. So as you know, we are including already a fair value of the JVs, but also the breakup costs of deriving from the JVs. Again, with our estimates, with the deal that we have. But obviously, once the deal gets done, we will update everything in that sense.

So in summary, it has been incorporated in the numbers, in terms of capital impact and so forth.

There's a change of ownership clause that we expect to remain in some of those JV agreements, Ignacio, especially in the pension and insurance one. So we upfront -- upfront, put those in the PPA, and we take them into account. But in the restructuring number of EUR 1.4 billion in year 2029, we don't foresee any other charge for JV breakups or whatever. We will be looking into them throughout the process. But at the moment, we put an upfront capital charge through insurance and pension, because they are JVs and there might be a change of ownership clause in those agreements, which we don't know, but we want to be conservative. And for 2029 plus, we are not putting any new number on top.

Thank you very much, Ignacio. Next question, please.

Our next question comes from Pablo de la Torre from RBC.

Just two follow-ups on Ignacio's and a previous question as well. On the JVs, I think the Slide 22 mentioned that the asset management and custody JVs are not included in the capital impact. But I think reading the concept -- prospectus, the tech suggests that they are included in all the capital impact. So just clarifying this small point. And then, if you could just, Luisa, repeat the capital impact of the restructuring costs to get the like-for-like view versus the previous numbers.

Well, on the first one, Pablo, the custody and asset management, they are not JVs. They are distribution agreements that they have with selected partners. That's why for the real JV, there is a company, and there is a shared ownership of that company and so on, which is insurance and pension. On those we included all the numbers up front, again, in the PPA and so on. Asset management and custody, there are distribution agreements. That's why they are not included, and there is no conflict between the prospectus and what we were saying before. The second question?

Yes. With regards to restructuring costs in the offer that we announced, there were like, as Onur said before, around 16 basis points of impact from restructuring costs. If I were to calculate that number today, again, it's not included in the capital impacts, because it's going to happen in '29 and the same way, we're not including synergies in the capital impact.

What we would have is an impact of around 11 basis points. And why is that? Because, again, the bases are different, and we have more capital now. So when you're looking at the numbers, the numbers -- the restructuring costs are the same. But when you look at it from a capital sensitivity point of view, it's a lower number just because the base is larger.

Thank you very much, Pablo. Next question, please.

[Operator Instructions] Our next question is a follow-up question from Britta Schmidt from Autonomous Research. Please go ahead.

Just on the fair value adjustments, could you just help us with the Euro 2 billion number that you've used for your calculations? And then a brief follow-up on the synergies? Have you reflected anything for the Spanish banking tax? Or how have you reflected it? And would you expect if it still applied the impact to be pre- versus post-merger scenario?

Do you want to take the PPA?

Okay. Yes, sure. With regards to the price purchase allocation, the first, as you well remember, Britta, we mentioned when we announced the deal that we were estimated around EUR 2 billion of PPAs, now basically, there have been three changes that we've incorporated in our numbers today.

One is the updated prices that we have and the updated public information. Obviously, there has been now information that is updated on the prices of Level 1 assets in terms of what Sabadell is disclosing in their figures. So that has been obviously taken into account. And there are another two things that we've taken into account. The rest, by the way, remains more or less the same.

One has to do with the intangibles, right? So at the time, we were considering a fairly quick merger. And we were within the PPA writing off, writing down the software intangibles to the platform of technology of Sabadell. That number now has not been written down. So we have basically adjusted that EUR 2 billion number for the intangibles coming from the software that we had written down initially, and now we're not writing down, because obviously, we still need that technology going forward. So that's one relevant impact. I would say that's the most relevant impact.

And the second impact has to do with tax impact because then, again, at the time, we had an assumption that it was going to be a very quick merger, and we wouldn't be able to incorporate the tax losses coming from Sabadell and now that's not the case.

So net-net, what we are looking now is an impact on the PPA that's been incorporated in the capital numbers that moves from EUR 2 billion to approximately EUR 800 million. Now having said that, I would just like to highlight as well the same things that we said at that time.

First of all, this is a simplified PPA exercise. It has obviously our assumptions. We don't have the public information. We don't have public information. So again, when we do the deal, we'll have the access, and we'll do a proper full PPA.

And then the second thing is that even then we will still have a year according to NIF 3 to be able to adjust that PPA if during that period, we need to. So again, EUR 2 billion coming down to EUR 800 million, primarily because of updates, intangibles of software and tax impact. Simplified PPA, we will have 1 year to review that after we take control of Sabadell.

Very good. And then the second detailed question, Britta is, as you know, the extraordinary banking tax is extraordinary and it's for a period of 3 years. So Sabadell stand-alone or Sabadell as part of the combined entity, but as an independent entity within the next 3 years, it doesn't change the tax payments. As a result, it's not included as a separate value creation lever.

This was the last question. So we leave it here. Thank you for joining this audio webcast. And now I turn it over to Carlos for the final remarks.

Yes, I would like to reiterate our key messages for today, which is that the combination of BBVA and Sabadell has an even stronger strategic rationale than when we announced the offer. As we have shown with significant value creation through synergies. And that after all approvals, Sabadell shareholders now have the opportunity to accept over the coming months, our highly attractive offer, with the current equivalent value for Sabadell at the highest of more than a decade.

And with that, they can enjoy an EPS accretion of more than 25%. So we trust they will appreciate the merits of our offer, and the sustained value creation potential of our joint project.

And we thank you very much for your attention, for your questions, and wish you a very good weekend.