Banco Bilbao Vizcaya Argentaria. - ADR Aktie

[Audio Gap] Consistently, consistently over years. On the left-hand side, you can see the acceleration in our loan growth since December 2023, reaching more than 20% year-on-year in current euros at the end of last quarter. And while our European peers are also growing faster, BBVA continues to outperform, supported by our diversified presence in relatively low leverage countries, the strength of our leading franchises, our growth in the enterprise segment per our strategic plan and our consistent ability to gain new customers. And what is particularly remarkable is that we are delivering this growth while maintaining our lending profitability.

On the right side of the page, our 22% return on tangible equity stands well above our cost of equity and compares very well with the 15.6% for our European peers, an important gap that we have consistently maintained over time. On Page #7, this slide 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, Page #8, the summarized P&L for the quarter. As usual, I would highlight the excellent performance of the core revenues with NII, especially with NII growing 16.5% year-over-year and 5.7% quarter-over-quarter in constant serving as the main driver behind our net attributable profit growth.

Slide #9, the summarized P&L for the first 9 months of 2026 and similar message similar to quarterly evolution, our excellent core revenue growth is the fundamental reason behind the record EUR 9.6 billion of net attributable profit. Moving to Slide #10. You see the quarterly evolution of each revenue component, starting with net interest income. It is worth highlighting the acceleration of NII growth in the last quarter, supported by the strong activity growth. Turning to net fees and commissions. We recorded a 12.4% increase year-over-year with payments and asset management business continuing to be the main growth drivers here. Net trading income increased by 5.7% year-over-year with a slightly positive quarterly evolution as the positive contribution coming from the FX hedges are practically offset by the muted global markets activity.

All in, gross income increased by 15.7% year-over-year and 4.2% versus the previous quarter. Moving to Slide #11. For Spain and Mexico, our 2 largest markets, let me focus on activity and loan growth, which again remain the key drivers of our net interest income growth. In Spain, loan growth remains very strong at 7.3% year-over-year while in Mexico, it further accelerated to 12% growth. In both markets, growth continues to be driven by the most profitable segments. You also see that in the middle of the page, consumer and credit cards on the retail side and enterprises on the wholesale side, most profitable segments, they are growing even faster. Coupled with the stabilization of interest rates, the very strong activity growth translates into a very strong quarterly growth of NII in both markets. In fact, if you annualize the last quarter growth of NII in both markets, you arrive at a higher run rate of annual growth, which again makes us positive for the quarters to come.

Moving to Page 12 on efficiency. On the left-hand side, gross income grew by 16.3% as we discussed in the first 9 months year-over-year, while expenses increased by 16%, leading to positive jaws, even including the nonrecurring items recorded during the year. On the right side of the slide, our efficiency ratio slightly improved by 9 basis points to 37.9% in annual comparison. Excluding the nonrecurring effects described in the footnote, the true improvement in the efficiency ratio would have been 81 basis points, which we also value a lot. In short, we continue to deliver an outstanding efficiency ratio while investing on growth and transformation. Turning to Slide #13. Asset quality metrics. They remain stable throughout the quarter in a context of, again, very good growth in lending. Starting with the cost of risk on the bottom left, it remained broadly stable at 144 basis points for the first 9 months of the year, in line with our expectations. The quarterly evolution of absolute impairments, it shows an increase due to the impact of a large portfolio sale that we have done, if you remember, in the second quarter.

On the bottom right, our NPL ratio also remained stable at 2.6%, while the coverage ratio stood at 84%, basically overall broad stability. Slide #14. On capital, our CET1 ratio stood at 12.21% compared to 12.41% in June, the pro forma after deducting the EUR 2 billion extraordinary share buyback currently underway. This represents a 20 basis points, as we discussed in the first page, 20 basis point reduction during the quarter. So focusing on that difference in the waterfall, main impacts of the quarter. Number one, the strong results that contributes 71 basis points, dividend accrual and AT1 coupons, deducting 38 basis points. Then as you see on the page, minus 44 basis points from RWAs growth, again, reflecting our exceptional lending activity in the quarter, deploying capital to profitable growth, enabling our future earnings and future capital generation, as we discussed all the time. This figure, the [ EUR 44 million, ] it's net of SRT. It includes the result of SRTs basically, which contributed plus 3 basis points, which is, as you know, a somewhat smaller figure than other quarters due to summer seasonality.

And finally, minus 9 basis points in the other category, which is also a bit different from other quarters. It includes a relatively large minus 22 basis points impact from the market movements, especially the sharp movement of the interest rate curves and the currencies. On shareholder remuneration, on the right-hand side, we paid a record interim dividend of [indiscernible] Moving to Page #15, let me briefly also update you on our AI transformation strategy. As I mentioned last quarter and also even the quarter before. At BBVA, we are determined to lead the AI transformation in banking as we did in digital transformation. We held our BBVA strategic talk on AI on other things, but including AI on October 6, and where we shared our strategy and the progress we are making. So I will not go into too much detail today. But 2 messages to highlight from that session, which is also summarized in this page. First, we are already starting to see very tangible positive impact. Using AI, we are improving customer experience, achieving higher productivity by redesigning our processes and utilizing AI tools broadly across the bank.

Just to give you a couple of examples that are listed here, our AI-powered voice assistant is achieving close to a 90% successful resolution rate in pilot interactions while some of our first AI agents are reducing the time for the preparation of our financial program on the risk side for the enterprises by as much as 30%. And the second message on this page is that we believe the real opportunity is to scale these use cases and the results across the entire bank, and in a controlled but facilitated manner. And this is precisely what the frame as we call it, will allow us to do. We are already making headway in industrializing AI, and this will enable us to build, deploy and manage the AI agents at scale, again, faster but with full control. And more to come on this one in the following quarters.

And finally, moving to Page #16 regarding the evolution of our financial goals for the 2025-2028 period. This page is very important to us. That's why we bring it to you every quarter. As usual, I will not go through each one of them, but we do have the full confidence to beat our goals at the end of the planning period, I guess, is the main message. And now for the business areas update, I turn it to Gonzalo.

Thank you very much, Onur, and good morning, everyone. Let me start with Spain, where net profit reached EUR 934 million in the quarter with a 9-month earnings reaching EUR 3.1 billion. That is up 2.3% year-on-year excluding 2 nonrecurring items. First of all, VIT adjustments in the second quarter of both this year and last year; and second, we ones cost in the first quarter. Overall, in Spain, solid earnings performance. This performance is supported by strong core revenue growth and commercial momentum. On lending, lending grew by 7.3% year-on-year driven by sustained growth across the most profitable segments with consumer and enterprise lending, both growing at around 10%. On the liability side, deposits grew 5.8% year-on-year driven by sustained growth in retail deposits through customer acquisition through our focus on customer transactionality and additionally, wholesale time deposits.

Now turning to the P&L in Spain. NII, NII increased by 3.4% year-on-year and 1.2% quarter-on-quarter, supported by robust lending activity. Customer spread improved slightly in the quarter, benefiting from higher lending yields due to the pricing of our new loan production. Deposit costs also increased, mainly reflecting the immediate repricing of wholesale deposits, while retail deposit costs, retail deposit costs remained broadly stable in the quarter. Looking ahead, we expect further support for customer spread from the gradual repricing of our mortgage portfolio, which is still at an early stage. Went to fees, as for fees, net commissions grew 2.3% year-on-year. The quarterly decline mainly reflects lower CIB fees, partly offset by growth in asset management. Cost, costs remain well controlled in Spain, increasing by 4.5% year-on-year, excluding the nonrecurring items. And finally, asset quality. Asset quality metrics remain very solid in Spain, higher impairments in the quarter is explained by the positive one-off of our portfolio sale in the second quarter, and cost of risk stood at 33 basis points within our full year guidance. So overall, overall, Spain continues to deliver a very solid performance, fully in line with our guidance.

Turning now to Mexico on Slide 19. The business in Mexico delivered again another strong quarter driven by lending growth and solid core revenues. Net profit in Mexico totaled EUR 4.5 billion in the first 9 months, up by 8.4% year-on-year in constant euros. Loan growth accelerated to 12% year-on-year, supported by a stronger demand from midsized companies and retail lending, which also maintained very solid momentum with consumer and SME segments growing at around 2% in the quarter. This strong activity translated into solid revenue performance. Let me elevate this a bit further. NII, NII increased by 2.6% quarter-on-quarter and 8.5% year-on-year with strong lending growth, more than offsetting the remaining pressure on customer spread from the easing rate cycle. As Onur mentioned before, we expect lending growth to provide further support to NII as the easing cycle has come to an end. Fees, fees remained broadly stable in the quarter due to lower CIB fees following a strong second quarter, while maintaining a solid year-on-year growth of 7%.

At the operating level, gross income grew by 8.5% year-on-year with a cost-to-income ratio of 30.7%, supporting outstanding efficiency in Mexico, while we continue to invest for future growth in this country. Now moving to asset quality. The key message is that underlying trends remain very sound. Cost of risk declined to 319 basis points year-to-date. Mostly benefiting from provision releases following the annual model parameter update. Underlying cost of risk stood around 330 basis points, in line with our expectations. So overall, Mexico continues to deliver strong and profitable growth, and we remain on track to meet our full year guidance in Mexico. Moving now to Turkey on Slide 20. Net profit in Turkey reached close to EUR 260 million in the third quarter with cumulative earnings of EUR 799 million, that is close to up 22% year-on-year in current euros. Looking first at revenues, we delivered strong NII growth, up 16.8% quarter-on-quarter. NII benefited from a significant improvement in Turkish lira customer spread, reflecting the normalization of funding condition, and also our active funding cost optimization strategy.

Higher lending volumes also contributed positively, and fees, fees in Turkey remained broadly stable in the quarter. On asset quality, retail credit risk remains under pressure in a higher for longer interest rate environment and cost of risk increased to 255 basis points year-to-date, explained by the elevated provisioning needs in retail portfolios and lower recoveries in wholesale. As a result, cost of risk in Turkey could come slightly above our guidance of 220 basis points for the year, reflecting a more prolonged period of elevated rates that we initially anticipated. Nevertheless, we remain confident in delivering our net profit guidance in Turkey of around EUR 1 billion with a downward bias. Given our positive sensitivity to lower rates in Turkey, the recent easing cycle should support customer spreads and NII growth going forward. Now moving to South America on Slide 21. The region continued to deliver strong year-on-year earnings growth. Net profit reached EUR 265 million in the third quarter, taking the ninth month total to EUR 821 million, up 42% year-on-year in current euros. This performance in South America was supported by solid core revenue generation across our main franchises.

NII benefited from sustained lending growth with the loan book increasing by close to 15% year-on-year in constant euros, together with improved customer spread, particularly in Colombia and in Peru. Fee income. Fee income also contributed positively, driven by growth in payments and transactional service fees. So overall, overall, solid income growth in South America that combined with disciplined cost management, brought the region's cost-to-income ratio to 41.5% in the first 9 months of the year. Turning to asset quality in the region. Underlying trends remained solid in Peru and Colombia. In the case of Argentina, impairments remained broadly stable quarter-on-quarter, though still elevated. Following our proactive adjustment of risk appetite, we are beginning to see signs of stabilization in asset quality metrics in Argentina, and a gradual improvement expected throughout 2027. For the full year, in South America, cost of risk could come slightly above our guidance of below 250 basis points, mainly depending on asset quality developments in Argentina. However, stronger gross income performance should offset this impact in the region. So overall, in short, we remain confident in the region's earnings contribution to the group.

Finally, let me turn to rest of business on Slide 22. The unit delivered another strong quarter with net profit reaching EUR 291 million, up 7% quarter-on-quarter and EUR 800 million for the first 9 months. Lending continues to grow strongly across geographies, reflecting the strength of our global CIB franchise and our ability to support corporate clients as they grow internationally. As we have been emphasizing our CIB strategy is about corporate banking. Our aim is to be a key partner for wholesale clients. And in fact, close to 90% -- close to 90% of our CIB business revenues are client-driven with close to 40% involving cross-border activity. This strong commercial momentum continues to translate into solid revenue growth. Gross income increased close to 12% quarter-on-quarter, supported by strong NII and higher NTI. Expenses continued to reflect investments in strategic initiatives and key capabilities while maintaining positive jaws year-on-year.

Finally, on asset quality. Asset quality remains very strong with cost of risk declining to 11 basis points year-to-date. So overall, in short, rest of business continues to deliver strong and profitable growth supported by the strength of our CIB franchise. And now back to Onur for the final remarks.

Thank you, Gonzalo. So for the main takeaways on Page 23. Again, let me not take time by repeating all the key messages. But in short, in our view, another set of excellent results in the quarter, driven by the strength in activity and as a result, in core revenues, further improving our industry-leading growth, profitability and efficiency ratios and profile. And regarding guidance, we maintained a positive outlook shared last quarter.

In the -- at the group level, we see upside potential for the ROTE, return on tangible equity guidance at the group level which we now improved to be about 20%, above 20%. And now back to Patricia about 21 -- about 21%. What did I say? About 21, obviously, we are already -- and now back to Patricia for the Q&A. Patricia?

Yes. Thank you, Onur and Gonzalo. We are ready now to start the Q&A session. Operator, could we have the first question, please?

[Operator Instructions]

First question comes from Maksym Mishyn with JB Capital.

Two from me, please. The first 1 is on Spain. You mentioned that cost of deposits went up due to wholesale. I was wondering how much of the growth in deposits was driven by wholesale. And given that you are at almost 100% loan-to-deposit ratio, do you think loan growth may of course you to attract more wholesale deposits pressuring the overall deposit costs going forward?

And the second question is on trading income. I understand it's hard to give guidance, but it moderated significantly. And I was wondering what run rate should we think of for Spain?

Thank you, Maks, for both questions. On Spain, as you mentioned, again, most of this came from wholesale deposits, which is the automatic -- the relatively automatically repriced part of the deposit base. The 13 basis points that you see as the cost of deposit increase in Spain, 13, basically 10 of that increase has come from nonretail, which is mainly corporate. If you look into -- if you isolate for that impact, and if you only look into the, we call Banco de Commercial, which is EUR 150 billion of the roughly EUR 200 billion of the deposits, demand deposits in Spain, is, as we call retail, retail and SME. That group, EUR 150 billion, the cost of deposit increase for that group is around 4 basis points.

And if you -- there is a small segment there, which is, again, automatically repriced. If you isolate for that, the increase is actually 2 basis points for the group. So we are not seeing that much pressure to be fair, on the retail side. And as such, most of the increase that you have seen came from the wholesale deposits, as we mentioned. On the trading income, actually, the highlight of Spain, if you look into the quarter, in my humble view, the only negative -- core negative or the [indiscernible] P&L this quarter was trading income? And why is that? Because of the interest rate curves. We are primary dealers. We are market makers. We are the emitters of securities in Spain, in other European countries like Italy and so on. And as part of that primary dealer role, obviously, we have to hold some of those securities.

So with the interest rate curves going up, it had hurt the NTI also, not only in capital, but also in NTI, there was this negative impact. So if the interest rate curves remain as is, if they don't go up as much, the NTI would improve in Spain and broadly for the group. So it was mainly for that. But you're asking what would be the run rate. NTI is the only one that I cannot say what the run rate would be because it's a very volatile item, as you know, Maks. But there was that impact, which was coming from the interest rate curve which seems like will not be the case in the fourth quarter or for the quarters to come. Anything you want to add, Gonzalo on Spain?

Thank you. On the cost of deposits, just reiterate that we're having very strong momentum on new customer acquisition. At September, we are above last year figures, and we expect to reach close to 1 million customers, new customers at the end of year-end. And again, as we have said, more than 70% become primary customer and more than 30% become payroll customers within the first 6 months. And so we see some momentum, in system momentum also on a small business acquisition. We expect to reach more than 70,000 customers this year. So -- and again, also in payroll market share, we are above 17%, and we grew 30 basis points year-on-year. So in short, we'll continue to grow inside deposits mainly coming from retail.

But maybe let's tangilize this one also. I mean in the chart of Spain on Page 18, a -- you see the growth year-over-year of the deposits as well. When you look into the growth in deposits, you see that in the last year, September versus September, our demand deposit balances, they have gone up by EUR 4 billion roughly, I'm talking, EUR 4 billion. when you deep dive into the growth of that EUR 4 billion, basically the majority, close to 80% comes from retail. So despite a very heavy competition because we have a lot of fintechs and neobancos, new banks operating in Spain, we are increasing on the retail side. We are increasing our demand deposits in our view in a very healthy way.

If you look into the growth of the time deposits, and that time deposits is, again, more price sensitive, obviously, and so on. Basically, the majority of the growth of that amount was driven purely by corporate. So we are doing corporate time deposits, but we are increasing our demand deposit base in retail, which, in our view, is good news, good news for the coming quarters as well.

We now turn to Miruna Chirea with Jefferies.

The first one is on Mexico. I guess it's very encouraging to see growth very strong at 12% year-on-year and especially this being driven by the acceleration corporate loans. So I was wondering what is your updated for lending growth in Mexico this year? And how would you see growth in 2027? And then on the customer spread in Mexico, was 3Q the bottom? And how should we expect the margins to progress from here?

And on what base rate assumption is that based on? And then maybe just a quick follow-up on the wholesale deposits in Spain. I wanted to ask -- what is the duration of these deposits that we place very, very quickly with rates? I guess my question is out of the 2 ECB hikes that we've seen so far, is the whole repricing on the wholesale deposits already seen in Q3? Or should we expect some more to come in Q4?

Very good. Thank you, Miruna, for all the questions. I'll take the Mexico questions, maybe you jump in also Gonzalo in Spain. On the deposits, corporate deposit pricing frequency -- on Mexico, some of you when we meet face-to-face, you tell me that I'm too positive on Mexico. At least so far, I have been proving right, and I continue to be very positive on Mexico, very positive. So on lending growth, you see 12% growth because of the base effect, this 12 might modulate a little bit. But as you know, our guidance was around 10%. So most likely, we will beat our guidance. but very positive lending growth, very positive. And you see that across all the product categories. I mean, consumers going up 9%, credit cards going up 11%. SME is going up 10%. We now have 34% market share in SMEs.

Other commercial is going up 17%. So very positive, very healthy lending growth. We stick to our guidance. We don't want to change our guidance, but obviously, we have a positive bias on the number that we guided you on activity. It's going very strong. Regarding margins, we do think we have reached the bottom on the margins. It's very much related to the interest rate, obviously, of the Central Bank. The Central Bank has reached 6.5% interest rate, and they are indicating that it will be around the -- it will be at these levels for some quarters to come. They don't have a tendency to increase but they don't have a tendency to decrease either, which was originally the base case when we started the year.

So the 6.5%, the bottom reached at interest rates is implying that we have also basically touched the bottom in customer spread. So looking forward, you asked about 2027, Miruna. We don't obviously give guidance yet on 2027, but you will again criticize me, I guess, but I'm very positive on Mexico for the coming quarter and for 2027. On the pricing of deposits, corporate deposits?

Yes. On the pricing of deposits and duration of deposits in Spain, so wholesale, which was the main increase this quarter, the duration is very short term, very short term. We may see -- so in cost of deposits, we may see some increase in the fourth quarter depending on your Euribor and also on the mix. But to your question, the duration is and it's very short term.

So mineral it's already repriced, everything. If the Euribor, it's tied to the Eurobor or sometimes to [indiscernible] the Central Bank rate. If Central Bank rates go up again in December, you will see some impact from that. And let's see, today, but we are not expecting any increase today in the Central Bank credit ECB rates. So the ECB rate increase is the only driver here. The frequency, the pricing frequency is very quick.

We now turn to Benjamin Toms with RBC.

The bank's SREP requirement will go up 40 basis points from January. Given this movement, are management is still comfortable with running the business at 11.5% to 12% CET1 ratio range. Could we see the range move up to a circa 12% target ratio? And then secondly, the RoTE for the 9 months so far is 22%. Do you still expect RoTE to go up from these levels in '27 and '28?

Very good. Thank you, Benjamin. So on the target, we discussed this from time to time. This question comes in the quarterly in general. We have no intention to increase our management target for a specific reason. Again, we are one of the most profitable banks in Europe. We are the most profitable large bank in Europe. And more importantly, when you look into the volatility of this profitability and volatility of capital generation, organic capital generation, you do see that we are not only very highly profitable, but the volatility of that is also very low.

As a result of all of this, the supervisors, they set a requirement on different banks. When you look into our requirements, and we published it 2 days ago, our 2027 requirement would be 936. That requirement, again, is relatively low as compared to some of our peers. The difference between the requirement and the upper end of our target range, which is 12%, it's 264 basis points, 264 basis points. How does that compare the 264 basis points with our competitors? When you look into that large bank group that we also list in our presentations in the footnotes, who they are, the large European banks, the average is 258 basis points. So even with the increased requirement on BBVA, our buffer, if you will, on CET1 between our management target and the requirement is larger than the average of our peers.

In that context, relatively speaking as well, we are very well positioned, very well situated in terms of that buffer. So we have no intention to increase our management. target. Then return on tangible equity of '22, we should you expect more on this in the coming years. We don't give guidance for the coming years, specifically for 2027 yet. But we do have, as you know, our midterm plan. In the midterm plan, our average commitment to the market is 22% average. Last year, if you remember, it was 19% plus. So the average of the 2 years or the average a year and 9 months, as you see in the document that we are sharing is 20.6%. To be able to get to 22% on average, we have to do better in 2027 and 2028. In short, we expect the return on tangible equity to further improve in 2027 and in 2028.

We now turn to Antonio Riley with Bank of America.

It's Antonio from Bank of America. A couple of questions from my side, please. The first one is on Spain. I guess it's a follow-up. I mean looking outside in, the growth in the quarter looked like it came with some margin pressure and our customer spreads have moved up slightly. But I wonder if maybe hedging strategies were put in place earlier in the year when expectations were for rates to drop or if there is anything else that we need to be aware aside of commercial drivers. So if you could just talk us through your moving parts in NII and what we should expect going forward for NII in Spain? That's my first question.

The second one is on Turkey. My question is, do you see further NII recovery picking up from here? -- conscious that you also have much more conservative macro assumptions for 2027 on both rates than what your peers seem to have in Turkey. And related to that, a follow-up, if I may, while you've taken the better part of NII growth this quarter, you also seem to have taken the worst part when it comes to asset quality. So I wonder, if embedded in your guidance for cost of risk in Turkey to be around 220 bps, you're also really telling us that the worst would [indiscernible] is now behind us in terms of NPL inflows and cost of risk in the region.

Thank you, Antonio, for both questions. On Spain, let's start with the NII perspective going forward. So you see the 2 sides of the NII, the volume and then the margin on the volume, it's very clear. You see it in the figures. 7.3% growth year-over-year in the overall book. As you see in the document as well, I mean we are relatively very cautious actually on mortgage. So we are losing market share in mortgage -- but in consumer, we are gaining share. And especially in enterprises, we gained 50 basis points market share in enterprises in the last year. So we are growing very nicely. The market is doing well, and we are doing even better than the market. So you should expect very robust loan growth in Spain going forward. So volume, very good.

Margins. On the margins, we do expect a slight improvement going forward. Actually, in the fourth quarter numbers are going to be even better than the third quarter in terms of spread. It depends on the rates of it, but we have been guiding you to a sensitivity of 4% NII improvement with 100 basis points step-up in the interest rate curve. Interest rate curves, it seems like they're going to be going up further. So there will be even more improvement in the coming year in our view with that change. But even without that change, then rate changes happen like in the case very recently you get immediately a hit on cost of deposits, but then you get some time in repricing your loans. If you remember, we guide this to the market as well. In our mortgage book, 2/3 of our mortgage book is repriced every 6 months and 1/3 every year and you get the Euribor, typically 12 months or 2 months before. So actually, it's 6 plus 2, and 12 plus 2 repricing.

So the loan repricings have not come into effect yet from the latest increases that ECB had done. As a result, even there is no increase in the ECB rates, we are expecting some improvement in the spreads. And if the interest rates continue to go up, as is the best case scenario for us, you will see even more. In short, we are very positive for Spain NII. Lending is very strong. And I've been here for some time now. I mean, I have seen negative -- many years of negative growth in loans. Spain continues to do well as a country investments. It's 5% up year-over-year, the investment part of the economy and consumer spending is also very robust. The services economy is doing really well. That's why our expectation for GDP growth of this year is 2.6%. For next year, it's 2.1%. Very robust economic growth and in this context, we are gaining market share in short, volumes very strong, margins will continue to improve.

On Turkey, as you said, the macro assumptions turned out to be worse than what we have originally planned for. At the beginning of the year, if you remember, we guided you to a net profit figure. But with that net profit figure, we had a clear footnote. I mentioned it multiple times that we had certain macro assumptions baked into it. At the beginning of the year, we were expecting 25% inflation for the year and 32% end-of-year interest rate. We are very sensitive to those 2 parameters, and 25% inflation turned out to be it's going to be around 30%. And the 32 end-of-year interest rate, it's going to be 36%, maybe 35%, but our base case scenario is 35%, 36% in that range. So much higher than what we thought. And those have a direct impact on the profitability. And as you say, this has an implication on asset quality.

But despite the fact that we missed on those macro assumptions, we even provided a sensitivity on those figures. We managed to basically deliver what we would have been delivering in that scenario of positive environment. So we are more or less there. Asset quality will come out a bit higher than the [ 220, ] as Gonzalo mentioned in the presentation. So it will come a bit higher. That asset quality, high rise quality figures, higher cost of risk will be compensated for other factors, especially NII. So we are quite confident with the guidance that we have for the year.

We now turn to Francisco Riquel with Alantra.

I want to ask about loan growth in CIB outside your home markets in what you call the rest of business area, which is very strong. It's up 15% Q-on-Q, 69% year-on-year. You give the split by region, but I wonder if you can comment on the exposure by sector, BBVA has appeared a [indiscernible] to one of the AI built out in what -- where the market believes it could be travel. So how can you reassure about risk taking in this fast-growing loan book? And also connected to this, your loan-to-deposit ratio for BBVA SA has reached 100%. So do you see that as a constraint that could limit loan growth in the international CIB loan book or even in Spain?

Let me start with the second one very quickly. On the 100%. We don't see that as a restriction. As you can imagine, we have multiple -- we prefer deposits all the time, obviously, but we have multiple funding sources available to us and 100% is obviously something that we can live very nicely, very comfortably. So we don't see that as a restriction at the moment at all. On the CIB book, you mentioned about diversification and you mentioned about the overall growth. Maybe I'll talk a little bit about the overall CIB growth. We did a strategic talk on this in spring. But let me be a bit more clear on this one.

So CIB, we put it into our strategic plan. We made it very clear to all of you to the market participants as well that we want to grow in this area for a very simple reason. We want to accompany our clients on their journey of internationalization, which is a very high-level framing or statement to say. But there are very few very few banks now who do have local presence in the countries that we are in, like we do. You can be with the CIB franchise everywhere. But being with the full fledged retail, SME, corporate, commercial presence in multiple geographies that we are in is relatively rare these days. And these geographies, we are in the core of those economies. Our clients in those geographies, they do business in beyond their geographies. Like a Mexican client does business in the U.S., a Spanish client does a lot of business in Latin America. So our CIB strategy is based on something which we called right to compete do we have something different? Do we have something better than our competitors?

We believe not in the investment banking side of this purely, but especially on the corporate banking side. We do have a clear right to compete and right to win. That's where we are growing. And I think Gonzalo gave the numbers in the presentation. 90% of our CIB income, 90 is client revenues. So the trading, the prop trading business, we are not in that business. That 90% of client revenues when you deep dive into it, 40% of that is what we call cross-border, which is the revenues that you generate from a client of yours in a geography beyond the home country of that client. So we are basically tagging along with our clients to serve them, to help them in the -- again, international footprint that they have. Given that, we believe we have something different and we have something resilient to bank on.

As part of that process, as we grow in some of those rest of business that you ask [indiscernible] or geographies, there are opportunities there as we are in the market. Again, we will be very selective, again, like in project finance, which we think we have something better than others because we have been in that business for so long. We will be there, and we will do some business. We will not be doing like M&A in the U.S., we will not because we don't think we can compete, but in the debt financing in debt advisory, debt structuring project finance, we have the expertise, and we believe we can generate enough returns to be able to compete there. I'm giving you all this background because this is receiving attention, but I want to make sure that you all understand that we are doing this in a purposeful, in a deliberate, in a strategic manner, not in the way that we want to grow.

With that strategy, we are growing, and we are growing profitably. That's the most important thing that I would highlight. Our return on capital for the CIB business is now 23% if we exclude Argentina and Turkey, which is very high return. So you have to exclude them to have a more conservative figure, and that's 23%. In the rest of business, depending on where you count the revenues between 20% to 24% return on capital. It's profitable. It's clearly above cost of equity. That's why we are in that business, and we believe it's going to create further returns and further capital for our shareholders going forward. Coming back to your one question. In the press, you said something came out in a project finance. First of all, I don't know which one you referred to, but I have a guess. Obviously, we don't talk about specific clients.

But the referral that -- regarding that specific publicly available or there were some public comments on a certain client, I can tell you that in general, the exposure that we have is not -- it was a debt syndicate information and the exposure -- net exposure that we have is obviously needs to be considering the post origination sales, all the hedges that you do on that and so on. So again, we don't talk about the specific client, but we feel very well comfortable with the exposure that we have. It's mainly project finance that we do on the AI topic, mainly project finance, data centers. When you look into those transactions, 95% of those project finance financings, they are backed by an investment-grade hyperscale and the construction risk that you are looking into, a majority of them are in the middle of their construction period.

And so we see very little risk in that. Obviously, we have to be vigilant. It's an environment that we have to be very vigilant. But we think our risks are well controlled.

We now turn to Alvaro Serrano with Morgan Stanley.

I guess these are another 2 follow-up questions. Just to make sure I understand the moving parts in the Spanish deposits. [indiscernible] think called out the balances were also the increase in term was hotel-driven and I see there's a significant quarter-on-quarter sort of increase. That's EUR 5.9 billion in balances in term. Is that sort of a lumpy sort of wholesale deposits because we can see the demand has dipped. I guess the question is, is it wholesale? Is it going to sort of come down again? Or is there -- how should we think about the mix the deposits over the next few quarters as we model the rate sensitivity and the pass-throughs?

And second, on Mexico, volumes obviously doing very well. On the customer spread, I think the guidance was that it would bottom out in the second half of the year. Is this now the bottom of the customer spread? Could it a bit more -- a bit of color on the progress there?

Let me start with the second one, and maybe Gonzalo will take the first one on deposits. On Mexico, I mentioned it very briefly before. We do think we reached the bottom. It obviously depends on the mix EBIT. If you grow much more -- on the enterprise side, it has a negative impact on the average spread. But beyond the mix effect, we have seen all the repricing of the loans and the deposits done already. So we do think we have reached the bottom, and it should be going up from here, again, excluding the mix effect. On deposits?

So on deposits, just to reiterate what Onur said before, we keep our rig sensitivity [indiscernible] to plus/minus 4% to 100 basis points move in the curve. And also, we expect customer spread to improve slightly going forward. So to your question on the exact mix of wholesale deposits going forward, it's difficult to predict, but we keep our -- as I said, reiterated sensitivity of plus, minus 4% and the improvement in customer spread.

But on the quarter-over-quarter also over, you referred to a quarter-over-quarter evolution of deposits. It's pure seasonality because at the end of June, in Spain, there are still some companies who have like 14 salaries and so on. At the end of June, point balances you see a hike and then you see a decline. These are point balances that you see in the presentation. But average balances, they are actually up quarter-over-quarter. They are actually up because of retail. So we feel quite comfortable now on this topic.

We now have to Sofie Peterzens with Goldman Sachs.

Sofie from Goldman Sachs. My first question would be on kind of your guidance of EUR 36 billion in payout between 2025 and consent is somewhere around EUR 5 billion, slightly more than EUR 5 billion in share buybacks with the next 2 years in '27 and '28, how should we think about kind of your core equity Tier 1 ratio? What can you do to improve it? Is it 12 million present that you reported today a little bit like a transitionary and you can do more authorities going forward. So if you can comment on this a little bit more.

And then my second question would be on mortgage share gains. You mentioned a few times that you're gaining market share both in Mexico and Spain. Could you maybe just discuss a little bit more in which products and from what of entities you're gaining the market share?

You refer to it to market share gains in Mexico and which products?

Sorry, in Spain and Mexico, in lending.

Overall lending, okay? Because we are not gaining market share in mortgages I thought. Okay. So on the market share, maybe you can -- on the capital topic, Sofie, I mentioned it briefly also during the presentation. So SRT is a very important lever for the bank to be able to utilize to optimize the use of capital. Obviously, in the third quarter, it's basically summer seasonality because August is a very slow month. If you can -- if you imagine in Spain, in the third quarter, the impact of SRT in the capital ratio was 3 basis points. That 3 basis points is a relatively small number as compared to the other quarters. In the first quarter, for example, we did 12 basis points. in the second quarter, if I'm not mistaken, we are at 6.

So 12, 6 and then 3 in summer. We are now -- and we had the guidance that this year, we should be doing between 30 to 40 , which implies that in the fourth quarter, we will have a very good delivery on the SRT, which will then liberate more capital. Actually, we are expecting around 12 to 15 -- 12 to 14 basis points SRT impact in the fourth quarter because the deals are already in process. So the SRTs would be a clear lever. And in the fourth quarter, you will see obviously a much higher figure coming as a positive contribution from SRTs than what we have had in the third quarter. And looking forward, we still see a very robust demand there, especially for players like us. There is a lot of demand. So we might be increasing our pace on SRT in the coming years.

But coming back to your first comment on the EUR 36 billion. It's a very important number for us. We have multiple figures in this medium to short term -- medium to long-term plan and the guidance that we have for 2025 to 2028. If you remember, in that plan, we said we will be generating EUR 49 billion of capital in the 4-year period, EUR 49 million. EUR 13 billion will be dedicated to growth. And then EUR 36 billion will be dedicated to -- will be distributions to shareholders or excess capital above 12% above our upper end of our management range. We still stick to that EUR 36 billion. We just looked into the numbers very recently on where we are. There might be more than EUR 13 billion dedicated to growth, which is very good. Once again, as long as it's profitable as long as it's about cost of equity, we have a nice margin, we do think growing should be the priority because it will create a better franchise going forward, it will create even more capital for our shareholders going forward. So there might be more than EUR 13 billion dedicated to growth.

But again, looking into our planning at the moment, we still will be delivering that EUR 36 billion that we referred to as distributions to shareholders or excess capital above EUR 12 billion, that number is still standing very robustly, very nicely out there. Regarding the market shares?

Yes, on market shares in Spain, we are growing in the most profitable segments. So we are growing in consumer and commercial. In consumer, we are growing 6 basis points year-on-year. And in commercial, we are growing 51 basis points year-on-year. On mortgages. On mortgages, we -- market share is declining 31 basis points year-on-year. And this is due to the new mortgage origination market share, which is around even below 10% over the last 3, 4 months. So again, in Spain, we are growing market share overall, but focusing on the most profitable segments, consumer and commercial.

In the case of Mexico, despite competition from fintechs and neobanks, we keep growing market share. We are growing 34 basis points in total year-on-year. And the breakdown is the following. We are growing mainly wholesale, 40 basis points, but we are also growing in consumer 7 basis points. So overall, I think, again, focusing on growing both in Spain and Mexico in the most profitable segments.

We now turn to Ignacio Ulargui with BNP Paribas.

I have 2 questions. One is on capital a follow-up on capital. I mean if you could update us in what kind of regulatory headwinds, operational risk-weighted asset inflation could we expect into the fourth quarter? And the second one is on the Danish compromise. If you could update us on when you plan to get approval for that for the treatment and whether that could have an implication for yourself looking further into insurance revenues, particularly in Mexico?

Very good on the regulatory headwinds for the fourth quarter, we don't expect anything natural. On the Danish compromise, we already applied for it. We are in the process of receiving that approval or we are in the process of that thing to be sorted out. We have, in general, positive news, but it's taking some time. in terms of the impact of the Danish compromise, the impact on the CET1 overall at the moment would be marginal. It will not be affecting too much the number that we have today. But we do have a clear intention to grow that business. So for that growth to happen and for that growth to come along with not consuming too much capital, that is important to us. So it's more of a future thing than a present thing in short.

We now turn to Andrea Filtri with Mediobanca.

I wanted to know your expectation on the impact of the reform of securitization that was approved by the European Commission last week?.

I didn't get the full question, but the securitization framework pro Euros -- it's going to help us even more Andrea. Again, we are one of those banks who will benefit more from -- in general, securitizations, SRTs, for one very simple reason. Our WA density, even after the full program, the model review and everything else that we did, which helped us a bit, is now 44%. So RWA density, we have 44%. And the average of our peers is around 27%. So in SRT would be helping us more because at the moment, it's basically the risk weights of how much capital with an outside investor would be dedicating to this versus us.

So we have a better arbitrage let me say it that way, to be able to benefit from the SRTs. In that context, the framework, the new thing that was approved also in the past few weeks, it's going to help us even more. So it's going to facilitate the process. It's going to help us to do even more SRTs. That is why I said that for this year, 30 to 40 basis points was the number that we put into our capital plan, and we are going to be delivering that towards the upper end, actually. But for next year, probably we will put even a higher, depending on the markets, obviously, but we will put a higher figure into our planning.

We now turn to Carlos Peixoto with Caixa Bank.

Carlos from Caixa Bank here. A couple of questions from my side as well. So the first one in Spain, looking at the cost of risk and also asset quality in the quarter, you had a minor uptick in the NPL ratio. And if we look at the cost of risk in the quarter stand-alone -- it does seem to have picked up a bit as well. Just wondering how do you see going forward. So that's 38 basis points that I get to in the quarter stand-alone. Would that be a reference for the future? Was there any review of macro inputs here that trigger this? Just to understand that [indiscernible] here?

And then the second question, I'm sorry to go back to the Spanish NII as well. But just putting it briefly, you now see it closer to the lower end or the upper end of the low to mid-single-digit growth guidance that you had provided before.

Thank you, Carlos. Yes, on the 2 questions on asset quality. At the business as usual level, we don't see any change whatsoever. The asset quality continues to perform really well. They were -- if you remember in the second, you referred to the quarterly evolution. In the second quarter, there was a large portfolio sale, and that has helped on cost of risk and also NPLs. But on the cost of risk and that has reverted. And in the third quarter, the house price -- the curves, the macro IFRS 9 upfront provisioning that we do, there was a slightly negative impact. It was a slight negative impact, but it was there. that slight negative impact coming from macro calibration.

The macro seems -- continues to be really well, but there are other components in that macro parameters that affect IFRS 9 provisioning. House prices are going very strong, but they are going to be growing EBIT lower than what we have originally thought, which created a slight negative impact on IFRS 9 provisioning. And then in the second quarter, again, there was a very big one-off, positive one-off on that number. But at the business as usual level, stability and in line with our guidance, we said low 30s in our guidance. we will deliver that, and it turned out to be the case. On the Spanish NII, our guidance is our guidance. You're asking for a specific information. I will repeat what I said before. We are positive. Activity is very positive. Margins slight improvement, but every quarter, we will see improvement. And if the rates continue to go up even more. So we are quite positive.

We now turn to Borja Ramirez with Citi.

I have 2, please, related to Spain. Firstly, a bit more technical, if you could kindly remind me that the percentage of loans that are floating rate in Spain and maybe also the amount of index remunerated deposits. And then my second question would be on the rate sensitivity. I understand it's more geared to the short-term rates. So you recover 3 months and 6 months. So maybe -- I mean, I guess maybe the bigger benefit from higher rates is still to come, but maybe you could provide a bit more color on maybe if you could see maybe a bigger benefit maybe in the first half of next year? Or when do you see the bigger benefit?

Very good. Thank you, Borja for the questions. In terms of the loans, 44% are variable rate loans in BBVA Spain. But in the BBVA SA, which also includes the rest of our business and so on, that variable rate portfolio goes up to 60%. But Spain business unit, it's 44% floating rate loans. In terms of deposits, they are not a very direct automatic thing, but you get repricing because they are very short term, daily. Some of them are overnight daily deposits. So you get immediate impact but it's much -- it's on the corporate side, it's much lower, obviously. As you know, 80% of our deposits in Spain is retail.

Coming back to the second question on the Euribor, you are 100% right. Our real sensitivity is actually to Euribor 3 months, Euribor 6 months, Euribor 12 months, we do have mortgage hedges, so our sensitivity is actually lower to Euribor 12 months, but the 3 months and 6 months. And the impact of the Euribor 3 months and 6 months is going to be coming more in the fourth quarter. It takes some time for that to be reflected. So that's where we are. But the 2 most important index for us is 3 months and 6 months.

We now turn to Fernando Gil with Intesa Sanpaolo.

Quick oneon rest of the business. Can you please update on the digital exposure to Italy and Germany loans, deposits and number of clients, please?

We announced last week, we did a press release on this one that we reached 1 million clients in Italy, 1 million. This was launched 5 years ago. So 5 years, 1 million clearly beyond our original business plan. We are doing really well. In Germany, we launched it recently. As you know, it was June 2025, so more than -- slightly more than a year. And in the first year, we basically passed the 100,000 mark there as well. And you see the numbers in the documentation in the deposits, you do see that we have EUR 10.6 billion of deposits from those 2 franchises.

We now turn to Britta Schmidt with Autonomous Research.

I think it's gone for most of it already. Just a clarification on your SREP, please. the pillars or the removal of the add-on for prudential provisioning, shall we assume that this will now be deducted from capital or is that going to disappear entirely? And if it is a deduction from capital, would that already have been included in Q3? Or should we factor this in for Q4?

Thank you, Britta. So the NPL backstop, which was originally, again, part of the requirement, it's not anymore because we will deduct it from capital at the end of the year. If you remember that number, we started, if I'm not mistaken is 21 basis points and then 18 and then the last year, it was 12 basis points. There has been a clear trend of reducing that backstop figure, mainly through portfolio sales. We are in the process of doing another sale on that one. If the conditions continue to be positive, we will continue that sale process in the fourth quarter. Our expectation is that, that number will come down to a very marginal figure at the end of the year, at the end of December, and we will basically -- we have the commitment to take it out from the capital at the end of the year, but it's going to be a marginal figure. It's not going to be affecting the figures too much.

We now turn to Hugo Cruz with KBW.

So my question is on NII, and apologies if some of this has already been asked, but first one, I'm more in the camp that you have good control of your deposit costs. So you missed a bit on NII this quarter versus consensus, the loan growth is stronger. The loan mix are positive to margins. So you miss basically because of costs. And I was wondering how much of that higher deposit costs? Are you willingly paying more to take market share in loans, especially on the corporate side, where your loan growth is very strong versus just corporates are just have flush liquidity and just selling you a lot of deposits, and you're not going to say no to that.

And the second question is around Turkey and rest of business. the deposit growth Q-on-Q is very strong. Should we see the level in 3Q sort of the new floor? Or could it go down in the coming quarters?

Hugo, I didn't get the second question. It was on Turkey?

Turkey and rest of business on deposit also.

Can you repeat the second question, Hugo?

Yes. Just the -- sorry, the growth was very strong Q-on-Q. Should we see that level in the Turkey and rest of business as sort of the floor for example, for Q4?

For Turkey and for rest of our business. Okay very well. On the first question, so there are camps out there. As you said, you are in the camp, we are controlling our cost of deposits really well. I can tell you once again, the same thing. It's not because of the growth on the lending side is so high and it creates a pressure and not at all, not at all. You mentioned loan-to-deposit ratio of 100% for our Euro book, which is the case. But if you look into the Spain business unit, our loan-to-deposit ratio is 80%. If you look into the Spain banking system, the loan-to-deposit ratio of the Spain banking system is less than 90%. In most of the banks, you will see 80s. The reason that it's 100for us is there is also funding to the rest of Europe and so on in the CIB book, -- the reason that it's 100 is because of that, not because of the fact that Spain is now very tight on liquidity, not at all.

So because of the growth on the lending, we are then now pressuring the cost of deposit. That's not the case. As we mentioned before, this is coming from corporate deposits, some of the corporate deposits are very, very quickly priced. The pricing of the loans take some time. The pricing of corporate deposits happen very quickly. We mentioned that maybe we weren't there in the first question, but we mentioned it before, if you look into the Banco de Commercial, the retail segment, which is the most important segment in deposits, the cost of deposits have increased only 4 basis points in the quarter -- and then you deep dive into it, there's a very small segment with automatic pricing there as well. If you isolate that segment, it's actually 2 basis points. So the cost of deposits for the core segment, which is that the core of deposits is only increasing 2 basis points in the quarter. So we don't feel that in that sense, that pressure.

But you'll see how the market develops, we will see, but the retail side of this because there is a lot of competition now. The cost of deposits are going up too much. That's not the case. And I want to make sure that you all understand this. Regarding the NII for Turkey and for rest of our business, they will continue to be positive, good in the fourth quarter, you were asking. Rest of our business NII would be very well because we have grown. We are growing, maybe not as much in the coming quarters, but we have grown so much that, that loan volume growth will be translated into higher NII for rest of business.

And for Turkey, interest rates have started coming down. If you have seen it 100 basis points, now the interest rates are 36, they were 37 in summer. So they started this easing, maybe not too much, but it started helping us on the margins, on the spread and the spread will continue to improve. So you would see also strength in the NII in Turkey in the fourth quarter as compared to the previous quarters. So in both cases, you will see a good NII evolution.

Thank you very much, Hugo. That was our last question. So thank you, everyone, for joining us today and for your questions. Let me remind you that the Investor Relations team remains available for any further questions you may have. So thank you, and have a great day.

Good morning, everyone, and welcome to the second edition of BBVA Strategic Talks. Apologies, we got started with some delay due to the traffic. It's been particularly bad today in Madrid. But in any case, it's a pleasure to have you all with us today here both in Madrid and virtually. Thank you very much for joining us.

As you can see on the screen, we have a great agenda for today. We will start with one of our key strategic priorities. It is artificial intelligence, data and technology. For this session, I will be joined by Antonio Bravo, Global Head of AI Transformation, and by Carlos Casas, Global Head of Engineering. Then we will turn to Spain, one of our main markets, where Peio Belausteguigoitia, Country Head of BBVA Spain, will share with us how we are bringing this strategy to life in one of our core franchises. The session will have 2 parts. First, a presentation from our speakers, and then, a live Q&A. We very much encourage you to participate and make the most of this session.

With that, it is my pleasure to hand over to our Chair, Carlos Torres Vila, for our initial remarks. Thank you very much, and Carlos, the floor is yours.

Thank you. Thank you, Patricia. And welcome to our second edition of BBVA Strategic Talks. Welcome, and thank you very much for joining. And apologies again for the slight delay due to traffic.

The sessions, as Patricia said, are designed to give you a deeper view of BBVA's strategic priorities, which, as a way of reminder, you have here on the screen to embed into everything we do, a radical client perspective, to leverage sustainability for growth, scaling up the enterprise segment, promoting a value and capital creation mindset throughout the entire organization, unlocking the potential of AI and technology and data, and then finally, a team embedded with empathy to succeed.

In the first edition of the BBVA Strategic Talks, we cover the Enterprise segment. We also cover the Mexico business. Today, we will, as you know, talk about AI and technology as well as the Spanish business. Let me start with a simple conviction, which is that AI gives us an extraordinary opportunity to create value for our clients, for our customers, and through that, for our shareholders. Capabilities, as we are all seeing, are advancing extremely fast at breakneck speed. AI agents can increasingly reason, understand context, execute complex tasks. And with each improvement, we see how this expands what we can do, how we serve customers, how we operate, how we manage risks, how we build code.

So across the bank, it expands what we can do because banking is particularly well suited to this transformation. Financial decisions depend heavily on context, so your circumstances, your goals, your needs, the needs of your business. And these can be complex. Managing your finances often takes more time and effort than it should. And with AI, we can address all 3: understand context better, make complex decisions easier and help customers get things done with less time and less effort. So therefore, our ambition is a bank that understands each customer, anticipates their needs and helps them act.

More relevant advice, more personalized solutions, a simpler, more effortless experience for individuals and for businesses alike. For a business, that could mean anticipating cash flows, it could mean managing working capital better. It could mean navigating the complexity of trade, international trade, for example, with advice tailored to that business and its circumstances.

That's towards the client, but then inside the bank, AI multiplies our capacity. It is helping our bankers prepare better for conversations and to prepare better conversations, our developers to deliver solutions faster, our teams to complete processes with less administrative work, including fully automated workflows managed by AI agents. This all means more capacity, more capacity to serve customers, to develop new services and to grow with a more productive operating model.

Of course, we should also be clear about the competitive implications that this will have. AI will make it easier, no doubt, for customers to compare alternatives. It will raise expectations. It will intensify competition. It will put pressure on margins. So part of the value of the increased productivity will go to customers through better service, through more competitive offers. And increasingly, the better players like BBVA will gain disproportionate share and economics. So we intend to lead that process. Use AI to deliver greater customer value, deepen relationships and win more business while improving our cost to serve. That is how we aim to turn this transformation into sustainable growth and attractive returns.

Now, the critical question is execution. There's already a substantial gap between what the technology can do, which grows ever faster and what most organizations have deployed. So a successful pilot is one thing, but integrating AI into real processes, connecting it to data, to systems in a secure, reliable way and operating it, all of it, reliably at scale is much, much harder. And this is where we believe BBVA is particularly well-positioned.

First, we have strong foundations. We have lots of data. We have engineering talent, and we have millions of digital customers who trust us and with whom we have developed deep customer relationships, strong foundations. Second, we have demonstrated that we can do this, that we can transform successfully, leading the industry. We moved early and decisively in digital, as you well know. We changed dramatically how we work internally. We turned that transformation into a competitive advantage, which lasts, as we can see in our performance metrics.

And third, we're making AI a priority across the whole organization with the same conviction that drove our digital transformation. That conviction is not just some theoretical, abstract concept. It's something that drives and it translates -- sorry, into concrete choices: how we organize, where we invest, the talent we dedicate, the partnerships we build. It means being willing to change priorities and redesign how the bank works.

We're obviously focusing on the areas with the greatest potential first, where there is potential impact, driving adoption across our teams and building capabilities to scale. You will see some examples today, including early results from our priority initiatives. Antonio will cover them. He will also explain The Frame, which is the common foundation we're building to create, deploy and manage AI agents across BBVA with security, control and accountability built in. So this means defining what each agent can access, what each agent can do, when human approval is required and how we monitor performance.

Actually, defining what performance is, what good is and then monitoring each and every execution, not only to ensure that it's within the bounds we want, but to keep improving. This matters. This frame, this scaling, this common ground matters because our ambition extends across the whole bank. We need to rethink processes, priorities, ways of working and to make successful solutions reusable across countries. So scaling is the name of the word. So we have use cases, but scaling through this common platform is the critical point.

Our starting position is strong. We have now to earn the advantage through execution. After Antonio, Carlos will explain how our technology is evolving to support that ambition of delivering change faster with the resilience and security our customers expect. And finally, Peio will take you through Spain, which is well connected. Spain illustrates really well how sustained transformation can strengthen the franchise. It also shows the opportunity ahead: deeper customer relationships, more effective bankers and greater productivity, building on what we have already achieved.

By the end of today, I hope you will have a clear view of the opportunity we see, the capabilities we're building and how we intend to turn them into value. We have done this before. We understand what it takes, and we're determined to lead again.

Thank you, and welcome, and I turn it over to Antonio.

Thank you very much, Carlos. We will now start the first session focused on AI transformation and technology. Joining me on the stage are Antonio Bravo, Carlos Casas, and our CFO, Gonzalo Rodriguez.

So without further delay, Antonio, the floor is yours.

Thank you very much, Patricia, and good morning, everyone. Today, I'm going to walk you through 3 sections of content. I will start by setting the context of this very transformational wave that we are living, to then go deep into our strategy and the progress that we've made so far, and I will conclude with some final remarks.

Going into the first section and talking about the opportunity that we see ahead of us. The first reflection is that if you look at what happens in an industry like ours, the fundamentals are very much reliant on data and analytical models. Across the value chain, in all customer journeys and different segments, everything has data and analytical models underneath: customer onboarding, cross-selling, credit underwriting.

The foundations of our business are very analytical-driven. And that's why we believe that this new wave of transformation that comes with AI presents a huge opportunity for a business like ours, because it can be very transformative in the way we manage and relate with clients. It can make our experiences more personalized, more tailored. It can also bring greater transparency for the clients in terms of processes. It enables faster execution and processes, which will also return into a better experience of our clients. And it will also have a dramatic way in the way our employees work and in their productivity.

We believe that AI brings abundance to all these 3 dimensions. It makes easy what typically was complex. It makes fast what typically used to take a lot of time. It can parallelize efforts that used to be sequential. Everything in banking can be rethink through AI for the better of our clients, for the better of our shareholders, for the better of our employees.

With this said, what is it that we are doing? And how is it that we are planning to win this transformation? Let me start with saying that we've already seen, we've already witnessed how technology can transform a business like ours. Through the digital transformation, BBVA has been able to combine a change in our growth trajectory with an increase of our profitability while also, and most importantly, doing it for the better of our clients as we see customer experience improving across all our markets.

And as we step into this new transformation era of AI, we believe that our strengths and foundations are very solid. First, we have data ready for all the countries in a global way in the cloud, which is one of the core foundations of every AI-related efforts. We've also been able to establish very deep partnerships with the main ecosystem players, which in a context where technology evolves so fast, we believe is very relevant to make sure that BBVA always operates in the state-of-the-art of technology. And lastly, we created a data unit 10 years ago. Throughout that period of time, we've been building capabilities of core disciplines such as data scientists, data analysts, machine learning engineers across all our countries.

And those capabilities and those teams are now at the core of the execution of our strategy. So we have the data ready for all the countries. We have also core partnerships and resources from the ecosystem, and we have the teams and the organization ready to be pioneering in the execution of our strategy. As already said by Carlos, AI is one of our core strategic priorities of the strategic plan that we outlined last year. But more than that, it's present across all the others because it's very transversal. It's going to help us be more radical about the way we relate and we serve clients.

It will serve us, as we will see later on, to better advise clients also in the enterprise segments, in sustainability, and of course, to create value and transform the way our teams work. But not only we have AI as one of our core strategic priorities touching all the others, but we've also recently rewired our organization on an operating model to make sure that we have our AI transformation unit well equipped and self-contained so as to execute on the strategy that we will now go deep into.

And what is it that we've been working on? We outlined in the strategic plan last year around our AI strategy, which we call The Eight. The Eight is basically a top-down agenda that is bank-wide. It touches some of the main pieces of our value chain. And it has been the first strategic agenda on agents that we've been working on, as I was saying, for the last year. It's made of 6 robots, each robot is a set of agents and 2 pillars. The robots are structured in 3 blocks, one of them, which is -- has the goal to transform the way we serve clients, both through a personal adviser on digital channels that is multimodal and will serve retail clients and enterprise clients in a multimodal way. It's what we call Blue. And another one that is geared towards helping our clients spend more time with clients in advisory roles.

On the processes front, we have a couple of robots, one of them with full focus on our risk processes, in particular, for the wholesale business, which again is one of our core strategic priorities and then also another robot focused in processes in the back-office operations.

And lastly, for our employees, we've been focusing specifically on software development for which AI brings a huge opportunity to transform our productivity as well as on providing AI for every other employee at BBVA regardless of the role or the unit that they are part of. And these 6 robots have been relying on 2 core pillars, one of them, which I've already referred, making sure that data and information, which is a core differentiation, is ready for agents to be consumed and also that we have the technical capabilities not only to build, but to operate this set of agents.

And what I wanted to do now is to bring this to life to all of you. And in that sense, we have prepared some demos, not of all the robots, but of 3 of them, the first 3 of them, to show and demonstrate how these experiences that are already either into production or will be into production in the next few weeks look like. And with this, I will start with the demo of robot #1. Before we go into it, what you are going to see is our personalized assistant for our retail clients through a mobile experience. And you're going to see 3 cases that we've selected, one of them in which Blue advises clients and helps clients navigate their movements and enables them to talk to their data and also get some advice. In the second one, we'll see how Blue allows our clients to be advised in the -- in a sales process for a consumer loan. And lastly, we will see a third example on how Blue can also support clients in the process of putting a claim of an insurance.

So with this said, let's go with the first demo, and later on, I'll introduce it to others.

[Presentation]

And with this, the claim already goes into processes and it's already managed for the clients. So you've seen this is just some examples on how the new experiences that we will enable clients to be served with through our mobile app, our web, and eventually through any other device that might come to the market in the future will enable our clients to have a conversation with their data, with the services that we provide in a very dynamic way, same way you use generative AI tools. And that will apply to both information about your day-to-day banking, also advice to get products such as consumer loans or to solve complex things like claims that typically also create a lot of burden in different cases.

So this is a product that, by the way, we're going to be putting a new version of into production over the next few weeks for all our employees, and then, progressively through the remaining of the year and starting of next year, we will roll it out to clients in Spain, Mexico, and also in countries in South America and in Latin America. So that was the first demo on Blue. I'll later on touch a little bit on the metrics.

Let's go now with the second demo, which is the robot #2, AI Banker. We are going to be focusing, in particular, in AI Banker for corporate and investment banking. Again, it's one of our highest growing segments. But we are also developing such type of agents to support our commercial SMEs, bankers, and of course, our retail bankers. However, in the benefit of time, today, we decided to show you the demo of the AI Banker for our Corporate and Investment Banking business. So let's go with this second demo, please.

[Presentation]

So that was an example on how we are enabling our bankers to talk to different information that we have about clients. It was an example of internal information. We're also working on a set of agents that will couple that internal information with external information, also will allow bankers to create pitches and generate ideas for those pitches. In essence, as you see and we will -- as we will discuss, we have a road map to continue to bring these type of capabilities to make easier the day-to-day of our bankers, again, not only in corporate and investment banking, as you've seen, but also across the rest of the segments.

And so we've seen a demo of the robot #1, digital experiences with Blue in the -- and robot #2 for our AI banker capabilities for CIB. And we'll go now with the third demo on the processes front, in particular, for the credit and the program -- financial program generation on the risk front. And let's go with the demo. In this case, I'll be explaining what happens in this screen.

Everything is integrated into the workflow. Analysts can select the client, the language that they want the financial program to be built in. And then they can select the sector in which the client operates and the context information that wants to be -- that the analysts want to be part of the financial program. With this, the agent starts putting together a financial program. It's a very long process. So it will typically can take up to 30 minutes.

Just to give you a reference, this typically will take a human 25 hours in different days. Here, the agent takes some time and produces this output in which, first, it provides a confidence score on each one of the fields based on the ground truths that we've defined so that the banker can review all the different sections of the financial program. It also enables -- sorry, the analyst -- it also enables the analyst, of course, to edit any of the fields that came out of the automatic PF. And also, it enables the analysts to check the sources. As typically, there's many sources that have been involved, public and private. And you can go -- always route to the source of each one of the contents that were brought to the draft of the financial program, and again, do edits and adjustments accordingly.

Again, confidence scores show up there. And also, we have the ability to establish alerts that might require a specific review by our analysts. And in that sense, those are flagged into the system for the risk analysts to review and take some action on them. Again, they can be edited. And with that, the financial program can be saved as a draft and be sent into the workflows where it will be feeding our approval systems and limits for the specific client, which, in this case, might have been developed for. So this was the third demo, again, in this case, showing how we can bring agents through our risk analysts to make their life easier and also shorten times, compress times in their workflows, which will also be producing a nice -- improving our customer experience due to greater ability to execute faster.

So with this said, let me show you what are the first early results that we've gotten out of rolling out the products that you've seen. Across the client front, we've seen already that some of the intents that we are prioritizing in countries like Peru and Mexico, and in this case, into production, are able to absorb 90% of the calls that we get into the contact center end-to-end. We've also seen that the initial versions of Blue, not even the one that you've seen today, have been able to filter 50% of the conversations -- of the chat conversations that used to be managed by our relationship managers, in this case, in Spain.

On the processes front, we've been able to reduce 30% in total, the time that we take to produce a financial program and also a rating of a client, and we are going to go up to 80% in this case. And also, on the processes front, we've been able to shorten 80% of the time in the way we manage claims. Lastly, on the employees front, we have 75% of BBVA employees using AI recurrently with self-declared savings of 2.4 hours. But beyond that, we believe that this is a very strong foundation as we envision a future in which our employees will be working alongside AI agents. The fact that we are being able to push adoption to these limits clearly prepares us well for what the future looks like.

And also, on the employee front, as Carlos will discuss and will present later today, we are already seeing increases of productivity across certain pieces of the software development life cycle of close to 30%. So what you've seen is already real. It's into production in some environments in different countries. And we now also see that there's a huge opportunity to scale all these efforts that you've seen.

We have more than 50 million monthly calls in our contact centers, almost 40,000 bankers at BBVA serving all segments that only, let's say, spend 50% of the time advising clients. We have more than 150 million operations managed annually at BBVA across all our businesses, too, and an installed capacity of 12,000 software developers for which we have a huge opportunity to do a step change in their productivity. So we believe that scaling what you've seen beyond the early impacts that we've already registered will allow us to tap into a very nice opportunity, as you see here. And precisely for that, we have a plan to continue to scale the agents that you've seen across countries and continue to give them also greater functionality.

On the client front, as I have already mentioned, we have a road map to progressively roll out Blue to all the countries. And by the way, not only for retail, but also for enterprises. On the contact center, we are already into production in countries like Peru and will soon be in production in Mexico. AI Banker for retail is already in production in Spain, in Mexico, in Peru, in Colombia, and will soon be in the rest of the countries also with increased functionality for our bankers.

And in the case of wholesale, the demo that you've seen, we have already going -- we've already developed this into enterprises segment and corporate and investment banking, and we'll continue to enhance the experience, as I was mentioning before, to pitch building, sectorial notes and visit presentations.

On the processes front, our goal is to have 100% of our risk analysts in wholesale using tools such as financial program generation and also the rating by the end of the year. And from there, in 2027, we will expand an equivalent experience for our commercial banking analysts. And on the processes front, we are working in some core areas such as, as I was mentioning, claim management, recoveries, insurance claims for which you have also seen a demo in Blue and also in some core processes in our finance function such as accounting, which we believe presents also a great opportunity.

And lastly, on the employees front, again, Carlos will elaborate on this one later to everything related to software development, but we're already developing and deploying agents for some core pieces of our value chain, such as design and testing. And for AI for all the employees, we are defining a set of agents that every other employee of BBVA, regardless of their role, will be able to use and that are already also into production.

But through the process of building this progress in which, again, we've been for the last year building agents under this framework that we call The Eight, putting them into production, registering and seeing some early signals of the impact that AI can have for our business, our client processes and employees, as valuable as that has been the learning that came through the way in how to build an agent because it was something that we hadn't done before. And in that sense, we have tackled the challenges of doing these first agents in a very artisanal way.

We've been literally exploring uncharted territory for us. And again, as valuable as the progress that we've made and that we've shown today has been the learnings that we've had in basically identifying that there are common primitives, that there are patterns that every time you build an agent there's a process that you can systematize, that you can industrialize. And that's what has inspired the next wave of our transformation, which is what we call The Frame, whose goal is to industrialize agent development so as to allow and enable BBVA to capture the abundance of agents beyond this initial framework that we've used and take it to the rest of the bank.

And this, again, is an effort that we've called The Frame, whose goal is industrializing agent development to bring agents to everywhere in the bank. And with 3 goals, we want to build agents faster. This is very relevant because, again, we believe that there's a huge competitive advantage for being first-movers. We also want to build agents not only faster, but of course, in a controlled and governed way and in a homogeneous way and also preserving our sovereignty and optionality. We think that our sovereignty will rely on our data, our context, our connectors, our systems, and we will be leveraging on the best-of-breed capabilities out there in the market at any point in time.

So again, this is the next wave of our strategy, which will serve as a booster to bring the abundance of AI to all the organization well beyond the efforts that we've shown within The Eight. And to bring to life what is it that we want to industrialize so that you can also understand what it entails to build an agent, we've highlighted here some of the core technological components that we are in the process of industrializing.

First one is the tech environment. In the same way that every time we onboard an employee, we provide that employee with a chair and a table. We have to provide agents with a technological environment to live in. Also, we have to provide them with access to data, and data has to be ready, as we've seen during the demos with context and semantics so that agents can understand that data. Not only data we have to give them access to, but also tools and systems. If we want agents to execute on certain actions, they need to have access to those tools.

Of course, we need to provide agents with guardrails who are very relevant, be very clear and deterministic in things that we don't want to happen at any point in time during the execution of an action. Evaluation and monitoring, this is very relevant, showing the agent what good looks like, what is the ground truth, what's the standard of quality that we want the agent to converge to in every other execution and then observe how the execution converges or not to then adjust the agent.

Governance and security, it's very relevant, and we'll talk later about how we believe that trust is going to be increasingly relevant in the agentic world. Resilience, also, especially for those agents that are going to be serving clients. Life and value management, which is also very relevant. I guess, we have all seen the news coming on tokenmaxxing and token consumption. Here, we want to manage this agent by agent and making sure that token spend comes with value in every other development.

So this is -- these are some of the components that we are in the process of industrializing to build agents. And again, we discovered that these components are necessary and that there's a process that you can systematize during the process of building the first agents within the framework of The Eight. And now, we are going to scale this in a very determined way across the entire organization.

So wrapping it up, we started with the execution program of The Eight, produced some initial promising results that we are in the process of scaling and also help us get some very relevant learnings about what it entails to build agents. And that has inspired our -- the next piece of our strategy, which is The Frame with this goal of industrializing agent development to bring it to all the processes in the bank, and by doing that, being able to capture the abundance of AI for the better of our clients, our employees, our shareholders and also the society.

And we are going to be operating in a context where we are also conscious of the risk that we are going to be managing. It's already been mentioned that we will face tougher competition from new competitors that in the last few weeks, many of them came new into the market, Muse, Instinct, Dots by OpenAI, are meant to be disintermediating client relationship, bringing different experiences to the market. And we believe, again, that in that sense, the trust that we've built over the years will continue to be increasingly relevant to retain the relationship with the clients.

Asset quality, I've mentioned before that this is going to be a very deep transformation in the financial sector, but actually, we believe that all the productive sectors are going to be facing similar challenges and also opportunities. And in that sense, we are going to carefully manage our portfolios, especially in wholesale, same way we've been observing and managing transition risk to other technologies such as decarbonization.

And lastly, cybersecurity and resilience. It's also been a very trendy topic over the past few months. Carlos will touch on this also later today, but we are preparing well to be able to respond to this new environment where AI and agents are clearly raising the bar.

With this, I'll go to the final remarks. Again, we believe that this AI transformation that we are now living in presents a huge opportunity for us to transform our business and our operating model. And as we step into it, we believe that we have the trust that we've built over years of relationship with our clients that will continue to be very relevant in this context of agentic relationships. We also have the track record in having -- being successful in demonstrating that we are an execution machine of our priorities. That was true in digital, and it's already being true today in our agentic transformation, as you've seen today. And also, we have the strategy to go big, to capture the impact at scale through The Frame and to make sure that we embrace the abundance of AI in a very structured and determined way.

And with this said, Patricia, I'll pass the word to Carlos.

Yes. Perfect. Thank you very much, Antonio.

Thank you, Antonio. And after the presentation on AI, now we are going to be covering a broader perspective on how we are working with technology to ensure that we deliver on the strategic priorities that we have. The way we are going to be doing this is, first of all, we are going to be reflecting on where we are, what we've done, what are the sources of our core strategic assets that we have today and how this is a base and a foundation for the future. Then, we will reflect on what it is coming next. As Antonio was saying, the world, it is entering a new era, a very different scenario. And therefore, we need to get ready and to prepare our technology to tackle the challenges that we are going to be finding. And finally, we will close with some final insights and remarks and some conclusions.

So starting with what we are today. Well, as a very important foundation of BBVA is technology. And this is a core source of competitive advantage. We really believe that it is one of the engines that we need to deliver on our strategy. And I think that we have a very good track record of delivering on that. And we have several recognitions as a well-prepared bank in this particular dimension, some of them very recent. But I believe that the best way to show this is by looking to who we are today. You could argue that we are one of the largest fintechs you can find in the world. Our business is digital.

And as you see today, a vast majority of the millions of customers that we acquire every single year are coming through digital channels, but it is not only client acquisition, most importantly is the way that we are developing our relationship with them. Most of our digital sales are going through digital channels today. So as I said today, we are very digital. And obviously, this is a consequence of everything that we have built in terms of our technology.

Now the question is what do we find behind this, behind this strategy. And we believe that we have 4 very clear core assets, core technological assets that are behind our competitive advantage. First of all, we have the best channels and experiences in the industry, number 1. Number 2, this is based on a tech stack, on a platform that we have been evolving over time, and it is extremely modern, and that is helping us to deliver what we need to do. Number 3, we are a global bank, and that means that we have an advantage as we can create once and deliver in many parts of the world, and this is providing an advantage in terms of speed and in terms of efficiency. And finally, we put a lot of effort on resilience. As you can imagine, trust of our clients and customers is the most important asset that we have, and therefore, technology has to be supporting that.

Starting with the first and initial core asset that we have, which is our digital channels. We believe that at the end of the day, what technology has to do is to ensure that we have the capability to better serve our clients and customers. At the end of the day, technology for the sake of technology doesn't make any sense. It has to be focused on anticipating the client needs and making sure that the experience that we deliver are the best. And that is true in every single segment, in retail, in commercial, in large corporates.

If we take the example of our retail segment, and we take the example of our mobile app, you could argue that it is one of the best that you can find in the industry. And this is basically because we are trying to cover 2 dimensions. First of all, it has to be convenient. It has to make things easy for our clients and customers. And there are several features, several characteristics that we have today that show that, for example, the capacity that we have to enable very fast payments with our mobile application. But it's not only that, let us say, easiest -- easier part.

It's also very important to make sure that we are able to offer a very good advice, meaning that with the usage of data, with the usage of our technological capabilities, we can offer the best financial advice, and we can make sure that the value added that we are providing to our customers is top-notch. And that can be done very easily with our mobile application. Antonio was talking before about how we are evolving that with our capabilities such as Blue. And this, as you can see in this page, there are some very strong numbers in terms of the rating that our mobile application has and also the strong client engagement that we are able to develop.

Secondly, as I was mentioning before, it is not only the -- our capability to serve our customers well, it is also the technology stack that we have behind. As you know, we are a bank with 169 years of history. That means that our technology has been evolving over time. And obviously, we have had to modernize our technological stack so we can offer a platform that it is modern and that can serve the different needs that we have.

In particular, when thinking about our tech stack, we have put a lot of effort in the last few years to build a technological stack that it is next-gen, that it is global, that it is modern and that it is based on the core principles of modern technological architectures. For example, making sure that it is cloud-based, that it is layered and modular, therefore, that it is composable. And that with that, we can offer very good and flexible experiences for our clients and customers.

We have clear facts about how the development of this particular technology has been helping us to transform our bank. And as you can see, we have gone through a pattern of modernization of our technology. We have been migrating a very significant part of our transactionality. And today, we see that 2/3, meaning 66% approximately, of our online transactionality is going through this NextGen platform, which is very significant. A very significant majority of our transactionality has already been moved. And that has a very clear impact.

On the one hand, we see that the cost base that we have today when running our technology is EUR 200 million per year lower than what it would have been in the case we had not gone through this particular modernization. And that has a contribution as well to our cost-to-income ratio. It is one important component, not the only one of our efficiency, but we see that all these efforts is bringing us to a cost-to-income which is best-in-class. Obviously, this is an effort that it is ongoing. In the next section, when we think about the future, I will further comment on how we are making sure that we are continuing modernizing and transforming our technological platform.

As I said before, a third core asset that we have, first one being the channels, the digital channels that are top in class, our ability to offer the best solutions to clients and customers. Second, the NextGen tech stack. Number 3 is how we leverage globality because when you see this, the fact that we are a global bank, the fact that we operate in different countries in the world enables that we can have global technologies, where we build once and we deploy everywhere.

The tech stack I was referring to before, the NextGen tech stack is a tech stack that it is global by definition, by nature. And then there are elements that contribute to this. First of all, our global software development practice, our creation practices, we have global pipelines. We have global source code repositories. And therefore, whatever we develop is accessible and available for the different parts of the world where we operate. So we have one single software development practice and single software development tools, which is a great advantage to make sure that what we develop is available for everybody.

And then there is another very, very good example, and Antonio was mentioning that before, which is what we call ADA, which is our data platform, which at the end of the day is our analytical data and AI global backbone. Basically, this is where we manage information. We manage information globally from 1 single platform. And this is very important. I mean, when you think about one global strategic asset, and when we think about data, which is at the core of what we are doing today and at the core of what is going to be needed in the future in the world of AI, the fact that we have such a platform is critical. And it is available everywhere with the only exception of those countries where we cannot use for regulatory reasons, cloud technologies.

And most importantly, we were able, and I think it is a very good example of speed and the usage of globality to be able to deliver faster, we developed the entire platform and deployed in every single country in less than 1 year. So I think this is a good sign on how our global practices are allowing us to be faster and more effective when developing our technology and our capabilities.

And the fourth core asset that we have is resilience. As I was mentioning in my introduction, when we think about what is the core strategic asset of a bank, you could argue it is the customer and client base that we have, and therefore, the trust that they have on us. So it is something that we need to protect and we need to reinforce every single day. And at the core of our practices in technology is resilience by design, meaning that it's not something that basically we put at the end of our process to make sure that something is going to be stable or it's going to be available or it's going to be protected. It is part of the initial design of everything that we do. And this is something we have been reinforcing lately to make sure that this is something that we cover no doubt. And you have over there some of the very strong results and metrics that we have that clearly show that we are very resilient and getting better and better.

When you see the number of incidents that take place in our technology, in our installation, you see that it is half of what it used to be just a few years ago. And when we have an incident, we recover also in half of the time we used to do. So this is the result of how we are implementing those resilience by design practices in the way that we operate technology.

And then I would also highlight a clear fact. When you see the availability of service of our channels, take mobile retail channel, which probably is the most important one that we have and the more visible one, either in Spain, in Turkey, Mexico, we have availability levels that are top-notch in the ballpark of 99.9%, which is a very good number.

So basically, with that, we have covered how we see technology. So as you see, number 1, how we offer the best experiences with the best channels; number 2, how we run a technological stack that we need to modernize to be able to run our services in the best way and to develop new value propositions that enable the future. Number 3, how we leverage globality to do things faster and to build once and in a very efficient way, and number 4, resilience, right? But when we look to the future, we see that Antonio was mentioning that in his presentation. We are entering in a very different world, and there are things that are going to be different going forward.

And with regards to technology, you could argue that what we are seeing is a computing revolution. So just a few years ago, the only sort of productive computing that we had was the classical computing based on deterministic algorithms, bits and logical operations as we know. Now, we have generative AI, which is a different way of computing. It's based on not on numbers, but on language, language models. It is not based on complete certainty, but rather on patterns. It is a different way of understanding computing and offering new possibilities such as generating new content and replicating how a person, a human would think.

And then very soon, probably before the end of the decade, we are going to have a productive quantum computing, which is a different sort of computing based on a different way of thinking about the problems, right? It is exponential variables, and it is going to enable computing alternatives and probabilities that today with classical computing, we cannot do. So that's going to be a different paradigm. So this is what we are going to be encountering.

And we reflect on 3 topics. First of all is that technology is going to be even more important, number 1. Number 2, that this is going to come faster. And number 3, that this is going to be complex and that the context of risk where we are is going to be different. We are going to be encountering bigger risks and more complex risks. So that is why in the 4 core assets that we have, we need to think how we are going to be evolving those.

When you think about best-in-class channels and experiences, our -- Antonio was showing that before, the way we are going to relating to our clients and customers is going to be different. First of all, it's going to be agentic, meaning that we, as a bank, our channels are going to become agents somehow. And that the sort of conversation that we are going to have with our clients and customers, you saw that in Blue in robot #1, is going to be very different. And not only we are going to be interacting with people, we will interact with other systems, other agents of other clients and customers or even of some partners.

Number 2, we were talking about our tech platform. I was showing how we are modernizing that to enable for the future, but this is coming really fast. So we will have to accelerate on our modernization in different ways. And one important point is that we are going to face a huge increase in transactionality and that will imply that we will have to scale up our technology to be able to face the future that we have in front of us.

Number 3, we were showing how our scale and our creation practices offer a competitive advantage in terms of speed and efficiency. But the world that it is coming is coming really fast. And we will have to be even faster compared to where we are today. And that's going to mean that we will have to drastically change the way we do technology, the way we create solutions, the way we adapt our technology for the future, and that's going to be a significant shift.

And finally, and I was mentioning that in the previous page, the context of risk is going to be very different. And therefore, we need to reinforce and secure our technology installation because we are going to be facing a different context.

Let me briefly go one by one. The first one, as I said, is that we will have to enable new ways of interacting with clients and customers. Antonio was showing how we want to be doing that in terms of how the experience will be in the future for our clients and customers, hyperpersonalized, it will be very event-driven. So it will happen in a much faster and convenient way compared to what it is today. We will need to enable a lot of context, a lot of information. So what we do and the solutions we offer for our clients and customers are more complete, more relevant, more proactive and more conversational, so somehow more personalized, right?

Antonio was also saying that because of that, we are building the infrastructure that we need, which is The Frame. And let me just focus, not to repeat what Antonio said before, on the technical capabilities that are behind and that will have to be part of the agentic technological architecture that we will have to embed in our tech stack. So we will have to connect new channels, agentic. We will have to make data even more available with a unified data foundation that we will need, properly connected, properly contextualized, for example, with a context and semantic layer, Antonio was mentioning that in robot #2.

In order to have that capacity to be able to contextualize well the information that we are going to be using to support clients and customers, we are going to have technical components that are semantic layers that are going to be helping us doing that. We will have to develop different run times, obviously, so the environment in which we compute when thinking about AI. And from the point of view of security and resilience elements such as AI ops, evals or the different security components that we will need. So basically, in order to be able to serve our clients and customers in a different way, our tech stack needs to be complemented, adapted, and we need to introduce new architectures, agentic architectures to be able to do that.

Then, let me move to the modernization of our platform. As I was saying, in this new context, the modernization of our technological platform is going to be even more important. As I said before, we have gone through an effort of modernizing our platform in the last few years. This is why today, as I said before, we have 2/3 of our online transactionality already happening in cloud, already happening in NextGen architectures, but we want to accelerate that.

And one important message here is that the acceleration that we propose is not just accelerating for the sake of having a NextGen technology. It is basically practical and focused on ensuring that we develop the components that we need going forward in terms of what we want to build and also that we can scale what we have in a world of more transactionality that we can do this in an efficient way because technology, as you know, is expensive. And finally, that this is resilient. So with those principles is how we are evolving our technological stack, and we follow our modernization pattern.

So as you can see, thanks to what we have done in the past, we've seen that with increases of transactionality in an annual basis, close to 30%, our transactionality or processing costs are growing only 5%. So that means that with the use of the right technology and the right modernization, we can be pretty efficient in the way that we scale up. And we pretend to continue doing that in the future. And as a matter of fact, in the same fashion that I said before that our -- that today we have 2/3 of our transactionality in NextGen. By the end of this strategic cycle, by the end of 2029, the very, very vast majority, 90% approximately, is going to be NextGen. We have a plan for that. We have a clear path for modernization.

This is going to leave us in a situation in which our business rules, business logic are going to be in modern technologies that is going to help us be much more flexible and adaptable. Therefore, that is going to mean that our legacy technologies, particularly the core banking that we have is going to be reduced to a deterministic system of record, which is very, very transactional.

And then, the -- an important part is that we can accelerate the transformation basically because AI is providing an advantage on this. This used to be multiyear, very complex projects or programs with the use of AI, and we are partnering with top vendors such as Anthropic on this particular point. We are going to be able to accelerate this very fast because AI is very good, as you will see in a second in coding, and this is basically about coding and making the right modernization and transferring workloads from legacy to NextGen.

Third element we were referring to had to do with speed, and we had to do with how we make sure that in a world where things are moving very fast, we are able to create faster. Antonio was mentioning that before, if you remember, when he was talking about The Eight and the different mission-critical robots that we have. There is one about our creation model, robot #5, which is about software development. And I would argue that we need software development, but actually it is broader because it is the entire creation process. So basically, we are drastically transforming the way we are creating software, creating solutions to make sure that this is fully agentic, number 1, that it is very iterative as opposed to previous processes that were much more sequential.

We are able to create prototypes and to try things much earlier in the process, and we are able to do this in a fashion where the different people, the different roles that need to cooperate and work together can do it in a different way, and they can do it altogether from the very beginning, which means better quality, much faster, much more productive, better outcome.

So the way we're thinking about it is with some domains, big domains that we are covering within our software development or creation process. The first one is obviously about thinking about what you need, which is the design part, where basically you take an idea and you finalize with the technical specifications that you really need, and that part is very iterative with business representatives and technological representatives.

And most importantly, with the agents behind, as you will see in a second, are helping us do the process in a very different way. Then we have the construction itself, which used to be complex because there are many different architectural solutions, integration with our systems and so on. We are agentifying that part as well. So we can put that into production much faster. And then the final part is related to the operation of the solution itself.

With this, we are, as I was saying, changing drastically the way that we are creating software and creating solutions. This is already in production. So what it means is that we have several programs, creation programs in the group where we are already implementing this, and we have a clear path of scaling this up to all domains by the end of this year and to all projects by 2027. And as you will see, we will have the capacity to deliver more things because we will make a better use of the resources that we have, and we will go from projects that used to take months, if not years, to weeks as we are seeing with the current outputs that we see from the projects that we are doing.

What we are going to be doing next is to have a look to one particular demo. It's a bit technical because it is based on -- as I was saying before, on the real projects that we are doing right now using this new way of thinking. And we are going to be focusing on the first part, which is about design. So meaning the idea generation and how we finalize with the use of agents in the entire process with technical specifications. So we can see the video.

[Presentation]

So as you have seen, this is a very different way of building solutions and our expectations given the very positive impact that we are seeing already in the projects that we are conducting is that we are going to be improving a lot in terms of speed, capacity to build more things faster, as I was saying. And therefore, this will continue to be a source of competitive advantage in a world where speed is going to be paramount.

And the fourth element that -- core asset that we were referring to in this presentation has to do with resilience. I was saying before that it is the most important thing that we have relating our clients and customers' trust, right? And as we are entering a new world, a new era, we need to prepare for that, right, because the context of risk is going to be quite different to what it used to be. And there are many dimensions here. Let me mention 3.

The first one is that we are going to be running a new technology. We are going to be agentifying our processes. So that means that we are going to be complementing our current systems with new ones that behave in a different way. So we need to rethink all the core principles of resilience that we have in our traditional technological stack, how that has to be or can be replicated in the new systems that we are going to have. So that is why building safe agentic systems, ensuring that we have the right components to manage reliability in terms of availability of service, in terms of recovery, in terms of data protection and so on and so forth is a core part. Again, Antonio was saying before, within our framework, The Frame, of the structural pieces that we need to scale up our agentic creation, this is part of that, number 1.

Number 3 (sic) [ Number 2 ], in the same fashion that AI is bringing superpowers to us, so we can better serve our clients and customers. Unfortunately, those superpowers can be used by the wrong people against us. And in that dimension, we can think about fraud. We can think about money laundering, and of course, cyber attacks, right? So that's a core part of what we do. As you know, this is a source of concern for the entire industry that we take extremely, extremely seriously. As you know, we are -- we have been working with the different banks with the European Central Bank to make sure that we have the right plans, and we do. So we are fully committed to reinforce what we need to reinforce. So we are well prepared and well equipped to defend ourselves if necessary. And we have a plan, and we are putting all the resources that are needed to be able to do that in a short period of time, talking about the following weeks, following months for some pieces.

And the third element is preparing for an explosion of transactionality, growing volume. So when we think about resilience and availability of service, one very relevant point is that our infrastructure is ready to be able to do that. So we can scale exponentially if needed to be able to run the compute that we need. So that's a core part. Again, I'm referring back to our modernization plans of our technology. All our journey to cloud is obviously putting us in a very good position. And that's going to be also part of our lines of work with regards to technology, and in particular, to our resilience efforts.

To finalize, so some of the points that we have been discussing or debating today, the first one is that technology is a core asset for us. It's a core differentiating factor. It has been in the past, as you've seen. Thanks to the use of technology, we believe that we are in a very good position today. We're an extremely digital bank. As I said before, you could argue it is one of the largest fintechs in the world, as our business basically is digital today, a very big part of that.

Second, this is the consequence of a very good track record on managing technology as recognized in the industry. We have quite a practical approach in terms of not being dogmatic with technology because at the end of the day, what we need to have is productive technology that it is able to serve what we need, but that implies, of course, a lot of modernization elements as needed. And what we have today is a tech stack that it is ready for the future, although we need to continue obviously investing in that as the world continues changing. And as in the past, it has been very good and a core asset to be able to develop a competitive advantage. It will continue to be in the future.

Number 3, what is going to be different? The pace is accelerating. This is a very technological transformation what we see with AI and some other sorts of computing that are coming, such as quantum computing. That is creating a lot of opportunities, but obviously, we will have to face a more complex world and continue evolving what we have, and we are very conscious of that, but we are extremely committed as we have a clear strategy, clear commitments, and we are ready to continue strengthening our technology to be able to support the growth and the success of the bank as needed in the future.

And with that, I finalize this presentation.

Thank you. Thank you very much, Antonio and Carlos, for your insightful views. We will move now to the Q&A session. We will start with the questions in the room and then move to the questions from our online audience. [Operator Instructions] So let's start with the first question. Alvaro, please.

Alvaro Serrano from Morgan Stanley. I had 2 questions, which I guess for both of you. And when we think about sort of AI, sort of Agentic AI, we immediately think about margins, and lately, especially after news about deposit sweeping technology and what can that do to the bank's business model. When you see -- when you're deploying the tools today, can you maybe talk us through your thoughts on sort of any obstacles from automatic sweeping? Beyond customer trust, how do you see that working out in the future? I mean, from a technology perspective, is there any regulatory sort of impediments to automatic sweeping? How do you see that affecting the broader deposit franchise of BBVA in the industry?

And maybe the second question is, with that in mind, how can you defend against it? And maybe on the cost leadership side, presumably, these technology will be available to everyone, and it's about sort of bringing down the costs. Maybe you can give us some color. You mentioned that 2/3 of the transactionality is now through the cloud, you're going to 90%. How does that change the cost-income picture? I mean, maybe not an exact number, but a flavor of the order of magnitude of some of these cost benefits that -- while you change the cost platform?

Antonio, perhaps, you can take the first one...

Yes, I'll take the first one. And Carlos, you take the second one, okay?

Sure.

So thank you, Alvaro. I've alluded to it, the fact that we are operating in a new competitive context, and Muse, which you've also referenced to, is a good example on how clients might be shifting their relationship channel to agents of third parties, such as Muse. I guess, it's something quite new that has been rolled out in the U.S., not yet into Europe. What we clearly see is that, to your question, we will continue to raise the bar for trust, which is going to be basically the competition is going to be a competition for trust. Who is going -- who is the client going to trust? Is it going to be a third-party agent or a BBVA agent? So we believe that, yes, there will be competition. There will be margin pressure that will be coming through that new type of competition.

And our plan is to continue to build trust and enhance our value proposition so that we not only retain the trust, but that we hopefully increase it down the road. But clearly, the rise of a new type of competition in terms of agents for general purpose that will serve clients across many different things across industries is something that we'll need to tackle on that type of competition. And again, enhancing our efforts on trust, the client experience is going to be one of the core areas of focus.

Is there any regulatory hurdles today? For example, can AI agent go with the passwords into BBVA account and shop around the deposits?

As of today, there hasn't been any regulation. Yet again, these products have not -- in the case of Muse have not come yet to Europe. We'll see down the road how regulation might evolve and if eventually might be easier or not for agents to do such type of execution or money movement actions yet to be seen, as I said, early days still.

In terms of the productivity and efficiency, you're right. When we look to the future and when we see our modernization of our platform, one of the reasons why -- not the only one, but one of the reasons why we are doing that is because they are more scalable and they are more productive. And as I said before, with the 2/3 of online transactionality that we are already running in cloud, our cost base is really in the ballpark of EUR 200 million lower than what it would have been if we had not gone through that transformation.

When we look into the future and when we see going from -- as you said, from 2/3 to vast majority, the ballpark of 90%, that is going to be -- that is going to have an impact. And again, our projected cost base in the future is going to be in the ballpark of additional EUR 100 million lower than what it would be if we don't go through that particular path. The thing is that this is going to help us contain rising costs basically because our expectation is that transactionality is going to be much higher, much higher in the future. So therefore, as we are seeing, computing is something that it is increasing.

So by unit, if I may say, by transaction, cost is going to be lower. However, depending on how this explodes, and it's something that we will have to see in the future, we see that those costs are going to be rising as well. Having said all that, the fact that more and more, we are more efficient and productive when running our technology, that is one of the factors that it is helping in the projected cost-to-income that we have in our strategic plan and that has been communicated to the market. Obviously, it is part of that as well.

Sophie, please.

Sophie from Goldman Sachs. So you mentioned quite a few times that you're expecting quite a big increase in transactionality and volumes. Could you just walk us through what will drive that? Is it expansion into new markets? Or do you expect existing customers to do more transactions? Or what's the kind of key driver?

Well, I would say that it's mainly the customers increasing the transactionality with us, as they will have a new way of interacting with the bank with all these data, and also, we will be more proactive and provided insights that will drive that increase in transactionality. It's not regarding expansion in our business outside our footprint currently.

And also, Patricia, growing organically. As you know, we are focused on customer acquisition, and this will drive obviously more transactions.

Absolutely.

And if I may complement, there are patterns that we have seen in the past, which is, obviously, every single year, we have an increase in transactionality per client, basically because we are creating better experiences for them. Our digital channels are more useful, if I may say, and that is driving more usage. So that is happening, thanks to the fact that we have better things to offer, and therefore, more consumption from each individual client customer. And when you think about the future with AI, this is also true, right?

At the end of the day, transactionality is not going to be only classical computing. It's going to be as well agentic transactionality. And all the robots and all the agents that we are creating, of course, they are going to be generating technical transactionality as well in our infrastructure. So all of that compounded is what we see in the future that our transactionality is going to be higher also from usage of our clients and the technical design that we have.

Just wondering, do you see like the pie growing? Or do you see BBVA getting a bigger share of the pie?

Both. Both. Both.

We see the pie growing. Carlos was saying the pie will grow because we'll have more transactions, more agents making transactions. Our share will be larger because we want to -- our commitment is to lead this transformation, and so we'll have increasing market share.

So it's a bit about growing the customer base. It's about building deeper relationships and having more interactions with our customers.

Luis, please.

This is Luis Peña from Bestinver Asset Management. It's quite impressive what the bank is doing. I have 2 questions that are related. So first one is how much is the AI budget for the group? How that compares to the overall tech budget?

And then the second one is related because there's been comments from U.S. banks and also from European banks saying that the cost of the AI is going to be significantly higher of what initially the institutions were budgeting. So the question is how are you budgeting the cost of AI going forward? It seems that the price of the token is going to come down somehow, but the models are going to consume a larger number of tokens. And in this regard, actually the largest bank in the world is growing the cost base, as we speak, at more than double digits and is trading at more than 3x tangible book value.

So it seems that the market is paying for the institutions that spend massively and wisely. So I just want to sort of understand and take the view of the bank on how this AI cost is going to impact the bank in the short term because it seems that in the very short term, it's going to be an additional cost. So it's not going to bring an overall cost reduction for the group, and how management, we have the Chairman and the CEO here, see basically sort of this cost going forward, if really the management is ready to make this significant investment and spend more?

I don't know if you want to start with the tokens and the AI cost as of today. Yes.

Yes. Perfect, and then, I'll pass it to you to do the detailed figures on cost and the weight. So I think the first idea I want to mention is that every token consumption that we will have will come hand-in-hand with an assessment of the value that the corresponding agent will bring, which we believe it's a very structured way to address our agentic transformation. So every time we put agents such as the one that you've seen today into production, it is true. They have a cost. Some processes such as the risk agents that we saw actually also required one of the best -- or some of the best models that are more token heavy.

So every time we build agents, we are very conscious on the fact that they have a cost, and that we put it, we have to assess, and we assess it hand-in-hand with the value that they will bring. So in that sense, the rise of token consumption that we are going to have and that we are already having comes hand-in-hand with the impact that we want each one of the agents that we are developing to bring. And my point is that as we scale the spend in tokens, we are going to be doing that in a way that we ensure that will also bring the value alongside the spend in there.

Thank you very much, Antonio. Perhaps, Gonzalo, you can provide some insights on our views on investment and cost going forward?

Sure. So definitely, we will continue investment on technology. If you look total IT cash out. That year was EUR 4.2 billion, and this year going to be higher. And if you look at also at the weight of IT cost of overall cost base, 2019 was 21%, '25 was 27%. So definitely, we're investing in IT and we are committed to continue investing. And this, in a way, is what has really helped us to achieve a leading position in cost to income. Second quarter achieved 37.8% cost/income ratio. And we are committed to a strategic retail plan of reaching 35%. So we believe it's compatible to invest in technology as we're investing and banking is becoming more and more a technology business. So we will continue definitely investing in technology while keeping our cost ratio at the levels that we are committed.

And Gonzalo within the figures that you've mentioned, the weight of AI is obviously increasing.

Do you have -- sorry do you have long-term contracts with your AI providers with a set price. So I mean the market right now basically is trying to understand how this cost is going to evolve. And I don't think that anyone really has a clear view on this. So we just want to know really, I mean, how are you setting your contracts with your providers? If there's certain cap above which you are not going to go in terms of total cost? I mean, how do you structure those contracts?

So yes, we definitely -- and I was talking before about the partnerships that we've established with some key players in the ecosystem. And as you've already mentioned so we typically allocate some compute capacity. And that's what typically comes as part of the agreement. It doesn't make sense to do the contract at the token cost because as you were saying, it continues to drop every now and then. So we save the capacity and with that capacity, then we are able to consume tokens or credits of different models depending on the pricing that again drops and continues to evolve over time. But yes, we're sourcing contracts, some of them for terms of 2 to 3 years with some of our partners. And typically, we say compute for our agentic organization to run rather than cost per tokens because that's fast evolving.

Actually, [indiscernible]. I have a follow-up on Luis' question. As long as the cost may change within time. And do you want to have resilience on your processes? At some point, what do you want to keep human how -- I'm not going to tell you to ask how many are you going to get rid of. But at some point, you imagine that in 5 years' time, whatever happens, energy costs are pretty high. Token cost goes up by 2x, and you've maybe substituted one person that at some point was kind of productive but that new token cost, it isn't. So how are you managing this process of taking this process out from people today in order to make this resilience for the long term.

And then another thing that might be a bit -- sorry about that, is that on the -- on the cloud development model. You've taken quite a different approach than another red bank. You started before they would have done that. But you rely more on partnerships instead of the in-house development. So which one will provide in the long term better cost, which have more resilience against these attacks because at the end of the day, if you have that built internally, probably you might be certainly better productive, but probably you have less ability to react to those threats. And how -- what's the one that could adapt more rapidly to the changes that we have here. And then one -- sorry about that. That's for Antonio, because coming from wherever he comes is about carbon neutrality of this process because BBVA has been a leader in terms of becoming carbon neutral. But these are heavy expenses in terms of energy. So how can this be managed in the future?

So perhaps the first one for you, Antonio...

I'll take 1 and 3 and Carlos take the second one. We love the questions, by the way. Thank you. So going into the first one, Well, actually, it's reflecting about what you were saying, our growth and our plans are typically constrained by the capacity that we have to execute on them. Take any business in any country, typically have plans that go beyond the capacity that we have. The view that we are taking on this, as I was explaining at the beginning, is to embrace the abundance of resource to be able to do -- to clear the huge backlogs that we have in all the countries to do also that in a faster way. And we believe that doing more with the teams and resources that we have.

Yes, along the way, there might be roles that will be eventually changing like 10 years ago, we didn't have any designer at BBVA. Now we -- that's one of the core disciplines or capabilities. So yes, there might be some jobs that eventually might change. We'll onboard new profile, so we will reskill some of them. But also if we look backwards throughout the digital transformation, which, again, has yielded great results in terms of profitability and growth. We haven't seen a dramatic drop in the number of employees at BBVA. And I think that can be used as a reference. Going to your third question related to carbon neutrality, yes, we're seeing clearly how AI takes a lot of energy and also, in some cases, water consumption, though that's still being more recently well managed by all the hyperscalers and players operating data centers. We are committed to our net zero targets, and we will factor in the token consumption that we do as an organization as part of them. So same way we do with other carbon emissions related to our third party providers for value chain. Carlos, you take the big one?

Yes, of course. Good question. Different dimensions to your question, let me try to cover those. First of all, when compared to others, and obviously, I cannot comment on the strategy of some others. But what is in the market is that there are some places, particularly when you think about traditional banks that need to modernize tech stack. Some are taking a way that at the end of the day is basically becoming more efficient. So you see some technical optimization that what they look for is that they are going to be running in a cheaper infrastructure, which is good in itself. Our approach is much broader than that because we are not doing just a direct lift and shift.

Basically, what we are doing is to rethink what our technology should be. We think our logic, we think our technological architecture, so it is ready for the future. And that implies that our modernization process goes through a different pattern. That is why when I was mentioning in the initial part of my presentation that our modernization looks not only to cloud, of course, it looks to cloud, but it looks to modularity, a layered and composable architecture data being available and exposed as needed and so on and so forth. So that is part of the core modernization plan that we have, which is pretty much based on rethinking the technological architecture that we need going forward. And of course, we look for productivity and efficiency, and I was providing significant numbers in terms of cost avoidance in the past and what we expect for the future.

But we also believe that our core objective is to make sure that we offer the best solutions to our core clients and services, the best experiences that we do it quickly and fast time to market and that which is resilient as well. So that is the approach that we have. You were having another comment regarding how we interact with our partners, and that's different to others. It is true that we have very good strategic partnerships with those that can offer the best technology for us and for the best technology for our clients and customers. And we are proud of doing that because we believe that this is the way to make sure that we offer to our clients and customers the best available. But we always keep control and we keep ownership of the core strategic assets that we have. Our tech stack is ours. Our technological architecture is ours, what we do basically is to make sure that, that can work with best-in-breed solutions of some partners when needed.

And then one final, you were having a comment also connected to what Antonio responded before. Regarding about resilience and in a world where agents are going to be doing things how we keep control and so on. I would like to think that at the end of the day, we are going to be improving a lot in the way that we are running the bank with agents. But we are accountable for that. So the way that we think in terms of how we build resilient, human in the loop and so on in with the core principle that we, as BBVA people, we are accountable for everything that is done and we are not going to be losing that.

Borja Ramirez from Citi. I have 2 questions, please. And firstly, you have highlighted the importance of scale and investing in AI to successfully deploy the AI. In your view, does the AI increase the importance of scale in banking and also, if you could -- I guess maybe the larger banks are maybe relatively in a more favorable position than the smaller banks in this regard.

And then my second question would be tech is evolving very fast. I know you provided some useful data points on 2029. But if I look towards the next 5 years, for example, how do you see the competitive landscape? And where is the biggest source of competitive advantage? Is it the customers' trust? Is it the data? Is it the scale or the AI capabilities.

So I'll take the 2 and then you guys chip in. So the first one is, of course, you think that scale matters in this transformation, I've alluded to the fact that most of the agentic efforts that we presented in demo today are being deployed globally, in our franchise in Spain, and Pedro will also comment later on Mexico, South America. Clearly, scale matters in AI, big time, and we believe that is going to be also increasingly relevant.

Then into the second question on competitive advantages. I think clearly, we've been talking about trust in the context where there's going to be new competitors also claiming or competing to get the trust of the client for general purpose things. We believe that we have strength -- existing strength, which is the trust of our clients to manage and serve them with financial services that we can step up with the tools and the agents that we are going to be deploying, both in our enterprise segments and our retail segments. That's going to be, we believe, very, very relevant, increasingly relevant in the agentic revolution, the trust and the retention of the trust. And then as we are today, as where we are today, we believe that one of the core competitive advantages will be, as we were saying, the ability of an organization to structurally change their operating model so that agents become a new workforce managed by our employees. That requires some structural change to onboard agents into the organization as we've been putting some examples and it's very deep.

But if done right, we believe will present a huge competitive advantage because it will allow us to transform our productive model, combine our existing workforce with agents that will allow us to raise our execution capabilities. And to do that at scale, you need a very determined and structured approach which is what we are going to be doing through the frame to really rise to the challenge and capture the entire opportunity. So I think trust and then the industrialization capacity and determination and execution to make it happen at scale will be differentiating factors. Because then with that, by the way, to your first question, we'll be able to tap on the opportunity that size might bring to each one of us.

Just to add one comment, Antonio, on your comments. Definitely the first one is scale matters, both on AI and technology given that you have a larger customer base, you can dilute those costs on a larger customer base. And this is why we think that we are in most -- in a more favorable position, given that we are -- most of our franchises, we are either #1 or #2 in retail banking. And this is obviously, to your second question, creating a competitive advantage together with trust, the skill that we already have in our retail franchises provide us with a very good competitive advantage.

Miriam Fernandez from S&P Global. You've been talking a lot about this industrialization of agents now the agentic economy, where we see agents transacting not only internally but also externally. So I'm curious to see in terms of like the governance of that infrastructure, whether do you think there is a business case for those agents to be running on chain to be underpinned by smart contracts and stablecoins or other type of cryptocurrency to transact and to make that fully transparent and accountable on chain? Or whether do you have another business case where that's a function in the future?

No, thank you for the question, Miriam, this is very emerging trends on the agent disintermediation side, the products that have been launched literally over the last few weeks. And yes, I agree with you that eventually they could have this new general agent services, they could have an intersection, as you were saying, with ledgers. And eventually, that might be a new infrastructure underlying for agents to operate still hard to say how things are going to be evolving. Again, we are in the early days of the rise of these new product offerings.

Miruna Chirea at Jefferies. So there is clearly a lot of opportunity from deploying AI into our day-to-day processes. But I also wanted to understand a bit better what are the risks and how we are striking a balance between deploying new opportunities, but not deploying them too fast as in to create risk in the business. So I was wondering if you could share with us maybe some of the more negative experiences that you had in your early AI deployment process. The problems that arise and how you address those?

And then secondly, I was wondering to what extent you are already using AI into your credit decisions today and how you see the opportunity there?

Thank you, Miruna. So we've made, I would say, we've learned a lot along the way. We've done a lot of mistakes in the development of the agents. Of course, we make sure that before pulling an agent into production for an employee or for a client, those mistakes are removed. But certainly, we've learned a lot. And we've been precisely encapsulating all that learning into some of the core components that are very relevant within our DFM effort. I was mentioning before, to security guard rates evaluation turned out to be some of the most relevant assets for us to make sure that agent executions comply or converge to the quality standards to the golden truth that we define for each one of them.

And interestingly enough, another one of the learnings that came through the way is that our agentic organization has greater observability than we thought, we can monitor and see how agents are executing and performing versus the standard that we've set for them. And based on that observation, we can adjust or fine-tune if there's any deviation on performance. But to your point, we've had a lot of learnings throughout this year. We've learned a lot. We've made mistakes and precisely those learnings are what we are going to encapsulate -- what we are encapsulating into the frame to make sure that as we scale our agentic organization, we're also managing the risk in a very structured way.

And to go into the second part of your question related to risk, actually, risk underwriting for retail clients is one of the use cases of AI within the AI Act, defined as high risk alongside insurance and recruiting. And in that sense, we haven't done yet any efforts on that front. What you've seen basically is AI supporting analysts always with a human in the loop for our wholesale underwriting processes.

And that's a little bit where we are today. And we will continue to explore the boundaries of the AI Act to ensure that we make the most of technology while also complying with the existing regulation frameworks.

If I may comment quickly on that one. Something that's interesting also to highlight is that agents can be extremely resilient and secure even more than what we had before. The reason being that by design, you can embed into the agent, the security requirements that you need. In terms of resilience, for example, when we think about security requirements, we are moving from processes in which you would have add-ons to make sure that our systems are secure to something that by design, by definition because it is part of the context, part of the instructions that you are giving to the agent is part of it.

I think it's important because although we need to continue learning and make sure that, that is working absolutely well. I think that the promise of having a more secure environment is also by design because the way it is.

Alvaro from UBS. This is kind of a follow-up question on Alvaro's first question. Do you think AI-driven pressure on margins might be higher in developed markets than in developing markets. And in this context, BBVA being a bit more protected than other entities?

I don't know if you want to add something...

No, I think the only thing I would add is, I mean, it goes back to the trust question. So trust is an issue in developed markets and emerging markets. And definitely, the pace about this threat will evolve. It depends a lot on how customers trust about letting an agent moving or making transactions on your behalf. Accountability would happen if something happens to the customer or there is fraud or the agent contracted one product and also regulation and this both impact emerging in developed markets.

What I would add also is the fact that, in any case, the most important thing, and this is part of our core strategy, both in Mexico, LatAm, South America and Spain is to become the primary bank for our customers. So the best way to defend ourselves against this threat is when you are in the flow, the payment flow of our customers, you have the payroll, you have direct debits, if you have debit card, credit card, the risk of the intermediation is much lower, whereas if you compete just on pricing or deposit pricing, this risk is much higher.

Jorge from [indiscernible] So 2 very quick questions. The first one is you mentioned there's an advantage of being a first mover, but first movers sometimes do mistakes and competitors from that, right? So how do you plan? Or how is it possible to track actually what other competitors are doing right, better than you guys and implement those things into your process.

And the second question would be how is this all the tools that you are developing, how it is to implement those tools or those -- yes, those tools. into potentially inorganic growth. So when you develop all these tools, do you also keep a focus on how we see is those to implement? Or you just develop it, just to focus on organic and forget about potential M&A and how it is to implement those tools, or is it a case by case? So it will depend for some potential targets it would work for some it won't? How do you think on this?

On the first mover advantage...

Perfect. Yes. No, you're totally right. And there was also a question before on the fact that when you're a pioneer and you move first, you can also make mistakes. We see it as learning process. And we believe that being an organization that is able to learn fast enough in this very fast-paced changing environment, it's also a core competitive advantage.

Yes, sometimes it requires flexibility because, again, the context is very dynamic. But the learning that we get through the process of being pioneer, we believe is a huge competitive advantage because it actually turns back into a greater execution capability. And on the second question.

On the second question, I don't know if you want Carlos to give some insights on how we build our tech stack, but I would say that it's primarily focusing our current operations.

Yes. The tech stack that we are building, both NextGen as I mentioned before, but one in particular, the agentic architecture that we are building is fully global. So that means that we are developing it once, and then it's being deployed in the different countries that we have. And we are building those interfaces that are needed to properly work with the back-end systems that we might have in the different countries. That means that when we think if eventually we would have to take this to some other tech stack, it would apply because of the way it is being designed. It's a global one with that capability to be deployed in different parts of the world.

Hugo Cruz from KBW. I have quite a few questions. I'll just go with 2. So first on costs, if you could give a bit more color. How do you guarantee so if you have this compute for 3 years, how do you guarantee that after 3 years, the cost is not going to go outside of your control? And also, when you build agents in-house, how does that compare against building it with third parties? If you could give any numbers that would be helpful.

Second question, what this approach to technology, which I think is the right one. But what does that mean for your M&A? So does that mean M&A more likely because you have a plug-and-play system, you can just bring a new bank into your systems. Or actually, does it mean it's less likely because you have a culture and a strategy that's perhaps very different from other banks.

I mean regarding the M&A strategy, I don't think that the IT strategy is linked to M&A at all. So we have a variety of strategy to manage our current operations and it is not factored in. So that is what I could say. I don't know if you want to add anything, Carlos?

Say it again, sorry?

No, I don't think that M&A is factored in when we are thinking about our IT strategy at all.

No, no, no, it is not -- I mean, at the end of the day, what we are trying to do with our tech strategy to make sure that, as I said before, it is scalable, proficient, best experiences, and that is the part that we are covering. At the end of the day, as long as it is becoming more and more global and more and more modular, obviously, it is easier to deploy in different parts. But as you said, it's not part of our core strategy today or one of the core elements.

And to the first part of the question, again, as of today, we're sourcing tokens through cloud with different partners and providers with contracts that are -- take some years, 2 to 3 years. We see tokens cost on the decrease dramatically. And in that sense, we believe that we will be able to continue to source those contracts later on down the road and even benefit from the economies of scale and also the reduction in prices, though also, in some countries, specifically in Turkey, where because of regulation, we have to source and own our own AI infrastructure, we're also leveraging those learnings and what it entails to have your own AI data center in place to eventually factor those in as part of our complete strategy if at some point, that was necessary.

Cecilia Romero from Barclays. I just had a question on fraud. As AI is lowering the cost and increases the sophistication of fraud and do you see an increase in structural charges in fraud losses for the industry?

Yes. Good question because as part of the big risks that we see is an increase, for example, in fraud or money laundering and so on and so forth. And we have a very strong financial crime prevention unit that basically is working on that. What I would say is that attempts of fraud are increasing quite a lot because we see different patterns and they can use technology, as you say, to do it. And that has an impact on the way that we are responding. If you take Spain business units, we have actually materialized a very significant decrease even with this new pattern in fraud this year, basically for 2 main reasons.

The first one is that we have to develop more intel in terms of understanding what the patterns are in the industry and therefore, fostering our ability to quickly respond to that changing if needed, some business rules in the way that we are doing things. Most importantly, we are incorporating very successfully. This is still something that needs to grow. But we have very promising results. We're incorporating AI itself to improve the way that we can detect and that we can prevent fraud from happening. So in a nutshell, I think that yes, we are in a context of risk, which is much higher. Yes, we are seeing more and more attempts kind of different nature that requires a response from our side, which we are doing and what we need to do is to use technology in our own defense as well as we are doing right now successfully.

Representation Francisco Riquel from Alantra. And you have given some examples of the efficiency gains that you can achieve with the use of AI, for example, with call centers on the number of calls that you receive and the time to save solving these questions. I wonder if you can share with us the number of outsourced FTEs that BBVA has across the group? And how do you see that number evolving in the next 5 years? And then also more broadly for the in-house FTEs, the workforce, how big a reduction shall we expect in the next 5 to 10 years only because of AI.

So as a general answer, I would say that it's too early to know the precise impact of this technology and the workforce. It is true that we have a relevant number of external sales force working for BBVA across the footprint, but it's a number that we do not disclose, and that is included in our cost base. And we will see how things evolve and we will try to manage that. As Antonio was mentioning before, the priorities scale the business to try to do more with the same restructures to have a better time to market to try to be able to give a better response and more hyperpersonalized to our customers. I mean, we think the opportunity is huge, and we will see how things evolve going forward.

Okay. So I think we have already covered all the questions in the room. We can move now for the questions from our online audience. Operator, please?

[Operator Instructions]

We have a question from Carlos Peixoto of CaixaBank.

Carlos Peixoto from Caixa Bank here. So just a quick one on my side or a bit of different theme that's basically attached to cybersecurity. I was just wondering if you could give some color on the type of budget that you have for cybersecurity? And also touching on the size of potential litigation risk and threat. So you have seen some discussions regarding agents' behavior going rogue in a way and the way that these liabilities would fall on the different institutions, there's some press reporting as well on the insurance sector concerned with that. I was just trying to understand here if you have basically coverages in place for those type of threats, whether the liability for a rogue agent would fall within yourselves or whether it will be on the provider side, just a bit of context on that as well. Sorry for the -- a bit of a philosophical question here.

Okay. I can tackle the first one on cybersecurity. Basically, we are making sure that we are doing everything that is needed to have BBVA and most importantly, our clients and customers well protected in terms of cybersecurity. This is a top concern of the bank at every single level. And that means that we obviously have already started heavily working on this. And in the following weeks or months. We'll continue doing so. We have a very specific plan on it that we can cover whatever it takes. And we are, of course, having more resources than we used to have, even if it implies in occasions getting specialists from some other parts of the group to put them to work over here. This is dynamic basically as we will see new threats coming, but all the efforts as needed are being covered, obviously, in accordance also with the ECB. And this is what we can comment on that.

Yes, and to the second one related with liabilities. I guess that as we develop our own agents, we've also been very conscious on the relevance of having both for client facing and employee-facing employees, a human in the loop, certifying the actions that are going to be taken by the agent. And when that goes beyond BBVA with other agents, when Carlos was also referring to the fact that the accountability is going to be the key issue to be managed on who is accountable and liable for what agents might execute when there's a multi-agent interaction, and that's in the shaping.

Thank you very much. I don't think we have any further questions. So we will take now a coffee break. We will be back at 12:00 for our second session focused on BBVA Spain. Thank you Antonio and Carlos.

[Break]

Welcome back. Let's now turn to Spain. BBVA Spain was a pioneer in digital transformation and that leadership has delivered tangible results, more customers, deeper relationships, and leading profitability and efficiency. To explain how BBVA is facing this new strategic cycle, we have Peio Belausteguigoitia, Country Head of BBVA Spain, with us. Peio will present in Spanish, and the Q&A will be open both in English and in Spanish. Headsets are available for simultaneous translation. Peio, the floor is yours.

Hello. I'm here to tell you about the history of Spain and the story of Spain in the past few years and the targets we have set for ourselves into the future. My presentation is divided into 3 blocks. The first one, a couple of slides, to begin with, to share with you the macro context in Spain, so that by comparison with other countries in Europe, you will see that all the macro data are tremendously positive, providing for a very positive environment for growth in our industry.

In the central block of my presentation, you will see how BBVA Spain has led or taken the lead of the transformation model in recent years, particularly a transformation that has taken foothold on the customer experience, understanding that such experience would bring in further clients, further growth, further cross-selling to clients who are satisfied with BBVA, which would be translated into very specific outcomes that we're here to share with you in terms of financial return, efficiency, and profitability. And then during the third block, I will show you how we intend to work in the next few years under the same strategy, a strategy where clients and customers sit at the core of our day-to-day work and where customer experience is the vital element to generate further growth ahead.

So starting with the first block, I just wanted to share some data with you. The economy in Spain is growing well above those around us. Also, in terms of GDP, in 2025 and 2026 follows the same trend, as well as the forecasts for 2027 point to a positive gap between Spain and surrounding countries in Europe. Private consumption boasts very strong data. Employment numbers are looking up in terms of growth and sustainability. And the economy in Spain has very clear flags in terms of how competitive Spanish companies are when they go out into the world to compete in exports, not only related to tourism, but also in connection with services.

So in this positive environment, in terms of the banking industry in Spain, I bring some data highlights. A very positive number that keeps us optimistic in terms of demand for the next few years, we have household leveraging and business leveraging during the past few years. Today, compared to the rest of Europe, we stand below the household and business average in Europe. As for interest rates, well, they're growing, but still remain moderate, 2.5%. 2.5% for credit facilities remains a moderate rate, and we're positive in terms of the impact of such rate in terms of credit demand. And the data we get every month from the Bank of Spain in terms of credit growth in year-on-year terms are positive for growth in consumer credit and mortgages. And in this environment of moderate interest rates, debt return quality data and NPL data remain very positive when compared to our peers and sloping down. So the environment involving credit demand, credit quality, and NPL look very positive for our industry.

As for what we've been doing in BBVA Spain recently, I have a set of slides to share the tangible results of the strategy we've been applying in the past few years. I would say that we have very clearly focused on the customer experience. And at all times, we have understood that the value proposition was key in this aspect. It's not just about being the best. It's about being the best in all possible channels to offer the best way to interact with the bank. And this has played a fundamental role in terms of relationship models and distribution. And focusing so keenly on annual, monthly, and daily follow-up of our connections with clients has placed it at the top of customers' choice. As clients get to know us better, they deepen their relationship with us, which generates a serious return for the strategy we applied, as it has always been centered around the client and client experience.

And this slide generates a very good idea in numbers of how we have entirely turned our transformation model around. And these are some of the results or outcomes we got. Let's take a look at the middle block, improving customer satisfaction, the Net Promoter Score among all our clients and customers. And we're talking about individuals, SMEs, and businesses. And on screen, you have the numbers of how NPS data have improved. Actually, both in retail, SMEs, and commercial, we have outdone our own NPS levels, as you can see. This comes from a radical change to the relationship model of the past, which largely pivoted around the face-to-face model. So we opened different and new channels, different ways to contact clients. And we have decidedly supported the digital channel, but at the same time, we've also supported the online model and still face-to-face in terms of capillarity and specialization. Why not? But to the reduction of our face-to-face presence, you can add a significant growth in specialized or teams specializing on face-to-face customer services, both for SME and for private banking.

In terms of online banking, and this would deserve its own meeting. Today, we have the best possible remote system, absolutely differentiating a model which has been welcomed and adopted from square 1, generating a much higher acceptance level. Right now, our sales force exceeds 4,700 units, either hybrid or remote, with all the possibilities to do servicing and creating new accounts, a model that clients value so positively that our NPS for the remote model is 72%, and this model is present in all our banking sections, particularly in retail.

But we're also supporting the remote model in commercial banking. We have transactional managers that remotely interact with clients to get their trust and their transactions. They're present in their payments and collections. And 26% of our sales forces are precisely on the commercial online side. So we have decidedly supported and invested on each of these channels until we have become #1 in each of them, and have been awarded best banking app in the world, the best by far in Spain, and going way beyond our initial objective, which was making the bank available to clients in their own mobile phone or smartphone. And this goes beyond servicing and new accounts. Our app covers that and so many other experiences that our clients value positively, which are related to their financial health and very specific aspects of their needs and opportunities during each of their life milestones.

So I was saying that we were obsessed with growing and getting new clients, obviously, taking support on the digital channel, but at the same time, taking support on how our own clients promote us, our Promoter Score. So new entries have nearly doubled this year. In retail, we're almost doubling the number of new customers and clients. And on the SME side, well, you can read the numbers, nearly 70,000 to 75,000 companies will start dealing with BBVA throughout 2026. And our share of new clients in the SME sector has gone from 20% to 25% new client share. So 1 of every 4 or 5 new banking relationships opened in the SME world go to BBVA. So this obsession for reeling in new clients has led us to achieving the best online channel for onboarding and welcoming new clients.

And then we also have the new onboarded client onboarding, where we explain, not just describe, explain all the new features at their fingertips in the different channels through which they can contact us. And that is something we do because we seek to be in the heart of our clients' and customers' activity. Not only transactionality, it's also about turning that client into a preferential client. We want to be their bank of choice, so that they can run all their transactions through our bank. And that entails a certain profitability. When we're someone's main bank, it does make a difference. And in terms of transactionality, our numbers are out there for anyone to see. We hold 17.4% market share in payrolls. And when back in 2019, our payroll share was 4.0%, we have now gone 340 basis points above that.

In terms of every other aspect, we've been doing better. The trust concept, as others have mentioned before me today, is built by delivering, delivering, delivering. It's about providing increasingly better experiences to the clients via innovation. And we are a clear example of how BBVA Spain and BBVA Corporate Group hold innovation in our DNA. We hold 19% business share in P2P payments, not just Bizum. We have several other solutions. And in e-commerce, for instance, well, we have a Bizum payment share of 58% because we were first adopters. We were the first to offer Bizum to e-commerce. And e-commerce now stands for 20% of payments made in Spain. Out of every EUR 100 sold, 20 are sold on e-commerce. And e-commerce has a growing presence there. And Bizum is a clear example of this trust we have generated by building, innovating, and evolving, while keeping our focus on the client.

So transactionality and being our clients' and customers' first bank or bank of choice generates trust. And here, you have the data on our sound deposit base on the share between time deposits and demand deposits. Well, granularity of those liabilities are vital. I mean, those accounts from retail and SMEs and even corporate are vital to us. In this competitive environment of today, neobanks stand out. But there are 2 things I want to say. We've been competing in this arena for years. And for a long time, we've witnessed different value propositions that were purely digital and highly niche-centered. Some of them came in as early as the turn of the century, and we stand at 2026 now.

In the past couple of years, we've seen a strong impact of these newcomers in terms of opening new accounts or new accounts opened in neobanks in Spain. We also do see that they tend to cannibalize one another in time. These new entrants cannibalize one another. So I would say that at BBVA, we constantly monitor all the clients we share with competitors, clearly also with neobanks. We have all the data on how those clients interact with our competitors and with neobanks. And we, in terms of users, well, we can monitor whether they interact with other banks once a year, twice a year, once a month, and we can see how our clients evolve into the products they hold with us 3 months, 6 months after them opening a new account with a neobank.

So we can take a perfect picture of the product where those new entrants and competitors are present. And well, ultimately, the big challenge is being someone's main bank. That's the holy grail. And what we see is that remaining #1 is a very difficult task. When you have a model like the model we have in BBVA Spain, encompassing customer experience and offering the best channels and therefore, evolving those clients, you have the winning ticket. We have customers that have other banks. But when it comes to core products, we are still many, many customers' main bank.

And clearly, with our value proposition, we offer our customers the best possible scenarios and the best of all worlds in terms of multichanneling and customer experience. So ultimately, that trust goes beyond a mere concept and becomes a deliverable in many experiences we've been offering our customers in different channels. But a clear example of that, also the online advantage, and it exists across all of our departments, and it would be very difficult or complicated for our competitors to clone that option. And then we have a live face-to-face channel.

So 1 bank, 1 single channel with a niche value proposition and a very good experience as long as you remain within the happy path, we'll have to compete with a multichannel, omnichannel, placing the customer at the core of every decision made. That's a harsh comparison. So as you can see on this slide, our experience has driven us to take a significant turn in our total lending mix. We're supporting growth, particularly in specific segments and products where we understand much more value could be found. In our specific example, I'm talking about business. I mean, SMEs, small businesses, big corporates, and consumer lending.

Well, we have grown more than the system. The system has grown by 1.5% since December 2020, whereas we grew our balance sheet by 2.6%. Particularly under corporate, we have grown 260 basis points during the same period. And in consumer loans, according to our data and including preapproved and 1-click loans, we have grown by 261 basis points. And thanks to this growth, our balance sheet mix is very different from the one we had in 2022. So now these numbers are a lot more significant in our mix. So in the enterprise world, you can see our data from the past few years. If we take December 2020 as 100 base in aggregated terms, the system has grown by 1%, whereas our balance sheet grew by 33% in the same period. That's what I meant by 260 basis point market share growth.

And we're offering -- or we're contemplating all sorts of businesses, small businesses, SMEs, corporate. And I have some data for you. When we were determined to be our customers' main bank, we decided to focus on a model that would help those clients with their payments and collections and growth and debt. And our commitment to each of them is divided into short-term and long-term share. And in aggregate, we have grown over 400 basis points, and over 500 basis points in short term, in other words, in payment financing. So in specialization and SMEs, we have grown our sales force by 53%, going from 930 to over 1,400 individuals.

And our transactional managers today, which have an impact and have an interaction with customers over the phone to be there for them are up to 26% of the total sales force in enterprise segments. And just as we invested in digital capabilities in individuals or retail, we've also invested in the digital features of the enterprise segment, both for our account managers with the best CRM out there in terms of the use of data and opportunities and the digital channel we offer through our app and our website for everyone in the enterprise segment.

Another aspect on which we have worked very hard is trying to get all those products and experiences that were mostly reserved for larger corporate clients, we have cascaded down to smaller businesses and SMEs. So the options or our outlook for SMEs is turning their smartphone into a first face-to-face interaction for servicing and new account opening. 40% of our SMEs have pre-granted limit loans for their business in the digital channel. So this is a model that was successful in retail via pre-granted loans, and we have just cloned it into the world of smaller businesses.

And this whole transformation endeavor in terms of customer experience and new clients and growth translates into our balance sheet. In 2025, we had a profit of 4.14% with an RORC of 20.2% and an efficiency of 33.3%, an efficiency ratio, which are the best numbers in Spain as long as we don't compare apples and oranges, because some competitors include their CIB when they talk about Spain or they include enterprise banking branches in Europe that we do not include in our earnings call because we call it Spain versus rest of businesses.

But if we compare Spain business to Spain business in terms of efficiency and profitability, we remain #1. And that comes from following the path I just described that we envisaged years ago, highly focused on the customer experience. So as you can see, if we benchmark ourselves to our peers, we get 24% of the total results, considering that other competitors have a comparative scope that does not exactly match ours. So usually, during earning calls, I add business volumes for each entity and what they call their Spanish business and assets and liabilities and then benchmark them to other entities and to their business volume. And we still stand at the top. We are #1 by far in terms of efficiency and profitability versus business volume. So that's how far we've come.

And both Carlos and Antonio talked about a differentiating factor BBVA has, and that is our clear strategy. We have stuck to that strategy. And in terms of execution, our outcomes are our best billboard. We have been successful managers. And there is a very similar challenge ahead of us. We want to give our clients and customers the best value proposition, whether they be a company or an individual or a corporation. Ultimately, all customers want their banking institution to be relevant and useful to them.

And what we see, as you've heard enough times today, is that based on the new technology, we now have the opportunity to build a brand-new bank that, in terms of customer experience and trust, can build on its own experience to earn our customers' trust in a new competitive environment. So from now on, we have 2 sub-blocks of the last block. Opportunities or businesses where we have or continue to have room for growth and further profitability. And at the same time, on the side of big new ideas, things that we need to do as part of the new technology to have a real impact on technology growth and return.

So acquiring more and more customers. That's our obsession and has been for years. In 2026, as I was saying, based on the data we monitor every day in this highly competitive environment filled with new players and different value propositions, we aim to continue to grow just as we grew or maybe slightly more than we did last year. And as I said, with a specific example of Bizum, trust comes from our innovative DNA, always in search of new solutions to make the whole customer journey a lot simpler for them, seeking new value pockets that translate into specific projects like the data transfer from public institutions that you can get during onboarding, not only from Spain, but also from the rest of Europe, so that we can engage new clients from other countries in Europe, or making use of our existing footprint and the related business ecosystem to extend our value proposition to more potential clients.

In terms of business where we have a greater possibility of growing, we'll talk about insurance. Insurance and capital, there's a lot of competitiveness in this sector. We are a very important player. We have Vida Life, and household insurance is in-house, and outside these kind of agreements, we have [ Altérra ] we use just for reference, and it's Sanitas for health insurance. And the rest, we have different areas in non-home and non-health with cyber risk and a very wide coverage beyond the Sanitas, the health care company. But here, we can see the growth, 18% comparing the rest of the sector, only 7%. And the balance sheet contribution of 17% higher in commissions, it's pre-tax profit and fees CAGR from 2025 to 2025 (sic) [ 2026 ].

And we have a great opportunity in insurance where we have 21% of our customers that have subscribed an insurance policy with us. So it's 79% of the clients that we can reach out to them and convince them of our proposal, okay, so that they start holding policies with us. And we are conscious that our proposition must be based on confidence. We think that in the sector, they sell and sell with the dropouts and nonrenewal rates that they take into account, as there is always in any branch of the insurance world. But we're working on that. We're improving the clients' experience, so that we can drastically reduce the dropout rate and therefore, increase significantly the rates of renewal.

In the case of claims, you can do everything through the application. You will have a single claim manager and you have a follow-up claim for the home accident, for example, you will have the full management and follow-up through the app. And in the very short term, the agent in the app will play an increasingly relevant role in the customers' experience through the app. And concerning private banking now, I can share some data on our situation. We have a very solid starting point, very solid indeed. We have more than 200,000 customers. As of August 2026, we've increased by 46% our sales force in the world of private banking.

By the end of the year, we'll go on increasing it because it's a very strong and decided bet from our side. And we have an NPS, which is excellent, 84%.

We talked about neobanks and the challenges we face in the future before, right? And the need to update ourselves and to gain and acquire customers, but happy customers. So this is a challenge for our competitors. They fight against this barrier, which is 84% of NPS that we have amongst our clients. And we believe we may grow even more in terms of value propositions in some very specific issues that have to do with the concept of differentiating ourselves with the private banking customers that may have, he, she, and/or their family, some advantages because of their being best preferential clients of the bank concerning different options and value propositions that we wish to improve upon. And our own bankers, as Antonio was saying before, will be obtaining upgrades in terms of advisory capabilities, leverage on a better knowledge of both the market and the clients, as I said, driven by the AI.

And the enterprise world, we have 2 slides here. It's been an absolute focus on the entrepreneurial world growth. We've grown in 260 basis points. We've increased sales force in terms of specialization, the building and deployment of CRM in our sales force for enterprises with a continued investment, significantly so in digital and remote channels in terms of providing a better experience to our customers.

And we are going to continue with this effort. We are going to measure -- we really measure absolutely all our customers' transactionality, payments, finance, nonfinance, national and internationally. We know about the inflation rates that each of the clients are exposed to. We have very clearly set goals in terms of growing and growing and keep on growing.

That data that I shared before about that growth of more than 500 basis points is a very specific example on how we've been able to land and settle our strategy, and we're going to go investing. And we're going to go on investing in channels in the payments and collections of funds nationally and internationally in the remote channel for the specialization of our transactionality teams in order to help our clients better in the foreign trade.

And AI is also going to help us. As I said before, we're digitalizing our commercial proposition and pre-granted loans. So it's going to help us, AI, with a better process of knowledge about the client and creation and building a risk framework that is appropriate to that specific client and the translation to the digital channel for the convenience of the client, so that they can hire the different products with their own risk assessment. It's a product. We talked about democratizing these products. Where we launched a product for bigger companies that was multi-financing capabilities, we collected all the different lines that they have as cash flow in the company, credit line, confirming, factoring, whatever, and to include everything, integrating it into a comprehensive frame of risk assessment.

And then the client can decide, I have EUR 100 million and it would be up to me to designate that EUR 100 million into each of the standard products. It's wonderful, this product, in terms of clients' experience. They will be contacting the manager continually and offset between confirming and factoring and rebalance the different charges. Well, you don't have to do that anymore. We have it for the enterprise world, and we launched it a couple of months ago for SMEs, and 2,000 SMEs have now chosen this product of BBVA. And it's an example of how BBVA's innovation is reaching out to all clients, all segments and all clients of all sizes, which is our obsession, and this is what we work for.

And also for the enterprise segment, in every size, of course, there are different value niches where growth may be expected. For SMEs, we have specific examples, examples of the middle market, middle-sized enterprises and the big corporate clients. We want to improve their experience. The AI agents will be very important, orchestrating the traffic of many of the interventions that the clients undertake with us. And it's a big bet so that the experience is the best. And orchestrating with AI, we'll be able to use commercial opportunities from any kind of interaction, even though the first interaction that the client might have had is a servicing interaction, but it will be the same, the same we obtained with the remote model.

I talked about the remote model before. There were similar figures of the remote segment in the physical persons with something similar in the face-to-face world. Well, now for remote world, we have an average of 38 sales a month. The same for a live interaction means 26 sales. In remote, we have a resolution of about 85%, okay? We convert the servicing into a commercial opportunity. Why? Because the client is so happy with our resolution capabilities that it promotes it. It's a multichannel world that only us offer. And we're taking the same opportunity to enterprise segment.

And in middle-sized companies, we've grown. We've grown in terms of our presential distribution. We have now specialized managers in that middle-sized companies, EUR 15 million to EUR 50 million in business turnover. And we've already shown the results. It's contributed to the balance sheet for 2026, and we're growing 115 basis points more than the average in that sector. And of course, as I shared before, the enterprise segment has experienced a very, very significant growth.

And lastly, I would like to share with all of you what our position is in terms of the customers' experience towards the future. I was saying that in the past few years, the client has always been at the center of our strategy. The client-centric strategy meant we were going to be the first, the first for all kinds of banks in terms of NPS, the Net Promoter Score, the NPS. And that's why we can explain our situation. We're in the top tier. It's a whole different playing field. We're first-rate because the technology allows us to listen to the customers many more times.

So now we have the open market NPS and the same questions, specifically questions -- physical SMEs and corporations, we ask the same questions as soon as they access our app. At 12 months, we have answers of about 1.5 million customers. 25% of them, of the customers that we do ask questions, they answer back and give you feedback on where you have to improve, and that very active listening effort that we undertake in the enterprise segment takes to action, action in action.

They are actionable because we build new functionalities, and we improve many of those that we already had, and that the clients are demanding, asking or telling us about that have room for improvement. So the culture in BBVA, the culture of BBVA promotes active listening of clients, notwithstanding their size or segment and therefore, react to that active listening endeavor. And we've gone beyond the absolute values on NPS that gives us a larger dimension of the clients' opinions. Now we've gone towards a detailed information on each of the type of segment and to measure the emotional moment with BBVA and their perception of the relationship with BBVA. It's not only 12 months, but to know at any time what the relationship is.

And we have millions and millions of sources of information. Obviously, NPS, the 2 kinds, and also in terms of granularity, we have the transactional NPS and real-time and all the different conversations that we process through AI, the conversations that the customers have with us, voice conversations or text conversations, and we can measure and value and assess the feedback in each of the conversations. And starting from that, and I insist starting from that, we build upon that. And also we measure other issues or feedback that the customers provide as to processes, for example, that may be entertained as a possibility of a fraud, a card being blocked or requesting a mortgage at a given time. All that leads to active listening and then actions, actions and actions, corresponding actions.

More than 50,000 clients a month have had some kind of reaction or negative feedback to the last relationship that they've had with us in specific cases. And the evidence tells us that listening to them, calling them and listening and understanding, we changed their perception of the bank and improved upon the NPS. So BBVA goes beyond the acronym. It's an attitude, a listening attitude, a reacting attitude to what we've heard, which means that the clients' experience is our strategy, because it is the center of all our decisions.

And now by way of conclusion, I've given you some specific examples where we can see that AI will have a clear impact in everything, everything that we do and how we do it. We want to build a bank that is more convenient, easier to use, more comfortable, faster, more contextual, as Carlos said in the beginning, and therefore, much more personalized, personalization understood as answering the needs that each of our clients present at any given time. And of course, a robust bank, a safe bank and a scalable bank. And when I talk about scalability, I talk about growth, which is our main objective. We shall be able to offer all these functionalities and all these positive experiences to an increasing number of clients in a much simpler and faster fashion.

In conclusion, some final remarks following the different blocks we've seen in the presentation. In Spain, we are in a macroeconomic positive environment. We're quite optimistic as to the credit demand growth and economic growth in general. BBVA has proven its strategy. We are boosting the way we implement and execute the strategy, the focus on the customer, the excellence in delivery in each of the channels. We're moving forward. We have a clear goal to the future to growth, and growth in the future based on the clients' experience, and looking for those hubs or niches where we think we have a possibility of growth and improvement. And we're moving towards the future.

Of course, we are moving forward. As Carlos has said, we're building a new bank. Carlos Casas has mentioned this, and we're going to build on the way we work our relationship model and distribution model. And it will have a very strong impact on the customers' experience since we clearly are leaders in clients' experience, and we have been leaders in customers' experience in the past few years. And we have the credibility of having been successful in the past in terms of executing all the strategy that I have described in the other slides and as it couldn't be otherwise; of course, placing the customer at the center of all our decisions.

Well, thank you. Thank you very much for your presentation, Peio. We'll start with the Q&A. Firstly, answering questions from the room, and then afterwards, those online. Please.

I had 2 questions. First, many of your competitors have been trying to grow in private banking in Spain, the competitors. What is BBVA doing differently? How big do you think the opportunity for private banking in the next 5 years will be? And second question, a few months ago, I remember that we saw the data on the percentage of customers' revenue that is remaining at BBVA 12 months after identifying that it was sharing with neobank in Mexico. I was curious, do you follow the same statistics in Spain, the same metrics?

Thank you, Miruna, for the 2 questions. In terms of private banking and the opportunity, well, it's a very competitive segment. Instead of traditional players, we have some niche players, boutique banking and so on. The big opportunity that we have at BBVA is to compete and acquire external customers. It also has to do with our own clients that are segmented in personal banking -- or not even properly segmented. And now thanks to our own study with the commercial intelligence and through their behavior and functionality, we have come to realize that these clients do work with BBVA and are probably clients of private banking for other competitors.

And in-house, we have a brutal growth capability of already existing customers who are already working with other financial institutions. And then we capture them, we acquire them internally as an upgrade in order to engage with private banking with us. And other competitors don't have that asset. Those niche or boutique competitors don't have that advantage. And this is a very, very relevant growth opportunity. And also the configuration, the nature of the bank's configuration in different areas and business units is also a very important growth opportunity. Internal synergies are very important in terms of private banking and transactionality. It's one of the greatest tools that we can leverage upon.

We're working on that. We have many investment incentives, and many of the payrolls transactions are acquired through different commercial propositions that the different companies that we work with will facilitate. We have become the primary bank for many of the employees, and that's a very important segment and a great opportunity for growth with this cross-selling between the different areas of the bank. And the same goes for private banking, usually comes from different corporates, executives, SME chairs that are working with BBVA in some of the areas, and that somehow we capture them and persuade them to work with the bank in a more comprehensive fashion. And that is a very relevant opportunity for growth.

I'm very optimistic as to the future in the next years, we have great capabilities for growth. Our data says that we have almost doubled the assets we manage in private banking in the past 5 years. For you to have an idea, 2/3 of that growth are explained because of invoicing on third parties because of the market effect. 2/3 of that growth has been a duplication of the growth of factoring and what I mentioned of the internal synergies and the in-house management of clients.

And the second point, I wanted to add something on the first point on private banking. It's important to understand what Peio has mentioned, the digital transformation and the remote model has allowed us to be more efficient and to release some capacity that was devoted to particulars and grow in enterprise, private banking, SMEs, and that's why we've grown. We have 90% of private banking managers than we had 6 years ago as a result of digitalization and the consolidation of the managers to high-value segments.

And as to the second question, we do measure what each customer does as we share them with other banks. We measure the behavior and transaction with each and all the products. But we still -- our main customers prefer, customers went with the primary bank. And after a few months, we have seen how many clients we've shared with Revolut or the others are still having primary banking with BBVA, which is more or less the same percentage as we lose the stock or the primary banking clients is more or less the same rates. We see a few niche effects, but the primary banking with the clients, it's preserved and the transactional liquidity still managed with us as well. And we could also insist that the companies that pay through BBVA, the payroll, where those payments end up, and we know perfectly how many payrolls are paid from BBVA to neobanks. And the amount is 0. It's not significant at all.

Thank you. My question probably for the 2 of you. As, Gonzalo, you played a former role, you'll be comfortable with the question. You've given us the market share rates for the enterprise, 68 growth in basis points in the past few years, I think I remember correctly. Can you tell us in which credit segments and what type of tools or maybe by sector or type of credit tools that you have gained market share?

And towards the future, do you see a greater possibility in gaining further market share? Do you have any objective that you can share? Or it would be just the natural growth in market share that you can provide that you think is a reasonable forecast for the future? And second, more qualitative question. You mentioned credit and if you had to rank the 2 or 3 segments where you expect a greater growth in the next 4 years, which one would it be?

On growth, well, it's been quite cross-sectional across all sectors. We have all the data, of course, on the evolution of the risk cost. You could ask, this was paid at the expense of paying an increase in NPL or a worsening in indebtedness of the quality. We have broken it down by SMEs, corporations, middle size, and we have very, very good data.

In the aggregate, we can see how we compare with our peers, but you analyze the breakdown into each of the product segments, the results are very good as well. So it has nothing to do with quality of our credits.

And in terms of profitability, we have a granularity in the follow-up of detail of operations in each customer, which is a brutal level of detail. So we have a very insightful understanding. And it's been cross-sectional across all sectors. And after all, we just reflect the mosaic of our economy, and we take up after the environment. There's been a few sectors such as the tourism sector, which in Spain has been leading, okay, ahead of the others, but maybe which is a characteristic of the growth of Spain in the last few years, which is not usually reflected in our sector. It is that more or less all sectors have been doing well.

Geographically speaking, they've all been experiencing positive results, some better than others, but they've been doing reasonably well. And we've been growing in all sectors and in all segments, which is very important, middle-sized, SMEs.

And SMEs, when you ask about service and the first, second provider payrolls, we have grown significantly in the past 4 years. We went up to 14% in SMEs with fourth or fifth, and we are third in the SME segments. We've grown in corporate, middle-sized, in CIB, in the contribution on the marginal benefits in Spain. It's now 56%. But in '23 and '25, the contribution to the business has contributed by BBVA because we're more relevant with the clients. We're involved in the most significant operations and transactions. So we grow more in terms of results. So I would think it's been across all sectors and all segments and all sizes.

That's been our obsession to grow through the client-centered, on the client, any kind of segment, any size of clients. It has been an acquisition obsession to offer and provide the best client experience no matter the size and no matter the challenge. We insisted on democratizing all the different products that seem to be a niche for the big corporate clients and now are being brought down towards to middle size and SMEs. The same kind of services and value propositions that were successfully in private banking with remote or digital servicing or contracting or risk assessment have moved from private banking to SMEs and enterprise world and enterprise segment. So we've worked across all segments and it has borne its fruit, of course.

And your second question, I don't think about ranking with members of our team. We don't want to be confusing who's in the second or the third position. No. You just see a possibility for growth in everything we've been summarizing. In the enterprise world, we come from spectacular results.

Whatever way you look at it, whatever piece of data you study from the Bank of Spain, NPS rates, first provider penetration in payrolls, all the data. Absolutely, all the data have improved acquisition of first new clients. We're first-in-class for all sizes of the enterprises. And we pursue with this ambition because we have seen in the past few years that we have been able to offer the best client experience. And if we go on providing the best experience, help them be relevant, we're going to keep on growing, which will be our objective.

And now to be specific, going beyond the enterprise world to the insurance, private banking, there were other 2 worlds, right, that you mentioned. I was talking as the country head manager and as Peio Belausteguigoitia. Well, I think we have a great opportunity in the area of the insurance world because up to now, we have not profited so much from our strategies. In terms of experience for the client, we haven't translated this into actual results. If we are consistent with our strategy, we'll provide results. And we have to admit that we have room for improvement in the clients' experience in the insurance world. And as we have seen, as soon as we focus on the clients, the results come. There's a big gap in the insurance world, and we're going to work with clients there, and we expect a great growth in that area.

Yes, I have 2 questions. First, we see many entities providing better offerings in remunerated digital accounts, payroll accounts. So have you noticed an increase of competition in liability products? And what influence could this have in the cost of deposits? And the second one, a follow-up on insurance. Since you already have financial conglomerate status, do you see an organic growth in insurance in your future?

You take the second one. I'll take the first one?

Okay. It's a very competitive world. All you need to do is watch TV and the ads on TV. There are different propositions out there. Ours is a proposition for individuals and SMEs, and it's very, very powerful. It's a vivid contrast to the ideas out there among our competitors. And data state that.

I mean, the client rules sovereign. And when you remain above 20% in new clients in SMEs for 4 years in a row, it means what you're offering is really good. In retail, we have a very solid dynamic proposition in terms of the benefits we offer to customers seeking a new bank. And we're doing very well competing in that field.

And also, as I've said before, we have an entire journey to make ourselves known to customers through an entire journey, so that in a very short time, since they open an account with us, we help them know us and get the best possible experience so that they will want to continue to work with BBVA. Yes, there is media pressure about remunerated accounts, et cetera. Well, we have our own value proposition with a different approach and different products.

We can offer investment funds, personal banking, private banking, where you can find savings products, some of them insurance related. We also have structured products. So we have a wide variety of products and customers choose us. As for media pressure on remunerated accounts, I think we're focused on transactionality. And clients will pour in, in the world of SMEs, enterprise and retail. And that's where we have experience and granularity in Spain.

About the second part of your question, as you know, yes, we have a financial conglomerate certification. And before the end of the year, we will also get the certification. Well, it won't have an impact on CET1 release because we're below the threshold for immediate release, but it will provide the chance to grow in insurance with no capital penalties. So further for growth in insurance. And also to run stress tests, we get an extra buffer. So when it comes to calculating the P2R, we will have an advantage as well.

Yes. Go ahead, Borja, please.

Borja Ramirez from Citi. I have 2 questions for you. The first one is about AI. Considering new clients, you reported 1 million new clients last year, and I believe you expect to capture an extra 1 million this year. Where do you think the AI has the largest impact, accelerating client acquisition or increasing cross-sales on existing clients? That's my first question. And the second one is about being a customer's main bank or principality, as you call it. What are the most effective products to get a customer to have you for their main client? Is it payroll, savings, loans?

Well, your question on AI, that's a very good question about the impact of AI in accelerating the acquisition of new clients. Perhaps I would round up that impact under guaranteeing a completely different customer experience. And that goes back to something Antonio said a while ago. In the next few weeks and before the end of the year, we will launch a conversational assistant like the robot you saw a while ago, and that customer experience leap ahead.

And it shows how you can use natural language to interact with this assistant that will provide suggestions and support until the customer decides to get a loan. That's one step ahead and above the customer experience we know so far. So our strategy in recent years, at least in Spain, will generate more cross-sales, higher tickets, bigger balance sheet and a customer experience that is a quantum leap ahead of the digitalization process.

As for the rest, I would say, being the main bank for individuals is about a payroll account, right, which is how they and we articulate payments and collections. So depending on who you are, the way you get your money and pay your things makes all the difference. And cards, including nonbanking players, we have a share of 2.6%, and counting them. We have 16.6% versus 18%. As I said, 20% of transactions in Spain are on e-commerce, and we have a share in that market of 29%. And Bizum specifically, well, we have a 58% market share in Bizum as a form of payment method. So that's only for businesses.

And if I had to consider the size of the business world, well, if you are a corporation and pay your employees through BBVA and then to that, you add taxes, factoring, confirming, well, you are their top supplier for banking services, and that is our obsession. And that we have made so much investment on the digital channel and on playing remote. 26% of our [ delta force ] is remote and devote 100% of their time to transactionality with corporate or companies.

Yes, one more thing. The relevance of transactionality involves not only deposits, it also involves individuals' assets. If we have the customers' transactions, it's easier to cross-sell. And most of our consumer loans market share comes from cross-sales and providing a super simple digital experience. You can tell which position he comes from, right?

Go ahead, Jorge.

Jorge from Quadriga. My question is about the race for liabilities, the race for deposits. So how do you envisage young customers? Because I don't see that big risk in neobanks right now, but 15 years from now, when the generational gap closes, because right now, the banking business is a trust business. And those who already have the money today also have a certain age. So how do you track -- I mean, do you have any indicator to track the way average age evolves amongst your clients? And do you have any initiatives to reel in those young clients? There is no trust because they haven't had a bank yet. So do you think that trust can be built 15, 20 years down the road with the likes of Revolut that might lead to a loss of the ensuing transactionality?

Well, thank you for that, Jorge. That's a very appropriate question. Some data for you. Nearly 50% of the individuals we brought in 2025 in Spain are actually young, aged under 30. So these are hard data. Because you're right, Jorge, that there is this perception, there is this narrative about the entrance of neobanks and their impact on younger population, but 50% of our new clients are young.

And that is because we were actually the first to do digital onboarding based on a selfie, for instance. And I believe that has kept us 2 to 3 steps ahead of our competitors.

When they made it to where we were, we were already 6 months beyond. And our value proposition kept evolving. And we have addressed value propositions to younger populations. And yes, 3 to 4 years before the flooding of neobanks into Spain. So that's a target we never lost sight of. And we wanted to be our clients' first bank. So we -- like first bank ever, not just preferred bank, and we have value propositions for the young, and we've had them for years. And about the entrance of neobanks, when we monitor the sequencing of different products and interactions with our clients since they start working with banks and neobanks, we have clearly segmented those clients that start working with neobanks by age range.

And if you look at the data, there's this neobank that started advertising their services using travel services. And you go to the airport, you see 18-year-olds, 35-year-olds and 80-year-olds traveling, and they work with us. So the perception of clients we share with neobanks does not depend so much on age groups. We do a follow-up based on age group international numbers, and you see plenty of banking interactions that happen, say, once a year, say, they use a neobank for traveling to a specific place and then never use it again, and we're still their preferred bank. So competition doesn't come so much from age group. I mean you see all sorts of age groups at an airport. And as BBVA, like I said, we've always been several steps ahead in terms of bringing in new clients and digital channels. And we've been focusing on the young segment for years.

Yes, not beyond what Peio is saying, not only do we measure each client individually. When we compete with neobanks, we also measure the features they offer. And we compare their features to ours. So if it's a joint proposition, well, it's a package. And then we look to what they offer and we don't. And it goes to our development backup that allows us to catch up with the experience amongst the youth or not, but any feature our neobank will offer is in our pipeline. And it helps us enhance our value proposition to our existing clients.

And since you mentioned private banking and made a couple of comments about it, if I recall correctly, did you launch an initiative for a multifamily office in Spain? And if so, how is that working? And can it be replicated to other countries? Or is it very locally specific?

Well, yes, we launched an initiative right before the summit. It's part of our private banking proposition, but it's too soon to tell because we just launched that initiative a month ago. As for the potential to export that to other countries, well, we're considering other countries like Mexico, and we're analyzing the numbers.

Yes. Next question. Alfredo from Deutsche Bank.

About your comment on profitability versus stock. And when you said that you're the most profitable bank in Spain, I wanted to see that from a different perspective, optimum time, minimum cost of risk, plus the advantage of the change in structure and increased efficiency. So how much further room to grow do you have in profitability per stock unit? And how much of future profit should come from growth? And back to something you mentioned a while ago, this monitoring of customer-by-customer cross-selling. Well, basically, the star of your cross-selling model used to be mortgages, but the world is evolving. So how do mortgages stand today in terms of value? How valuable are they for you? And how big a foothold do you have in the market without including mortgages?

Well, just to provide some context on increased profitability. As you know, we continue to strive for a better profitability in Spain based on the growth of credit and a favorable interest rate environment. At some point, we had stability. Right now, interest rates are slightly higher sooner than we expected. We expected Euribor at 2.5% in 2027, and we have already hit that mark of 2.5%.

But we're still positive about the growth of the credit dynamics in the industry, as Peio explained. And we also maintain our strategy to profitably capture that growth in highest value segments. So those would be the main drivers. And obviously, we maintain our efficiency pledge.

Yes, good question about cross-sales, Alfredo. Yes, we are aware that mortgages were our star product. But that has changed, as so many other things have. And I believe that you must have seen that in today's presentation, the bank has changed and our value proposition has changed. And actually, Gonzalo said something about that before. The key is transactionality, transactionality, transactionality.

It's a key element to better understand customers, but also new inference and propension models help us understand customers and offer different alternatives at different times.

Hence, cross-selling is no longer anchored to a single specific product, but rather, it takes root on better understanding and knowing our customer, better using the customer data we have to provide a better experience for them at their life milestones to cover their milestone needs. So yes, I am aware and I agree that the star product used to be mortgages, but not anymore. Well, depending on the year, we can have 60,000 to 90,000 mortgages, but we're capturing 1 million new clients and more than 60% of those bring in their own income. So the mortgages are no longer the big pearly gates for clients to walk in through. Well, there's still a relevant product for us, but the difference between mortgages and other products are a whole order of magnitude.

Two questions. So first, if you could talk a bit what you're doing, especially on consumer lending and embedded finance in the Spanish market. And then on a different topic, given the early elections, what can the banking sector do or what it's missing for the sector to be able to support a stronger housing supply in Spain?

Thank you, Hugo. Well, in terms of consumer lending, our growth has been highly leveraged on the 1-click loan product. It's pre-granted loans that stand for approximately 80% of our monthly revenues. We have nearly EUR 4 million in limits. And we closely monitor all the subsegments within those 4 million clients in terms of risk quality to measure the cost of risk for this product, consumer lending and therefore, its efficiency. I would say that it is probably the most successful product we have created in this bank in years. And as I said, it's constantly monitored. And we modify those products every month based on name, last name, and amount. On the side of embedded finance, yes, we're looking ahead into the future. And we want to enhance our value proposition and ecosystems that are not from inside the bank.

And your question about housing, BBVA as a bank and as part of an industry has always supported free new construction for housing involving both ownership and rentals. We support our clients, and our share in the industry is definitely relevant. And both BBVA and the banking industry have always supported and continue to support the housing industry as far as we can go, which is basically financing real estate and housing projects at different levels and of different nature with different purposes. I mean, the real problem in housing is the mismatch between supply and demand. More homes need to be built. That's it.

I don't think we have any further questions. Yes, sorry.

Yes. I was just wondering, where do you see the banking in Spain in kind of 10 to 15 years from now? Do you think, yes, we're going to have the same banks that currently are the leading banks in Spain? Or do you think that the banking environment will look materially different compared to what we have today?

Well, I would say that 10, 15 years into the future, it's very difficult to predict the future. But as Carlos and Antonio presented, scale matters, and it will be increasingly relevant. Investment in technology will continue to grow as will investment in AI, which will be a relevant part of banking costs. And if we can dilute those costs among a larger customer base, scale becomes vital. So certainly, 10, 15 years down the road, you will see banks that can compete in an environment that is highly technology-driven.

So thank you very much for joining us today for all your questions. I hope the event has been useful for you. Thank you, Peio, for your presentation. And for those here with us. I would like to invite you to join us for a cocktail just outside.

Thank you so much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

All right. Thanks, everyone, for joining this session.

Thank you so much. So I understand you are having the Spanish banks one after another.

I was going to say from one Spanish bank to another, or I could have said from one global bank to another.

One global bank to another. It's a bank that we respect a lot. So it's great to be...

Well, there's a lot of overlap, of course. But obviously, I'm very pleased, and thank you, Onur, for joining us, Onur Genc, Group CEO of BBVA.

I think we can get started if you agree. And maybe a good way to start is to look at sort of overall the outlook for the group. You've delivered a return on tangible equity of 22% in the first half of the year. That's broadly in line and consistent with your ambition to average around 22% over the plan period, '25 to 2028. At the same time, BBVA has consistently stood out in terms of better growth among European banks. And my question is against this backdrop, how sustainable do you think the combination of sort of profitability growth and be able to sort of distribute -- the distribution -- the shareholder distribution that you delivered -- you committed to distribute?

So how sustainable is it and also how sustainable the distributions or the linkage with the distributions, if that's the question, yes?

Antonio, as always, thank you so much for hosting us, for hosting me. And thank you also for pointing out to the growth dimension because it is true that our return on tangible equity in the first half of the year is now 22.2%. The decimals are even important for us. Every penny counts, as I say, in the bank. So the profitability has been at the forefront, and people are talking about it, writing about it that we are the -- among the largest European banks, we are the most profitable. But the growth dimension in my humble view, is less noticed or less taken into account. And I do think it's a very important number. And you have given the number, but let me repeat that once again. So we have grown our lending book 62% since the end of COVID, since the beginning of 2021, 62% and the average of the 15 largest European banks, excluding us, is 13%, 13% versus 62%. I do think there's a meaningful difference in there as well. So our growth profile is also very noteworthy, in my view, beyond the profitability.

So in short, the question of sustainability, is this sustainable at these levels? Our perspective is, yes and the clear yes. For a few reasons and some of you who follow us really closely, we quote a few factors that, in our view, they are hard to replicate assets or capabilities that is leading us to this conviction that we will continue sustainably on these levels.

What are those? Number one, we are a diversified bank, but we typically operate in low leverage countries, which is very important. It's like a household. It's like a company. If you have overleveraged, you face some issues if you take more debt on. And in our case, we are in many countries, but when you look into the leverage in those respective countries, they are very low. Mexico is one of the least leveraged countries globally. Even in the emerging countries landscape, it's very low, 35% banking debt over GDP is one of the lowest that you can find out there in the emerging market landscape. Spain, it's one of the least leveraged now after 15 years of deleveraging within Europe. So low leverage countries, number one.

Number two, wherever we are, we are either #1, #2 or #3. I mean, we don't really care about being #1 or #2, but we have scale. We have leading enterprises wherever we are. And in our business, mainly a retail banking, commercial banking business, scale really matters. And what really matters in our view, still at the moment is local scale and being large wherever you are, having the leading enterprises in wherever you are, makes a huge difference. Being #1 or #6, in my humble view, there's a huge difference between the 2. That's the second factor that we have. Low leverage, diversified bank leading enterprises wherever we are.

And on top of that, I would add 2 things that we have been working on really hard in the last 10 years. One is this topic of embracing technology, embracing innovation, embracing digitalization, which is, in our view, is a bit differential. Everyone does it, but we do believe it's a bit differential. It is proven by our numbers in terms of customer acquisition and what percent of our new customers come from pure digital channels, very different than the rest of the industry.

And number four, very basic concept, easier said than done, but we do think our discipline on capital is also very good. At macro decisions, I think we have proven this in our M&A decisions, especially in our sales decisions. We sold Chile. We sold Paraguay. We are now selling Romania, where we have subscale franchises. So we are capital oriented in our macro decisions and in also micro decisions. Every single euro of capital deployed in lending to clients, marginally speaking, that additional euro that you put into a client, it has to be profitable. And that discipline is a mantra in our bank, and we are -- we have also done really well on this one.

Given these 4 topics, I'll repeat, diversified, low leverage, leading enterprises wherever we are, huge focus on technology and innovation and digitalization and now AI. And then the capital discipline, very basic concept. When you sum them up, our conviction is that we will continue to deliver the best profitability in the European banking sector and then the best growth in the European banking sector.

One final thing that you said in terms of sustainability, how do we -- the sustainability of growth versus shareholder distribution. I'm not sure whether you implied it, but some people tell us that there is a clear trade-off between the 2. We don't agree. For a long-term investor, we do think, again, as long as you maintain the condition that marginally speaking, every marginal euro of capital that you put into deployment, that you put into your loans, as long as that marginal euro is productive and capital productive, profitable, there is no conflict. It actually creates a flywheel. You grow, it's profitable. You create more capital from this, your cost of equity. And then with that additional capital, you compensate your shareholders.

I mean, we were paying EUR 0.31 of dividend in 2021 -- from 2021 results. 4 years ago, -5 years ago, EUR 31 (sic) [ 0.31 ]. Last year, 2025, we paid EUR 0.92, 3x. And this year, hopefully, we will pay much more. So as long as that growth is profitable, there's no trade-off. It's a flywheel actually. You grow, you create more capital, you distribute it to your shareholders. You create more growth through this, you invest. And it's a flywheel, positive flywheel as long as marginally you are profitable.

I think you framed it very well for everyone to understand. I think it's quite important. Maybe let's go through some of the geographies that sort of contribute to what you just said, starting with Mexico, which is your largest profit contributor. Well, BBVA is the largest financial institution in the country. And you've clearly been benefiting from the near-shoring trend. But if you look at global trade, there's obviously been a significant shift with around 1/3 of global trade now exposed to some degree of uncertainty, while Mexico is also navigating through sort of the USMCA process, which is going to stay with us. Now what are you seeing on the ground? And what's your overview for your market position?

What we see on the ground is a bit uncertainty, obviously. But I would say it's one of the misunderstood parts about -- around Mexico, but we are quite positive. And let me see -- let me be more tangible and numbers oriented because otherwise, it's all concepts and nothing is real. So let me give it -- put it into numbers.

First of all, before the numbers, I do think this concept of USMCA and the trade relationship between U.S. and Mexico because Mexico, 85% of the exports go to U.S. and so on, it's very important for Mexico. At the core, at the fundamental level, Mexico will be a beneficiary out of this in any case because not because U.S. cares about Mexico per se, but for the competitiveness of the U.S., for the competitiveness of the U.S. businesses, at the fundamental level, we are positive.

Why? We quote this number from time to time, and it's analysis and data done by the U.S. administration, U.S. institutions, actually academic institutions in the U.S. The labor cost in Mexico for an average industry and for an average skill level versus a low-cost state in the U.S., like Indiana, I think, was the analysis, it's 1 7, 7 1. For the competitiveness of the U.S. industry, it's a major difference. You just cannot deny the fact, for competitiveness, U.S. businesses at least, U.S. economic environment needs Mexico. And also, as a neighbor, U.S. right next to Mexico or the other way around, you need a relatively stable neighbor. Otherwise, there are issues in immigration and many other crime and drugs and so on. So you need a relatively stable neighbor.

So at the fundamental level, that is why if you read the U.S. Trade Representative report about USMCA, every single U.S. business who contributed to that report, every single one of them basically claimed that they need Mexico in the mix. As a result, all the supply chains are integrated and so on. So at the fundamental level, you just cannot deny the fact that Mexico is needed.

But what is happening, you ask on the ground what's happening. I know that one, maybe I share some data. The exports of Mexico to U.S. in the first 7 months of this year versus 7 months of last year, January, July, is up 16%. The share of Mexico in the U.S. import market has gone up from 15%, 15.6% to be precise, to 17.2%. So Mexico is gaining share and growing very nicely in the exports to U.S. The average tariff for the Mexican products and goods to U.S. is actually around 4%. And as a result of this, it is true that there's uncertainty. There is uncertainty. But it is true that at the real level, when you look into the numbers, actually, Mexico is not negatively affected at all from all the dialogue and political situation around tax.

But more importantly, I would claim that in Mexico, the key issue has always been -- in the last 10 years has always been domestic investments because FDI -- even this year, FDI is up 2% first half of this year versus first half last year, up 2% FDI, foreign direct investment. But domestic investment has been an issue. On that one, we see some light at the end of the tunnel. It's this President Sheinbaum. She is putting the right framework into mix. They announced this plan called Plan Mexico, which is basically $70 billion, $80 billion of investments every year in the next 5 years to be done to improve the infrastructure, to improve the energy environment, energy production environment of Mexico and so on.

And this plan, we see that in every single country because we operate in many, many countries, but it's tangibilizing. We are seeing it in the ground. You might have seen it in the second quarter as part of Plan Mexico, there were tenders, 37 tenders finalized worth $9 billion of investments to be done by private sector in the energy industry. They have names, and now we are working with each one of them to be able to finance those investments. It is becoming real EBIT to domestic investments.

Given all that, we are relatively positive on the macro environment. And on top of that, if you add the fact that, again, I mentioned it upfront, low leverage, Mexico is one of the lowest leveraged countries even in the emerging market landscape. 35% banking debt over GDP and Brazil is 70%. So there's so much potential in banking sector growth. Again, in short, if I wrap everything out. The country, obviously, there is some uncertainty, but it has not been affected negatively from this latest trade disputes. It is affected actually positively. And on top of that, with the positive bias coming from Plan Mexico, we are relatively positive on the environment and on the banking sector.

And I guess that's one of the reasons why a lot of players want our banking license in the country. So staying with Mexico, you make nearly double the ROE of your Mexican banking peers. And whenever that's the case, I think it's natural for the market to wonder to what extent this gap can be sustained going forward with the competitive landscape changing both across banks and with fintechs. Now what's your view there? And we've seen a few fintechs gain banking license. How do you see the competitive landscape in Mexico?

As you say, the competitive environment is changing with a lot of fintechs gaining ground or being very visible, very active in the market. But before that, again, we talked about the environment, which is positive in the previous question. But on this one, I can also say that I've seen many banks in my career in many geographies, even within the BBVA landscape. I would claim, again, a bit may be subjective, but I believe I'm objective by saying that it is one of the unique franchises that I've ever seen in my life in any country. It has the scale. We have 26% market share. It has what we call transactionality, which is very important for us. You have to be in the cash flow of clients in any segment, cash flow of clients to be able to have a better relationship with the customer.

We have more than 40% market share in payroll. We have 35% market share in acquiring. We are overproportionately represented in the cash flow, cash management systems of companies, amazing franchise. We have the best technological capabilities. If you look into our digital, again, going back to the -- one of our differentiators as a bank, we are one of the best digital players for sure in Mexico in terms of digital capabilities. And as a result of that, as you say, we have nearly doubled return on equity. It has come down a little bit in the last year, mainly because of rates because when rates are low, that multiple comes down a bit. But when rates are high, it goes up, it's mainly because of the rates, but we have the better customer satisfaction than any other player as a large player with 26% market share. It's not easy to be by far the best customer satisfaction player in the market, which we are. So it's a unique, unique bank.

But you asked about the competitive environment, and you refer to, I guess, to the fintechs, which is true. If you look into the last 5 years, the change in competitive environment is mainly coming from this new breed of players that we see in the country, which is fintechs. I can say a few things on that one. So it's a very competitive environment, but we are competing well. Again, past is not always the best estimate of the future. But if you look into the only fact that we have on the table, if you look into our market share, we have been growing market share very nicely, even in the markets, in the segments, in the products that fintechs are competing very aggressively, like in credit cards, we gained market share in the last 5 years. We gained market share. So fintechs, one of them has now 4% market share.

Where are they getting their own share? They are getting it from the smaller players, typically small to midsized players, but us, we are competing really well. We claim that we are one of the best fintechs in the country. Last year in Mexico, we acquired 4.7 million new customers, 4.7 million. 84% of the customer acquisition in Mexico came from pure digital channels. They didn't go to a branch, they didn't call anyone. They became like a fintech, a customer of a bank through pure digital channels, 84%, more than 4 million customers. With these numbers, we are acquiring much more than any other fintech in the country through digital channels, new customers. So we compete really well.

And we do think we have certain assets that they cannot replicate. The cash infrastructure, we have 15,000 ATMs. Cash is still very relevant in Mexico. We do have the full product set. Fintechs typically pick a certain product, not the whole thing, obviously. We have the best brand score in the country. I can go on and on. But in short, very competitive, a lot of fintechs. We take them really seriously.

I have a dashboard in my table. I go every single day to look into that. One piece of that dashboard is the development of fintechs in Mexico, especially on how they are developing for every single client that is a BBVA customer, BBVA credit card customer who now has -- who we detect also has a separate fintech credit card. We track that customer one by one. If we see a decline in the spending with us, we immediately create a program, a campaign for that customer specifically. So we take them really seriously. But so far, it wasn't us who lost position and share. There is some margin erosion, but it's very normal. As long as we continue to do 25% return on equity in the country, we are okay.

That's interesting color on the dashboard. Thanks for sharing. Maybe moving on to Spain, which has been one of the fastest economy once again this year. You've been -- well, been gaining share actually with loan growth at 7%, significantly outperforming the market. A similar question to Mexico. Can you talk a little bit more about what you're seeing about business and the competitive landscape? And to what extent sort of these market share gains can come without compromising pricing discipline and cost of risk?

And cost of risk. The competitive environment is very heterogeneous in terms of segments or products in certain products or actually in only one product, which is mortgage, which is very price sensitive, as you all know, in banking, where -- because you only buy a house and the mortgage once or twice, maybe a bit more, but very few times in your lifetime, and you care about the price, you do the research and so on. It's a very price-sensitive product, and we see a lot of competition on that one. But beyond that, the competitive environment, in our view, is in general, healthy.

But coming -- but you talked -- you asked about the market. So maybe I can break it down into different pieces. The country, the macro continues to do really well. In Spain, the latest forecast that we have is going to grow is 2.4% GDP growth this year. And now we have a positive bias on that because the numbers came even better than what we thought. So we might need to revise it up. The team is working on this. In October, they will be publishing the final forecast that we have, but very positive 2.4% versus around 1% of Europe. Every single year in the last 5, 10 years, this has been the case. Spain grew more than 2% and Europe much less. So we are -- among the large economies, we are kind of the star in Europe for a few reasons.

Number one, there's a very pro immigration environment. So -- and there's a very easy integration, especially most of the immigrants come from Latin America. We speak the same language. We share the same culture. And that is creating a bit of a boost to the economy that has been creating a boost. There is a lot of service-based economy. Spain is a service-based economy. And what we have seen, especially after COVID is that service-based economies, they grow much better than pure manufacturing-based economies.

Tourism, again, this year, we are going to have another record. But beyond tourism, all the service-based economies, all the service components, and there are a lot of people. We are blessed with some, many people basically work out of Spain to do software engineering for many other global companies. For example, the service-based economies are -- or segments are growing very nicely. And also, there has been this investment boost, investment drive for Spain, partially driven by this next-generation EU funds. We have received basically EUR 80 billion in 3 years from Europe to boost the economy, to boost the infrastructure. So there was also an investment component, which was very positive. And when I look into the future, most of these components in one way or another will be there. So we still expect the macro to be quite positive.

On top of that, -- so the economy grows well, the first part of the puzzle. The banking sector grows even better for one simple reason. Macro is strong. But even beyond that, Spain has deleveraged for 15 years after 2010, 10 or 13, 14 years. Only after 2024, we are seeing some growth. But every other year, we have seen loan balances come down. And for the first time, after many, many years, basically the leverage in households in corporate is now half of what they were in 2010. And now we are much lower leveraged than European averages, EU averages. So there is room also in the banking industry in a positive macro environment to grow. That's why you might have seen it in the first half, we grew our loan book by 7%. So macro is positive. Banking sector is positive.

Then you ask about the competitive environment. In this environment, BBVA has been doing really well. We have been gaining market share, but we were very selective in areas where we do think -- again, I go back to the global priorities or global differentiators of BBVA, this capital discipline topic, again, easier said than done. But we are -- it's a mantra in BBVA. We have to be getting the worth of the capital deployed. As a result, in the last 5 years, then you look into what has happened to BBVA, again, proven by numbers, we have grown our enterprise loan market share by 250 basis points, not easy in banking to gain as much. We have grown our consumer loan portfolio by 260 basis points, mainly to payroll clients because we are overrepresented in payroll. The only place that we lost market share is mortgages where the competition is.

So you ask about growth is coming well, but aren't you compensating the implication, I guess, was the returns? No, not at all. In the areas where there is no return, we stay back. In the areas where we see return, we push hard. As a result of that, we again have more than 20% return on equity in Spain business. So it's going really well. It's the same story as the global thing as well. We have an amazing franchise in Spain. It's 169-year-old bank. The brand is someone that everyone knows. It's the household name in Spain. We are overrepresented in cash flow businesses as we call them.

We have 14% market share in overall lending, but we have 17% market share in payroll. We have close to 17% market share again in acquiring. We are in the cash flow of clients. We have this entrenched customer relationship. We have an NPS, a customer satisfaction much better than others. Again, it goes back to digital. It goes back to capital discipline. But I don't think we are compromising at all the return because we don't -- again, marginally, we don't invest our capital in areas that we don't see value.

So very positive on Mexico, quite positive on Spain. Maybe talk -- we'll move on to Turkey, which is part of your sort of diversification.

You're looking for a negative area.

I'm not. But of course, Turkey is back on the radar and this time it's not for good reasons. The direction of travel seems to have -- at the very least, it seems to have been delayed to some extent. And I'm referring in particular to inflation expectations, which is what matters for you, those have moved back up and so have rates. You guided to somewhat around EUR 1 billion net profit this year with a downward bias. But more importantly, the market was relying on you coming off hyperinflation accounting by 2028, which, of course, will be a big deal. But maybe you can talk us through your expectations going forward and the key moving parts for your P&L.

Very well. So on hyperinflation accounting in the second quarter call, we put it on the table basically saying that we don't expect Turkey to come out of hyperinflation in 2028, which was the original assumption in our medium-term plan. If you look into our medium-term plan and targets, it was assuming that Turkey will come out in 2028. Now we expect, as we said in the second quarter call that that's not going to be the case. But we also said in the same call that we are -- Turkey might be delivering a bit less. Turkey was never a big part of the plan in any case, as we were saying from the first day on the plan.

So it will be slightly negative in the overall plan concept, but we will be doing even better in our view than the plan for other reasons, for other parts of the business. But Turkey, as you know, as you said, is the -- in the short term, at least, it is the negative part of the story. We have been actually -- I come to this conference actually every year. It's the only one that I come actually every year. And until 3 years ago, personally and in general, as the bank, we were -- and I'm Turkish. So we were very negative on Turkey, very negative actually. In the last 3 years, we are a bit positive for the fact that the team who is managing the economy now is a very good team in our view. They are doing the right things at least in that sense as compared to before.

So in the long term, we still maintain our positivity. But in the short term, as you say, it's negative. And you asked about the moving parts. We were very clear and we provided even the sensitivity at the beginning of the year. And in the short term, it turned out to be worse than what we expected. There are basically 3 macro parameters that defines the value creation, the P&L and the value creation of Turkey. 3 parameters.

Number one, inflation, we were expecting at the beginning of the year 25%. Now we are expecting today 30%, so worse. As related to this, we were expecting inflation at the end of the year -- sorry, interest rates to come down, the Central Bank policy rate to come down to 32%. Now our expectation is 36%, again, worse than expected. So in the short term, negative. The currency has -- the third parameter is the currency, what happens to currency. It is behaving better than what we have put into our original -- at the beginning of the year forecast, but currency is managed in Turkey, basically in short in that sense.

So on that one, I wouldn't put a positive thing on the table. But the other 2 parameters, which is very important, inflation, interest rates, they turned out to be worse than what we expected. That's why we said EUR 1 billion originally, then we put a negative bias to this, given this. We even provided the sensitivities on this. Every 1 percentage point in inflation, every 1 percentage point extra devaluation creates basically EUR 15 million, EUR 20 million negative impact in BBVA profits, EUR 15 million, EUR 20 million. Every 1 percentage point higher interest rate creates EUR 40 million impact on the bottom line of BBVA, EUR 40 million. So the numbers are very clear. If the macro parameters turn out to be worse than expected, you get penalized from this. That's why with the negative bias. We compensated for some of these through other means. So it's going to be -- that's why EUR 1 billion with a negative bias, somewhere close to EUR 1 billion, but not passing EUR 1 billion, which was the original goal that we had at the beginning of the year.

In short, given the macro parameters, short term looks negative, and we would not be getting out of hyperinflation in 2028 as originally expected. But in the long term, again, given the fact that it goes back to how you manage this and whether you are sticking with orthodoxy and or not, we have confidence in the fact that it is being managed properly in that sense. And as a result, for the long term, we are quite positive. And for the long term, this hyperinflationary accounting or accounting, so many questions are being asked on this one, Antonio, but I really do think it's not relevant because what matters is not the accounting, what matters is whether inflation really comes down or not. Because hyperinflationary accounting for the P&L, it hurts you, but the hurting is a formula, which is an amount multiplied by inflation. If inflation is lower, independent of hyperinflationary accounting is there or not, your negativity will be coming down.

So if inflation comes down, independent of accounting, you would be benefiting from this. So what we should be looking into is what year are we getting of hyperinflation? And by the way, this is for only for P&L. For capital, it's neutral, as you all know. So we should be asking whether Turkey will be reducing their inflation or not, not the time of hyperinflation. And on that one, 2027, we are not very hopeful. It's going to be probably in the 20s, high 20s. We haven't published any forecasts yet, but high 20s inflation because it's going to be either at the end of 2027 or early 2028, there will be elections. If there are elections, there's always some fiscal loosening. If there is some fiscal loosening, it hurts inflation. So 2027, we are not hopeful. 2028, it might be coming down again, as long as they continue on this path of doing the right things. And when that happens, independent of hyperinflationary accounting, our expectation is that with inflation at teens, we will be delivering more than EUR 2 billion in profits in Turkey because we have the best bank in the country, in our view.

That's a great answer. We have 8 minutes to go. I want to try and open up for questions from the audience. There is a question I want to ask you on technology, which I know it's close to your heart and it's important in your story. Maybe let's first -- if there's any questions from the audience? If anyone wants to raise the hands, we've got one here.

You talked a lot about your businesses, but they're not really the place where the loan growth is the highest. That's in your rest of business, which has been growing year-on-year by more than 50%, which is an astonishing growth rate. So I think perhaps we should hear a bit more about that from you. Is that business sustainable? Doesn't feel that it fits the criteria that you just outlined. And does it mean that you're up to your eyes in hyperscaler risk?

Okay. So as you said, the growth, relatively speaking, is coming from there more than any other thing, but absolute -- at absolute levels, no, the growth is also coming from the other places. Just to be very specific, we grew 52%, 53% in the rest of business, as you say, but it's a very low base. We grew 10% in Mexico, and it came from a very large base. We grew 7%, 7.4% in Spain, which is the bulk of our loan book in any case.

So at the absolute growth levels, it's not that big because the starting base is very low. But we are growing in that business for a very clear reason, which is we want to tag along with our clients and wherever they are. We have seen an opportunity there. We have seen an opportunity. We have many clients. We are a global bank. We have many clients in Spain who do a lot of business in Spain, in Latin America, in the U.S., and we were not serving them. They were being captured by the U.S. banks in Latin America. And we were like, no, this cannot be the case. Well, there are many Mexican clients who do a lot of business in Latin America, in Argentina, in Colombia, in Peru, we are there. And why were they banking with the U.S. banks in the CIB business? It didn't make sense. So we wanted to own that business.

As part of that business, when you are in the countries that you were not before in a relatively large way to serve our own clients, there are opportunities in the U.S., in Asia, in rest of Europe that we wanted to benefit from. But we started publishing this in the second quarter results. You would see it in the appendix. You would see that our CIB business is number one, is client driven. It's not prop trading or trading driven. You would see that a vast majority of our revenues in that business, in the rest of the business comes from clients, number one.

Number two, you would see in that page, same page that 40%, 40% of our profits come from [ B2B ] transactions cross-border. So It's basically clients. The revenues that we generate from the clients outside of their home country. As a result, we do think that's a natural turf that we can play well and that we can gain again better returns. The best proxy of this, again, is the return on capital. Our return on capital in the CIB business is excluding Turkey because Turkey inflates the number to an even better level. Excluding Turkey, it's 23.4% return on capital, clearly above our cost of equity. As long as we maintain the focus that I just mentioned, those returns are very positive for us, and we will create value.

You asked about hyperscalers. As part of that, obviously, we have some exposure to hyperscalers. But we do think you know us quite well. I mean, proven by numbers, not the subjective assessment, proven by numbers, we do have a very conservative risk profile. Our CIB business is conservative risk, follow your clients and deliver above cost of equity. That's the play there.

Thanks for the question, and thanks for the answer. Any more from the audience? There's one over there.

Last week, President Trump mentioned the possibility of the U.S. reaching bilateral agreement with Mexico. It's not the USMCA, but do you think that will be enough to improve the business confidence in the country to start thinking again of lending activity to nearshoring? And what will be the opportunities for corporates and the SME sector?

Yes. Very good question. Legally speaking, that's a very remote possibility. So USMCA, which is a 3-party deal, cannot be converted into 2 bilateral deals, cannot be. It has to go through the legal process in the U.S. That's the interpretation of our legal team and I think shared by the market that it has to be going through the market, through the Congress and so on for that to be a bilateral deal, cannot happen because the Congress and so on, you'll know what's going to happen there and so on.

But what we are seeing is within the 3-party deal of USMCA, the treatment of Mexico going forward is going to be a relatively positive one versus what we are seeing between U.S. and Canada. So there can be different treatments. Within the USMCA framework, they can inject things that can make things worse for U.S.-Canada relationship, but better for U.S.-Mexico, which is the base case that we have. But a completely new deal, which is going to be giving a preferential treatment to Mexico, is not going to happen. That's not the base case that we have.

I mean technology is going to be a theme for the next few years, the way financial institutions adopt new technologies. And I mean, you're a market leader on this. Any more color you want to share on what BBVA is doing and why BBVA stands out on this important...

As I mentioned, it is one of the things that we thought that we should do better than others. We thought digital at the time was a differentiation play, not a hygiene, not everyone will have it, so there is no differentiation kind of a perspective. Everyone thought that let's follow, let's do the transactions through digital channel, but digital is kind of servicing or whatever. We thought, no, it can be a differentiation channel. It can be a differentiation topic. That is why we claim that we are embracing, in general, technology, innovation, digitalization much better than others. That is why we spent EUR 4.5 billion cash out to technology every single year, which is relatively large as compared to -- relatively speaking to our competitors.

And we are going to do the same thing with AI. They are going to do the same thing with AI because what we are seeing is already, it is creating a differentiation. We have 127,000 people working for BBVA. Every single -- most of them are client-facing, but every single one of them, including the ones who are facing clients, they can be much more productive, much more effective with AI, number one.

Number two, we are a retail and commercial bank. We are basically an accumulation of processes. We do the same thing over and over again for the same customer for millions of customers, processes. We have thousands of them. Every single process that we have in the bank can be much more productive, can be much more effective with AI. And the customer interface is going to change big time with AI, as it changed with digital. I give the same example all the time. We have 81 million customers. And globally, because we are a global bank, except Turkey, basically, 81 million customers, they open the same app. It's the same -- when they open the app, BBVA in Argentina, in Colombia, in Peru, Mexico and Spain, it's the same app. But 81 million customers, they all do different things with the app.

Why do we open the same app to them? Why do we not tailor a bit to what they want to do with the app, with the bank? Why do we still do lots of click -- if you want to send money, the basic transaction. You do 5 clicks. If it's not in your address book, you have to input the IBAN and so on. Click, click, click, why do we do this? Why can't we talk to our app and get things done? Banking is going to change, in my view, once again with AI. And as we have done in digital, we are going to be a differentiator.

Thank you very much. We could have gone all day talking about this. It's a pleasure to have you, and we're very happy that if you go to conference every year. So thanks, everyone, for attending.

Thank you to everyone.

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.