Banco Bilbao Vizcaya Argentaria S.A.

Good morning, everyone. Buenos dias a todos y bienvenidos. Here with me today are Onur Gens, Chief Executive Officer of the group, and Rafael Salinas, BBVA CFO. As in previous quarters, Onur will start with the presentation of group results, and then Rafa will review the business areas. Then we will move straight to the live Q&A session. And now I will turn it over to Onur to begin with his presentation.

Thank you. Thank you, Patricia. Good morning to everyone. Welcome and thank you for joining our 2021 results audio webcast. I will start, as always, directly with the pages. Page number three, I will highlight some of the key achievements of 2021. First, the first line we have made in our view significant progress in the execution of our strategy focused on profitable growth, At the same time, leading the digital and the sustainability space. We have ended the year having acquired close to 9 million gross new clients, an all-time record. 73% of our unit sales have been done digitally, another all-time high. And we are also at the frontline of the industry in terms of sustainability. In 2021, we channeled more than 35 billion in sustainable finance. Second, today we are reporting the highest recurrent results of the past 10 years. Net attributable profit, excluding some non-recurring items, is above the 5 billion mark. Excellent results at the operating level as well, with operating income growing at double-digit, 10.8% in constant euros versus 2020. Third, we continue delivering on our commitment to profitable growth and value creation for our shareholders, ROTE at 12%, and a strong 10.1% increase of tangible book value per share plus dividends. All of this is allowing us to significantly increase distributions to our shareholders, including a proposed distribution of a cash dividend amount of 31 euro cents per share, the highest cash dividend in the last 10 years. And we are on track executing one of the largest share buyback programs in Europe. And last, we are on the right path to achieve the ambitious long-term targets that we announced in our investor day in November. These highlights are what I will be expanding upon in the coming pages. So page number four, New customer acquisition. As always, I love this page. Our relentless focus on growing our franchise has allowed us to acquire 8.7 million gross new clients in 2021. And as I mentioned, an all-time record. The share of those acquired through digital channels is also consistently increasing. As you can see in the graph, we have increased digital acquisition from 4% in 2016 to to an impressive 40% in 2021. That is more than 3.5 million new clients in the year acquired through digital channels, 47% increase versus 2020. Moving to slide number five, our leadership in digital has also proven to be essential and differential in our view. Let me put some figures to this on the left-hand side of the slide. We have almost 40 million mobile customers, a figure three times higher than 2016, and the record high with a 66% penetration rate. Our digital sales, I mentioned this, but it has reached 73% in terms of units and 56% in terms of value, again, record. And on digital advice, we have been designing different digital journeys, financial tools in the app to improve our clients' financial health and with direct impact, direct impact on our business. The users of financial health advisory tools through our app in Spain It has an NPS, customer satisfaction, 90 percentage points higher than non-users. These tools, they also drive digital sales. 27% of new mortgages and also 27% of new investment funds in Spain sold. They were sold with the help of these digital advisor tools. And on the right-hand side of the page, we are also investing in innovation and disruption as enablers for our growth, entering in new and attractive markets. Firstly, through Selective, Selective digital bank investments, like the digital bank Atom in the UK, our own BBVA app in Italy, Solaris in Europe, and Neon in Brazil. And secondly, through venture capital vehicles, we are investing in other fintechs, Propel. They have invested 40 companies, and 40 companies, six of the 40, they are currently unicorns in the portfolio. So Propel, I would like to highlight this once again, it has contributed 328 million pre-tax income to UVA in 2021. Moving to slide number six, we are also trendsetters in sustainability. We are at the forefront of the industry in sustainable finance commitment, and we have made great strides in this front, in my view. This year, we doubled our target of sustainable finance, granted between 2018 and 2025, our pledge from 100 billion to 200 billion. And now we are even outpacing this new pledge path, as you can see in the chart. In 2021, we have channeled 35 billion to sustainable finance, an increase of 72% versus 2020. In addition, we are one of the very first banks to announce decarbonization targets in selected CO2-intensive industries, as you see on the right-hand side of the page. And lastly, I'm very happy to announce that we have scaled up one position, and we now rank first, first worldwide in the Dow Jones Sustainability Index. Slide number seven. From this slide on, I'm going to walk you through the financials. In 2021, as I mentioned, we delivered the highest recurrent profits in the past 10 years. On the left-hand side of the slide, you can see the quarterly evolution of our net attributable profits, reaching 1,341,000,000 euros and 19 euro cents in terms of earnings per share. This figure implies doubling the results of the same quarter of last year, but for a better comparison, is also well above pre-COVID levels with a 30% increase versus the fourth quarter of 2019. On the right-hand side of the slide, you can see the evolution of our annual results. 2021, outstanding year, as I mentioned, profits surpassing 5 billion after a long, long while, even though we generate these results from a smaller geographic scope. This figure is almost, again, two times higher than 2020. But again, for a better comparison, an increase of 18.7% versus 2019. These results bring our earnings per share up to 71 euro cents. Again, one of the highest ever. Lastly, let me note that for comparison purposes, in all these numbers that you would be seeing, all these figures, they exclude non-recurring impacts, more specifically the discontinued operations, including the U.S. goodwill impairment that we did in 2020, and the results from our U.S. business sold to PNC and the one-off from the restructuring costs of the collective layoff process in Spain in the coming pages. Including all these concepts, the final reported profits for 2021, it amounts to 4,653,000,000 euros. Slide number eight, very quickly, our tangible book value per share plus dividends closed at 666, a strong increase of 0.1% year-over-year increase, very positive in our view, also noteworthy, the continuous improvement in the profitability metrics. You will see it in a second. We are growing, but we are growing profitably. And our double-digit return on tangible equity and return on equity stands out. So 12% growth, 11.4% ROE, very positive figures on the profitability side as well. Slide number nine, what stands out in terms of 2021? Let me just give you the headlines here. First, the strong activity growth, gaining momentum throughout the year, especially in the fourth quarter. We're going to talk about it in a second. Second, the strong core revenues, NAI and fees. I'm very happy with the evolution in these lines. Third, our further improving and leading efficiency ratio as a result of this fourth excellent performance of operating income, double digit growth. We love this double digit in operating income. And fifth, cost of risk evolving better than expectations. And lastly, our strong capital position, which we will discuss again in a second. Slide number 10, looking at the summarized P&L of the year, the highlight in my view is the excellent evolution of gross income and operating income. Gross income growing 9.7%, operating income growing 10.8% respectively, driven by strong core revenues, NAI and fees. And obviously, net trading income was also delivered very good numbers. Also in this page, it's important to note the positive evolution of impairments and provisions below pre-COVID levels and largely explained, not by a release and this and that, but explained by the positive evolution of the underlying risk performance of our portfolios. Very, very positive dynamics there. All in all, as I said, net attributable profit of 5.1 billion, excluding non-recurring impacts, including all 4.7 billion euros. Slide number 11, the quarterly evolution. So focusing on the fourth quarter and maybe the year-over-year comparisons on the page, the second column from the left, what stands out again is the impressive 31.1% increase in operating income. And if you couple this with the lower impairments in the quarter, it leads to an excellent net attributable profit, a growth of 84% in that. Moving to slide number Twelve, an important page for us in this quarter. As we have been anticipating in the previous results presentations, we are focused on growth. We are focused on profitable growth. And you see in this page how the continued new loan production recovery in the year, and especially, again, in the fourth quarter, has been translated into loan balance growth in both segments, in both retail and wholesale, by the way. You can clearly identify the charts, but as you can see in the page, we have grown 6.3% year-over-year in loans in the year. Obviously, very positive implications in the NII and in the fee income, and this also gives us great hopes for the coming quarter and quarters. Slide number 13, some light into the quarterly revenues breakdown and evolution. Again, one of the clear highlights in my view of the quarters. Our net interest income increased strongly versus last year and last quarter, especially boosted by the strong activity growth, as we just discussed, and also some spread improvements in countries and higher CPI-linked risk contribution in Turkey. As mentioned, the NAI recovery has accelerated quarter over quarter, leading to a significant increase of 10.5% versus the previous quarter and 16.5% year over year. Next on the page, Extraordinary, in my view, extraordinary evolution of net fees and commissions, growing 22.2% year over year. We see this positive evolution across the board in such a way that this is once again the highest quarterly figure reported over the past years. Net trading income on the page at the bottom continues with an outstanding performance again year over year and quarter over quarter, all in strong growth in gross income of 22.9% versus the same period last year. Slide number 14. I would first highlight the fact that we end the year with positive jobs, thanks to our strong gross income. And despite the costs growing at 8.5%, slightly higher than the blended inflation rate in our footprint. You know us. We typically deliver lower cost growth than blended inflation. In this year, in these quarterly numbers, the increase of expenses is largely affected by the normalization in variable compensation. You would remember this, which was especially low and even non-existent. for certain roles in 2020 due to COVID. So there's a clear base effect here. And then the results of 2021 obviously was very good. In fact, if we exclude the variable compensation effect, so if we neutralize that line, expenses would have increased 3.6%. Again, much below inflation, our typical trend. And as we expect also that trend to continue in the coming year. In the middle of the page, you see the improvement in the efficiency ratio, the best compared with our European peers, and we continue to improve on this best position. We have improved our efficiency ratio to 45.2%, improving 53 basis points in the year. Slide number 15 on risk indicators, solid performance, very solid performance, good performance of total impairments in the quarters, more aligned and even better than the pre-COVID levels in absolute terms. This is, again, mainly explained by the positive evolution of the underlying risk performance of our portfolios in most of our geographies. We have done some prudential provisioning in the FX commercial portfolio in Turkey in the fourth quarter. But in terms of the underlying risk parameters, we see a very positive picture. And the numbers that you see does not include any release of buffers and this and that. No, these are underlying risk parameters showing resilience and strength. Year-to-date, the cost of risk closes at 93 basis points, significantly better than initial expectations, versus the 155 in 2020, and also comparing very positively with 2019 levels of 104 basis points. Regarding the rest of the asset quality indicators, we see a slight increase in the MPL ratio in the quarter to 4.1%, while our coverage ratio decreases to 75%. This is explained by the implementation of the new definition of default guidelines of the supervisors. We have made this decision for financial books in order to be aligned with the solvency slash prudential rules of the supervisor. And as you know, it is more conservative in comparison with IFRS 9 approach when classifying the loans to stage number three. As a result, the numbers are showing a slight increase in the MPLs. In fact, if we exclude this new definition of default impact in accounting, if we exclude this effect, MPL and coverage ratios, they would be standing at 3.8% MPL, a decrease, and 80% coverage ratio. Slide number 16, as we have repeatedly stated, we have a clear focus on value creation for our shareholders, which guides all of our decisions. In this regard, we have recently made some important announcements, as you all know. On the one hand, we raised our policy regarding distributions to shareholders. to a payout ratio of between 40 to 50% of our profit, as you remember, an increase in the payout ratio. And as you can see in the left-hand side of the slide, I'm very happy to announce that the proposal to be sent to the next AGM, it foresees the distribution in cash, cash of 31 Euro cents per share from 2021 results, of which 23 Euro cents per share will be payable in April, complementing the eight Euro cents we already paid in October 21. This is the highest dividend per share in cash in the past 10 years. The total amount to be distributed, it corresponds to a payout of 44% of the net attributable profit, including the BVA USA results and the net impact from the destruction process in Spain. Additionally, as you all know, we announced one of the largest share buybacks in Europe for a maximum amount of 3.5 billion. We have already executed 60% of the first tranche of 1.5 billion, and we will start The second tranche of $2 billion, as soon as the first is fully executed, estimated to be in March. So we will start immediately the second billion in March. And we expect that to last another four months or so. So we will be closing at the end of the second quarter, third quarter, beginning of the third quarter. In sum, we have increased significantly our shareholders' distribution, $5.5 billion in total, considering the $2 billion of dividends and the $3.5 billion of share buyback. which if you combine them both, it represents roughly 15% yield over BBVA's market cap. Slide number 17, our capital position, our CET1 fully loaded as of December 2021 stands at 1275. This level is 415 basis points above our recently received, it was actually two days ago or yesterday, SREP requirement of 8.60 for 2020, which remains stable. On the evolution in the quarter, let me first highlight that December 21 ratio, it includes deduction of the 3.5 billion share buyback program, which has an impact of 130 basis points. The results, the results add 44 basis points to the ratio. Then the dividend accrual and the 81 coupon payments, it is attracting 26 basis points. This reflects the higher final payout of 44%. versus the 40% that we have been accruing during the year. So an additional six basis points impact here because we wanted to pay higher dividends to our shareholders. So additional six basis points impact coming from here. Besides that, this quarter, the capital evolution is mainly explained by the RWAs increase, detracting 49 basis points. The most relevant RWA impact, around 60% of it, or 29 basis points, is explained in my view by a very good reason, the strong credit activity growth across the board. And we have discussed it aligned with the 4%, close to 4% loan increase only in the quarter, only in the fourth quarter. Growing, but as I mentioned, growing profitably as demonstrated also by the improvement in our profitability metrics in the quarter. So 29 BIPs goes to credit RWAs. The strong gross income evolution in the year has a direct implication in the operational risk capital consumption, whose calculation, as you might know, is updated once a year in December and, as you know, is positively correlated with the revenue performance. So better gross income has led to higher operational risk RWAs. This explains nine basis points. And finally, RWAs have also been affected by market risk-related RWAs, which explains 11 basis points, impacted mainly by Turkey and the CDS levels in Turkey and so on at the end of December. But a good part of this is already reverted or will be reverted in the first quarter. And lastly, the bucket of others of 12 basis points, you see it in the details in the footnote, but many other components come in there. And finally, slide number 18. on our long-term targets announced in the investor day. Let me just save time. I will not go into each one of them, but I can say clearly that we are very well positioned to achieve them all. And you will see the trends in the page. So we are very confident on the path that we are on to achieve our goals in the middle and long term. Now for the business areas update, I turn it to Rafa. Rafa.

Thank you very much, Onur. Good morning, everyone. Let me begin with Spain, slide number 20. Positive loan growth, close to 2% year-on-year in 2021, driven by a continued growth in the most profitable segments, consumer lending and SMEs, an improvement in mortgage portfolio devaluation rate, and a progressive recovery in the commercial segments, accelerating in the last quarter of the year. For 2022, We expect a slight growth in performing loans in Spain, with consumer loans to continue growing at a high single digit. Going to the profit and loss account, in 2021, pre-provisioning income grew 14.5% thanks to core revenue growth and higher contribution from the net trading income. Core revenue growth was elevated by the strong performance of fees growing above 20% in the year, with growth in all headings, mainly in those coming from asset management, banking services, and insurance after the JV with Allianz. Expenses decreased slightly in 2021, reflecting our continued cost control effort that have offset the increase in the variable compensation as activity and result continue to recover. In any case, We should keep in mind that the expenses compared with a normally low 2020, and when compared to 2019, they have declined by 7%. All in, we can see a very positive growth in Spain this year that lead to an improvement in the efficiency ratio of 3.4% to 51.1% ratio in 2021. Sound asset quality ratios with cost of risk down to 30 basis points in 2021, in line with expectations. All in all, very good results with net attributable profit in Spain above pre-COVID levels. For 2022, in terms of the P&L guidance, we expect in Spain NII excluding TLTRO flat to slight growth, net fees and commission flat consolidating 2021 outstanding levels, expenses to decrease in mid-single-digit and efficiency improving, and cost of risk around 30 basis points. Slide number 21, moving to Mexico. The loan portfolio growth accelerated gradually, ending the year at 6.5% in line with expectations. Retail segment drove loan growth with an outstanding performance in mortgages, credit cards, and SMEs, while commercial segment performance improved in the last quarter, reaching a 3% growth quarter-on-quarter. For 2022, we expect the loan portfolio in Mexico to grow at mid-single-digit. In terms of the P&L, net attributable profit increased 43% compared with 2020, thanks to the good performance of core revenues. Net interest income evolution was favored by the loan growth mentioned and by the improvement of the customer spreads thanks to our effort to reduce deposit costs and the improvement in deposit mix. For 2022, we could see NII growing at high single digits. Also on the core revenues, strong free growth driven by the recovery of activity and higher transactionality. On the other hand, expenses grew 10.9%, mainly explained by variable compensation normalization linked to the recovery of activity and result. In fact, excluding the increase in the variable compensation in 2021, expenses in Mexico will have increased by 5.9% year-on-year, in line with the aggregate inflation of 5.7%. All in, the efficiency remains at very sound levels at 35% in 2021. For 2022, we expect expenses to grow at mid-single digit with positive jaws, resulting in an improvement of efficiency ratio aligned with our long-term 24 target. In terms of assets quality, we see a slight increase of the NPL ratio and a reduction of the coverage ratio, explained by the fact that we have already implemented EBA's new designation of default for accounting purposes. with no significant impact in terms of cost of risk. In fact, there is a continued improvement of the cost of risk along the year, supported by good underlying trends on the loan portfolios, ending at 267 basis points in 2021. For 2022, we expect cost of risk at the end of the year below 300 basis points, in line with our long-term targets. Slide 22, Turkey. Starting with activity, TL loans have grown significantly in 2021 with double-digit growth in both retail and commercial segments, while foreign currency loans declined year-on-year in line with our strategy to reduce foreign currency loan exposure. For 2022, we expect TL loan growth at above 25%. and foreign currency loans to continue declining. In terms of P&L, gross income grew 25% in 2021, with a strong performance across the board. Continued improvement of the NII in the year, accelerating in 4Q, thanks to the TL loan growth, an improvement on the TL customer respect, and a higher contribution for the CPI linkers bond. For 2022, we expect NII to grow above the growth of the TL loan portfolio. Excellent performance in fees, mainly driven by payment systems and the higher activity when compared with 2020, and strong net trading income in the year, mainly due to a higher contribution from global markets and better foreign currency results, favored by market volatility. On the other hand, expenses growth is impacted by high inflation and the Turkish lira depreciation. All in, efficiency remains strong at 29.5% and we expect efficiency ratio to improve in 2022. Impairment significantly declined in 2021, impacted by the front-loaded provision book mainly in the first quarter of 2020, and the very good underlying performance trend of the different portfolios. In the fourth quarter, we have both higher impairment versus the previous quarter, mainly driven by our prudent risk assessment of foreign currency sensitivity wholesale clients, increasing their coverage. All in, cost of risk stands at 133 basis points in 2021, and for 2022, we expect the cost of risk to be around 150 basis points, although macro uncertainty remains high. And finally, slide 23, moving to South America, we provide some color on the main countries. In Colombia, the loan portfolio grew significantly. thanks to a good performance of both retail and commercial segments. On the profit and loss account, the net attributable profit increased 45.4% compared with 2020, driven by core revenues growth and lower impairment figure. In Peru, the loan portfolio benefited from improving economic conditions, reflecting mainly in the retail portfolio that grew above 8% in 2021. The strong core revenue growth, the positive jobs, and the lower impairments explain the increase of 28% in net attributable profits. Lastly, Argentina shows a positive net attributable profit contribution to the group of 63 million euros, despite a higher inflation adjustment, thanks to the net interest income growth favored by the higher securities portfolio contribution and fixed growth favored by higher transactionality. For 2022 and for the region, we expect long growth in line with 2021 and improvement in efficiency aligned with our long-term goal and cost of risk below 200 basis points. All in, very solid results in all our franchises, levered on core revenue growth and higher activity levels together with very positive trends on the asset quality side, leading to a significant reduction of the cost of risk across the board. And now, back to Onur to highlight the main taker weights on 21 and outlook for 22 results.

Perfect. Thank you, Rafa. We have this goal of finishing our presentation by 10, so I will skip page 25 and jump into 26, which is the outlook for 2022 at the group level. Really simple. Core revenues, we are expecting them to grow around double digits. maintaining our strategic focus towards the most profitable segments, as you would also see in the growth that we have been showing this year in different portfolios. On costs, we expect the growth to be less than inflation and efficiency to improve across the board in all the countries. Cost of risk is expected to be around 100 basis points, slightly better than pre-COVID levels. And lastly, sizable distributions to our shareholders will continue in 2022, with the full execution of the 3.5 billion maximum share buyback before October. But again, we expect it to be lasting four months, and we expect to start the second wave in March. And with this, I conclude the presentation. I go back to Patricia for the Q&A. Patricia.

Thank you, Onur. We are ready now to begin with the live Q&A session. So the first question, please.

If you wish to ask a question, please dial star 1 on your telephone keypad and please be informed that in order to assure audio quality, we recommend that all questions are asked from a landline. Thank you. The first question comes from Maxim Mission at JB Capital. Maxim, your line is open.

Hi, good morning. Thank you for the presentation and an opportunity to ask questions. I have two if I may. The first one is in Turkey. I was wondering if you could update us on the approval process for the guarantee bid and what acceptance rate from minorities would you consider as a success? And then on Mexico, I was just wondering to hear your view on sector consolidation. Would you favor domestic consolidation or a new entrant in the case of potential acquisition of Banamex? And do you think that it is possible BBVA could become one of the bidders? And what timeline for the process do you expect? Thank you.

Perfect. Thank you, Maxim. Very quickly, Turkey approval process. It's in its path. It continues. We guided when we announced it back in November that it will be in the first quarter of 2022. That's still the expectation. So the regular approval processes continue. You asked about the acceptance success. What do we expect? And so on. As again, we mentioned back in November, we are happy with any outcome on that one. we would be happy to get it all. Or as you know, we own 49.85% of shares in Guaranteed today. And then we pass the 50%. So if you get another 0.15% of the shares, we pass this important threshold of 50%, which gives us flexibility, a big optionality for the future of getting shares without the full tender. So with respect to market, we do think that our offer is an attractive one. whatever the outcome, we will be fine. We will be happy with any of the outcomes that might be coming out. You asked about the consolidation process in Mexico. Obviously, we don't comment on potential transactions and who might buy, who might not buy and so on. The only thing I can tell you is when you look into our results in the last few years and even today, for sure today, Mexico is so important for VVVA as a country, as a business, as a franchise. We will continue, whatever happens, whoever buys, whatever happens, we will continue to invest, and we will continue to grow in the country. We do have the best franchise in the country, in my view, by far. I'm a very quantitative numbers-focused person, and I look into ROEs, and I look into NPS, customer satisfaction, I mean, efficiency, whatever number that I look into. I see an amazing franchise of BBVA in Mexico. And our goal would be, whatever the outcome of this process is, we will continue on that path.

Thank you, Maxim. Next question, please.

The next question comes from Benjamin Toms at RBC. Benjamin, your line is open.

Good morning. Thank you for taking my questions. The first one is on Turkey. Inflation data is out today, and the official estimates of inflation is running around about 49%. People keep track of this number due to its potential implications for hypothecary accounting, which would be unhelpful for the valuation of the Turkish franchise. When you talk to accountants who are disinterested, when you talk to them about Turkish inflation, do they focus on the official estimates or do they also take into account unofficial estimates, which tend to be higher? And then secondly, can you just give us an update on your digital push into Italy? Thank you.

Very good. Thank you, Benjamin, for both questions. On the hyperinflation in Turkey, first of all, it's a decision of the accounting board. So the accounting board decide on this. It's not like us. And they look into multiple metrics. So it's a decision of an external party. But as you know, the decision-making on this is that the three-year cumulative inflation, if it exceeds 100%, then it gets into a pool of discussion and decision. It's not an automatic decision. Many other factors are recounted. If you look into the details, for example, the evolution, the trend of the inflation, and so on, I mean, whether the population keeps their wealth in non-monetary assets, it's a long list of different criteria. But for that criteria to be discussed, as far as I understand, that board first considers whether the three-year cumulative inflation is above 100%. There's one good news on this one, which came three days ago, I think. For 2022, the accounting board decided that hyperinflationary accounting will not be applied in Turkey. So 2022 is clear. For 2023, let's see. This 49% that was announced today, this morning, actually, was expected. It's not a surprise, actually. So we do, our BBA research team, they do expect discontinue for the next few months and quarter actually quarters. But then they see if the situation continues as such, they see a tempering in inflation in the third and the fourth quarter and so on. So to cut the long story short, 2022 is safe. 2023, it's not an automatic decision. It's the decision of the accounting board to look into this. As far as we understand beyond the cumulative 100%, which might be broken in this case, uh the trend is an important parameter here so if we see a declining trend in the quarterly monthly inflation in the coming quarters and months um it might still be the case that 2023 and and beyond there will not be hyperinflationary accounting um then the italy venture we did quote a number back in the in the investor day around 25 000 was the expectation for the two months that we were in italy What I can confirm to you is that that 25 percent, 25,000 customers, 25,000 customers is reached. But as I mentioned, when we first discussed this all together, our focus in Italy at the moment, my clear guidance, our clear guidance to the team of who is working on BBVA Italy is not the pure customer numbers. It's very easy to boost those numbers. Trust me. What matters is whether those customers whether those customers see us as a different bank, as a bank, a quality bank, and gives us that higher MPS, higher customer satisfaction scores. And that's what we will be focusing on. The trend that we have seen, which is a very good trend, much better than our expectations, as I said in the last quarter of the year after we launched in November, that trend continues in the month of January. So we are very happy with the customer acquisition trend. But I would reiterate once again that our focus is especially for the first year or two, is going to be on the quality and on the customer satisfaction.

Thank you, Benjamin. Next question, please.

The next question comes from Alvaro Serrano at Morgan Stanley. Alvaro, your line is open.

Good morning, everyone. Thanks for taking my questions. I've got one on capital and another one on costs in Spain. On capital, I'm just trying to get my head around because I remember in Q1 2020, capital also dipped and then it bounced back. Obviously, the market element, those 11 basis points that you've called out, presumably, we can hope, and that's the kind of question, we can hope that comes back. But I want to focus on the 29 basis points. Arnold, you mentioned that it was strong activity. in credit growth kind of a good problem to have but the reality or at least my perception is a lot of it is is a very strong growth in turkey obviously related to the inflationary situation and ultimately that's a despite the returns a high they're high for a reason and the pe multiple the market's paying very very low so can can you sort of confirm that that's the case and and if if if you are deploying more capital uh in de facto in turkey organically, wouldn't it be more sensible to cut back on lending at this point? So that was on capital, sorry, and very quickly on costs. In Spain, I think Rafa said, I mean, single-digit growth in costs in Spain, and that's despite the $250 million cost savings that you achieve with the restructuring. I just want to understand what's going on because salary inflation is not that high in Spain. And my understanding is the collective bargaining agreement reached until 2023. I get your point about variable pay, but just a bit more explanation around that figure if I've got it correct. Thank you.

Perfect. Thank you, Alvaro. Rafa, maybe you take the second one. On the first one on capital, Alvaro, very good question. But your deduction of a good part of this is coming from Turkey is wrong because the Turkish loan book increase, you see it also in the presentation. When you look into different countries and so on, this is in Turkish lira. So the page number 12 of the presentation that we have seen, the number that you see for Turkey is actually declining in the fourth quarter. This capital evolution, 29 basis points, is the fourth quarter number, the fourth quarter evolution that we are looking into. So not at all, because this is in Turkish lira, and then it depreciated in current euros. The capital consumption is not coming, not at all, from Turkey. It is coming from If you go to the pages that, again, you have in the presentation and that Rafa explained, in Spain, we have grown our what we call BEC, mid-sized companies segment. We grew our loans in mid-cap 10%. And stock growth of 10% in Spain, in my view, is an amazing number. The other portfolio that you see in Spain that has grown is 9% consumer business, consumer lending. You know the yields there. I mean, our average yield is around, customer yield is, lending yield is 6%. These are very high return portfolios. Then the other key portfolio that has grown in the quarter is if you go to Mexico, you see credit cards, 13.4% year-over-year growth. And you can compare that with the previous quarter to deduct also very quickly the quarterly figures. And SMEs, 15% growth. Our growth is coming from areas where we wanted to put capital. I'm very clear on this. We only grow, we have this, I mentioned this to some of you or all of you, I guess, in one of the results presentation. We have this micro capital planning process. You have to show as a business unit Even as an RM, if you are a corporate or commercial RM, you have to show that the lending that you do to a business, to a client, to a customer, or at the portfolio level, if it's retail, it has to deliver a certain return. And we adjust that certain return to the realities of where we are, in which country we are, in which portfolio we are, and so on. That's a micro capital planning process that we have in the bank. You cannot grow in areas where where the capital return is not above the cost of equity of putting that capital in there. As a result, basically, you see it in the figures, the growth, and these 29 basis points, I am very happy with the 29 basis points because it came from areas where there is a lot of capital return. On the Spain cost question, Rafa?

In Spain, Alvaro, I think the guidance for 22 is just a decrease on the expenses at mid-single digits. The fact is that, as you mentioned clearly, the restructuring program is going to provide a saving of $225 million on a 12-month basis in Spain and an additional $25 million at the company center. So at the end of the day, these $250 million are going to allow us just to decrease the expenses in Spain in 2022. Regarding 21 number, in fact, I think some savings were already included. I think it was 66 million in 21 and around 16 million and 9 million in the corporate center. That compensates the increase on the variable remuneration given the good results. But for 22, as I said, the guidance is a reduction of a mere single digit. Thank you, Alvaro.

Alvaro, maybe it's also important to confirm that when we did the collective saving, the destruction program in Spain, the ERE, we committed 250 million savings a year for that program. We can confirm to you that that 250 still holds.

Thank you, Alvaro. Next question, please.

The next question comes from Sophie Peterson at J.P. Morgan. Sophie, your line is open.

Yeah, hi. Here is Sophie from J.P. Morgan. So I was wondering if you could update us on your hedging policy, especially for Turkey. Could you give an update on how much of the profits and capital in Turkey has been hedged? How much you have paid for these hedges? And similarly, could you also update us on the hedging policy for Mexico? And then the second question would be on Turkey. Again, net interest income is very, very strong in the fourth quarter. And I know you said NII will grow higher than CL loans in 2022. But what are your underlying assumptions for Turkey, and how do you see things evolving from here? Thank you.

Perfect. Maybe, Rafa, again, you can take the guidance for 2022 on Turkey. On the first question, the hedging policy for Turkey and Mexico, as you all know, we do have this 30% to 50% of our incoming year profits to be hedged in the P&L level. And as you also know, we also hedge the capital. 60 to 70% every year we hedge the excess capital of respective subsidiaries that we have. This P&L hedging, it's a flow hedging, obviously, 30 to 50%. We have done much more than that in the previous years because we wanted to be a bit more cautious and the markets were also helpful and friendly on that one. So we have done more, but the 30% to 50% is our policy. And what we typically do is that we start hedging for the incoming year in the fourth quarter of the previous year, and we typically complete that, get to those levels, again, depending on the market situation, in the first quarter of the respective year. Having said this, given this whole policy, as it stands today, the 65% of the results of Mexico is hedged, 65%. And 20% of results in Turkey is hedged. Also for Peru and Colombia, basically it's all hedged, 100%. The reason that it's 65% in Mexico, 20% in Turkey as it stands now, again, every day we are dynamically evaluating and increasing if we need it. It depends on the market conditions. And the key thing here is the cost of the carry. The cost of the hedge is the cost of the carrier. So we have to look into the market conditions. We have to lay our perspective on what might be happening with the costs, and we adjust accordingly. So that's the policy, and that's where we are as of today. On the Turkey NII, Rafa?

On Turkey, I mean, the guidance you have seen is that the book, the loan growth is going to be around 25%. Clearly, buyers in favor of the TL book. growing around 39% on retails and 16% on commercial. On the other hand, we are keeping our strategy to continue reducing or declining the foreign currency loan portfolio. We are expecting that book, the US dollar-denominated loan book, to decrease around 13%.

Thank you, Sophie. Next question, please.

The next question comes from Ignacio Ulagi at BNP Paribas. Ignacio, your line is open.

Thanks very much. Thanks for taking my questions. I have two questions. One is on capital. I think, Anur, during the investor day, you flagged that you were expecting the bank to generate around 1.2, 1.5 billion of capital every year. I wanted just to see whether that is pre or after RWA growth. and what kind of RWA growth we should expect into 2022 is to get a bit of sense of the organic capital generation of the bank. And second question is on Mexico. They will have seen a strong growth in SMEs and cards in 21. Was wondering in the mid-single-digit growth guidance, which are the segments that you are just sort of like expecting to grow faster, and also whether you are taking into consideration current market expectations of rate hikes. in Mexico.

Perfect, thank you Ignacio. On the capital, yes, it was 1 to 1.5 billion organic capital generation. This does include, for sure, the RWA growth because it's a bit driven by us and we know how the markets will evolve. So it's more estimable and calculatable. It does not include the regulatory and supervisory impacts and also M&A because they are one-off things and you cannot judge sometimes. It's a bit unexpected and this and that. So the regulatory and supervisory impacts and M&A is not included, but everything else is included in our capital planning. With those RWA estimates that we have increased, estimates that we have, we do create 1 to 1.5 billion average. depending on the payout in the coming years. Then the Mexico question, the growth is still gonna be biased towards retail. Retail has been the driver for many years and also last year, 9% growth in retail balances, very high return books. We do have amazing competitive advantages, let's say, in that segment. I mean, I did mention it before. We do measure the success or the strength of our franchise with the relationship on the cash management side, on the daily banking side that we have with our clients. So on retail, it's about payroll, it's about credit cards and so on. In the case of companies, it's about cash management and so on. And then using technology tools to be able to provide those services to the clients. In the case of retail, we have close to 40% for zero in terms of salaries paid. volume of salaries paid, 40% market share in Mexico. And we do think that that's a great competitive advantage. And that helps us in gaining further market share in retail credit cards. We have gained a huge amount of credit card market share this year, and we will continue on the retail growth. So biased towards retail, we will see how the investment demand will be on the enterprise side, on the company side. But at least in the plan that we have, we are putting more focus on the retail side.

Thank you very much, Nato. Next question, please.

The next question comes from Marta Romero of Bank of America. Marta, your line is open.

Thank you very much. I've got a couple of follow-ups in Mexico. Can you be more explicit on what are you expecting for interest rates this year, CPI, and GDP growth. And then if you can give us more color following Nacho's question, how do you see the year starting for SMEs and corporate demand? Do you expect growth, any growth this year in that book? And just quickly, sorry, on fees in Spain, if I understand correctly, you're guiding for just flat, which seems a bit weak relative to the guidance given by other banks in Spain. What is driving that? Could you split banking fees versus asset management fees? Thank you.

Perfect. Maybe Spain, you can take, Rafa. Very quickly on Mexico, the interest rate, 550 was the end of the year, as you know very well, Martha. We are expecting that 550 end of year to go up to 7%, so 150 basis points. That's what BVA research is estimating on what might be happening driven by inflation. So 150 basis points increase in the rates. And as you very well know, we are asset sensitive in basically all of our geographies, including Mexico. Our NAI is positively correlated with the rate rises. So we will hopefully get some help from this as well. Regarding the other macro parameters that you asked, the GDP growth that BVA research is expecting for Mexico for the coming year is 2.2%. lower than obviously this year, lower than potential in our view. But let's see. I mean, it's a bit the supply chain bottlenecks and all of that will feed into this. But 2.2% is the current expectation. And inflation expectation that we have for Mexico for 2022 is 4.1 average. This year we expect it to be 7.4, the final number, and next year 4.1. Regarding the loan growth, do we expect loan growth to happen in SMEs and commercial? The answer is yes. So we were asking whether it can be negative. Our clear expectation is it will be positive. You see, even this year, the SME book has increased by 15%, not purely because of the market. We are gaining market share. The reason is that SMEs is a segment that we like across the board. We do have a clear program on it globally. We did create what we call Banco de Barrio, a very strategic program in Mexico, and we are getting benefits from that program. And that program is going to continue to give us positive growth in lending balances for both SMEs and I would say what we call the back mid-corporate, mid-companies segment as well. Rafa, on Spain?

On the fees in Spain, I think this conservative guidance that we are providing for 2022 is based on, first of all, on the outstanding performance of the fees in 2021, clearly with very high levels. Second, we want to be conservative on the contribution of the asset management-related fees, given the very good performance of the markets in 2021, and the uncertainty is clearly, in 2022 in terms of markets. But underlying, I think we continue seeing very solid dynamics in terms of activity, and especially on those related with transactionality and activity.

Thank you, Marta. Next question, please.

The next question comes from Andrea Filtri at Mediobanca. Andrea, your line is open.

Thank you. First question on fees. if you could give us the contribution of upfront and performance fees in FinCAM in 2021 and in Q4. And the second question is on the NII and cost of risk guidance. Could you disclose what absolute contribution from ALCO portfolio you are assuming in 2022 versus 2021 And in the cost of risk guidance, if you could detail if you have any assumptions of right backs from COVID overlay provisions. Finally, if you can just remind us of the TLPRO maturities. Thank you.

Perfect. On the fees question, Rafa, if you have it, please say it. Otherwise, we can come back to you, Andrea. um on the nai and the alcohol portfolio contribution to to nai the alcohol contribution we didn't increase the contribution of alcohol yet we wanted to see the markets before we can decide on anything we kept basically our alcohol book in the planning cycle at least it is changing we might change that decision in the coming months depending on how the yields evolve but we kept the alcohol portfolio size relatively flat and replacing the ones that are expiring but not doing much beyond. You might have seen that our HQLA portfolio, it's in the backup of the presentation as well, our HQLA portfolio have come down. We had a very short-term HQLA portfolio to manage the liquidity, basically, but we have been holding on the decision to increase our ALCO book until we see the yields pick up a bit, let me say it that way, We are seeing some of that, but again, in the planning cycle and in the forecasts, in the guidance that we have received, we have not put an additional incremental, materially incremental contribution from our co-books. On the cost of risk guidance that you are seeing, we will see how it evolves, Andrea, but we do have these, I don't want to call them buffers because they are there for a reason. But we have built up some COVID-related, let me call them buffers. It's fine. It's the easy word to use. And a big chunk of that was for Spain. And we wanted to see how what we call the eco-loans, the government-guaranteed loans, behave. Because some of those loans were given three years ago. They are going to be coming online starting in the second quarter of this year, especially starting April, May period. two billion expiration, for example, in April. We see very positive signals in that portfolio. So no problems whatsoever. Very positive signals helped by the overall development of Spain, overall contribution may be coming also in the next generation. You would help in the coming year. But given the economic situation, we see very positive signals in that portfolio. But we did create some what we call post-modal adjustments or management adjustments for the portfolio, for the Tico portfolio. And we will only release those once we are comfortable with what we see after the expiration of these loans. The currency period, as we call it in Spain, which is the you don't pay for the principal, there's a non-payment period. Until we see that non-payment periods expire and we see the loans behave in the way that we like them to behave, then we can consider releases. The guidance that we have given does not include any positivity from that discussion yet. We have to see the second quarter before we can comment on this. The guidance is the business as usual that you would be seeing. On the TLTRO, we have 38 billion... in total and Rafa maybe you have the details maybe Rafa you are the best to answer this in terms of the maturities of the TLTRO sorry I didn't follow you because I was the TLTRO maturities the 38 we will be the 11 billion is expiring this year and in the next year and a half all of that will be expiring the 38 billion basically I answered it very quickly on the fees on the performance and success part of it do you have any details on that Rafa?

Again, the TLTRO, I mean, the relevant maturity is in June 23 with 21 billion, but before that we have 7 billion by the end of the year. 7 billion. At the end of the first quarter of 23. And in terms of the composition of fees in Spain, I mean, Andrea will provide you with more detail, but just what I have in mind is just the fees for asset management as around 900 million is In 2021, around 70 or 73 out of those 900 are performance fees related with the behavior of the markets below the funds.

Thank you very much. So next question, please.

The next question comes from Carlos Ortega. from CaixaBank. Carlos, your line is open.

Hello, good morning. Thank you for taking my question. So the first question would actually be a follow-up on one of the early questions, which is regarding Banamex. I was just wondering, because it didn't come out clear to me, whether you see yourselves as a potential beater for this unit or whether you think that given your size in the country, it will make sense to acquire it. And if you see yourself as a leader, how would you think the deal could be structured? I'm asking here whether you could have to finance it through a capital increase. Secondly, in terms of outlook, fees in Mexico in the fourth quarter have an unexciting performance, let's call it that way. I was wondering how do you see the trends going forward? in what type of restrictions you see in fee income evolution in Mexico. Thank you.

Very good. Carlos, on Banamex, we don't comment on potential transactions. We don't. We don't know even how the transaction will be structured, in what way, form, or so on. So we don't comment on the potential transactions. On the outlook for Mexico on the fee income, the fee income for the fourth quarter was partially affected by the CIB situation. And that might, as you know, that's a very volatile or quarter-to-quarter different performance. We are very positive on the fee income evolution in the coming quarter. As you know, a large part, the majority actually, a large part of the fee income in Mexico is driven by what we call payment systems. Overall, the credit cards and POS and so on. And we see very positive dynamics there, very positive dynamics. Hence, the numbers will be strong, maybe even in 2022.

Thank you, Carlos. Next question, please.

The next question comes from Carlos Corbo from Societe General. Carlos, your line is open.

Hi, thank you very much for the presentation. Can I please ask you to clarify the TL-303 impact in NII in Spain? We have the total TL-303 number, but if you could specify how much of that is Spain and what is the step down? Just to follow up on that previous question, which I think it was the focus. For me, one on tangible book value per share, if you don't mind explaining the performance I was expecting some drops driven by the Turkish real depreciation, but it actually went the other way around. So I was wondering if the capital was hedged in excess of the capital surplus, or how did you manage to offset that currency impact in TNAV? And also, if you could guide us to what is the total expected hedging cost to be booked against capital in 2022. What's going to be the size and how that compares with 2021 due to the high cost in Turkey? Thank you.

Very good. Maybe the last one you can get, Rafa. On the first one, TLTRO, Carlos, 97 million is the expected hit for the expiration of TLTRO minus 100 basis points impact. It's going to be 97, to be precise, million impact in net interest income. But as you all know, there is this discussion of increasing the tiering multiplier, which I presume we will know in the March meeting. So we will see in March whether the tiering multiplier is increased. That might have a positive impact. Independent of that decision, though, the expiration of the program in June 2022 has an impact of 97 million for the year in net interest income. Tangible book value per share. We actually have increased 1.6% in the quarter. you should know that 0.3% of that was due to accretive impact of the share buyback program. So at the end of December, a certain part of the shares were obviously purchased. We started in November, as you know, November to end of December, we acquired some shares. And as you know, we are acquiring shares at lower than tangible book value. And as a result, you create some accretive impact in tangible book value per share. But that's only 0.3%. The other 1.3% or the 1.6% is basically helped by the profits. I mean, we have 1.3 billion, more than 1.3 billion profit in the quarter, and that's the key core positive impact for the numbers. For the third question, Rafa?

In terms of the planning, what we do is just to take into consideration the differential of interest rates between the different currencies. So at the end of the day, we are just including all our planning process that carry all the hedges, all the P&L go against P&L, all the hedges against capital go against the capital base. Thank you, Carlos.

Next question, please.

The next question comes from Ignacio Cerezo at UBS. Ignacio, your line is open.

Yeah, hi, good morning. Thank you for taking my questions. I've got two. If you can give us your best approximation of how much RWAs are going to grow in the year if a mid- and single-digit number is a reasonable ballpark for you. And then the second one is on the capital return. Do we need to work with the 50% payout ratio, or do you think there's a space for extra dividend or another buyback actually in the back of 22 earnings?

Thank you. Okay. Let me start with the second one. When we sold the U.S., it was all triggered by that. It was a big decision, obviously. And then in that time, we said we will do a few things. to be able to create value for the shareholders. I underline this, create value for the shareholders. We said we will be investing in profitable growth in the markets that we are in. That's what we are doing, as you see in the figures. And we will be increasing the distribution to our shareholders. The 3.5 billion, it's one of the largest share buyback programs that has been announced in Europe. And then we then increased our payout from 35, 40 to 50%. Depending on the different opportunities that would be coming and all of those opportunities will be connected under this umbrella theme of we will create value for the shareholder and whichever is the better return generating alternative we will invest in that in that alternative that's our guidance on this one um ignacio so i can i will not comment to you we will do this or that until we see how the situation evolves we are in the process of some of the largest again, buyback programs and increased, we have paying the largest cash dividend that BBVA has seen in the last 10 years. So we will continue on our path, see how different opportunities come around. And depending on that, obviously, we will continue to create value for shareholders. I'm giving you a very high level answer, but it's very important. It's very important that you understand, everyone understands that our key driver in any of the decisions that you take is that value creation. And if you cannot find Great value creation opportunities, obviously, we always return it back to the shareholder as we have been doing. Regarding RWA's growth, mid single digit, you are saying that's the activity, the RWA growth, it depends a bit on the portfolio on where we grow, given the fact it's gonna be less than that in my calculations, but I would revert back to the number that we said in the previous questions. In the next three to four years, on average, after RWAs, after the growth, you would see that we would be delivering one to 1.5 billion in capital, organic capital generation in the coming years on average. The RWA growth, the 29 basis points that we discussed today, you would expect some of that to revert back also in the first quarter, because some of that was end of year. There were some factoring deals, very short term, obviously, end of the year. Given end of the year, Many other banks did not show interest in them, but they were very high return, very high return deals. And they were with our good clients, so we wanted to get engaged in them. But those factoring short-term deals have expired, so you would also see some of that returning back. You would also, as I mentioned in the presentation, the market risk-related RWAs, it was mainly related to the CDS levels of Turkey being very high at the end of the year. Those numbers have already reverted back. So in the first quarter of 2022, you would see up to 15 basis points reverted from the RWA inflation that you have seen at the end of 2021. Thank you, Nacho.

Next question, please.

The next question comes from Fernando Gil at Barclays. Fernando, your line is open.

Thank you very much. Two questions, please, from my side. First one is, if you can refresh the capital impact on Turkey acquisition if we are assuming 100% take-up and today's currency levels. This is one. The other one is on CPI linkers in Turkey and the link to this hyperinflation that we are seeing. What should we expect for this line in 2022?

Thank you very much. Very good. On the first question, Fernando, the December 31st impact that we have from the OPA, if 100% is taken, is 32 basis points. And as we mentioned, we don't know the take-up. It can be much less than that. It can be in the middle, 100%. But the total impact we are talking about, the latest number is 32 basis points. Then the CPI linkers, what do we expect? We will see. We did our budget with a much lower figure, but after also today's figure, this morning's figure of 49%. We will see. You should know that our CPI book in Turkey is 2.3 billion euros, 2.3 billion euros. So every one percentage point in inflation has an impact, as you can see, 23. So there is that sensitivity that you can look into.

Thank you, Fernando. Next question, please.

The next question comes from Britta Schmidt at Autonomous Research. Britta, your line is open.

Yeah, hi there. I've got three questions, please. Firstly, could you just update us on regulatory impacts in capital that are still outstanding? What do you expect in 2022? The second one would be on the cost outlook. What is the blended inflation rate that you assume in your guidance? And could you perhaps quantify a little bit the basis, the COVID-related base effect? What sort of Euro million numbers are we talking here? And then lastly, on Mexico, There is obviously a macro worsening, but long growth is still strong and the cost of risk garden still looks okay. How do you explain that, the sort of disconnect? Thanks.

Richard, can you repeat the second question? I couldn't get the second question.

The second question was on the cost outlook. Could you tell us what the blended inflation rate is that you assume for the group when you say you want to grow below inflation? And can you also give us some help quantifying in Euromillion terms, what the COVID-related base effect is. Obviously, there were some COVID-related savings, T&E expenses, et cetera. What sort of Euromillion number are we talking about?

Okay. Rafa, maybe you can take the course question on the regulatory impacts outstanding. As we have told you before, the main regulatory piece, supervisory piece remaining is these EBA guidelines. You would notice that we talked to you about EBA has guidelines on multiple pieces of the models. Those are the PD, probability of default, LGDs, and margin of conservatism, MOCs as we call them. So this PD impact on the EBA guidelines has already been incorporated in 2021. In the last quarterly calls, we told you that we are expecting EBA guidelines on LGDs to come online in 2022. We were expecting 15, 20 basis points on that one, and that is there to be taken into account in 2022. And then the EBA guidelines on what we call MOCs, the margin of conservatism, it might also be coming and impacting us. The EBA guidelines have put some new strict, actually, rules on that one. So the total, total that you would be expecting for this year, including the LGD, is around 35 basis points. Then, on the Mexican, maybe you take the cost question, I go back to Mexico, Rafa.

The blended inflation for our footprint that we are assuming for 2022 is 11.3%.

On the Mexican cost of risk question, well, this year was not easy either, and we have delivered, as you have seen in the documentation in the discussion, 267. Our typical Before COVID, our cost of risk was around 300 basis points, if you remember. Our 10-year average for cost of risk in Mexico was around 340 basis points. When we look into how or why that improvement has happened, and then you isolate for the mixed effect, so different portfolios and maybe it's a different mix of portfolios and so on, at the isolated for the portfolio level, when you go into credit cards in Mexico, consumer in Mexico, we are seeing very good numbers. And when you go into it, it's also our performance improving. We have better information, better data, better modeling, better processes. We have invested, for example, a lot on collection infrastructure and collection processes in Mexico in the last three years, even during COVID. As a result of all of this, some of the improvement that we have seen from 340 in the last 10 years to 300 just before COVID And 267 this year, we do think that it's structural improvements that we have done internally in our bank, and some of that is there to stay. That's why we are guiding less than 300. So independent of the market and the macro, we do think that we are confident that we will be realizing those numbers. And the start of the year, it's confirming this view.

Thank you very much. So next question, please.

The final question comes from Pamela Zuluaga at Credit Suisse. Pamela, your line is open.

Hello, good morning. Thank you for taking my question. I have one regarding the next-gen EU funds that you were mentioning before, possibly translating into higher loan growth in Spain. Do you have a clear idea of the role banks will play in the deployment of these funds? And if so, can you give some details on the evolution of the loans from this support? Would there be some margin compression if there is a collaboration between the banks and the government? Or if, alternatively, most of the activity we expect in Spain will come from continuing growth in the consumer segment, do you see some margin pressures from high competition there? And then as a follow-up on something that you were saying before on the EICO loans, other peers have granted extensions to the grace period on these loans. Do you anticipate granting further extensions and potentially delaying even further any write-backs related to that COVID overlay? Thank you.

Very good. Thank you, Pamela. On the next generation EU, obviously we are very open to operating with the government in channeling and distributing these funds to the economy. There are different products that we have even launched. We call them NGU, Advance, Loan, Factoring, to be able to complement the subsidized part of these projects. So the subsidy you can get from the government and then you can get the complementary financing funding from the bank. So we do have specific products and we are in constant cooperation with the government on this. But in terms of the impact, you were more asking for the impact, I guess. For the GDP, first of all, for the GDP, this next generation EU, our BVA research team, they do expect a one percentage point impact in the GDP growth because of next generation EU in 2022. And 1.5% percentage point increase in GDP growth in Spain due to next generation EU funds. So overall economic situation will be helped from this. We have also deep dived into which sectors are going to be receiving this, which types of companies, what is the subsidy level, how much financing, additional financing those clients might be needing and so on. We do expect annually an 8% increase in what we call new loan production in the commercial segment, SME and commercial segment. due to these programs and in the stock though this will be corresponding to one to one point five percent increase more than otherwise more than if you isolate for this impact only one to one point five percent more higher increase in loan balances in commercial and sme segments so positive positive for us regarding the further extensions on eco There might be another six months maybe at the end of the day because most of them will be expiring in terms of this non-payment period in the second quarter this year and the third quarter. There might be a slight extension on this, but I don't think there's much need on the topic. I wouldn't expect that to be the base case. I would expect that everything to normalize as already is in the plans, which is the second quarter, third quarter expirations. But if also it is extended to the end of the year, a slight increase of three months, six months, I wouldn't rule out that either. But beyond that, I don't think there will be anything else needed in terms of extensions and new durations and new non-payment periods. I don't think it's needed because the portfolio is behaving quite nicely.

Thank you. So thank you for all your questions, and let me remind you that the entire IR team will be available to answer any questions you might have. Thank you very much for attending this call.