Banco Bilbao Vizcaya Argentaria S.A.

Good morning, and welcome, everyone, to BBVA's quarterly audio webcast. As in previous quarters, I am joined today by our CEO, Onur Genç, and the group CFO, Ruiz Agome Bravo. Today, along with the second quarter results, we are also announcing the group's midterm goals. Accordingly, we will dedicate the first part of the call to reviewing the quarterly figures and then move on to our strategic objectives. Finally, we will open the line for your questions. So without further delay, I turn over to Arnold.

Thank you. Thank you, Patricia. Good morning to everyone. Welcome and thank you for joining BBVA's second quarter 2025 earnings webcast. As Patricia mentioned, we have two things today, the second quarter results, as always, and we also have medium-term objectives at the end of the presentation. So let me start with the second quarter results and starting with slide number three. You can see in the quarter the strong evolution of tangible book value per share plus dividends on the left-hand side of the page, which increased 14.6% year-over-year and 2.9% in the quarter, very good figures despite the relatively high currency depreciations in the quarter. On the right-hand side, you see our profitability. Our profitability continues to improve and rises to an outstanding return on tangible equity of 20.4% and the return on equity of 19.5% in the first six months of 2025. On page number four, on the left-hand side, another very strong quarter for net attributable profit, reaching €2,749,000,000. despite the falling rates in our core markets, which obviously negatively impacts our results, and despite the currency headwinds, we have managed to sustain our record profit levels. In this profit figure, there are two extraordinary items that I want to make you aware of, which affect the Spanish business unit and the holding, the corporate center only, in different accounting lines. But to be specific, first, in the second quarter, We have closed a tax audit process in Spain covering fiscal years 2017 to 2020. This tax audit, it resulted in some positive impacts leading to the release of some fiscal provisions affecting the tax rate. So the tax line item is affected from this. And also a review of VAT, the value added tax payment calculations. This latter, the VAT topic, it has a positive impact on the operating expenses, operating expenses lines in Spain and the corporate centers. Now the second extraordinary item to note is the negative NTI impact of US dollar hedges that are in place to manage the volatility of our CET1 ratio, as you all know. The impact was obviously relatively high this quarter due to US dollar depreciation against Euro. And starting from this quarter, third quarter 2025, the hedges will be accounted for under capital rather than P&L. So the total net attributable profit impact of these two items We're approximately positive 150 million euros in the bottom line at the net attributable profit level. 150 million euros, extraordinary impacts. Also on this page, on the right-hand side of the page, you see our CET1 capital ratio, which improved with an exceptional 25 basis points during the quarter, reaching 1334. We have very positive news on capital, which I will explain in detail later on. To elaborate further on profitability on page five, our first half profits continue their upward trend on the left-hand side, reaching 5,447,000,000 euros in 2025. This represents a 9.1% increase year over year, leading to a new record in our semestral profits. As compared to our peers on the right, our 20.4% return on tangible equity, and its trend, more important to me is the trend, it remains unmatched. With these figures, we are clearly one of the most profitable banks in the industry. Moving to page number six, this page is a summary of the pages to follow, where I will talk to you about activity, revenue growth, costs, asset quality, capital, and execution of our strategy. So please allow me to directly move to the next slide. Slide number seven, as always, the summarized P&L of the quarter. I would highlight in this page the robust evolution of the core revenues in constant euros with net interest income and fees growing 11 and 18% year-over-year respectively, and 4% each quarter-over-quarter as well. Slide number eight, the summarized P&L of the first half. I would once again highlight the positive core revenues and the gross income evolution, which increases in gross income 20% in constant euros year-over-year. The strong gross income growth coupled with the positive jaws and the limited growth in the impairments, it led, obviously, to an outstanding net attributable profit. Some more light into the revenue breakdown on slide number nine. I'm trying to pick up my speed because we have a second chapter to talk to you, so very quickly on this one. What is important to highlight in this page is not the numbers per se, but it is the consistent quarterly improvement in net interest income and net fees and commissions. And despite the macro context and falling interest rates, as we mentioned before, we have managed to grow our core revenues, which is very important to us. The only trend-breaking number in the quarter is the net trading income. As mentioned before, this quarter we have recorded a negative impact from the market-to-market of FX hedges, in particular related to the U.S. dollar hedges that are in place to manage the CET1 ratio, as I mentioned, and that comes in the holding in the NTI line. And despite all of this, the gross income, it grows 11.7% year over year and 1.7% quarter over quarter. Moving to slide number 10, a bit more focused on activity and long growth, which has increased at group level to an impressive 16% year over year. This is, even in our standard, it's an exceptional growth figure. It's very good news for the coming quarters, in my view, since we delivered this growth in a profitable manner. measured by return on capital metric on a loan-by-loan basis in every single country in every single segment. In Spain, loan growth remained very strong, 6.3% year-over-year, while Mexico maintained an excellent double-digit loan growth at 11.7% year-over-year. These numbers will lead us to improve our guidance on activity today for both geographies. Luisa is going to talk to you about it in a second for both countries. As you know, although we have been proactively managing it, we are still rate sensitive in both Spain and Mexico. And despite the fact that we have seen significant reduction in market rates lately, our robust activity growth more than compensated for spread compression. As a result, we continued expanding our core revenues with 2.2% year-over-year increase in Spain and 9.6% increase in Mexico. Similarly, we have beaten expectations and managed to grow our core revenues in both countries in the quarters as well. Slide number 11, on the left-hand side of the slide, we continue showing positive jaws at the group level, thanks to the good performance of gross income, as I mentioned before, growing almost 20% year-over-year, while costs are growing at 10% below the group's footprint average inflation, as you see on the page. And on the right side of the slide, you can see our efficiency ratio, which shows an outstanding improvement to 37.6%. If you exclude the VAT-related impact, the extraordinary impact that I talked to you on the results page, if you exclude that VAT impact on costs, the efficiency ratio would have been 38.6%, still at record. Slide number 12, this page shows the positive evolution of our asset quality metrics, which are performing better than expectations in a context of strong activity growth, in a context of growth in the most profitable segment. On the left-hand side of the page at the bottom, our cost of risk stands at 132 basis points, quite aligned to last quarter, and better than, again, our end-of-year estimates. Meanwhile, on the right bottom, both our MPL and coverage ratios, they remain close to last quarter levels, so stability. Slide number 13, important page in my view. On capital, as I mentioned before, we have some amazing news for this quarter and beyond. First, we had a very strong quarter, as we mentioned, increasing our CET1 ratio by 25 basis points to 1334. The ratio was helped by someone else, which I will explain in a second. But even at the business as usual level, even in the context of record activity growth, we continue to accumulate capital organically. So following the waterfall on the page, main impacts of the quarter are results, 69 basis points, given the cruel and 81 coupons, 37 basis points deduction. Then 41 basis points due to the RWA's growth. This figure reflects our ability, once again, to reinvest part of our capital generation into profitable growth. And also this number includes the result of several risk transfer transactions, SRTs as we call it, as you know, which positively contributed in this figure 10 basis points to the ratio in the quarter. Then we have a bucket of others, 17 basis points. As always, two things here, the market-related impacts and the credit in OCIE for hyperinflationary countries. And lastly, in the waterfall, you have a one-off bucket of 70 basis points, which includes two components. First, we recognize the positive impact related to Basel IV implementation, basically, after some pending clarifications in certain regulatory technical standards that were clarified this quarter. Okay? Second, in the number in the one-off, you also have the negative impact of the tax credits, which helps us on P&L, obviously, as we discussed, but which creates a negative impact on capital. On capital, on this page, I also would like to point your attention to the bubble at the top right-hand corner. And as part of our efforts to simplify our IRB regulatory model landscape, and in alignment with ECB's simplification drive, we have submitted an exhaustive plan to the supervisor at the beginning of this year around the simplification of our models. We just received in July the authorization for that work. which will come into effect in the fourth quarter of 2025. Also incorporating some pending model review of impacts, we now expect all combined to release an additional 40 to 50 basis points of CET1 in the remainder of 2025. I mean, on this one, from time to time, I talk to you about our RWA densities and mention that our RWA density is 50%. then the average RWA density of our peers is 29%. And there are multiple reasons to explain this difference, but after the implementation of Basel IV, through the use of SRTs, which would benefit BBVA much more than our peers, and through the simplification of our IRB model landscape that we just talked about, we expect this RWA density gap with our competitors to reduce going forward. And it's also worth to highlight that this IRB model simplification and so on, the reduced risk weights would not only create obviously a positive one-off impact, as you saw on the page, but also, also it's very important, it will help us on a continuous basis for the new loan origination. Moving to page number four and our strategic progress, new customer acquisition on this page, pickup speed, so 5.7 million new customers, records, digital, competitive advantage for BBVA. Slide number 15, another pillar of our growth strategy, sustainability. Another record, 63 billion euros of sustainable finance channeling in the first six months of the year. We are clearly on our path to channel 700 billion euros in sustainable finance until 2029. So, all good. For the business areas, Louisa.

Thank you very much, Anur, and good morning, everyone. Starting with Spain on slide 17, it has continued its impressive momentum in the second quarter, delivering outstanding results in the first half of the year. Net profit reached $1.1 billion in the quarter, supported by ongoing positive dynamics in NII, even in a lower rate environment, sound fees, and lower operating expenses. NII continued to grow by 1% quarter on quarter, even in the context of declining rates. This was mainly supported by strong loan growth up to 2% quarter-on-quarter, particularly in consumer lending and SMEs, the areas that we've been focusing on in the past as well. We also benefited from an improved deposit mix and a higher contribution from the ALCO portfolio. On expenses, as Onur mentioned, we had a positive one-off impact coming from the revision of our VAT payment calculations. Excluding this effect, expenses remained well-contained, growing by just 1.3% year-on-year in the first half of the year. Efficiency continued to improve, supported by sound gross income growth and lower costs. Our cost-to-income ratio stands at 31.3% in the first half of the year, or 33% if we exclude the above-mentioned one-offs. Risk metrics also remained solid. Cost of risk came in at 32 basis points for the first half, better than expected. Finally, given the very strong results and positive future projections of the Spanish business unit, We have activated some DTAs, some deferred tax assets this quarter. It is worth highlighting that if the Spanish business unit delivers in line with our expectations in the coming years, more DTA activations can be executed beyond this year. Based on this solid performance, we are pleased to announce that we are improving our full year guidance across all key lines. We now expect loan growth to accelerate to mid-single digit, NII to show slight growth, fees to increase by low to mid-single digit, and expenses to decline by low single digit. As a result, we are targeting a 33% cost-to-income ratio for the full year. On the asset quality side, we expect cumulative cost of risk to remain below 35 basis points for the year. In conclusion, an exceptional performance of BBVA Spain in the first half of this year. Moving on now to Mexico on slide 18. Once again, BVA Mexico delivered also a strong set of results in a still uncertain macro environment. Net profit reached nearly 1.3 billion euros, supported by a solid operating income growth of over 2% quarter-on-quarter, driven by NII growing by more than 2% quarter-over-quarter, primarily supported by strong lending activity across both retail and commercial segments. In addition to this solid lending momentum, we also observed more favorable deposit trends, with an improved deposit mix and lower deposit costs, which further contributed to the positive NII performance this quarter. The customer spread remains stable, which is particularly noteworthy in a declining interest rate environment. Recall that Banxico cut rates by 200 basis points since the beginning of the year. On the cost front, we recorded a slight quarterly decrease, reflecting the early impact of efficiency initiatives launched earlier this year. All in, our efficiency ratio remains at an exceptional 30.6%. On the asset quality side, we saw an increase in impairments this quarter, mainly driven by the IFRS 9 macro adjustment following the updated macroeconomic scenario. That said, underlying trends remain solid, with cost of risk standing at 324 basis points for the first half of the year. All in all, the solid dynamics observed so far in BVA Mexico have led us to revise the full year guidance upwards for both activity growth and cost of risk. We now expect loan growth to be close to 10% by year end and cost of risk to come below 350 basis points. Moving now to Turkey on slide 19. Guaranty UVA reported a net profit of 412 million euros, increasing by more than 17% year over year. The solid performance was driven by higher core revenues and lower impact from the hyperinflationary adjustment, which more than offset the expected increase in impairments. NII growth was strongly driven by a significant improvement in the Turkish lira customer spread, up by more than 150 basis points in the first half of the year as compared to the same period in 2024. This was driven by both higher yield on loans and lower deposit costs. At the same time, loan growth continued across both Turkish lira and foreign currency portfolios. Fees remain a strong contributor to revenue growth, driven by higher commissions from payment systems, as well as positive performance in both asset management and the insurance businesses. The impact of hyperinflation continued to decline in line with the continued disinflationary trend in the country. Impairments increased year-on-year, reflecting a normalization in the cost of risk amid the ongoing macro rebalancing. For the first half of the year, the cumulative cost of risk stands at 164 basis points ahead of expectations. Going forward, we expect it to close at around 180 basis points, as provisioning needs in the retail portfolios remain high. All in all, positive underlying trends combined with the resumption of the monitoring easing cycle by the CDRT reinforce our confidence in the four-year net profit guidance, which we expect to close somewhat below €1 billion in 2025. Let me remind you that Guaranteed UVA's balance sheet shows negative sensitivity to lower rates. And finally, let's turn to South America. The region continued to deliver a strong earnings contribution to the group, achieving a net profit of 421 million euros in the first half of the year, representing a 33% year-on-year increase. This quarter's solid performance across geographies was further supported by sound lending trends and improved deposit mix and disciplined price management. Despite a lower interest environment, it is noteworthy that the customer spread improved in the quarter in Colombia while it remained stable in Peru. On the asset quality side, the cost of risk remains well under control in both Peru and Colombia, reflecting improving asset quality trends within what we had anticipated, supported by a more favorable economic environment and the adjustment to our risk appetite in the most vulnerable retail portfolios. These positive dynamics in the risk metrics have led us to review downwards for full-year cost of risk guidance for the region, which we now expect to stand below 250 basis points. Finally, in Argentina, we continue to observe a reduced impact on the hyperinflation adjustment driven by easing inflationary pressures. And now, back to Anu for the final remarks on the quarter.

Thank you. Thank you, Luisa. So regarding 2025 and the guidance on this page number 21, you have the full list of metrics we have provided you guidance for at the beginning of the year. And as Luisa has just explained, today we are upgrading our guidance for the full year in the majority of the metrics, as you can again see on the page, including the group metrics. And you also see at the bottom of the page, it's worth highlighting here, that including the nearly €1 billion of share buyback pending to be executed, potentially more than €5 billion as regular payout from 2025 results, And given the expected end of year 2025 excess capital to be accumulated, in total, around 13 billion euros are expected to be available for distribution in the short term. And lastly, for the main takeaways of the quarterly results, we are all excited to go to the second chapter, so let's not take time repeating the key messages here, but in short, we are very happy, very happy with the performance in the quarter. Now, the second chapter in the document is about medium-term strategic objectives. As you know, at last, we are at the final meters of the voluntary tender offer process with Banco Sabadell. Such, for investors to better understand BBVA's intrinsic standalone value, we wanted to disclose our objectives for 2025-2028 associated with the strategic plan that we have launched at the beginning of this year. We'll try to be brief on the next pages, but as I'm sure you have already reviewed the messages and the figures, I'm very eager to move to the Q&A. So, on page number 24, let me open the page also. As you know, again, we communicated our new strategic priorities that will help us strengthen our leadership position in the coming years, but a quick recap on this page of the strategic levers. First strategic priority is to embed radical client perspective in all we do. We want to set an industry-leading customer service and satisfaction standard and deliver every day in and out against this golden standard. Our second and third priorities, they refer to our growth levers with sustainability and enterprises having a prominent position in this growth drive. We will invest more and increase the value contribution coming from these areas of sustainability and enterprises. Fourth, our value and capital creation mindset. This priority reflects very clearly that capital is our scarce resource, and we are here to deliver about the cost of that capital at macro and at the micro level as well for every single loan that we give. Lastly, our fifth and sixth priorities, our enablers. We will unlock the strong potential of AI and innovation, and we will continue to invest in our teams who are the real actors to achieve anything in our business. Moving to page number 25, before explaining the main figures of our strategic plan, in this page we include the main macro assumptions underlying the figures. So from a global perspective, in short, we expect relative stability around economic growth and inflation. Nominal credit growth is expected to stay slightly above GDP growth. In lower inflation geographies, like in Spain, Mexico, Peru, we expect interest rates to reach bottom in 2025 or 2026. We also expect depreciation of currencies to moderate a bit in alignment with inflation, directly correlated with inflation. On top of this, in Spain, economic growth, it comes down slightly in the period, but remains sound, leading to solid activity growth as well. In Mexico, annual GDP growth, our expectation at the end of June was a reduction, was a decline in GDP in Mexico in 2025. With yesterday's numbers, now this can change, but it was a negative figure in our forecast. In this plan, we are expecting it to recover, but still staying below 2% growth every year in 2026 to 2028. And finally, in Turkey and Argentina, we estimate a gradual decline of inflation and interest rates throughout the period, and both are expected to exit hyperinflationary accounting in 2028. The highlights are in this page, but I do think they're very important pages. In the appendix of this document, you have the full details of these macro assumptions per country, so you can find them in the appendix of the document. On page 26, what should be highlighted in this new strategic cycle or maybe maybe set in a different manner what are the implications or the qualitative goals of the plan first we plan to grow slightly above market gaining market share by continuing to increase our customer base with a particular focus on the enterprise segments as we discussed before i believe in terms of market share gain and so we have proven our worth here over and over again every quarter And the record customer acquisition we have seen in the past few years and also in this presentation today, those customers that we acquired recently, it will ensure the continuity of the market share gain going forward. Second, we expect our core countries to improve their already high profitability levels, slightly but still improving, helped by strong activity growth and slightly lower cost of risk. It is very important to underscore here the dynamic. The expected dynamics is very important. That's one of the crucial points of this plan. In the past few quarters, all the activity growth we have realized was basically absorbing the spread compression happening due to decline in rates. As we mentioned in the previous page, we expect some rate stability in the coming years. With that rate stability, Our expectation is that margin compression will stop, and as a result, activity growth will flow naturally to the bottom line profits. Third on this page, regarding the countries under hyperinflation in our footprint, namely Turkey and Argentina, we expect them to improve especially in the second part of the cycle. Fourth, the contribution from enterprise and CIB segments, it will be significantly larger during this period as we will focus on leveraging cross-border, leveraging sustainability, where we clearly do have a competitive advantage. For example, in this plan, we are expecting to double our gross income coming from CIB until 2028. And fifth, we will focus even more on fee-generating businesses with low capital consumption, especially insurance, asset management, and transactional products. Lastly, as described on the bottom of the page, we will be actively rotating our balance sheet to boost value creation, and we will be seizing opportunities presented by new technologies, AI, to gain a competitive edge and also to improve productivity. And our focus on costs and efficiency will be maintained in full force in this new strategic cycle. With all of this, page number 27, my favorite page, our goals for the 2025-2028 period at the group level. We expect return on tangible equity to be around 22% on average in the 2025-2028 period, average ROTE. Tangible book value growth, including dividends to be at mid-teens, compounded annual growth rate. Efficiency ratio to further improve and be around 35% in 2028. and the cumulative net attributable profit of 48 billion euros in this four-year period. On the details around the countries, Luisa, can you help us on the page on the countries?

Yes, thank you, Onur. On page 28, and bear with me, I know there's a lot of information on this slide, but I'll try and go through it as best as possible. Starting with Spain, we see sustained momentum in client activity. Loans are expected to grow at mid-single-digit annual growth rate through 2028. Growth will be selectively focused on the highest risk adjusted return segments, commercial and consumer, as you've heard me mention before, where we also anticipate measurable market share gains. This search and lending activity will support our net interest income expansion with spread expected to remain almost flat during the period. Beyond this, in consistent with our strategic plan, we aim to increase the contribution of fee-generating businesses, such as asset management and insurance. Therefore, we expect total revenues in Spain to increase by low to mid single digit on CAGR. On cost, strict discipline and productivity gains from AI crystallizing at the latter part of the period will lead our cost-to-income ratio to remain at low 30s by 2028. Coupled with an average cost of risk of around 30 basis points, this translates into an expected return on risk-weighted assets approaching 4% by 2028, versus 3.56% in the first half of 25. In Mexico, in a context of low GDP growth, we forecast high single-digit annual growth in lending volumes, levered on increasing banking penetration, again led by the consumer and commercial books. As in Spain, this activity growth will be a key lever behind our NII growth. This, together with the improved performance of our capital-like businesses, and particularly insurance in the case of Mexico, will drive an annual revenue growth of high single-digit over the period. Operational excellence remains a priority. We expect our efficiency ratio to remain around 30% in 2028, reflecting good cost control while continuing investing in the country. Meanwhile, an average cost of risk of 330 basis points will also support a robust ROA of roughly 6.5% in 2028 versus 5.87% in the first half of 2025. The Turkish franchise is expected to continue with its recovery path. Net interest income is expected to strengthen, driven by an above-inflation activity growth and spread expansion due to a lower cost of deposits as interest rates decrease. In 2028, as Onur has mentioned, Turkey is expected to exit hyperinflationary accounting, boosting revenues, which are expected to grow at high teens through 2028 in current euros. This revenue expansion, together with the declining inflation, will drive our efficiency ratio down to the low 30s in 2028. All this, together with an average cost of risk of around 200 basis points, will significantly improve Turkey's profitability from a return on risk-weighted assets of 1.60% now to a return on risk-weighted assets of above 3.5% by 2028. Across South America, we expect a favorable operating environment, with revenues growing at high single-digit in current euros, boosted by a sound activity growth, including market share gains, and Argentina exiting hyperinflation also in 2028. In a lower inflation environment, the efficiency ratio will improve to below 40% in 2028. We expect an average cost of risk of around 230 basis points, resulting in a return on risk-weighted assets of around 3% in 2028. In summary, profitability is expected to increase in Latam and particularly in Argentina as macro conditions normalize. As for rest of business, let me remind you that this area includes the CID business in the US, Europe, and Asia, as well as the digital banks in Europe, Italy, and Germany. For this area, prospects are also very positive, driven by our CID operations, which is one of our key priorities in the new strategic plan. We project a compound annual growth rate in the high teens and a revenue growth close to 20% through 2028, driven by fees and NTI, making it a significant growth engine for the group. Efficiency will improve with a cost-to-income ratio under 50% by 2028, but still impacted by the OPEX related to the strategic growth plans. Cost of risk is expected to remain at low levels around 20 basis points. All this supports an expected profitability improvement with a return on risk-weighted assets of about 2% versus 1.62% now. Overall, all the units are positioned to deliver sustainable capital-generative growth while maintaining best-in-class cost and risk discipline through the plan, leading to an improved profitability of all the units.

Thank you, Louisa. On the country, so on page 29... The final page, the most important page of my view, so I changed my favorite to this one. I want to shed light on the generation and uses of our CET1 capital. So during this 2025-2028 period, and including our excess capital at the beginning of the period, we believe we would be able to make available 49 billion euros of core capital. Of those, we expect to reinvest 13 billions in the business, growing our business in a profitable way, leaving 36 billion euros available for distributions. This amount, the 36 billion euros, is, in our view, the key anchor of our strategic plan. 36 billion Euro of capital available for distribution will follow, obviously, our payout policy, and as a result, maximum 24 billion Euros will be distributed to shareholders through our maximum 50% regular payout, basically 50% of the 48 billion that we are putting as a net attributable profit goal. Then this leaves the remainder amount, 12 billion Euros, as excess capital that can complement the distributions. So, in short, actually we are two minutes late than our regular commitment that we will finish by the hour, but I think it was justified. But in short, we are very positive for our present and for our future. We believe we are uniquely positioned as a bank who delivers exceptional growth and exceptional profitability at the same time. As such, we are relatively unique in the European banking landscape, combining these two things. And as a result, we have been delivering consistently above our goals of the previous strategic plan, and we are determined and confident that we will do that again in this new strategic cycle. And now back to Patricia for the Q&A. Patricia.

Yes, thank you. Thank you very much, Onur. We are ready now for the Q&A, so operator, please, the first question.

Of course. If you'd like to ask a question on today's call, please press star followed by 1 on your telephone keypad now. Our first question today comes from Benjamin Toms from RBC. When your line is open, please go ahead.

Good morning, both, and thank you for taking my questions. You set out your strategic objectives on slide 27 and 29, and clearly the message here is about growth, best-in-class, sustainable returns, and that leads to outsized shareholder distributions. But what would your ROT and CT1 available for distribution look like using current fraud FX rates rather than using a constant currency basis? Because I think that'll be an important driver of the delta between your objectives and what sits in most analyst models. And secondly, in relation to the 40 to 50 basis points benefit from capital from the simplification of models. Any color, additional color would be useful. And can you clarify, has the regulator already signed off on this number or could they revise it down? It just has a feeling of being a bit too good to be true at the moment. Thank you.

Very good. Thank you, Benjamin. On the first question, we are actually using forward rates in every single country except Turkey. Because in the case of Turkey, the forward rates for the next five years... They are not really readily available. Turkey is a relatively complicated country. As such, that's why I pointed you to the appendix of this presentation. You will see every single country, the depreciation of the currencies. You will see that in every single country, we are following the forward. In the case of Turkey, Given the uncertainty, we actually put a range of different depreciations, one quite aggressive, and what we are seeing is even in that aggressive depreciation scenario, These are the numbers that we commit. But I encourage you to look into the appendix, basically.

I would add, Onur, that Argentina as well doesn't have forwards.

The hyper countries.

The hyper countries. And you know that we've always been using our research estimates, which include a quite strong depreciation, as is pointed in the annex as well as the presentation.

Very good. Forty-fifty basis points, more color on this one. And can it be reversed? You're saying... If it could have been reversed, we wouldn't have put it in the presentation, Benjamin. It's a clear written formal approval coming from ECB, but more color on this. Again, I mentioned it before. Our RWA density at the end of the second quarter was 50% when the average of the European peers is 29%. There is a reason for this. We have different portfolios in different geographies and so on, and some of them were in advanced model, and they were actually producing, they were producing higher risk WA's than otherwise. So, specifically, let me be more specific on this. In two, it was an exhaustive work of going through every single model that we have, and the dialogue with the supervisor on this, and in two areas, we have received approval basically to simplify. One of them is Mexico credit cards. So we are going to go back to standard rather than having an advanced model on Mexico credit cards. And the second one is basically the wholesale portfolios in Spain and Mexico. Wholesale portfolios in Spain and Mexico. On that one, we will continue to have advanced models, but we will go to foundation. Basically, we will use the models for PD, but not for LGD and CCF. In that context, the positive impact that you have in that 40 to 50 basis points, the gross positive impact is basically evenly split, more or less half-half, between those two portfolios, Mexico credit cards, wholesale portfolios in Spain and Mexico.

Thank you, Benjamin. Next question, please.

The next question comes from Carlos Peixoto from CaixaBank. Carlos, your line is open. Please go ahead. Yes. Hi, good morning.

A couple of questions from my side as well. The first one will actually be focused on the second queue, so particularly on the one-offs. If you could help us quantify a bit on how much were the VAT gross impacts both in Spain and at the corporate center? um and then also and then also on the one else uh you mentioned some dta's recognition if you could also quantify how much that meant in in the pnl and whether and whether and if there is a split between the corporate center and in spain in the spanish unit um then the second question would be on the capital distribution the the 36 billion figure uh that you mentioned So the first part of the question is basically is the intention to distribute all of this or could part of those 12 billion of excess capital be still withheld? So just to make it clear. And then the second part of the question is basically this distribution does not account for the capital impacts from solidarity integration. How do you expect that figure to move? once you factor in both the impact on CD1 from solid health integration and also the additional earning generation that you will be having out of the deal as well. Thank you very much.

Very good. Thank you, Carlos, for the questions. On the first one, and maybe you take the DTAs one, Luisa. On the first one, the one offset you mentioned, I think it was page four, on the profits for the quarters, basically two things. Again, VAT and tax rate adjustment based on the results of the tax audit. Why not provide full transparency on the whole thing? These two impacts was basically around $250 million, both of them. And I can give you the rule of basically half. Half of this is VAT. The other half is tax rate impact. And half of each one of them is basically, roughly speaking, IMA. And half of each is basically Spain and for percentage. So you can divide the number of 250 along these line items and along these business units. The 250, I mentioned to you 150, the negative impact coming from U.S. dollar hedges was at the profit level, at the bottom line profit level was 100, minus 100. That is why in the presentation I mentioned to you that the extraordinary impact was 150 million. 250 from the tax and minus 100 from the U.S. dollar hedges. I mentioned it in the presentation, but I'm not sure that it was registered. The reason that we also categorized dollar hedges as extraordinary in this quarter is starting from this quarter, starting from third quarter 2025, we will be accounting that item because it was for CET1 hedges. to manage the volatility of the CET1, we will be accounting for this under capital rather than P&L as of this quarter. Only BTAs, Louisa?

Yes, well, we did re-estimate the tax rate for the end of the year, including the activation of 150 million euros of DTAs. We do expect that with the improved visibility that we have on the Spanish profitability, we will be, as I mentioned before, going forward to continue to include activation of DTAs. In this case, in our case, We have close to 1 billion euros of DTAs that are readily available, I would say, to be able to activate depending on the visibility that we have going forward of, as I mentioned, the profits of Spain. So that's what I would add.

Carlos, this goes back to the 2014-2015 acquisition of Catalonia Caixa and Unim and so on. There were some tax assets that we have gained, but we put them in the off-balance sheet because we didn't think that Spanish Business Unit would be doing as good as it is doing at the moment. So that, as Luisa mentioned, 900 to 1 billion DTA assets. In the next five years, they will be coming, in our view, into the P&L, following through the P&L. The last one about the capital distribution, you asked about $36 billion. Would you distribute all of this? Carlos, there's a big footnote at the bottom of that presentation, but that's the capital available. That's our intention. Actually, our capital stack or our capital deployment priorities are very clear. As you see on page 29, we are going to be creating, generating, or liberating in total 49 billion CET1 capitals. And we are saying 13, 1, 3 of this is for growth, and 36 is for distribution. I would actually love that 13 is a higher figure because it's profitable growth. We are creating further capital with that growth, okay? But as we have mentioned to you for the plan, we are gaining slight market share already in the plan, in the plan already. So the maximum that we thought we can deploy for growth is 13. As such, the remainder, 36, is available for distribution. 24 is regular payout. It's basically 40% to 50%. In the 24, we assume the maximum 50% times the 48 billion euros of profits that we will be generating. 24 is the regular payout, and the 12 is the excess capital. If we can grow profitably a bit more, we can channel a bit of this into the growth, but I don't think that's going to be the case, and this 36 will be available for distribution. And then the last one, capital impacts from the Sabadell integration. Do these include Sabadell? This is a standalone plan that we are presenting today. Nothing of Sabadell is in this number. We wanted to make sure that our standalone intrinsic value is totally captured in these figures. If the Sabadell transaction doesn't happen, these are the numbers that we will be delivering. And you asked about the impact from the Sabadell integration. On the Sabadell topic, As you know, it's very likely we expect the acceptation period and also the publishing of the prospectus will be done at the beginning of September. Once that happens, we will have a full session on the numbers around Sabadell and so on at that time. Today, it's the standalone intrinsic valuation of MBA.

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

The next question comes from Cecilia Romero from Barclays. Cecilia, your line is open. Please go ahead.

Thank you very much for taking my questions, and congratulations on the results. I wanted to ask the first one on the transaction. Following the government's announcement of the remedies, what visibility do you have on the facing of synergies? Even if it's a qualitative assessment, it would be good to have your thoughts. We heard from Sabadell on this during results. And also, my other question is, Turkey appears to be progressing well, perhaps a bit slower than you initially expected. Given its importance to allocating more value for BBVA, how do you see net profit developing over the course of the plan? Thank you.

Thank you, Cecilia, as always, for the questions. On the first one, phasing of the synergies, as I mentioned, in September, once we have the prospectus available, you will have all the numbers there, and we will have a dedicated call to discuss about those numbers. But on the transaction, the only thing I can tell you is that it is a delayed merger scenario. Delayed merger scenario. So we will be delaying the deal, but the synergies, again, in detail, we will discuss in September. Regarding Turkey, it is moving a bit slower than expected. You have, again, the full assumptions on the macro, which is very important for the peace of Turkey within the plan. Macro affects too much, or obviously it is driven by inflation and interest rates. You will see all the details in the appendix for Turkey on different macro parameters, growth, interest rates, inflation, and so on. The only thing that I can tell you is that in the plan, the $48 billion, which is another anchor for us for the strategic plan, $48 billion accumulated profits in four years. Turkey, in that number, represents around 10%, 10% to 12%, basically.

Thank you so much, Sathilya. Next question, please.

The next question comes from Ignacio Ilargui from BNP Paribas. Ignacio, your line is open. Please go ahead.

Thanks very much for the presentation and for taking my questions. I have two questions. The first one is on capital distribution and the $13 billion that you have readily available for distribution. Is there a chance that you can start the buyback before launching the offer for Sabadell, or that will have to come after everything has been cleared out? First question. And the second one is, On Mexico, I mean, you flagged that during your presentation, but Mexican economy has been very strong in Tokyo, and that was largely driven by investments. Could you just elaborate a bit on what would be the prospects of lending growth? If I just look, local currency loan growth was a bit soft in the quarter. Obviously, it was a very uncertain quarter. But, I mean, how should we think about this high single-digit growth in revenues and in activity growth? is going to be largely driven by corporate investments or it's more back on consumer lending and retail lending? Thank you.

Very good. Maybe on Mexico, Lisa, you can help on the share buyback that you asked. Nacho, we will start the share buyback after the completion of the acceptation period. On Mexico?

Yes, so on Mexico, the evolution of the portfolio of the grown notes in Mexico actually I think has remained quite solid because it's grown 0.7% quarter-on-quarter, but if you exclude the FX impacts, it really has grown 2% quarter-on-quarter. And we still have seen solid performance in retail growing 2.9%. And this is underpinned by the growth that we've been focusing on, which has been consumer, but especially SMEs, credit cards. And I would highlight SMEs and credit cards because in these two areas, we continue to gain market share, especially, I think, in SMEs. It's quite sound where we already have achieved a 33% market share. So this momentum is quite resilient despite, as we were mentioning, a softer macro scenario. In the corporate lending side, we decreased 1.7% quarter on quarter, but again, excluding effects, it really was an increase of 1%. And that was supported by growth in enterprise loans across the board, the high corporate and the lower enterprises. So I think in general, You know, the outlook continues to be supportive. We did raise our guidance for activity growth this year. In terms of the way it trickles into the P&L, I would say that, as we've mentioned, we do still see spreads being compressed. We do expect Banxico to continue to decrease rates. We are expecting a 7% rate increase. from Banxico at the end of the year, and that will continue to pressure the evolution of the NII, but still, I think, in a better way than what we see at the beginning of the year. So, all in all, I think that we are quite comfortable with the guidance that we've given on the high single-digit growth in revenues. Going forward, I would just say that the plan basically for the 2024-2028 numbers assumes that the profile of growth in Mexico is going to be quite consistent, i.e., we're going to still be seeing growth in retail and in corporate lending more or less in the same dynamics that we've seen so far.

I will highlight one thing that Luisa said, Nacho, which is, again, if you look into like two, two and a half years ago, the maximum rate that we have seen in Mexico, let me say it the other way around, was 11.25 in this last cycle, 11.25. Today, we are at 8%. So we have seen a reduction of 325 basis points in Mexico. And in Mexico, the rate variability affects mainly the wholesale loans, and it's a very quick repricing. The reset of the interest rate happens very quickly. So we have already incorporated 325 basis points into our core revenues, into our NII. What we are assuming in the plan, and again, you can see that in the macro assumptions in the appendix, that interest rates would continue to come down a bit more, but they will stabilize at 6.5%. Given the inflation in the country, again, inflation expectations and so on, that 6.5% we think is a very fair assumption. This is also where the market is, by the way. What happens then? If the interest rates stop declining, I mentioned this also briefly in the call, if interest rates stop declining, and again, we are today at eight, expectation is that it will stabilize at 6.5%. The margin compression, because of this, there are many other things that we are doing to help on the margin, but because of this, the margin compression will be moderating and will be stopping. What does that mean? The activity growth that you can achieve, unless, again, there is more decline in the interest rates, will flow to the bottom line. Activity growth will become a very important part of core revenue increase and will then increase the bottom line. That is the assumption here. Regarding the growth and the breakdown of the growth, we can tell you that the growth is relatively balanced. But as you know, we have 30% market share in retail in Mexico, but only 23% market share in enterprises. And that 23% market share, we want to increase. So the market share gains will come more from the enterprise side, but the growth, and I have it in front of me, portfolio by portfolio, it will be balanced.

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

The next question comes from Max Mission from JV Capital. Max, your line is open. Please go ahead.

Hi, good morning. Thanks very much for the presentation and taking our questions. The first one is on the efficiency target for 2028. I was wondering if it includes any restructuring and potential additional investments in between? And the second question is on the Sabadell deal. Apologies for this, but with such ambitious targets, just want to understand why you still want to pursue the Sabadell deal, especially considering the moratoria on the merger. They've just presented a plan with ROT of 16% and you are aiming at much higher standalone. Your thoughts on this would be super helpful. Thanks.

Do you want to take the efficiency goal?

Yes, for sure. I mean, we do have embedded in the plan, especially in the last part of the cycle, in the last two years, a productivity plan is included, relating primarily to our efforts in productivity stemming from engineering and ops, affected also by what's going on in terms of AI, data availability, and technology. and we do think that um the plan will start to um you know be in effect primarily more in 28 and 27 um and going actually on going forward you know and these this is the timeline that we are expecting right now and it will affect primarily the um engineering and and ops where we do see that there's a lot of potential we're already looking even today at some very interesting dynamics going on with the way we're using, you know, agents and bots and what we're developing. We're seeing, you know, in certain cases, even when we're developing very simple programs from software development, efficiencies in terms of time development of around, you know, even 70% of very simple things. You know, highlighting also And even in the way we're using the agent in our apps in blue in Mexico, it's already handling 37 million calls that we used to have in IBR, which improves the performance and the experience with customers significantly by 65% in terms of time attendance. So all these little things that we're seeing give us hope with a very structured priority. As you've seen, it is a strategic priority for us, as we highlighted at the beginning of the slides. We do feel that by 27, 28 and onwards, we will see productivity gains, and I was mentioning before, primarily driven in engineering and ops, but also in business networks and other areas. So we do expect those numbers to come in through 28, and that's why you see improved cost-to-incomes in that year.

Okay, and then the second question marks, which is, so you have a very strong plan. Why do you want to still pursue the Sabadell deal? Max, the deal is a great deal for everyone. You said it multiple times before, I don't want to repeat myself, but financial sector, banking sector, globally, especially in Europe, we need scale. We need scale. And I don't need to, again, repeat the numbers of the previous calls, but only in Spain, only in Spain, BBVA spends 1.1 billion euros in technology every year. This was the number of 2024. It keeps increasing. Globally, we are spending nearly 4 billion euros in technology. And big banks, small banks, in our view, it doesn't matter. Especially banks which operate in mass banking, which have branches, which have all the channels and so on. They cannot compete. unless they find a way to consolidate. Because even the small banks, they have to spend these hundreds of millions of euros or billions of euros in technology. You have to invest in AI. You have to invest in cybersecurity. You have to invest in DORA, which is the new regulation about the resilience of IT systems and this and that. Most of these costs are fixed costs. So it makes sense for two banks to come together. It's I called it once a textbook transaction. Why? Because you have to optimize the cost. It just doesn't make sense that two banks in Spain depay hundreds of millions of euros to external IT providers to develop our IT systems. It doesn't make sense. So it's a great deal for both. But, as you just said, we have a great plan ahead of us. And if the deal doesn't happen, it doesn't happen. It's completely fine. We move on. We said it multiple times. I'm repeating it with full force today. It doesn't happen. If it doesn't happen, we move on. We move on. I mean, I understand the curiosity or the inquiry around this. But as you just saw, we presented a plan of 48 billion euros accumulated profit in four years. Average, 12 billion euros in profits. You can only hear positive things from us about Sabadell. They're an amazing bank. They're a great bank. But they presented their plan last week. The expectation annual profit that they are projecting is 1.6 billion. Okay? 12 billion, 1.6 billion. We understand the curiosity around this. But if the deal doesn't happen, we move on. We have 12 billion to deliver. 1.6 billion can help because of the synergies that I mentioned and so on. But if it doesn't happen, we move on and we execute our amazing plan. And that's why we presented our plan today.

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

The next question comes from Francisco Raquel from Alantra. Francisco, your line is open. Please go ahead.

Yes, thank you. So my first question... If I understand well, slide 29, the presentation, you plan to generate $12 billion of excess capital in the plan, but you already have over $5 billion today. $5 billion more will come from SRTs, and $2 billion will come from the regulatory impacts that you expect in the second half. So I understand this plan is about... long growth, very capital intensive, but there is no excess capital generation organically from here, just to see whether I have the maths well or not. And second, in this context, it is key to assess the profitability of the capital that you will generate. So first of all, organically, you plan to invest 13 billion in growth. So that's equivalent to 108 billion in RWAs. That's a 27% growth in your RWA base. So will you increase profits by 27% as well over the same period? And how much will it come from Turkey and Argentina? And then inorganically, with 22% ROTE, such a great prospect to stand alone, what is the return that you would require from any M&A investment? Thank you.

Very good. So, Paco, on the first question, obviously you don't have all the details, but some of the assumptions that you were making is not what we have in the plan. For example, regulatory impacts. We have talked to you about regulatory impacts for this year, but for the four-year period that we are projecting here, we are expecting some negative regulatory impacts to come along as well. For example, in 2028, You'll try to manage it and so on, but there is this operational risk ASA topic that will be coming along next year, most likely now in 2027. We incorporated here FRTB, negative impact coming from those. So the regulatory impact number that you are putting is not true. The number that you are looking for, though, it's a good way to look into this. I fully agree. or the organic capital accumulation, capital generation number that we have is on average around 40 basis points. So on top of everything that you see, we will do the SRTs, we will grow, we will absorb the regulatory impacts and this and that, every year we are expecting on top of what we have to create 40 basis points of excess capital. That's the number that you should be looking into. Then the second question, I didn't fully get it. Maybe Luisa, you jump in. The only thing I would say is that we already answered the Turkey one, but the Turkish number here is 10 to 12% because we are expecting them to improve only in 2027 a bit and 2028, but not earlier. So 10 to 12% of the total accumulative profit that you see here will be coming from Turkey and for Argentina, much, much, much less, around 2% basically. Anything else you want to add on that?

No, I would just add that the evolution that we have, the K-bar of the bottom line of net attributable profit per year in the period is around 9%. And that is affected by, you know, obviously a slower K-bar at the beginning of the year or slower numbers of growth at the beginning of the year also. Again, increasing towards the end of the period, primarily also, again, with the hyperinflationary economies coming out of hyperinflation in 28. But on average, it's a 9% CAGR growth at the bottom line.

Then you asked about our threshold for M&A investments. Paco, on this one, as you know, and as I just mentioned, our capital deployment priorities are clear. If we can grow at the profitable level, first, we will grow organically. we will look into the excess capital and the threshold there is the threshold of alternatives. You have to look into what different alternatives exist to deploy that capital. And we always will look into what is the return of the share buyback and how that return of share buyback compares with any other potential M&A opportunity. But as you can imagine, we have said many times before, we see as we have done in Sabadell. We see M&A only makes sense if you can create a lot of synergies. That's why we always said we are only interested in domestic consolidation, and we don't see too many opportunities in that sense going forward. So you will compare with the share buyback if there is an opportunity, and if the share buyback beats, you don't do the deal. If the share buyback is lower, you do the deal. That's how we look into it.

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

The next question is from Britta Schmidt from Autonomous Research. Britta, your line is open. Please go ahead.

Yeah, good morning. Thank you for taking my questions. My first one will be on the capital and the excess capital calculation, which is based on the upper end of your 11% to 12% hurdle. A 12% ratio would still seem relatively low versus where we expect peers to be. How confident do you think that this is a realistic number that doesn't impact the implied cost of equity of the bank? The second one will be on the cost goals in the plan. Maybe you can give us a little bit of an idea how the cost cager would compare to the inflation assumptions that you've used on a group level. And then especially just a clarification, would I be right in assuming that you're aiming for around 10.5 billion profits this year, And then you're guiding towards a fewer increase in the near term and a little bit of a hockey stick towards 2028 given hyperinflation changes and also the impact of rate declines that could still impact 26, 27. Thank you.

Thank you, Britta, as always. So on the 11-12% and the target and so on. Britta, I think you mentioned also before in the previous calls, but I have a table in front of me that I look into quite frequently, which is the requirement from the supervisor and the target. Let's take the upper end or target 12 as the target for this analysis. Versus our CET1 requirement, our gap, our buffer is 288 basis points. Okay? 288. You have our peer group in all of our presentations in the footnotes. We indicate the largest banks as our peer group. The 10 largest banks in Europe within that peer group that you see in the presentations, what is the buffer that they have? They have 231. So we have 57 basis points more buffer than they do. So we always compare or look into the, when we discuss the management target, we look into the absolute number. But shouldn't we also look into the requirement? Because that requirement is driven by The capability of you delivering organic capital accumulation, the stability of that, your position in the stress test, all of that is factored in into a number which is the requirement. So as compared to our requirement, actually among, including the 10, including us, 11 banks, we are number two in that list. In that list. And maybe you have seen it, but there will be some adjustments to requirements as well going forward for us, positively speaking. Yesterday, Bank of Spain has published the new OC buffers and so on. So we don't expect, independent of that change, though, which is going to be helping on the requirement, we are not planning to change our management target. And we have numbers clearly in front of us, which talks about the sufficiency of that number. On the cost, Luisa, you want to take?

Well, I would just say that since you have the cost-to-income ratio there, I would highlight that the CAGR of the cost-to-income ratio is pretty similar to the actual target of the cost-to-income ratio. And you have the revenue growth. You can see, you know, that the cost growth is quite significant. subdued, I would say, in the period, and we're below the inflation targets. We expect positive jobs in all the geographies as well. So, again, as someone mentioned before, quite a strong cost discipline throughout the program, coupled with those productivity plans coming in at the latter part of the period.

Very good. The team here is warning me on the Paco's question, by the way, on the share buyback threshold or share buyback return as a threshold for M&A decisions. Obviously, I was assuming it. We are not going to be... If we have excess capital, we can do share buyback or we can give it back to the shareholders in terms of cash, depending on the share buyback returns and so on. Obviously, there is a threshold, but I'm not going to disclose that threshold. Regarding the last question, Britta, on 10 billion and the hockey stick, actually, there is not a huge hockey stick here at all. Again, it goes back to what I said also during the presentation. If you go back to that page in the appendix, and if you assume that the interest rates in Europe are As you see in Europe, it's 175. We are expecting at the end of this year, but then it doesn't go down any further. Or in the case of Mexico, if you assume 6.5 is the stability level of the interest rate, if you assume those, That is what affects the numbers much more in a pronounced way. I gave you the Turkish number as well. The hockey stick can only come from hyperinflation, but the total number of Turkey is 10% to 12% of the total accumulated profits. So it's a broader thing. Obviously, there is some improvement over the years, but I wouldn't categorize it as a hockey stick.

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

As a quick reminder, that's star one to ask the question today. And the next question comes from Hugo Cruz from KVW. Hugo, please go ahead. Your line is open.

Hi. Thank you for the time. I have a few questions. So first of all, you have a 48 billion cumulative profit target and a 39 billion of CT1 generation. Can you explain what's the delta between the two? You know, I can see, you know, the $1 billion of DTAs. There'll be some 801 coupons, I imagine, $4.5 billion. But what's the rest? Is it FX headwinds? So that's my first question. Second, you have, you know, you've talked about $13 billion of capital distribution available in the near term. If you could kind of give us a timing for that. And I guess related to that, some of that might be from the SRTs. You know, you have $5 billion of SRT contribution in the plan, but perhaps that's front-loaded. So, again, if you could give us the timing of those SRTs, that's it. Thank you.

Thank you, Hugo. On the SRTs, maybe what we expect in the plan, maybe also, and also this year, maybe talk about it, Luisa, but on the 39 billion, it's a very good point, Hugo. The 39 billion that we put in the page, page 29 of CET1 generation, why is it different from 48? Because of FX. If you look into the, again, the depreciation impact in the appendix of the currencies that we are putting in there, net of hyper impact is It's going to be that deduction, basically. 48 to 39 is that FX impact. Capital distribution, the 13 billion, what is the plan around that? As we said, we are waiting for the Sabadell transaction to conclude before we start the pending 1 billion, to be specific, 993 million euros of share buyback already approved, already deducted from capital. We're going to start that immediately after the period. And the rest... Given the fact that we are accumulating capital as issued in the document, there will be a continuous flow of distributions back to the shareholders in both forms, depending on where we are. On the SRTs?

Yes. Well, on the SRTs, we expect for the period to be delivering between 30 to 40 basis points of SRT CT1 capital to be generated. So it will depend, obviously, on on the different timings of the deals, but I think that's more or less the run rate that we have expected, pretty much similar to what we've done this year as well.

Thank you very much. Next question, please.

The next question comes from Ignacio Cerezo from UBS. Ignacio, your line is open. Please go ahead.

Hi. Good morning. Thank you for taking my questions. One is on the plans. if you can let us know basically whether the ROTI you're calculating implies the distribution of the 36 billion or you're just distributing the ordinary part of it. And the second one is unrelated basically to the plan and the targets. If you can give us your view about the impact that receiving the banking license by Nubank actually can have on your Mexican business and specifically on the cost of deposits. Thank you.

Very good. On the first one, yes. And we do it at the end of every year, starting from 2026, to be precise, Nacho. At the end of every year, starting 2026, we take back the capital level to 12 through distributions of that amount that you mentioned. Impact of receiving a banking license in Nubank. Nubank is already very active on all dimensions in Mexico. We respect them fully. An amazing competitor, a very good competitor. But we have our plans to compete, and so far, in my view, we have been doing really well. I mean, at the moment, they are 1.5% of deposits. They can accumulate deposits even today. They have very aggressive offers in the market. The thing that I would highlight to you is that that competitive advantage of pure price in the deposit game, in our view, will diminish when rates come down. I mean, they used to pay a year ago 14% to deposits, except this Kahita, which is a specific product which has a lot of conditions. But in general, they used to pay 14%. And today, except that specific product, up to 25,000 pesos. If you take that one out, they are now paying eight. And I do think that even in the context of we were facing 14% deposits, we have done really well. I keep mentioning this over and over again every call, but one-third of our deposits is less than 30,000 euros, with an average for that bucket, with an average deposit size of 780 euros, less than 1,000. That's the average. We have 44% market share in payrolls in Mexico. As long as we have that advantage, I do think we will be able to compete.

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

The next question is from Fernando Gil de Santivanez from InterVezo, Sao Paulo. Fernando, your line is open. Please go ahead.

Hi, good morning. Thank you very much for taking my question. So the first one is on the assumptions in Spain and rates. I see in 2028 a 2.5 rate assumption as a base case. Can you please provide what is the bear case scenario for that rate? and what would be the delta for the RORWA in the unit. And the second one is again on Spain. What market share is BBVA targeting in terms of products, mortgage, business, lending, and consumer? And what is the mix in the new production for mortgages between fixed and variable production? Thank you very much.

Fernando, you're asking for the plan of this breakdown or for the second half or the second, this year? Yeah, the plan, sorry, the plan.

Yes, well, this is exactly the base case, as you mentioned, with an expectation of rates as you see in the annex. We do think that this is going to be, you know, the more probable case, maybe the average arrival instead of the 2.5, maybe a 2.3. In any case, what I think is more relevant for the question is is that we expect the NIH sensitivity for the period to be roughly at where we have it now, circa 4%. changed the assumption. And as you know, depending on where actually we see the rates coming with the ALCO, we'll also position the book for the different scenarios. But the assumption underlying the revenues is Chirica 4% sensitivity to NII still through the period.

So if you have a different curve in your mind, once again, Fernando, 100 basis points of a decline in rate for the next 12 months, step function change in the interest rates would lead to 4% decline in the NAI, and that's the sensitivity that we keep for the period as well. Regarding the products and the growth, The key area that we have highlighted for growth for us is, once again, enterprises. Similar to Mexico that I mentioned before, we have an under-representation in terms of market share in the enterprises segment, especially these mid-sized companies and SMEs. We have room to go on that one, so we are expecting a higher growth in the plan, especially in that area. and consumer, always, which is important to us. We have 17% market share, for example, in acquiring, 16.1% market share in cards. All of that has to flow a bit more to our consumer lending book. The only thing that I would say is, as we are seeing this year, if you look into this year, the only product that we are losing market share is mortgages. And in the plan, we assume that softness to continue because it's a very competitive product in terms of price. And at these price levels, as you have seen again this year so far, we don't see the reason to grow too much in that area. So we are only losing market share in mortgages. Everywhere else we are gaining market share, and we expect that trend to continue also throughout the plan period.

So thank you very much, Fernando. There are no further questions in the line, so thank you, everyone, for joining this audio webcast. Just a reminder that the IR team is at your disposal for any further questions. I hope you have a great summer and enjoy your holidays. Thank you.