Banco Bilbao Vizcaya Argentaria S.A.

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

Thank you, Patricia. Good morning to everyone. Welcome, and thank you for joining BBVA's third quarter 2025 earnings webcast. As always, let's jump into the slides, starting with slide number three. And as always, starting with the value creation numbers on the left-hand side of the page, you can see the strong evolution of tangible book value per share plus dividends, which increased by 17% year-over-year and 4.5% in the quarter. In my view, excellent figures. On the right-hand side, you see the profitability ratios. They are sustained at very high levels with an industry-leading return on tangible equity of 19.7%. and ROE of 18.8% in the first nine months of 2025. On page number four, on the left-hand side, we delivered another strong quarter in terms of net attributable profit, once again exceeding the 2.5 billion euros mark, even in the context of a much lower rate environment, obviously. The net attributable profit decreased compared to the previous quarter, mainly to two things, higher inflation in Turkey, which impacts obviously the other income line item, and mostly due to the one-off positive impacts registered in the second quarter. If you remember more specifically, the release of some fiscal provisions affecting the tax rate, and the review of value-added tax, VAT, the payment calculations around this, and in effect, which then affected the operating expenses. The net attributable profit is also slightly below last year's figure for a good reason, we think, because Mexican peso has been appreciating lately versus a depreciation in the same period last year. This had a negative effect on the FX hedges of the net trading income line of the corporate center this quarter, but they will benefit from this, from an appreciated Mexican peso in the coming quarters. We take this any day. On the right-hand side of the page, you can see our CET1 capital ratio, which improved by 8 basis points during the quarter, reaching 1342. This solid capital position obviously provides us with the capacity to increase our shareholder remuneration, which I will explain later. Page number five on the left-hand side are cumulative profits for the first nine months. They continue their upward trend to a record level, reaching almost 8 billion euros in the first nine months of 2025, a 4.7% increase year-over-year in current euros. And on the right-hand side of the page are profitable metrics compared to European peers. Once again, our 19.7% return on tangible equity. It remains unmatched, and we are clearly one of the most profitable banks in the industry. Moving to page number six. This page is a summary of the pages to follow, so allow me to directly move to the next slide. Slide number seven. As always, the summarized P&L of the quarter. I would highlight the outstanding evolution of the core revenues, especially in the last quarter, especially in the last quarter, with net interest income and fees growing 18 and 15% year over year, respectively. In my view, an impressive 7% and 6%, quarter over quarter, respectively, again, in constant euros. Slide number eight, the summarized P&L of the first nine months of the year. I would once again highlight the very positive core revenues evolution, leading to an increase in gross income of 16% in constant euros year over year. The strong gross income growth, coupled with the positive jaws and the contained growth in impairments, which we will discuss later, it led again to the record, as I mentioned, net attributable profit of almost 8 billion euros. Moving to slide number nine, which puts more light into the revenue breakdown evolution. Once again, we continue to deliver quarter on quarter on revenue growth, driven mainly by net interest income and net fees and commissions, as you can see on the page. This has been the story of EVVA in my view in the past few years, and as you can see on the page, this quarter the performance is even more pronounced, with NAI growing 7.1% in the quarter and fees growing 5.8% in the quarter, leading to a quarterly growth rate of 4.4% in gross income. Despite an uncertain macro environment, despite declining interest rates, we keep delivering on core revenues. Regarding the, on the page, the annual decline in the net trading income, I already mentioned it, but an important part of it is, again, due to the strong gains from the FX hedges linked to Mexican peso depreciation last year versus a negative FX hedge impact this quarter due to Mexican peso depreciation. But again, as I said, we can take this anytime because it will help us in the coming quarters. Moving to slide number 10. Let me focus a bit more on activity and loan growth, which has maintained its pace at an excellent 16% growth year over year, then leading to an excellent NAI performance. As we claim, this is also very good news for the coming quarters, since we delivered this loan growth in a very profitable manner. In Spain, in the middle of the page, loan growth further accelerated to 7.8% year over year, while Mexico continues in line with our ambitious guidance at 9.8% year-over-year. In the case of Mexico, let me remark that if we exclude the U.S. dollar currency impact, the loan growth figure as of September 2025 would have been 10.9%. Now, on the right-hand side of the page, thanks to the strong long-growth figures and obviously our proactive price management, we continued expanding on our core revenues, the sum of NAI and fee income in both Spain and Mexico, in both year-over-year and quarter-over-quarter comparisons. And again, gaining pace in the last quarters. If you annualize the quarterly figures of the core revenues, they are really good numbers in our view. And this is one of the most important messages of the presentation banks are generally rate sensitive as we also are in Spain and Mexico But despite the rate compression Thanks to our unmatched long growth leading to in every single country market share gains and our proactive price management we continue to grow our core revenues and Now on page number 11, you see another reason for our optimism looking into the future. As I mentioned, we are quite rate sensitive in Spain and Mexico. The last two years, and especially the last year, we have seen interest rates decrease significantly in these markets. And the good news in our view is that we believe interest rates are already at or near the expected terminal rates in both Europe, Spain, and also Mexico. In the case of Europe, we expect the terminal rate to be around 2%, where interest rates already are, compared to the 4% at the beginning of 2024. And in the case of Mexico, the policy rate was at 11.25 at the beginning of 2024, and is now at 7.5%, as you know. We estimate the terminal rate to be around 6.5%, so we are almost there as well in Mexico. We have proactively managed the impact of these rate declines, which, by the way, happens quite fast in Mexico. The reset frequency is much faster in Mexico. And with some months delay in Spain, our customer spreads on the right-hand side of the page already reflect those impacts. And with limited room for further rate cuts, we expect relative stability in customer spreads going forward. In short, let's not take too much time on the page, but if spreads... stay around these levels. And with continued dynamism in activity and loan growth, we believe our revenues and profits will further strengthen in our core markets in the coming quarters and years. Moving to slide number 12. On the left-hand side of the slide, we continue to show positive jobs at the group level. supported by the solid performance of the gross income, which grew 16.2% year-over-year, while operating expenses increased by 11%, remaining below the average inflation across our footprint. And on the right-hand side of the slide, you can see our efficiency ratio again improving, reaching 38.2%, below last year's level, obviously. Slide number 13, this page shows the solid evolution of our asset quality metrics, which are performing better than expectations, better than our guidance at the beginning of the year, in a context of strong activity growth, especially in the most profitable and typically higher cost of risk segments. On the left-hand side of the page at the bottom, our cost of risk stands at 135 basis points, again, better than guidance, slightly above last quarter's figure, with the numbers already incorporating the negative impact coming from the annual risk model calibration process, partially compensated by the positive impact from the quarterly macro adjustments. Meanwhile, on the right bottom, you see that our MPL and coverage ratios, they continue improving. Slide number 14 on capital and shareholder remuneration. On the left-hand side of the slide, our capital waterfall for the quarter-over-quarter evolution. Our CT1 ratio once again has increased 8 basis points to 1342. And following the waterfall, results, 65 basis points. Dividend accrual and 81 coupons, minus 35 basis points. Then 37 basis points due to the RWA's growth. This figure reflects, again, our ability to reinvest part of our capital generation into profitable growth. And as in other recent quarters, it also reflects the result of several risk transfer transactions, SRTs, which positively contributed five basis points to the ratio of this quarter, a bit lower than the previous quarters because of the summer seasonality. Then we have a bucket of others of 15 basis points, which comprises, among others, the market-related impacts, slightly positive, and then the credit in OCIE for hyperinflationary countries. Lastly, regarding the CET1 ratio, and as we announced last quarter, we expect a positive regulatory impact in the fourth quarter in the range of 40 to 50 basis points, reinforcing our already very strong capital position. And then moving to the right side of the page, as the process of the Sabadell transaction has ended, we will resume our shareholder remuneration programs. First, we will begin our 1 billion euros, nearly 1 billion euros share buyback program starting tomorrow. Second, we will distribute on November the 7th a record interim dividend of 32 cents per share. Then, and most importantly, as soon as we get the required ECB authorization, for which the process has already been initiated, we will start another round of a significant share buyback. The details of this last piece will be announced obviously once we receive the authorization from ECB. Moving to page number 15, it's a quick review of our strategic progress and specifically on new customer acquisition. During the first nine months of 2025, we have acquired a record 8.7 million new customers with 66% joining us through digital channels, a clear competitive advantage for BBVA. Then on slide 16, another pillar of our growth strategy, sustainability. We continue to deliver quarter after quarter, even above our own expectations. In the first nine months of 2025, we have channeled a record 97 billion euros in sustainable business with a significant increase in all segments. And finally, moving to page number 17, as you know, last quarter, we set our ambitious financial goals for the 2025-2028 period. We will report back to you on the progress versus established goals every quarter. In short, we are at the early innings, but as compared to the numbers we have in the plan for the first nine months of 2025, we are performing better than our original expectations in all the metrics. And now for the business areas update, I turn it to Luisa. Luisa?

Thank you very much, Juanur, and good morning, everyone. In slide number 19, let's start with Spain, which has shown a strong momentum throughout the year and once again has delivered excellent results in the third quarter. Net profit reached 3.1 billion euros in the first nine months of 2025, with around 1 billion euros generated in the third quarter alone. These results, in line with previous quarters, reflect solid business performance and outstanding in AI evolution despite lower rates, robust fee income, strict cost discipline, and continued strength in asset quality. Starting with net interest income, it has continued to perform exceptionally well this quarter, up 3.2% quarter-on-quarter, driven by strong loan growth in our most profitable segments. As you can see, consumer lending and mid-sized company loans both grew by around 10% year-on-year, well above the overall loan growth of 7.8%. We also continue to benefit from the positive contribution of the ARCO portfolio fully aligned with our strategy to lock in higher rates. Based on this solid performance, we are racing our NII guidance for Spain to low single-digit growth in 2025, up from slightly positive previously. Fee income this quarter was affected by the usual summer seasonality. Year on year, performance remains very solid, up 4.2%, mainly driven by strong growth in asset management fees, nearly 10% year on year higher, together with increasing contributions from insurance and credit cards. On the cost side, the quarterly increase mainly reflects a runoff related to VAT payment calculations recorded last quarter, which you may remember. Excluding this impact, expenses were very well contained, up only 1.3%, clearly showing our continued focus on cost control. Finally, asset quality remains very solid, with both the MPL ratio and coverage ratio improving. Costs of risk remain contained at 34 basis points, in line with our guidance. Overall, a remarkable quarter in Spain, with solid activity driving robust core revenue growth, even in a low-rate environment. Moving now to Mexico on slide 20 for another quarter, and despite a challenging environment, BBVA Mexico delivered a very strong set of results with net profit of 1.3 billion euros in the quarter, driven by core revenues growth. Net interest income grew by 3.3 quarter-on-quarter, supported by robust lending activity, especially in retail, where we continue to focus on the most profitable portfolios, consumer and SMEs, both growing at 4% quarter-on-quarter. Corporate lending also remains strong, increasing by 9.1% year-on-year, excluding the effects derived from the Mexican peso appreciation. Fee income performed very well, up 2.6% quarter-on-quarter, with growth across the board mainly driven by credit card payments and asset management fees. Moving to cost, the increase in expenses mainly reflects higher IT investments as we continue investing for future growth, while personnel costs remain stable in the quarter. Overall, efficiency stands at close to 30% in the nine first months. Turning to asset quality, impairments decreased in the quarter, driven by both a net positive impact from the IFRS macro adjustments and solid underlying asset quality trends. As you may know, BBVA research has reviewed upwards its GDP growth forecast for Mexico, now expecting positive growth of 0.7% in 2025, compared with a contraction of minus 0.4% in the previous GDP forecast. This revision reflects the resilience of Mexican economy, even in a highly uncertain global environment. All in all, the cumulative cost of risk stands at 327 basis points as of September, better than expected, leading us to also improve our guidance for the full year. We now expect the cost of risk in Mexico to remain below 340 basis points. Finally, net profit reached 3.8 billion euros in the first nine months of the year. That's a 4.5% increase in constant euros, confirming the strength, resilience, and superior profitability of our Mexican franchise. Moving now to Turkey on slide 21, Turkey delivered net attributable profit of €648 million in the first nine months, a strong increase close to 50% compared to the same period last year. This solid performance was driven by higher core revenues and lower impact from the hyperinflationary adjustment supported by the disinflation trend observed in the country. If we briefly look at the income statement in the first nine months of the year, a few key points to highlight. First, we've seen a solid performance in NII, supported by strong activity growth, mainly driven by retail, significant year-on-year increase in the TL customer spread, but also an improved liquidity management during the quarter. In a context of declining rates, we have benefited from lower cost of deposits while also improving loan yields, supported both by our disciplined price management and our targeted loan growth strategy, focused on the most profitable segments. As you know, in Turkey, our balance sheet shows a positive sensitivity to lower rates as deposits reprice faster than loans. This means we will continue to benefit from the current easing cycle. Second, fees continue to show a positive trend underpinned by robust performance in payment systems and asset management fees as in previous quarters. Finally, the cost of risk slightly increased to 176 basis points in the first nine months, in line with our expectations. Impairments increased this quarter is mainly explained by the higher provision increases related to big ticket exposures recorded last quarter, which you also may remember. Provisioning needs remain high in retail, although we are starting to see stabilization in MPLs inflows in this part of the portfolio. Now let's turn to South America in slide 22. The region continued to make strong contributions to the group's results, posting a net profit of €585 million in the first nine months, a 24% increase year-on-year in current terms. During the quarter, NII remained solid, supported by healthy loan growth across the region and customer spread expansion, particularly in Peru and Colombia. This positive evolution of margins was partly offset by Argentina, where, ahead of the legislative elections, we saw a sharp compression in spreads amid a highly volatile rate and currency environment. The income, on the other hand, showed a remarkable increase in this quarter, with growth across all geographies reflecting our continued efforts and renewed focus on strengthening this revenue stream. Turning to asset quality, we continue to see positive trends in Peru and Colombia, supported by a more favorable macroeconomic outlook and rate environment. Meanwhile, Argentina continues to show some deterioration in a context of strong loan growth and sharp increase in real rates. Overall, the stock of MPLs remained flattish this quarter, while the MPL ratio improved to 4.08% and the coverage level increased to 93%. The cumulative cost of risk stands at 243 basis points as of September, in line with our full-year guidance. And finally, let's move to the rest of business on slide 23. It's an area that we haven't usually covered on these calls, but given the strategic plan focus on CAB business and commercial banking business, we have decided to also give you some indications of how this P&L is moving on because its strong performance and growing contribution to group's overall results are already very worthwhile. Just as a reminder, this unit mainly includes our CIB business conducted through our BBVA branches outside our core geographies. This activity accounts for more than 90% of the area's total loans and net profit. In addition, the digital banking operations in Italy and Germany are also reported under this business unit. This unit is already delivering around €480 million in profits. This solid performance reflects robust business momentum across the board, supported by cross-border activity and sustainability. Higher activity levels have led to revenue growth of close to 25% year-on-year in the first nine months, driven by a strong increase in NII, up 15% year-on-year, thanks to greater business volumes and disciplined price management, and outstanding contribution from fee income, showing very positive dynamics across all key geographies, supported by both investment banking and global transactional banking fees. On cost, the increase reflects the rollout of our strategic growth plans, building the capabilities that will enable future growth. Finally, risk metrics remain very solid in this segment. The MPL ratio improved to 18 basis points, and the cost of risk for the first nine months stands at just 10 basis points. Overall, we see this as a very promising business area where we are leveraging our diversified footprint to support clients wherever they operate, not only in our core markets, but also in other strategic geographies for them, such as the US, the UK, continental Europe, and Asia. And now, back to Onul for the key takeaways.

For the main takeaways, it's on page 24. Let me not take time because they're quite obvious on the page. But let me once again repeat the very high-level overall message, which is we are once again very happy with the performance in the quarter, especially the quarterly core revenue evolution. And we are very focused, very focused on creating organic capital and resuming our distributions to shareholders, which will be starting tomorrow morning. And with that, we go to Q&A. Patricia.

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

Thank you. If you'd like to ask a question on today's call, please press star followed by one on your telephone keypad now. When the parents ask you a question, please ensure you are unmuted locally. That's star followed by one. Our first question comes from Max Mission from JB Capital. Max, your line is open. Please go ahead.

Yeah, thanks. Hi, good morning. Thank you for the presentation and taking our questions. I have two questions. The first one is on loan book growth in Spain. Can you please talk more about the type of demand you are seeing in corporate loans? And also, why growth in mortgages is below the average for the sector? And the second one is on cost of risk in Mexico. Even though you improved guidance, the new guidance implies a pickup in the fourth quarter, and I was wondering why. Thank you.

Very good. Loan growth in Spain, the corporate loan growth, and you see it in the documentation, but the mid-sized companies, as we call them, the middle part of the corporate area, it is growing 11%, and the corporate NCIB is growing 18%. Where is this coming from? It's coming across the board. In all the sectors, actually, there is some investment drive. As you know, the Spanish economy is doing really well. We upgraded our GDP growth rate forecast in Spain to 3% this year and 2.3%. We also upgraded next year, 2026, to 2.3%. So the economy does well for a few reasons. Number one, immigration. Basically, there is a new flow of population into the geography. Number two, Spain is a very service-based economy, relatively speaking, obviously, and services sectors in general are doing really well. For Spain, tourism is very important under that chapter, doing really well. number three next generation eu funds it is affecting in a positive way the growth in in spain and number four there is a there is an investment pickup in the country in multiple dimensions we see two very clear strong areas number one the energy and renewables they continue to attract investment number two the housing There is a big demand in the market. You might know these numbers already, Max, but in Spain every year, basically around 300,000 new households are being formed. 300,000 versus the new supply of homes is around 150,000. So there's a mismatch in terms of demand and supply. This 150,000 new houses being constructed every year used to be 100,000 two years ago. So there's also some... vibrant activity on in the construction and the housing sector as well all combined is leading to the numbers that you see on the corporate segment why long growth is not so good in mortgages you know the answer the pricing we just don't see value in growing the mortgage book at these prices even if you incorporate the cross sell additional income So those loans, we just don't see the value. That's why we are staying out. This is not new for us. From the beginning of this year, actually, we have been losing market share in mortgages and we are completely fine with it if there is no return on the cartera, on the book. cost of risk in Mexico, we are actually upgrading our guidance to less than 340. Less than 340 does not mean 340. So the dynamics are very good. And as I mentioned in my part of the presentation, in the third quarter, in Mexico and in general, There was the positive impact from macro adjustment because we have upgraded the macro expectation for Mexico, but there was a larger negative impact coming from annual recalibration of the IFRS 9 modeling. That was the reason why it slightly went up versus the first six months of the year. It's lower than the second quarter. But the average of the first six months, it went up slightly. And the reason was that, basically. So we are quite positive, actually, what we are seeing in Mexico in terms of the growth dynamics and in terms of the cost of risk dynamics. Lucia, you want to add anything?

I would just only add to your point, just in case we just be fully transparent. The IFRS annual recalibration update that we do this year has taken place in the third quarter. Last year it took place in the fourth quarter. And this is done throughout the whole of our geographies, and it coincided also this quarter with a positive macro IFRS update in the geographies as well across the board.

Very good.

Thank you, Max.

Next question, please.

The next question comes from Antonio Real from Bank of America. Antonio, your line is open. Please go ahead.

Hi, morning all. It's Antonio from Bank of America. A couple of questions from my side, please. The first one, you'll forgive me if I go back to the Sabadell bit, but as a management team, you've put a lot of energy and resources into the project, which for one reason or the other didn't work out. So looking back, is there anything you think You would have done differently, or maybe just your takeaway, what do you walk away with? I mean, we've seen two failed bids in Europe and not something we've seen very frequently in the past. So that's my first question. My second question is more forward-looking and relates to sort of capital and your distribution outlook. You are 13.4% today, and you flagged some additional capital tailwinds of 40 to 50 basis points coming through, and that's in Q4. Now, you've confirmed also that your go-to capital target is at 11.5% to 12%. How quickly do you think you can go to that level? The market seems to be a bit skeptical about you running your business with that capital buffer, so maybe you can touch on that as well. Thank you.

Very good. Thank you, Antonio, as always. It's always good questions. On the Savarell topic, as you can see in the presentation today as well, and as we have been operating since that day of Friday, we closed that chapter. We closed that chapter. We do think it's a missed opportunity. It's a missed opportunity. for our shareholders, our clients, our employees, but definitely for Sabadell shareholders as well, Sabadell clients and Sabadell employees as well, for Spain, for Europe, for Catalonia. We do think it's a missed opportunity, but we close that chapter. We close that chapter for one very good reason, because we always care about our own stakeholders, our shareholders, our clients, our employees, and for the benefit of our own shareholders, our stakeholders, it's much better to move forward, to look into the future, and to focus on what we do best, which is running our business. And in that sense, again, we close that chapter. The learnings, obviously, we are reflecting on the learnings, but the chapter is clearly closed for us. On the capital, 1342, as you mentioned, we are expecting another 40 to 50. basis points in the fourth quarter only only from a positive regulatory impacts if you add that and if you also add the organic capital generation that we would be creating in the fourth quarters fourth quarter is typically a better quarter in terms of srt activity also you will see that we have a lot of excess capital and as we said many times before we are fully committed to the target 11.5 to 12 if you take the upper end of that range 12 We are gonna be basically distributing that capital back to our shareholders to get to that 12 level. That's why we said that we are waiting for DCB approval for this extraordinary significant share buyback and we'll go from there. Now coming back to the question of is you said, I don't know what word you use, but the 12 is that the right target and so on. I repeat the same thing every quarter, but I will do the repetition once again. We have to look not at the absolute level of that number, But we have to look into the difference versus the requirement. Because that requirement that is set by ECB, by the supervisor, is basically set based on many things. Based on the results of the stress test. Once again, we come as one of the best in the stress test results. based on return on tangible equity and the organic capital generation capacity based on the volatility of your organic capital generation based on multiple multiple metrics in all these metrics not only we create much better levels of organic capital if you take five years 10 years 15 years you also see that the volatility around the trend line is one of the lowest in the european banking sector for us because we have these wonderful franchises in our view in the different markets that we operate, one of the best franchises in every single country that we operate. In short, as a result, our requirement is 913. 913. If you take the upper end of our capital target range, 12, it's 287 basis points difference. Okay? So the buffer that we have versus our requirement is 287. We have a peer group. We keep reporting our numbers against the peer group, 15 largest banks of Europe. If you take out the non-EU banks from that list, because the list is European geography, which includes some UK banks and Swiss banks, if you take out those, the EU banks, for which the requirements are set by the same supervisor, ECB, the average of the buffer of the rest, which is the 10 other banks in our peer group, is 240 basis points. So our buffer is actually one of the best and clearly above the average of our peers, and we feel very comfortable operating with 12, and we are going to be distributing our excess capital back to our shareholders to get to that level.

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

The next question comes from Francisco Rico from Elantra. Francisco, your line is open. Please go ahead.

Yes, thank you. I want to ask about margins. First, in Spain, the customer spread has fallen below 2.9%, and I thought 3% was the draft of this interest rate cycle. So I wonder if you can share guidance on customer spread going forward. I have seen the loan yield falling 21 basic points Q&Q. So how much of the fall is mixed related? You have mentioned fast growth in CIV and public sector. Price competition, already some banks have flagged about this. Euribor resets pending. And then the cost of deposits falls very slowly. Just three basic points. And I see fast growth in time deposits. So you can explain the trends on the liability side as well. And then my second question, margins on Mexico. They are proving, on the contrary, very resilient, despite the sharp fall in interest rates. that you have mentioned, so I wonder if this is just a timing issue, given the speed of the repricing between the assets and liability, and where do you see the 11% customer spread once the balance sheet is fully repriced to lower interest rate, and how fast is the repricing? Thank you.

Thank you, Paco, for the questions. I think for both, there is a common theme that I would put on the table first, and then I go into each one of the countries that you mentioned. The theme is, given the rate cycle is coming again, as we have also put into the presentation, the rate cut cycle is coming to an end. There's some more to be done in Mexico, but in general, we are very close, in our view, to the marginal rate. We do think the spread that you see, the customer spread that you see in the pages that you indicated, are relatively the levels that you would be seeing going forward what does this mean you let's go then country by country to be more specific for spain you mentioned three percent as the floor i'm not sure that we quoted that number at all but i don't think so um the 288 that you see in the quarterly average actually the monthly figure monthly average for september if i'm not mistaken is 283 we were basically expecting margins to stabilize around these levels and we do think they are going to be stabilizing around these levels if ECB doesn't again start cutting rates. So the stability is already kicking in. You asked about the lending yields, why it came down too much. It's a bit mixed, but more than the mix, it's because of the repricing. I'm sure you are aware, you know our book really well, but the reset frequency for corporate lending book is typically one month or three months. And the reset frequency for the mortgage book is for two-thirds of the mortgage book is basically six months, but you take the, you report 12 months or two months ago, so it's effectively eight months. And one-third is basically more than a year. So there's some delay in the reflection of the rate cuts into the lending yield. The lending yield coming down is partially driven by mix, but more importantly, it was driven by the reflection of the rate declines that we have seen in the market in the last two years, in the last year. But we are quite positive on what we are seeing for a few reasons. Number one, the customer spread decline is as such, but the NIM in basically in spain was basically flat in the quarter because we do have this more than 50 billion euro uh alco book that we do think we did fix at the right time so the average yield of that book is at three percent uh that is helping obviously in the nim overall but on the customer spec specifically and on the lending specifically what you see is that the front book yields are now better than the back book yields, which is also a signal that the curve is coming now to the end. And we are growing in some areas, especially consumer and SME, which typically will help us in terms of mix going forward and in terms of spread. In short, we do think we are basically very close, close to the bottom of the customer spreads in Spain. Now, going back to Mexico, As you said, slight increase. You also asked about deposits, sorry, in Spain, in deposits, because there was a large growth of wholesale deposits in the quarter, and that has basically created a mixed effect on the deposit costs. And as you know, our deposit prices, as compared to other Spanish peers, is much lower. So the decline versus a starting point much lower is going to be much less. That's the reason. But the key reason in the quarter was the mix. Mexico, again, the overall message is that we should be seeing some stabilization slightly below around these levels. The reason that it has increased a bit in the quarter is, again, a bit mixed, because we have grown much more in the retail lending book versus the corporate lending book. But these levels, in our view, are relatively close to the levels that you would be seeing going forward as well.

Yeah, I would add to that on the Mexican front, Onur, that as you know and everybody knows, we maintain NIS sensitivity in Mexico of around 2.5%. to 100 basis points movement. That 2.5% is actually around 1.9% on the Mexican peso side. And as you know, rates in Mexico have come down very significantly since the rate peak at 11.25. Now we're expecting rates to come down to 7% this year. Moving on to what we think are going to be more terminal rates of 6.5 next year. with a downward bias depending on how the strength of the PIS on the macroeconomic policies go. But in general, we see those rates stabilizing, and I think the positive news is that that significant rate decline with that sensitivity that I just mentioned of 1.9%, to 100 basis point movement have been very much absorbed on the NRI side by excellent, I think, price management, also on the cost of deposits, which keep on being quite resilient and very much below our peers, which now have a cost of deposits of around 4.7, more or less.

And maybe on Mexico, one final thing to remind, we mentioned it, I think, in the past. In 2020-21 period, the interest rates in Mexico was around 425, if I don't remember incorrectly. 425 was the central bank rate. Even in that environment, we had basically 10% margin. Since then, we have improved the mix of the loan book in such a way that you would see these double-digit increases

more than 10 margins are quite resilient and quite quite expected in mexico going forward thank you very much paco next question please the next question comes from benjamin psalms at rbc ben your line is open please go ahead good morning both and thank you for taking my questions the first one's on group costs which are running up about 11 year over year that's broadly in line with your inflation footprint But do you have any additional levers you can pull going into 2026? I appreciate your footprints are different, but your largest peer is guiding the flat, slightly down costs. There just seems quite a large gap in aspirations here, but maybe you feel the cost growth is a natural consequence of higher balance sheet growth. And then secondly, you've broken out today some more details on the rest of the business division. Can you remind us what your ambitions are for your global CIB business? How fast do you think that business can grow by over the next three years? Thank you.

Maybe you do costs, Louisa, and I do CIV?

Yes. Well, I think the group costs were also affected quarter on quarter by the impact that we had of the one-offs in the second quarter. What I think is very important with regards to the cost is that we are containing, you know, the cost increase in the different geographies. It's important to highlight the Mexican efficiency plans that were carried out at the beginning of the year in terms of, you know, headcount reviews and revisions, also in Colombia. Spain is containing costs, I think, very well with that 1.9% increase year-on-year. I think what we need to really look at is with our strategic business plan going forward is that cost-to-income level. We are very much focusing on cost-to-income, ensuring that we have the right operational level, leverage, sorry, as long as we continue to invest in the franchises, which I think is very important for us. In this regard, we do think that the cost-to-income target of 35% at the end of our period, the 2028 number is – very much our focus. We have, as you know, the low 30s in Spain, low 30s in Mexico, low 30s in Turkey, cost-to-income ratios, and that's the way we are managing our cost side, investing, but at the same time being disciplined in ensuring that those investments generate revenues and allow us to achieve best-in-class efficiency ratios.

Very good. On costs, I would just add, Benjamin, the topic of two principles that we It's really important for BBVA management. Number one, the concept of JAWS. Our costs should not be growing higher than our revenues. And the second thing is we should grow in general because of the efficiencies that we are baking into the business every single day. We should not grow higher than inflation. The numbers that you mentioned and also you compared with the competitors, I can judge who the competitor that you are comparing to is. You should look into the hyperinflationary countries and the country mix. in that growth rate. But we stick with our two very important principles, positive jaws, less than inflation. On the CIB business, we already basically carved it out and then talked about it in the second quarter call. But if you remember in the second quarter call, we put some numbers, goals for this division as well. I would highlight only the two of them, which is revenue growth, we said would be around 20%. If you compound this 20%, the real goal that we have is that in the four-year period that we are looking into, we are going to double this business. Double this business. That's the aspiration. And then we are going to have a RORWA. And as you might have seen in the country pages that Louisa went through, we are now reporting RORWA. And RORWA will improve to more than 2% for that division, which then would yield, in our view, also very decent return on capital numbers. How are we going to do that? Basically two things, two very important strategic levers. We will talk more about this maybe in the following calls. But number one, cross-border trade finance focused, basically plain and plain vanilla corporate banking, corporate banking, transaction banking focused, and basically entailing going with our clients into these geographies that they also operate. We did realize that there are many clients of us in Mexico, in Spain, in South America, Turkey, many clients of us who do business outside of their home geographies, and we are not fairly represented. We have amazing relationships with them in their domestic business, but beyond their core geography, we don't basically serve them as well as we would like it to be. As such, we are going to be focusing on this multinational cross-border related business that we can tap into, and that's going to be a differential point for us. The second topic is, again, a bit we have asked as we were planning and as we were creating that plan, strategic plan on the CIB business, where we are different from others. And the second topic is the institutional business. There are many institutional clients, funds, asset managers, insurance companies, and so on, which we believe can benefit from our presence once again across the globe. We are the market maker of Mexican peso securities, for example. If any institutional investor wants to buy a Mexican peso security, we are the bank. And we have seen that many institutional clients were using our competitors. We are going to leverage our positioning and, again, our footprint. Being in multiple geographies would lead us to do better in the CIB business, and the observation or the aspiration is doubling in four years.

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

The next question comes from Sophie Peterson from Goldman Sachs. Sophie, your line is open. Please go ahead.

Yeah, hi. This is Sophie from Goldman Sachs. Thanks a lot for taking my question. So my first question would be going back to Mexico. We've seen some press headlines that Revolut wants to be quite aggressive in Mexico. NewBank is already... quite aggressive in terms of competition. How do you think about the competitive landscape and do you feel competition has increased? And if you could just remind us BVA's competitive strengths in Mexico. And then the second question is on inorganic growth opportunities and maybe also organic growth opportunities. Given that your capital position is quite solid and you have 40 to 50 basis points of capital tailwinds coming in the fourth quarter, do you think it would make sense to consider growing or looking at something outside of Spain? And how do you think about kind of inorganic growth opportunities across Europe? Would you consider that? And also, if you could remind us how the Italian and German digital buying store are going. Thank you.

Thank you, Sophie. Maybe I'll start with the second one. We are purely focused on organic growth from now on. I see what you're asking, but after the experience that we have had, I do think it's very fair that we will only focus on organic growth. We will always look into things, obviously, that's our job as well, but our plan, our numbers, our commitments that you see in the second quarter when we announced them and today is purely based on organic growth. You mentioned about Germany and Italy. Again, our plan there is to grow through our digital banks. This is the first time that we are now putting numbers into that business. It is covered in the page that Louisa disclosed on rest of business, which is, again, mainly CRB business. But in that page, you do see under the customer funds, there is a breakdown now which says digital banks at the end of september basically we had 10 billion euros of deposits in that unit which is again italy and germany and we will continue to grow in those geographies we are going much better than our original business plan we are going faster than what we thought we would be doing at this point in time in both geographies germany even better actually as compared to italy italy was an amazing experience and germany is doing even better So we will continue to grow through that business model, which is pure digital banking, leveraging the infrastructure and leveraging the application and the technology base of Spain to grow in Italy and Germany with the digital banking proposition. That's going to be the plan there. Regarding Mexico and Lisa, please jump in as well. The only thing I would say is that I said it many times in the past. I keep repeating it. I do know. But I do think it is important. What we have in Mexico, in my view, is just amazing. It's an amazing bank. And if you have not been to Mexico or you cover us very nicely, please do go there and then meet our management, meet our team there. It's an amazing bank. And I mention this every quarter, but it is important to highlight once again. We have 44% market share in payrolls. All the cash flow related products, transactionality related products, which is the bedrock of our business. We have amazing positioning in the country. We have the best talent. We have the best brand power. We have the best client franchise in the country. So let me not go more into it, but it's an amazing bank for multiple dimensions and not hard to replicate with, not easy to replicate assets and infrastructure. In that context, We take the newcomers, the neo-banks, very seriously, really very seriously in Mexico. They are amazing companies in our view, but we are going to compete, and we are going to compete hard. So what you see with these neo-banks is that they are basically attacking two different markets. One is credit cards, typically, and on credit cards, again, the brand power and the scale benefit that we have is very tough to beat. Because we come up with campaigns, rewards, and points for our customers because of our size that is not very easy to be replicated by others. So we are going to be fighting really hard in credit cards. You might have seen it in the figure. You can come up with that also in the in the numbers that we provide, but also the markets authority in Mexico publishes it, we have been gaining market share. Even in this environment, we have been gaining market share. Even including all these neobanks, we have been gaining market share in credit cards in Mexico. So we are going to compete hard, and we have a scale benefit, and we have a program which is very powerful that we think we will continue to gain market share independent of the newcomers. And then the second thing is the deposit market, that they are competing on deposits. They are offering really very high rates. You might have seen it, but last year ago, they were offering 15% to deposits when the interest rate in the market, the central bank rate was 11.25. And what we have defended then, when there was such a big difference, is going to be, in our view, easier for us going forward, because now all of them basically reduced their rates, because they cannot sustain those rates anymore, The latest that we see, most of these new banks, now they're offering 7%, 8%, which we can compete even more easily. And on that one again, hard to replicate asset. Basically one-third of our deposits are within the span of less than 30,000 euros, one-third. And one-third, that bucket, the average deposit size is 790 euros. It's a very small ticket. transactionality driven, payroll account driven, small ticket deposits. We will maintain that strength in our view going forward. But anything you want to add on the Mexican?

No, I would just end up saying that, as you know, the profitability of our Mexican franchise is well beyond the peers. We have a 28% ROE in Mexico versus the peers at 15%, and it's highlighting those strengths that Onur was mentioning. It's a universal bank with a number one MPS score of 70, above also all their competitors, including the neobanks. And I think it's a very focused bank and doing exceptionally well. So nothing else to add.

Very good. We are going to pick up some speed. Otherwise, we are not going to be done.

Thank you. Yes. Next question, please.

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

Please go ahead. Hi, thanks for taking my questions. It's good to be back. On Mexico, maybe a follow-up on this latest question on Mexico. And look, I completely agree that you've got the best franchise in Mexico and very difficult to replicate anywhere in the world. My question is more to try to pick your brains on the medium term. Because if you look at, is there a level of market share where some of the incumbents, sort of the challengers, sorry, could get to where they start to be more of a scale competitor. Maybe not for each, but for others, sort of the second layer of competitors after you, I'm thinking Sandaneda, and also some of the others, which could start to put more competition. Is there a level of market share which we should be looking out for? Because when I look at your deposits, it's true that you've very successfully reduced the deposits. but the mix is slightly sort of increasing to more savings and time, and I wonder if that's sort of effective competition. The second question is on delinquencies on Turkey and Argentina, in particular Turkey. They're ticking up as was expected and you had guided for. Should we expect this for a few more quarters? Any color you can give on that as to when, how many more quarters would you expect

mpls to continue to pick up there or yeah any hand holding there thank you very good uh there was a a noise in so if you don't capture all the questions that you asked uh or please let us know but what strength do we have it discussed about mexico but you're asking whether the second layer of competitors can come along and so on. I go back to the same thing. I mean, the strength that we have in Mexico is so unmatched in our view, the scale benefit, but also more decline franchise and the underlying business franchise. Of course, many others will come along, but we will maintain our position. And you see that in the last five years, in the last three years, we have been gaining market share. In this last year, only in the last year, we have gained 49 basis points market share, in the lending market share, with the profitability that Luisa just mentioned. Once again, we think it's a unique franchise and we'll continue to build upon that. And when others, where they can go, I don't know. If you're asking about the neobanks, one of the competitors there in Mexico, obviously, is Neobank, which is originally from Brazil. And in Brazil, they do have a market share. But when you look into their market share evolution, what you would see is that they started well. They are now at 3.5% market share in credit cards. Again, very credible competitor. We take them really seriously. But relatively speaking, their curve is now going lower than Brazil. So where they can get to, we don't know. We are going to fight hard and we are going to compete hard. But I don't think we will be the ones who would be losing market share. You asked about deposit savings and time. You said that time has gone up slightly more in the quarter. True. I mentioned this very clearly in the previous calls as well. Nacho kept asking me about this many times. But when the rates were much higher, $11.25, when the central bank rate was $11.25, we decided to be a bit out of the deposit market. We wanted to fund ourselves through wholesale funding. Because when rates are very high, heating up the competition doesn't help us. Doesn't help. Doesn't help. when rates come down and as you know again the latest central bank rate now is seven and a half we now want to go back to the deposit market a bit that's what we did especially in the corporate segment in the wholesale segment company segment we have acquired some deposits and that's why you have seen the time deposits going up but that in our view and we have seen that our loan to deposit ratio versus the changes that we have seen in a year ago and so on is now going to be not there. They're going to grow in deposits going forward in this context of a lower interest rate environment. That's the reason. It was very purposeful. very clear part of a strategy that we have employed, and now we are coming back to the deposit market. That's the reason for the exchange. About the asset quality in Turkey and Argentina, Lisa?

Yes, well, in Turkey, I think that the numbers that we're seeing are very much within the guidance that we've given to the market at the beginning of the year, the 180 basis points. It's true that quarter on quarter, um the comparisons have are affected obviously by macro adjustments but also by big ticket releases especially that we had in descent in the second quarter what i would say uh with regards to underlying asset quality is that we are seeing um the the mpl ratios and the asset quality of the retail portfolio stabilizing at the current level so i think that that is uh good news in in in the sense that you know we um had an increase in rates at the beginning of the year and uh rates now should be coming down going forward into the next year having said that i think 180 basis points is a cost of risk that is not a normalized cost of risk within a country like Turkey. We've had higher cost of risk in the past. So I think that the positive news is that those retail portfolios are stabilizing in terms of cost of risk. And going forward, I think that the numbers, we'll see what they look like. But in general, when we guided, I think we guided for around 200 basis points through our midterm, long-term plan. And in Turkey, should we move to Argentina? Argentina. So Argentina is a little bit of a different story. So Argentina, we had been seeing already in the second quarter, I would say, a sharp increase in Stage 3 and defaults, especially the retail portfolios. This is obviously due to inflation coming down quickly, but also very high real interest rates, which moved sharply in the third quarter. As you all know, we had rates touching the 60% in October versus inflation of around 31%. This has created a significant increase in deterioration in the asset qualities, again, especially in the retail portfolios. We are already deciding and taking decisions regarding the origination. You've seen in the third quarter that the quarter-on-quarter growth in Argentina slowed down significantly. We grew 10% versus the 21% in the second quarter. And specifically, we are curtailing our growth in credit cards and consumers, where loan production in the quarter fell 9%, focusing our growth towards more the commercial segment, which we feel is better. But we'll see how the macro develops. We think that the continued focus on the macro policies in decreasing inflation and decreasing rates should be supportive for a better environment. But we still need to see, I think, there, quarter on quarter, how things develop, again, especially on the retail portfolios.

Very good. On asset quality, Alvaro, I will finalize by saying that as compared to what we were thinking at the beginning of the year, in Spain, in Mexico for sure, Colombia, Peru, we have done much better than what we thought we would do in asset quality. Turkey is completely in line. Argentina is worse than what we expected because the real rates in Argentina is so high now that it is creating a load on the Argentinian landing book. But overall, this has been, in my view, a positive highlight of the year. And we are quite positive going forward as well.

Very good. Thank you, Alvaro. Next question, please.

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

Thanks very much for the presentation. Good morning, everyone. So I just have one question. When I first looked at the capital, you have covered organic and inorganic growth. I just wanted to ask... On the cost side, I mean, it could be any chance that you do or launch another restructuring plan in any of your geographies, thinking probably about Spain or Mexico in terms of trying to control further cost growth, or that would be ruled out at this stage. Thank you.

Very good. Again, let's pick up some pace. Nacho, the plan that we have put forward, that we are executing and that we will deliver on, does not incorporate any restructuring plan, as they call it ERE in Spain, into the plan at all. But we always look for productivity. Luisa mentioned it in the second quarter call and also partially today. We are always looking for productivity improvements. You might remember this in the first quarter of this year. We actually, it wasn't a very official program, but we have reduced productivity. our employee base in Mexico, for example. So we will always look for these productivity enhancement initiatives and I wouldn't call them a program, but the restructuring program in the sense that you mean it is not incorporated into the plan.

Thank you, Natan. Next question, please.

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

Good morning. Thank you for taking my questions. The first one was actually on the 20% ROT target that you had announced previously for 2025. Do you see that as still achievable? I reckon that the capital base is quite wide given the current capital excess, but should we still see that as something doable or should we focus more on the actual bottom line number around 12 billion euros? Then on the second question regarding Turkey, in light of the ongoing evolution of the previous target or the previous quarters, you had guided us towards a slightly below 1 billion net profit target for Turkey. Do you see that still achievable or should we be thinking more of something below 900 million euros as the nine-month annualized figure seems to suggest? Thank you very much.

Very good. Thank you, Carlos. As always, 20% for the year. As you said, the excess capital has built up in the denominator of the ratio. Now that we are starting the share buybacks tomorrow morning, it will help as well, but we are still committing to that number, yes. About Turkey. We are not giving guidance for the coming year yet. The only thing I would tell you is that for this year, we said first $1 billion, but it was very clear. I remember it very, very clearly because there was even a footnote in that presentation, in the first quarter's presentation, saying that that $1 billion was under the scenario of, if I don't remember it incorrectly, but 26.5% inflation and 31% interest rate. and there was also an FX depreciation assumption. Under this scenario, it will be $1 billion. And then, once we realize in the second quarter that those assumptions would be very tough to achieve for the macro, we set somewhat below $1 billion, and this year, we still stick with it. For next year, we will do it in the next quarterly call.

Very good. Thank you, Carlos. Next question, please.

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

Yeah, hi, good morning. Thank you for taking my questions. There's two quick ones, hopefully. The first one is on the approval of the buyback process by the ECB. If you can give us some indication about the timing and if it can be announced actually in the middle of the quarter when the approval is given or we need to wait for the full year results. And then the second one on Turkey, if you can give us a bit of a sense actually of how far are we from the customer spread do you think you can achieve and the rates actually in the 20-25% region you're targeting? I mean, how quickly actually can we get there and how far are we from the normalized customer spread in Turkey? Thank you.

Very good. On the approval of the share buyback, You cannot as you have seen we cannot disclose the specific amount that we asked for approval for and so on because there's a clear Regulation or clear guidance on this from ECB saying that unless it's fully approved It doesn't it cannot be announced and the amount cannot be known. But again, we initiated the process last week It's in the process now the legal maximum that they would use is four months actually, but as you might as you can imagine I Given the excess capital that we have, given all the dialogue that we have with them, we do expect it to be much earlier than that time frame. But again, we are dependent on ECB for their approval to be done. And once we receive the approval, it can be tomorrow, it can be two months, it can be less. Once we receive the approval, we will announce it, yes. Then on the Turkey, customer spread, not sure. It goes back to, again, how fast the interest rates are going to come down. You might know this already, obviously, but 39.5% is the latest central bank rate, 39.5. We were expecting it to be, as I said, at the beginning of the year, at 31. So it's coming down much slower than what everyone anticipated because inflation has turned out to be much more sticky than otherwise. But this country is still, in our view, a very positive path. It is on a path of normalization. they stick with the clear aspiration to reduce inflation and as a result also reduce the interest rates so when once interest rates come down and we will be giving you in the next call all the expectations for the coming year but obviously our expectation is that interest rates will continue to come down once that happens the spread will normalize as well but until that happens it's going to be very challenged one other thing that i should i should mention is that the customer spread and nim the difference between the two is actually larger in Turkey than in all the other markets because in Turkey there is a repo facility again at 39.5 for the central bank you can fund yourself a bit with the repo and then also through swaps 39.5 but our cost of funding is higher because there are beyond the availability of funding mechanisms there are certain regulatory ratios one being very specific the Turkish lira deposits divided by the total deposits there are certain ratios that we have to satisfy every month which is basically creating a deposit market at a higher price than other cheaper available funding opportunities so NEM as much as we can use those others and we cannot use them all the time But the NIM would be better than the customer spread going forward. Because when you use the repo facility, you would be optimizing the cost of funding a bit for the whole bank. So in the quarter, for example, you haven't seen the spread in Turkey to improve too much, the customer spread. But you would realize that the NIM... has improved by 65 basis points, more or less, mainly because we tapped into a cheaper funding resource, which is the repo market, as much as we can in the context of those regulatory restrictions that I talked to you about, and that has helped us improve NAI in a very good way.

Thank you very much. And our next question, please.

The next question comes from Borja Ramirez from Citi. Your line is now open. Please go ahead.

Hello. Hello. Good morning. Thank you very much for taking my questions. I have two. Firstly, on capital, you're showing a very strong capital position, and also I think you mentioned that maybe SRTs coming in Q4, so I would like to ask if you could provide some details. And linked to this, I see some upside to the 13 billion of capital available for distribution in the short term. So this will be my first question. And the second question would be in Spain, you are gaining market share quite nicely. I would like to ask if there are any, on this point, any learnings from when you're analyzing the Sabadell transaction in the Spanish market, maybe you've learned about new ways to gain share. Thank you.

Okay. The first one, SRTs, Luisa?

Yes. Well, as Anur mentioned in the quarter, we did five basis points of SRTs. We've done a total of around 8.2 billion RWA, you know, SRT transactions or SRT-able transactions. We also do and have engaged also this quarter on asset sales that you've also seen in the MPL ratios in Spain. I would say that the target that we had this year and going forward, by the way, is to generate around between 30 to 40 basis points of capital through SRTs. And obviously, in the first nine months of the year, we're already at 28 basis points and we'll be, you know, within that range, you know, comfortably in the fourth quarter. Again, it depends on the deal flows and the approvals process. The quarter will be obviously higher than the third quarter and will be, you know, above obviously very much above the 30 basis points in general in that context of the fourth quarter being better than the third quarter. But in general, I would say 30 to 40 basis points is what we can expect from SRT's capital generation going forward.

Perfect. And then the second question was on market share. Any learnings from Sabadell and so on? I'll go to the market share directly. Borja, we are gaining market share everywhere except Peru, actually, because of the CIB, the large corporate lending book. Because of the pricing, we are a bit out of that market. And because of mortgages in Spain, because of the pricing there, we are a bit out. We are losing market share. But beyond that, basically, we are gaining market share everywhere. It goes back to... might not see it fully in the breakdown but we are gaining market share 21 basis points in the year in total loans but it is basically negatively affected from mortgages as I just mentioned since the beginning of this year given the lack of profitability in that market we are out so we lost 30 basis points in mortgages but we are gaining market share public sector, consumer. We gained 58 basis points in the companies segment in Spain, 58 basis points in a year. And we will keep doing what we know well. Go after clients and provide our service because we have amazing people. In short, we already have our own medicine and we will replicate what we have been doing in the past five years. In the past five years, by the way, In the company's segment, we gained 200 basis points. We will do what we know well, and we will continue to gain market share.

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

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

Good morning. Thank you for taking my questions. A couple of clarifications, please. With regard to Turkey and the net interest income development, the repo financing that you mentioned, is that what Garanti talked about when he mentioned opportunistic liquidity management? And is that something that is quite sticky? So I'm kind of trying to figure out what the outlook is for the net interest income going forward. Then secondly, could you just help us quantifying the net impact of the IFRS 9 calibration and the macro updates on the 1.6 billion loan losses this quarter, i.e. what would have been the underlying cost of risk in the quarter and would that underlying run rate be a good steer for not just before but also the next couple of quarters? And I have two questions related to capital and distributions very quickly. Can you give us any expected impact on operational risk RWA changes in Q4? And maybe also clarify what you mean with the pending approval from governing bodies for the significant new share buyback program. Thank you.

Very good. Let me start with the last one, Brita, very quickly. I mean, we only wait for the ECB approval, but then once we receive the approval, the specifics of how much, whether it's externalized and so on, it is also subject to, obviously, to the board approval, but the real, the only requirement that we have is ECB. On the first one, on the Turkish situation, it is, in the context that I just explained, I gave some details. I don't want to go into too much detail, but you are now asking it again, so maybe I do a bit more, but as I mentioned, the customer spread didn't improve too much in Turkey, but NEM has increased by 67 basis points. Why? Because in Turkey we now have a situation where interest rate declines are not immediately being reflected in the customer spread. Rates come down, but the deposit rates do not come down as much. Why? Because of some of the restrictions that I mentioned to you. In Turkish lira deposits, the supervisor, central bank in this case, they have a certain ratio of TL deposits over total that needs to be satisfied. Otherwise, you are penalized. As a result, there is a big competition in the deposit market to deliver those restrictions through the requirements, and as a result, deposit prices are higher than wholesale funding opportunities. As long as those restrictions are as such, you might see that the customer spread doesn't improve as much, but you would see that the NII and NIM improves. So the rate declines would be converted into real because we can be tapping into those, obviously we have our own restrictions and our risk management metrics and so on, but we can tap into those cheaper funding resources as long as the situation is such, okay? But you are asking more the sustainability of this or can you expect more of this going forward? The answer is yes. If rates come down and that rate decline is not very much converted in the customer spread, you would see that NIM decline would be there, not maybe as much, but would be there, but the customer spread would not be moving ahead too much. I hope I'm clear, and if not, we have many details on this, you can call the IR team to get more on this one. On the provisions, the macro and so on, we don't disclose that as you know, Britta, the only thing I would say to you is that business as usual, If you incorporate all the two things, actually, the macro impact and also the annual recalibration impact, if you isolate for those, the business as usual would have been better. Slightly better. Not too much, but slightly better would have been. And there was another question, Louisa.

On the operational RWAs, we... have adjusted a little bit the number already in the third quarter um and in the fourth quarter we will update the operational rwas with the actual um you know related number but we don't expect a significant impact from operational rwas in the fourth quarter thank you next question please the next question comes from marina korea from jeffries your line is now open please go ahead

Hello, thank you very much for taking my question. I just had one on your return on tangible equity guidance for this. Hello? Can you hear me? Yes, please go ahead. Perfect. Sorry. My question was around your 20% about your 20% return on tangible equity guidance for this year. Obviously, that implies quite a strong performance in Q4 versus Q3. So could you please just walk us through the moving parts in the increasing return on tangible equity quarter on quarter in Q4 that you're expecting to see, to see the guidance?

I partially mentioned it in one of the previous questions, but you should also look into the denominator, because we would be doing share buyback, so the equity base would be coming down. So it's not just the numerator, which is the profit, but also the denominator that would be affected in the quarter. And then that number is for the full year.

When we look into the numbers... Just a quick reminder, that's star one to ask a question today. The next question comes from Fernando Gil de Santivanez from Intesa San Paolo. Fernando, please go ahead. Your line is open.

Thank you for taking my questions. Two quick ones. One, regarding stain, I see long growth in the quarter being flat, mainly explained by public sectors. Can you comment on these trends on the public sector, if there's anything I should be looking at? Second, regarding Spain and the litigation and the appeal that you guys presented against the Supreme Court and against the public mentions due to the merger, is the bank going to proceed with that? And finally, a short one, have you done any update on the hedging strategy regarding Argentina and the latest events after the elections and the intervention in FX markets? Thank you.

Very good. Let me do it very quickly, if that's okay, Luisa. On the public sector, there are some one-offs in there, so you cannot expect 20% growth year over year, every quarter. But you should see that the public sector is going to be quite positively reflected in the growth rate of Spain lending going forward for one reason. The local governments in Spain for many years did not use bank financing. because that there was a central scheme that they could have been financing themselves from the central government now the bank financing is coming into the play so you would see decent growths going forward not maybe at these levels because there were some one-offs here but you would see good decent growth then the supreme court we don't comment on the legal proceedings of the bank then the hedging strategy of argentina given the costs of hedging in argentina we have not been hedging and we will continue to be not hedging argentina it's so small also for the whole for the whole account that we can live with it without hedging.

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

We have no further questions at this time, so I'll hand it back to you. Okay.

Thank you very much, everyone, for joining this call, and thank you for participating with your questions. So if you have any further questions or clarifications, please reach out to the IAR team. Thank you very much.