Bankinter Sa Reg Shs

Good morning, and welcome to Bonquinza's first quarter 2026 results presentation. Financial statements were posted with market authorities earlier this morning, and all materials can be found on our corporate website. Please refer to the disclaimer in the presentation and note that this call is being recorded. Today, we welcome our Chief Executive Officer, Gloria Ortiz, and our Chief Financial Officer, Jacobo Diaz. Gloria, over to you.

Thank you, Laurie. Let me start with the key highlights for the quarter, which confirm the strength of our business model. Disciplined volume growth, continued margin improvements, a diversified and resilient income base, and best-in-class efficiency and risk metrics. In volatile markets and in an environment of geopolitical uncertainty, that combination is not a nice to have. It is what protects earnings power through the cycles. This quarter, we delivered it once again, with growth that is both profitable and controlled, supported by high-quality balance sheets. First, customer volumes increased by 6.5%, with customer lending at 5%, retail funds at 1%, and assets under management growing by 17%. This is balanced growth. We are growing where we see attractive risk-adjusted returns, and we are doing so without compromising the quality of the franchise. Second, on margins, we continue to demonstrate strong pricing discipline, with customer margins at 2.68% and NIM at 1.76%. In other words, we are not buying growth, we are growing selectively with strict pricing discipline. Third, our income sources are increasingly more diversified and resilient. Net interest income grew by 5.5% and net fees by 8%, driving gross operating income growth of 6.5%. Finally, operational excellence and balance sheet strength remain key defining features of Bank Inter. We continue to improve our management ratios, with the cost-to-income ratio declining towards 35%, NPL ratio below 2%, and strong capital levels. All of this translates into profitability and value creation. Net profit reached 291 million at 7.6% with growth at 20%. Let's now go into some detail behind these figures. Customer volumes grew across the franchise, increasing by 14 billion year-on-year. Growth was led by lending and assets and management, with deposits stable and improving in mix. Geographically, Spain remains the core growth engine, while Portugal and Ireland continue to add faster momentum of a smaller base. On page 7, you can see the quality of our core revenue growth. One third of core revenue growth comes from fees, which now represent 26% of core revenues, a clear final of higher value client base and a more diversified business model. This is not cyclical growth. It reflects structurally more diversified core revenues and margin management that sustains net interest income even in shifting rate environments. Page 8, key management ratios reinforce the quality of execution behind our results. Improving efficiency, strong assets quality and strengthening capital all confirm that growth is disciplined, risk is tightly controlled and profitability sustainable through the cycle. Let me now turn to milestones for the first half of the year, first part of the year. Portugal is a clear success story for Bank Inter. Since launching in 2016, we have delivered high-quality growth, doubling our client base, tripling business volumes, and transforming efficiency from over 120% to the low 30%. Profitability has scaled strongly on the back of a disciplined and diversified model, built on a fully integrated operating platform with strong internal capabilities, reinforced by joint ventures and strategic alliances with partners such as MAFRE, SONAE, and Generali. None of this would have been possible without the teams. So today, Bank Inter Portugal has 884 employees, around 70% of whom have been with us since 2016, complemented by more than 150 new recruits from a younger generation who will help foil the next phase of growth. Together, they end up in a genuinely scalable and sustainable model supported by digital transformation, applied AI, and a clear focus on value creation. On page 10, earlier this month, we announced two complementary and clearly strategic corporate transactions to scale our business in alternative investments. First, we merged our alternative investment fund manager with premium partners to strengthen leadership in direct alternative investments, expand sector expertise, and reinforce capabilities. As a second step, we will take a significant economic stake in Access Capital Partners, accelerating our pan-European expansion through scale, specialization, and greater product breadth across investment strategies and geographies. Together, these two transactions directly enhance our value proposition while broadening access to alternative products where we already distribute today to more than 15,000 private banking and retail clients across Iberia. Overall, these strategic decisions strengthen a high-value capital light, recurring fee franchise, deepening long-term client relationships. And having just reviewed 10 years of growth, delivery, and profitable success in Portugal, I have the strong convictions that Bank Interinvestment is on the same path, building scalable long-term growth and delivering strong value creation for our shareholders. And before handing over to Jacobo, let me briefly frame my view of the current environment. While geopolitical uncertainty has increased in recent weeks, our assessment remains that this will not in the near term translate into a contraction in consumption in our core markets. What we are seeing is greater prudence rather than a deterioration in underlying demand supported by solid private sector fundamentals. In this context, our geographic diversification across Spain, Portugal, and Ireland continues to provide stability and quality to our earnings profile. And these markets are expected also to be less impacted and to perform better than the European average. So this is all from my part, and it is now over to you, Jacobo. Thank you.

Thank you very much, Gloria, and good morning, everyone. Let me briefly summarize the income statement. Net profit reached 291 million, up 4% quarter-on-quarter and 8% year-on-year, driven by resilient net interest income, solid fees, disciplined cost control, and lower provisions. I'll now walk through the key drivers behind each of these lines in more detail on the following pages. Net interest income continues to progress well. NII reached 571 million in the quarter, up 5.5% year-on-year, and around 2% quarter-on-quarter on an adjusted pay count basis. This is driven by volume growth and improving customer margins, in special due to the improvement in deposit cost, which declined by 6 basis points during the quarter, supported by better deposit pricing and mix. On page 14, let me take a minute to talk about our deposit strategy. Our approach to deposit growth remains disciplined and margin-focused. We are actively managing the mix toward higher quality, more stable retail funds while maintaining tight pricing discipline. This focus has meant prioritizing the management of the cost of our deposit base rather than maximizing volumes. During the quarter, we continue to optimize pricing including actions on digital accounts and a review of deposit spreads for treasury and fixed term deposits. Retail funds declined by 3 million due to a 3 billion due to a seasonally softer first quarter and well as active margin management actions. We continue to optimize our funding mix with a lower share of price-sensitive term deposits and a greater share of current accounts supported by our digital strategy. This translates into lower deposit beta, lower funding costs, and improved margin resilience through the cycle. average retail deposit costs for the quarter continue to decline, reaching 81 basis points. At the same time, digital accounts continue to perform very strongly, increasing by almost 2 billion during the quarter to over 13 billion. This clearly demonstrates that our campaigns remain effective and customer engagement strong, even after the price reductions implemented on digital accounts during this quarter. This is fully consistent with the year-on-year trend shown on the slide, a structurally healthier and more stable retail funding mix with growth in current accounts and a continued reduction in term deposits. On page 15, turning to fees, this grew 8% year-on-year to €203 million, driven by wealth management activity as well as a strong growth in insurance activity. Q4-25 included some one-off items, so sequential comparability increased is not fully like-for-like. Our underlying mix is increasingly value-added and recurring, strengthening revenue resilience. On page 16, on other operating income and expenses, this also shows solid growth. Equity method, trading, and dividend income increased by a combined 18% year-on-year, reflected the continued diversification of revenues from business, such as banking and investment, our insurance joint ventures, as well as with our partnership with Sonae in Portugal through Universal. Overall, this further reinforces the quality, diversification, and resilience of our earnings base. Expenses. Bank Inter is well known for its best-in-class efficiency levels, and we want to underline that the improvement we are delivering today is structural, recurring, and still has room to improve. Business growth continues to be absorbed without creating structural pressure on the cost base. At the same time, efficiency is not being achieved by under-investing. We continue to invest in people and technology, with applied AI and simplification initiatives already delivering tangible productivity gains. These allow us to grow, invest, and keep improving profitability at the same time. And that leads directly to the next slide, which shows how we are maximizing the potential of AI. Our approach is very pragmatic and built on a dual framework. On the one hand, we have toned down CEO-driven priorities, applying AI across software development, commercial process, and day-to-day operations. On the other hand, we are pursuing a bottom-up approach, equipping our employees with an increasingly accessible AI tool set embedded in their daily workflows. Together, this supports higher productivity per employee in front and back offices and a lower cost to serve as volumes grow. In short, AI is not a future promise. It is already reinforcing cost efficiency and strengthening the scalability of our operating model and will continue to be a key driver of efficiency improvements in the coming years. Next page on credit costs remains low and well-controlled at 32 basis points in the quarter. Other provisions also performing well down to 7 basis points. Profit before and after tax grew by 8% year-on-year with net profit at 291 million, confirming the resilience of our profitability and our ability to create value through the cycle. Asset quality remains strong and clearly differentiated. NPLs are low, coverage is prudent, and we continue to outperform the sector across all geographies with risk metrics stable, well-controlled, and with no signs of deterioration. On page 22, Z1 ratio closed at 12.96%, above our target range and well above minimum requirements. Strong earnings generation comfortably offsets risk-weight assets growth. giving us flexibility to support organic growth and allocate capital to strategic opportunities, like the alternative investment transaction that Gloria referred to in the introduction. Next page. Customer volumes grew by 6%, supporting a 6% increase in gross operating income, with well-diversified contribution across geographies. Loan growth remains disciplined and continues to outperform the market, especially in Portugal, Ireland, and business banking in Spain. Regarding Spain, Spain continues to see strong revenue growth with pre-tax profits rising by 10%. While retail volume softened this quarter due to seasonal effects and tighter mortgage pricing, corporate lending and off-balance sheet wealth management have remained resilient despite market volatility. Regarding Portugal, Portugal marks, as it was mentioned, its 10th anniversary. Growth remains robust. Year-on-year movements in cost of risk largely reflect the one-off gain from an NPL sale last year in the first quarter. Excluding this effect, underlying performance remains solid and well-controlled. Ireland also continues to deliver strong growth momentum, with volumes up 20%, improving profitability and exceptional asset quality. The NPL ratio remains just at 0.3%. On page 26... Corporate and SME banking continues to grow well above the sector. Lending in Spain is up 8% versus 3% for the market. With very strong momentum in international business, world growth reached 17%. In page 29, in retail banking, our approach remains disciplined and margin-focused on both the asset and liability sides of the balance sheet. New account activity continues to be robust, with salary and digital account balances growing by close to 50% over the past year. reflecting solid customer acquisition and engagement. New mortgage origination in Spain was lowered during the quarter, reflecting pricing discipline in a tight margin environment with compressed risk-adjusted returns. This is consistent with our focus of allocating capital where returns are more attractive, such as in Portugal, where mortgage growth reached 8%, and in Ireland, where it grew by 37%. Overall, Ripple Banking continues to prioritize profitability and balance sheet quality over volume at any price. Next page, despite wealth management, despite heightened market volatility driven by recent geopolitical tensions, our wealth management business continues to prove resilient. Customer wealth increased by 18 billion, up 13% year-on-year, supported by net inflows and a growing high-quality client base. Even in volatile markets, our clients remain invested and continue to allocate savings, reflecting the strength of our franchise and the quality of our customer base. with flows that remain resilient through the cycle, even in periods of elevated uncertainty. Next page, you can see the same trend with double-digit growth in both AUMs and AUCs, reinforcing the resilient and recurring nature of this business. Finally, let me take a moment to review our ambitions for the year. This first quarter of 26 we have delivered a solid quarter and results fully aligned with our previous guidance, following a disciplined execution with excellent quality of results supported by recurring sources of revenues. The recovery of client margin level to close to 270 bits in Q1 and the improvement of efficiency levels towards our ambitions are the supporting levels of another successful year. Despite the ongoing uncertainty in the market environment, our expectations and guidance for 26 remain broadly unchanged and current levels of profitability are expected to be sustained in coming quarters. We will consider changes to our guidance in the next result presentation with more visibility over impact on macro scenario of current geopolitical events. We continue to anticipate stable volume growth in line with our initial assumptions. while maintaining our disciplined and balanced approach to liquidity and risk. On the lending side, we expect volumes to grow at mid-signal digit rates, supported by a still positive macro environment for all geographies where we operate, by a selective origination and a strong focus on risk-adjusted returns. Deposit volumes will be actively managed to preserve comfortable liquidity ratios and balance sheet resilience. Deposits to loan above 100% or loan to deposit below 100% are levels that have been committed in the past and will continue to be in the future. Across the group, we expect growth trends to remain broadly consistent with 25 levels and year-on-year for the first quarter, with Portugal and Ireland continuing to deliver a strong performance, and Spain maintaining solid momentum, particularly in corporate banking. With respect to NII, The continued volatility in interest rates means that visibility of the coming quarters remains still limited. However, current levels of forward curves anticipate potential rate increases that are supportive for NII incoming quarters. We continue to manage customer margin towards the 2,270 basis points or above. In this context, Rather than providing new guidance on NII levels, we remain focused on the levers that we can actively control, which are pricing discipline of the assets and liability, customer margin management, and prudent balance sheet optimization. As a result, NII should continue to be driven primarily by volume evolution, rather than by changes in pricing or margin assumptions. We expect Quarter-on-quarter NII growth during the quarters in 2026. Beyond NII, we remain confident in our ability to deliver high single-digit growth in free income, supported by our diversified business model and strong customer engagement. Recent corporate transaction on the alternative investment front is a good example of our strategic focus on recurring growth on the wealth management business. At the same time, we remain fully committed to delivering positive operating jobs in 2026, with the cost-to-income ratio expected to decline below 35% for the year, supported by simplification of our business organization and the combination of talent and technological investments. In terms of asset quality, our outlook remains stable. We do not see any signs of deterioration in credit quality, and we expect the cost of risk to remain stable around current levels. In this quarter, we keep improving our capital position, maintaining strong levels of capital buffers and NREL ratios. And finally, we expect return on tangible equity to remain above 20%, reflecting the underlying strength of our business model and supporting continued attractive value creation for shareholders. Now, Gloria, back to you, please.

Thank you, Jacobo. Well, this final slide captures the essence of this quarter, resilient performance and sustainable value creation. Even in volatile geopolitical and uncertain macro environments, our returns remain high and sustainable, supported by best-in-class efficiency, strong asset quality, and solid capital ratios. ROTI stands at 20%. Shareholder value continues to build, with dividends up 25% year-on-year. This consistency is not cyclical. It reflects a deliberate way of running the bank. Prudent risk management, capital allocation based on risk-adjusted returns, and continued investment in efficiency and organic growth. Together, these elements explain why our model delivers consistently and support our confidence in continuing to create sustainable value in 2026 and the years ahead. Well, thank you, and it is back to you, Lori, so that we can kick off the Q&A.

Thank you. Thank you both, Jacobo and Gloria. We'll now initiate our live Q&A session. As per the instructions previously sent out via email, please remember to press star 5 on your phone to submit a question, and we kindly ask you to limit your questions to two, please. Our first caller we have is Max Mission from JV Capital. Max, please go ahead.

presentation and taking our questions. Two questions for me. The first one is on deposit growth. There was a notable slowdown in the quarter despite several digital campaigns that you've launched. I was wondering what was the reason and how you see the remainder of the year. And the second question is on your expectations for customer spread for the remainder of the year. If you could just walk us through loan yields and deposit costs for the next quarters, that would be super useful. Thank you.

Hello, Max. I will answer you the first question, and then Jacobo will answer the second one regarding customer spreads. Well, listen, we have very – the first thing is that we have very comfortable liquidity ratios, as you might have seen in the presentation, I think in the annex. We have an LCR over 200%. and we have a loan-to-deposit ratio below 90%. We have given priority this quarter to actually accelerate the changing mix in our retail funds. You have seen there is quite much decline in deposits, so we have been reducing the duration of our deposits, and also, giving greater weight to more atomized and less sensible deposits. So we feel very comfortable with the liquidity ratios we have. We will continue to work on the cost and sensibility of our deposits in future months. So we will obviously maintain, as Jacobo has said during his presentation, we will maintain our commitment to have a loan-to-deposit ratio below 100% and solid LCA ratios.

Good morning, Max. Taking your question on the evolution of the customer spread, I guess, first of all, the commitment to reach, in average, these 270 bps or above client margin spread for the year. And the trends in the lending yields are, I would say, positive in the sense that with the current levels of rates and the expected level of rates, definitely there is a tailwind in positive repricing. First of all, in the corporate banking activity, that tends to reprice faster. And then, of course, in the mortgage activity, in the mortgage book, that reprices a little bit slower, but in a positive way. So in the sense of the lending yield, we should see a slight recovery or a slight growth over the following quarters. In the sense of the deposit cost, we've ended the quarter with 80, 81 basis points. We think this is a quite reasonable level where we can be. There might be a little bit room still for reduction, but this volatility in rates might be a little bit challenging for at least the second half of the year. We need to wait and see the evolution of rates. But again, our target is to ensure levels of 270 bps of customer spread. We know that the lending yields are going to be supportive, and then we will manage proactively pricing in the deposit cost to ensure that we achieve this level or even of both, you know, following or monitoring the current level of rates and the expected rates. Thank you.

Thank you. Our next question comes from Francisco Riquel from Alantra. Francisco, please go ahead.

Yes, thank you. My first question is a follow-up on customer funds. I see that salary and online deposits are up $9 billion year-on-year. Total deposits are up just $1 billion, so that means probably strong outflows in corporate deposits. you can please comment on the pricing actions both in retail and in corporates. And also, you can also comment on net new money flows into wealth management because I don't see that outflows out of term deposits as are retained within the bank. And my second question is if you can please elaborate more on the strategy and the return on investment that we should expect from the recent corporate transactions in alternative investments. Thank you.

Hello, Paco. I will answer you the first questions because probably it wasn't clear enough. Well, regarding next new money flows, there has been a very strong commercial activity, over $1 billion transformation from deposits to deposits. But obviously you don't see that movement because the market has detracted more or less the same amount. So this is why there is no movement from December to March. But as I've mentioned, I don't have the exact figure here, but it's between $1 billion and $1.5 billion of net new money in off-balance sheet funds. So, and with respect, you're right, I mentioned that we are, what we are doing, your right has been a drop or outflows in corporate funds because we are prioritizing smaller amount, smaller amount, less sensible to interest rates. So basically we are growing in payroll accounts, we are growing in FMEs, in transactional accounts, and also in medium-sized companies in transactional accounts. So we are giving, as I've mentioned earlier, priority to these type of accounts that are transactional and therefore less sensible to interest rates. But there has been an important outflow as well of balance sheet funds of around $1 billion, $1.5 billion. I hope I've answered it.

Hi, good morning, Paco. Taking your second question, I'm not sure if I took the right way, but basically definitely this business of alternative investment fund is a business that generates quite high and sustained return on equity. This is quite attractive business from our perspective. As we've mentioned in the presentation, we want to be the leader of alternative investment in Nigeria. Definitely This will provide sustained high level of fees in the long term. We think there is a huge opportunity in Iberia to progress in the development of this type of products. We provide access to investment of real assets to Spaniards and Portuguese people in terms of retail clients. Of course, this is not a product for everybody. but we think there is a huge evolution and huge potential in this business. Taking these strategic transactions, we are bringing all the know-how from our partners into the company, into the bank, and that provides us the full potential of building and developing new type of investment funds in the short, in the medium, and the long term. And I think this is a huge opportunity to bring on board capabilities that the bank doesn't have today and to ensure that we can build and distribute this type of products. We are, as you know, investing in renewables, in infrastructures, in spaces, in everything and these two partners are one of the leaders in Europe in this type of assets and that's why we are achieving the transactions with them. I hope I have answered. If not, I will talk later.

Thank you. Our next question comes from Avaro Serrano from Morgan Stanley. Avaro, please go ahead.

Good morning. A couple of questions from me, please. Gloria, I think you said at the beginning that you're not expecting impact on consumption, but you're seeing some prudence. Can you maybe talk us through what you saw, what we've seen doing during March and maybe early April. I don't know if it's sort of deposits, movements, appetite for loans or fees, maybe what you were referring to around that prudence statement. And then the second question related is when I'm thinking about the potential updates or changes to guidance that you referred to HACO and Q2, Are we thinking about sort of fees impact or can you give us a sense of, in an IFRS 9 world, what the sensitivity could be to provisions if, I don't know, 50 basis points change or GP or something along those lines that gives us a sense of direction?

Thank you. Hello, Alvaro. When I'm saying prudence, actually what I refer is that probably the consumption will continue to grow, but not at the same pace it has done, so it will not contribute in the same way to overall economic growth. We are not seeing really any... Any sign now in the reduction of the appetite for loans or for lending? And not really any changes from last quarter. But when I say prudence, it's what I see in the streets and what the statistics start to say. So I don't think there is any alarm sign or anything at all. And my prediction is that... consumption will grow, but not at the same pace as last year's, and therefore the contribution in GDP growth will be a bit lower than it has been. But GDP growth will still be robust, and I think enough, of course, to deliver our targets.

Good morning, Alvaro. Yes, just to clarify, I mean, We think that in three months so many things have happened in terms of volatility in the market that it's probably not very prudent to change our guidance so soon. But my words were oriented to the rate environment and the volatility of rates. You know that we are currently under expectations of potential interest rate rates in the coming months. And that is my comment about. We are not expecting... for the time being it changes in fees. I think I've been very clear in terms of efficiency and in terms of cost of risk. And obviously my comment is related to the NAI guidance and the possibility to have more tailwind in coming quarters if rates continue to be high or stay high for longer.

Thank you. Our next question comes from Martha Sanchez Romero from JP Morgan. Martha, please go ahead.

Thank you very much. Good morning. So my question is on capital. You're building capital at a faster pace than expected. I understand there will be seasonality in Q2 and Q4. Can you give us a sense of the capital generation situation? you expect after funding growth and a 50% ordinary dividend. Related to this, can you remind us about your capital allocation priorities? You will be spending roughly 20, 25 basis points on the old acquisition in Q4, but still that leaves you space to do more things, considering that you want to stay at around 2.4, 2.5% core equity tier 1. So can you remind us on your priorities, any bulletins that you could consider, what areas, businesses, et cetera, and when, if any, time would you consider to repay surplus capital to shareholders?

Thank you. Hello, Marta. Yes, actually, there has been a very strong capital buildup this quarter. because as you know, traditionally, the first quarter has some seasonality in credit. Actually, we have done a much better quarter than we thought we would do, taking into account the seasonality in the past, so we have done better in credit. So, regarding our – and you are right, sorry, that we will have to allocate 25 basis points next quarter to this – well, next quarter or when it is – when we have the regulatory go-aheads, which will be, I think, in the next quarters rather – probably next or the other, the following weeks. Where are we allocating capital? We are allocating capital in the geographies where we see there are profitable opportunities, like for instance in Ireland. As you can see, we continue to grow at double-digit, at 23%, 27% in mortgages. And we will continue to grow at that pace. In Portugal, we think we have opportunities to continue to grow also at double digit. And we think we will do better in corporates and enterprises than this quarter. So this means a little bit more capital allocation following quarters. And in Spain, given the situation in mortgages where we see that the prices continue to be below cost, cost of risk, and not only cost of credit risk, but also including everything that has to do with maturity mismatches and interest rate risk, we are actually investing heavily in enterprises and corporate banking, where you have seen we are growing at a higher digit than usually. So we think that we will have a comfortable management buffer. For the moment, we are not changing our dividend policy, which you know it is cash 50% of net profit. But don't forget that we have the main shareholders sitting at the board of directors. So if there is excess capital, obviously we will give it back to our shareholders, as we've done in the past. I mean, remember that Linea Directa deal was actually an extraordinary dividend. So, well, this is more or less, I think, I've answered. So I don't know if you want to add up anything. Okay, so.

I think you've been clear.

Thank you both. Our next question comes from Sophie Pitheson from Goldman Sachs. Sophie, please go ahead.

Thank you very much for taking my question. Here is Sophie from Goldman Sachs. So my first question would be on the customer margin versus NIM. We've all been very focused on the customer margin, and we saw significant improvement this quarter, but the NIM was very flat. So could you just kind of discuss what the delta is and why the NIM didn't improve this quarter and how we should think about the NIM improvement going forward? And related to that, could you also discuss your rate sensitivity? and how we should think about kind of higher rate impact on your net interest income, but also on the customer margin and name. And then my second question would be on kind of cyber insecurity. We have seen headlines about some of these AIs that can kind of penetrate banks very quickly. What are you doing to ensure that your cyber security is top-notch? Thank you.

Thank you, Sophie. Good morning. I'm going to start with your last question in terms of cybersecurity. I know this is a hot topic with the latest news about coding and non-mythos. Basically here, what has fundamentally changed, I mean, mythos does not represent a fundamentally new category of risk, but rather an acceleration of existing cyber threats through AI automation. So what really changes is the speed, not the nature of the attack. So the point here is in order to react, it's just basically with the same tools trying to be much more agile and much more quick in the execution of the responses. So basically the bank, ourselves or other banks, what they need to do is to move faster in the responses. So from manual responses to automated responses, behavior-based defense, to integrate AI into security operations, of course, maintain human side. But basically, this is the type of reaction. And I think also the type of reaction is not just a bank-on-bank individual type of reaction. I think this topic needs to be faced in a much more global approach, in the approach of an industry, of a country, of an entire Europe. Because all these threats is not just a threat to the banks, it's just to the whole economy. So basically these AI threats just change the tempo of the cyber risk, not these fundamentals. And the right response is just basically make sure that there is a coordinated automated defense from all the industries and countries and basically reinforce the resilience. So the tool might be a new tool for the attackers, but it's also a new tool for the defenders. I'm sure that everybody will accelerate the use of this new technology to accelerate the execution of the defense. Okay, so related to the sensitivity, sensitivity, we are around 3% for an increase of 100 basis points. I think that was your question. And in terms of NIM, it's just basically an activity on, it's trade activity that has increased the volumes of non-client activity has increased volumes in the asset side and in the liability side. And that has increased a little bit volumes and therefore maintained the NIM at current levels. But the most important thing for us is that the customer margin has been recovery, that the weight of the client activity in our balance sheet tends to be one of the highest, if not the highest. And for us that is really, really, really important. So we, as I mentioned before, we continue to expect quarter-on-quarter growth in NII for the coming quarters until the end of the year. Thank you.

Thank you. Our next question comes from Ignacio Ulari from BNP Paribas. Ignacio, please go ahead.

Thanks very much for the presentation and for taking my questions. I just have two questions. One is on Ireland. If you could please give us a bit of an update on your views in the country and what should be the opportunities that you could see now after the corporate transaction and corporate movement announced by BAWAC last week. And also if you could update us on the deposit strategy and the capacity to have deposits there when we should see a pickup on deposit growth coming from Ireland. The second topic is It's on the alcohol. I have seen that you have increased as highly the alcohol in the quarter. If you could just remind us a bit what would be the expected contribution for the year and also what would be the capacity to increase that from here onwards? Thank you.

Oh, hello, Ignacio. I will take your first question. In Ireland, we continue to see a lot of opportunity going forward. Basically, actually, there was very, as I've always said, competition. It's not as a competitive market as it is in Spain, let's say it this way. Actually, the margins, for instance, in mortgages are much higher. We are allocating more capital into these businesses. The recent transaction of Bawag acquiring PTSD actually is another great opportunity in the sense that PTSD needs very heavy restructuring. And, you know, as we have seen in the past here in Spain and many other, also in Portugal, when a bank is restructuring, clients are not served. you know, properly and therefore the customer attrition is higher. So we will take advantage of that situation in the next months. With regard to deposits, we have been testing deposits since I think it was late 2025. and with existing clients by invitation because we wanted to test because we have a completely new platform overall and obviously a new product. We also wanted to test all the marketing processes as well. We launched it to open market in February, I think, but also with very little or almost no, I would say, marketing expense. We have around 50 million euros in deposits at present, and what we want to test is the system at maturity of these deposits before we enter in the market in a mass mode. So this will be in the next, because most of these deposits have been signed three or six months maxi. So this will be in the coming quarter. We have also, now we are testing a simple current account, which have already constructed. And we will probably, by the summer, or maybe probably after the summer, because the summer is not the right month to launch these things, we will launch it to the market. When we have current accounts, it is when we will launch a more aggressive deposit-taking value proposition. So for the moment, you will just expect these little amounts to grow by a great percentage, by a low amount, because what we are doing is testing our systems and also our marketing processes.

Good morning, Ignacio. Regarding the ALCO portfolio, the ALCO portfolio, as you know, has a volume which is limited to 2.5 times our equity. So since our equity keeps growing quarter after quarter, there is the opportunity to grow a little bit the ALCO portfolio. So we don't expect to go far away or above that limit. So whatever increases in the ALCO portfolio, they should be expected to be some sort of limited. The current yield is around 2.5%. Expectation is that we can continue to have this level or even a little bit higher during the coming quarters, but no basic changes in the structure or of the type of assets that is in the ALCO portfolio.

Thank you. Our next question comes from Daphidia Romero from Barclays. Cecilia, please go ahead.

Thank you very much for taking my question. My first one is on asset quality and credit risk. I mean, SME lending has been an important growth engine for banking and now as market uncertainty has increased, how do you see credit risk evolving within the SME book and are there any particular sectors where you are becoming more cautious? And my second question is on cost. I mean, you have highlighted a medium-term ambition to move cost-to-income ratio towards 30% over the next three to four years, which I don't think is reflected in consensus. Is this still realistic given higher inflation environment, and what can you explain, and what are the key levers that will get you there? Thank you.

Hello, Cecilia. Thank you for your question. For the moment, we are not seeing any warming signs in asset quality in any of the business segments, actually. Nevertheless, the situation is such that, obviously, there could be some economic impact of all these geopolitical events that are happening. And therefore, we are being very cautious, and we've already told you, I think, in past webcasts with consumer credit, and particularly what we call open markets, which is not within our franchise of clients banking. So there we are being very, very cautious. We are actually reducing exposure. With respect to SMEs, you're right. It is also one of the weakest parts of the economy. And what we are doing is actually also being very cautious. In SMEs, below 2 million euros of turnover. And we are focusing our growth in companies above 30 million euros of turnover. and also increasing a little bit our exposure to the public sector because actually most of, you know, a lot of the investment in the economy is done by the public sector at present. So just to wrap up, we don't see signs of asset quality deterioration, but we think it is wise to be prudent with consumer credit in open markets and also in smaller SMEs.

Good morning, Cecilia. Regarding your second question about the cost-to-income ratio and the ambition, we definitely, this is our ambition, and of course we do expect that the combination of talent and technology allow us to provide year after year enough space between the growth of income and the growth of cost to achieve this target. So we keep maintaining our positive Joe's during the following years. As you've seen in the P&L that in this quarter, there is more than three points of difference between the growth of income and the growth of the cost. So this is something that we believe we can sustain. Of course, investment in technology, but also the organizational simplicity is a key driver of this achievement. Organizational simplicity from a legal perspective, of course, but also the limited number of branches that we have. and the enhancing of the digital business also is a great opportunity to achieve this. You mentioned inflation, so we do expect some inflation, as you know, but some temporary inflation. We do not expect inflation to stay at current levels for a long period of time. So we can basically deal with it, and yes, I mean, it's our ambition, and we think it's absolutely achievable.

Thank you. Moving to our next question from Carlos Peixoto from CaixaBank BPI. Carlos, please go ahead.

Yes, hi, good morning. A couple of questions from my side. One of them would be the follow-up on the interest rate sensitivity that you mentioned, so 3% for 100 basis points rise. I was just wondering, this is in 12 or 24-month periods. Maybe if you could give us just some highlights on the assumptions behind that sensitivity. Finally, particularly on deposit costs and all of that. And then the second question on the cost side as well. This 3% increase that we saw in total cost in the first queue, should we take it as a reference for the full year? Do you think the cost might accelerate throughout the year? Just a bit of a view on how you see that evolving. Thank you.

With respect to costs... We are targeting lower increases year on year in 2020 this year, so you should expect a reduction of the pace of growth in costs. And I think you can make a point on the rate sensitivity he's asking.

Yes, good morning, Carlos. Regarding the rate sensitivity, yes, good question, just to clarify my comments. So the rate sensitivity is around, as I mentioned, 3% for 100 basis points increase in 12 months. So if we were to measure this in 24 months, it would be close to 7%.

Thank you. Our next question comes from Borja Ramirez from Citi. Borja, please go ahead.

Hello, good morning. Thank you very much for taking my questions. I have two. Firstly, on the deposits, could you please remind me of the, regarding your digital account deposits, which were the volumes and the average cost as of March? And also, on this point, could you update on the competitive dynamics in the a digital deposit market in Spain. So for example, where are you seeing greater push on this side? And then my second question would be on rate sensitivity. If you could kind of provide a bit more details on the floating rate loans. I think you have a greater portion of... floating rate loans. And within corporate and SME, I think, given the fact that it's more focused on short-term working capital loans, I think it reprices faster than peers. So if you could kindly provide more details.

Thank you. Hello, Borja. Thank you for your question. And I will be answering the one regarding deposits. Well, the digital organization where you have all online deposits, whether they are the ones coming from Evo or the ones that we acquired with the digital organization back the last year, already has 11.7 billion euros in deposits. The average cost of all these 11.7 billion euros is 1.39%. and going down. Competitive dynamics. Well, this quarter we didn't launch a major campaign with high marketing costs. Obviously, we have always ongoing campaigns. So what we see are the higher competitors this quarter have been In the traditional banks, ING and probably I would say Sabadell also had a campaign this quarter. Also Open Bank from Santander. And then you have the digital banks or the neobancos, the neobanks. But the major, I would say, our major competition at present, the ones that take or to whom we take deposits are traditional banks.

Good morning, Borja. Regarding the rate sensitivity, you mentioned the floating rates, levels in credit in SMEs or corporate banks. Let me just clarify, I mean, of course, working capital facilities tend to be short-term funding or lending that, I mean, 90 days might change the rates. So that has a faster repricing. But in lending, for example, in SMEs, there is a strong level of real estate guarantees, which tends to be mortgages. So I would say that the corporate banking book has faster repricing than the SME book. I guess that this is your question. Of course, we have the floating rate mortgages, as you know, and everything related to credits that tends to reprice faster. But in the SME activity, we have at least... Almost three-quarters of the lending book tends to be guaranteed with real estate positions, and that means these are mortgages, and that means that it takes longer, the repricing of the SME book. Thank you.

Thank you. Our next question comes from Pablo de la Torre from RBC Capital Markets. Pablo, please go ahead.

Hi, and thank you for taking my questions. Hopefully, you can hear me okay. The first one would be a bit of a follow-up on the alternative investments transaction. And sorry to go back to the topic, but it would actually be quite useful to understand a bit more of the kind of line-by-line financial impacts of the transaction that you expect in coming years, both on the revenue and the cost side. And then the second one would be a bit of a follow-up as well on some comments that I believe Gloria made last quarter. I think, Gloria, you mentioned you were working with some of your insurance partners to improve or review some of your agreements at that time and see how you could impact, how could you change your current agreements. So I just wanted to know if there had been any updates on that side of the business on insurance income. Thank you.

Oh, yes. I mean, actually, we have signed, I would say, an agreement with Generali in Portugal for non-life insurance, and this will be dwelling growth. insurance in Portugal in the next in the next month so yes yes we have made progress there and we are working in Ireland that is also one of our strategic lines and for the moment we are not commercializing insurance but also to be to be commercializing insurance to our clients in the future And in Spain, well, I think that we are doing quite well, growing most of the growth that you have seen in the presentation. This 8% growth in insurance actually has to do most of it with the Spanish market.

Yes, good morning, Paolo. Coming back to your question of alternatives, we are pretty active on this type of business. So once we get all the authorizations for the transactions that might be finalized by the end of the year, what we do expect is to start generating around one billion of new volumes every year in the future. As I mentioned before, this is a quite good business in terms of the level of fees and the stable level of volumes that we can manage. So this is a great opportunity for us to build up a very good business. In fact, we just launched a new product in Spain called Fiil, F-I-I-L, which is an alternative investment fund to reach retail type of clients. that can be switched or moved from fund to fund. So it is a great opportunity. We have similar levels of ambitions with this new product that we've launched. Again, this is a clear message of the focus that we want to put in this type of business, in wealth management in general, but in this type of business we think Bank Inter has a great opportunity and plenty of new income to come with a great return on equity.

Thank you. Let's move into our last calls. And we have three. First is from Nacho Cerezo from UBS.

Yeah, hi, good morning. Thank you for taking my questions. First one is if you can give us the stock of the treasury deposits at the end of Q1, the one which is embedded within your side deposits that are remunerated, and if we should be expecting additional reductions in coming quarters on this deposit book. And then the second one is a follow-up to Cecilia's question on costs. I mean, how do we need to think about kind of logical evolution of headcount levels alongside the implementation of AI in the bank? Are you expecting a gradual reduction of staff personnel levels, or do you think actually you're going to have to be replacing people living with new hires? Thank you.

Hello, Nacho. With respect to treasury accounts, we have around... $11 billion, and this quarter it has gone down by $1 billion. We don't expect major reductions in this line, you know, around maybe 10% or something like that, because we have already done quite a bit of work that needs to be done in that portfolio. The other thing was respect headcount. We are increasing headcount in Ireland and we are increasing headcount in Portugal. In Portugal for two reasons. We were keeping the same commercial workforce. that we had in 2016 so obviously there is a moment if we want to continue to grow and maintain the quality levels we need to reinforce the commercial team. The second, in Ireland, it's obvious. We are expanding our activities to be a full-fledged bank, so obviously we need to increase also the headcount there. We are talking around 30 per country. Where we are seeing that the headcount stagnating is in Spain, we don't foresee reductions of headcount, but we don't see either increases as the business grows. So we think that not much of the efficiency will come from in the Spanish operations.

Thank you. Our next question comes from Hugo Cruz from CBW. Hugo, please go ahead. KBW, sorry.

Hi, hello. Thank you for the time. I was wondering if you could just give a bit more color on your loan growth dynamics by product over the rest of the year. You know, you're growing 5% year on year, but with the macro potential, we could see a slowdown, even if you keep that mid-single digit. So if you could give a bit more color. Thank you.

Hello, Hugo. We keep our commitment to grow this single digit around this 5-ish percent. And we think we still have opportunities to grow in profitable business lines, like I've mentioned, mortgages in Portugal, mortgages in Ireland, but also enterprises in Portugal and a lot in Spain, in greater, you know, for companies over 30 years. 30 million turnover and also a bit more in the public sector.

Thank you. And our last question comes from Brita Smith from Autonomous Research. Brita, please go ahead.

Yeah, hi, thanks for taking my questions. Just quickly coming back to the deposits, could you give us the split of the deposits into corporate and retail where they are now and where they would be, for example, by year-end? And you mentioned that you're changing the mix to more atomized deposits. How do you think that would impact your deposit beta? It peaked at something more than 50%. If we were to see rate rises, do you think the deposit data would be potentially lower, slightly lower, and even with these changes that we're seeing, do you still prefer to manage your NRS sensitivity around the 3% level for 12 months, or could we see that improving? Thank you.

Good morning. Yeah, good morning, Britta. No, regarding the data, as you know, it depends how, You made your calculations. Today we are around 80 bps with a current level of 2% in ECB rate that gives you a ratio of around 40%. So we do estimate this 40% to keep going down in coming quarters. So whatever increase in rates that might happen, we estimate that no more than 10% of that increase in rate could potentially impact the cost of deposits. So beta is going to continue to go down over the next quarters.

With respect to the mix, I don't really have what the mix is between big corporates and because what we call retail includes also FMEs, you know. So I don't have the exact figure. I think, yeah, June. We will come back to you later with, but yes, I mean, you can expect a reduction in bigger corporates, and you can expect an increase in what we call retail or transactional accounts, which include, obviously, SMEs and also retail companies.

Thank you. Thank you, everyone. Thank you, Gloria Jacobo. And that now concludes our session. And on behalf of the entire Bunking team, we thank you again for your interest and participation in the webcast. Everyone, please have a great day.

Thank you very much. Bye.