Caixabank Sa Unsp/Adr

Good morning and welcome to the CaixaBank results presentation for the second quarter of 2026. As usual, we are joined today by our CEO, Gonzalo Gortazar, and our CFO, Javier Pano. In terms of logistics, a brief reminder, we plan to spend about 30 minutes with the presentation, followed by a Q&A, and you should have received instructions by email on how to participate. We have the press conference immediately afterwards, so we will need to be mindful of the time today and wrap up promptly. My team and I will be at your full disposal after the call for follow-up questions. And without further ado, Gonzalo, the floor is yours.

Thank you, Marta, and felicidades. Santa Marta today on top of the World Cup but anyhow second quarter I'd say the highlights are very clear it's how successful we've been in the market in terms of our commercial traction you have a few figures here customer funds and performing loans both growing eight percent level well above what we were expecting and and we're very Thank you very much. Gaining market share as we like is just gradual. We're too big to be growing too fast in this market, but it's just a gradual trend. Fifteen basis points in payroll is very relevant. You look at the insurance side where we have a very clear, strong position in life savings and life risk. We see very strong growth. Also in non-life insurance where We're increasingly becoming a leading player in the market. So very satisfied to see that our commercial machine is working at full speed. Revenues are growing as guided in terms of NII and, in fact, accelerating. Revenues from services, 7.4%. NII was up 2%. Asset quality, big. Thank you very much. Thank you very much. Very strong second quarter. The economy is doing well. We are actually upgrading back our estimates for growth in Spain from 2.1 percent to 2.4 percent. As you know, we had some softening of our expectations once the Iran war started, and in the current, obviously, there's a lot of volatility we cannot Javier Pano Riera, Luis Javier Blas Agueros, Marta Nogueros, Maria Luisa Martinez Gistau, Thank you very much. We'll discuss a lot on rate curve and expectations during today's, but you can see obviously a steepening, very significant steepening of the yield curve, particularly again not just during the second quarter, but also in July. And then, as you know, we keep having in Spain some structural reasons for this strong growth, which we expect to last for the foreseeable future. The detail of commercial momentum, as you can see, business volume up 7.8%. It's actually accelerating from last year. And this is kind of the trend we see almost at every indicator we look. It's a strong growth. And even if last year it was pretty good, we're seeing it even better now. Customer acquisition, payroll, and you see that, again, in payroll deposits, 36%. We keep, obviously, improving our position in the market, and as I said, very significant increase, other than deposits and private sector loans, also in insurance, where the numbers are actually I wouldn't say surprisingly high because we have been delivering those very often in the past, but they still are quite shocking. Imagine, I would say No News continues to do very well, 20% year-on-year growth. I just wanted to make sure that everybody understands that despite the very strong competition that we have from established and new entrants in the market, Imaging continues to do very well and as you can see in some comparison with neobanks is clearly in terms of business volume the leading neobank in Spain and we're planning to keep it that way. Transformation is critical, easy to observe, but obviously a driver of long-term competitiveness for us. We continue to maintain our app as the number one ranked according to Google Play in Spain, which is no small feat given how many. and many more. Javier Pano Riera, Luis Javier Blas Agueros, Maria Luisa Martinez Gistau, David Lopez Puig Javier Blas Agueros, Maria Luisa Martinez Gistau, David Lopez Puig Thank you very much. Thank you. Obviously, keep growing our market share, our revenues. On the lending side, very strong growth. Residential up 6.7% year-on-year. Consumer, residential mortgages, consumer more than double G or double G, 11.5%. And business lending also in double D territory. Obviously, in business lending, there's a contribution around half of that growth is coming from outside Spain and Portugal, EAE. Our international branches continue to grow nicely, even though they will gradually keep bringing some growth to the overall Lombok. Thank you very much. We look at granularity in our franchise, our ability to get to sort of the small part of the market, which is more profitable, The customer funds, we had an extraordinary quarter, particularly the market impact after a weak first quarter with the Iran war. Javier Pano Riera, Manuel Galarza Pont, Maria Luisa Martinez Gistau, David Lopez Puig Margin and relevant deposits, you see growth of 5% Gaining market shares, light gain, but that is what is Thank you very much. Thank you very much. Thank you very much. The long-term track record of growth in life risk is staggering when looking at what the market has done over the last 10 years. So that's really it. We continue to look at the future with confidence. We have a great, certainly in relative terms, great economies in which we operate. Our clients are very well positioned in terms of the leverage they have relative to the EU average and that makes a difference because they are a more resilient and b we have more potential to grow. The rate outlook is certainly positive even if it generates obviously volatility but we have the franchise, the momentum and the balance sheet to keep delivering and that's what we plan to do. Thank you.

Okay then, from my side, as always, and good morning, sorry. As always, the usual comments on the P&L and the balance sheet. On the first slide of my part of the presentation, here you have the consolidated income statement, a net income of 1 billion, 631 million. This is up by slightly over 10% year-on-year, also up by close to 4% quarter-on-quarter, 18% ROTE, as Gonzalo already commented. And moving upwards to revenues, NII, with its growth is gathering pace, up by 3.5% year-on-year, 2.5% quarter-on-quarter, details in a couple of slides. Revenues from services exceeding our initial expectations honestly here with strong momentum from wealth management and protection and as you may see revenues from services up by more than 7% year-on-year and also up quarter-on-quarter. On other revenues, everything is pretty much in line with a strong contribution from equity accounted, basically from Segur Caixa Deslas, and a slightly weaker trading this quarter. Then on expenses, everything also is evolving according to our plans, up by 4.3% year-on-year. Then on loan and loss charges, we have a slight increase in Euro terms, but as you may see, in terms of cost of risk, we are pretty much in line at 24 basis points. and this is due to the recalibration of the macro scenarios for IFRS 9 models that something we can discuss in in a few slides. Other provisions slightly better also than initial expectations and then on gains and losses we have a strong profit here from the disposal of other real estate assets repossessed assets basically taking advantage of very good market conditions in Spain and this is something that may continue for some more quarters as we continue to dispose at a very good pace and with good margins. On taxes, my final comment on this slide is going to be that we have a write-up of 135 million DTAs as in previous quarter. We go to Portugal now with a net income for the first half of 218 million. Business volume is also doing very well in Portugal, as you may see, up by 7% year on year, with a clear outperformance since we took control versus the industry. We are gaining market share in Portugal across key products from mortgages to business lending and wealth management, as you may see, and also with high profitability with an ROTE 16.7%, pretty close to the average for the group, strong balance sheet also, NPS just 1.5%, strong coverage 81%, and rating upgrades also at Portugal level, so Fitch A plus from single A and also an upgrade from Moody's to A1 for seniors. We have some KPIs of the AI and IT transformation that is also taking place in Portugal as in group level. Let's move to the core of the presentation, the usual NII slide, focusing first on the central quarterly bridge. You may see here, on a quarter-on-quarter basis, NII up by 2.5%. We have a slight negative from client yields. There is some impact from some non-recurrence we can discuss. This is set to clearly improve in coming quarters, adding to NII progression. On the right hand side you may see a comment on front book loan yields already being accretive and moving upwards, so this is going to support. Also that part of the NII bridge. Then strong support from volumes and also ALCO. And if we move to the upper left chart here to take a broader or longer term view, you have the comparison of the same bridge for the first half this year, first half last year, where you may see that the negative from client yields due to the repricing of floating rate loan books is much more than compensated by volumes and ALCO. Talking about Talco, I commented last quarter that we had, to some extent, front-loaded plenty of our hedging activities to the first quarter, taking advantage in March of a strong increase in market rates. So this quarter the activity has been more subdued. We have added 2.7 billion to hedges, current stock 77 billion, and a slight increase on the fixed income portfolio. Javier Pano Riera, Luis Javier Blas Agueros Thank you very much. Precisely, talking about deposits, let's zoom in on precisely our deposit balances. Here, remember, we have the quarterly average evolution. You may see that it's up by 4.7% year-on-year, but the most interesting part, as always, is the mix, where you may see that non-interest-bearing are progressing pretty well, up by 5.5% year-on-year, while we keep interest-bearing Javier Pano Riera, Luis Javier Blas Agueros, Maria Luisa Martinez Gistau, David Lopez Puig To the cost of our interest-bearing deposits, up by 5 basis points to 161%, and you see below that 12-month arrival this quarter up by 44 basis points, an upward trend that already started some quarters ago. Moving to another key P&L line, revenues from services that are doing pretty well, also taking, let's say, a longer-term view on the left part of this slide. This is first half versus first half. You may see clearly that wealth management and protection are well into a double-digit progression and a slight negative from the rest of banking fees. But if you combine wealth management, protection, and CIV, This is up by more than 12% year-on-year, so first half this year, first half last year. Quite a good performance. You see the quarterly evolution and what is behind the strong performance in world management is what Gonzalo already commented, strong inflows, very positive momentum on that front with inflows, I would say, in line with the pace of last year. and also with a strong contribution from MarketFX, which is also quite a positive. And then protection insurance, also strong growth. You saw the increase of insurance premium that is also Thank you very much. On this line we have the, excuse me, we have the, also we are including on fees the impact of the SRTs. You have all the details on the full note below. And what they know that we are being more and more active on that front. So this is also having some small impact into, let's say, recurring banking fees evolution. Costs, not much to say. If you look first half versus first half, up by 4.5% in line with our guidance. You may see that general expenses and depreciation are growing at a faster pace as a result of the execution of our intense plan on AI and IT transformation. and well we have cost to income slightly below 40% which compares extremely well with the peer average that is still over 50%. We move to MPLs and cost of risk. On MPLs, you may see that we have a strong reduction of the stock, circa 500 million. There are some portfolio disposals, but on top of that, there is a very positive, let's say, MPL organic evolution. The ratio comes down to 78%, coverage 81%. You may see that the evolution of MPLs across the different segments is very benign, very favorable, so we are not observing any sign of deterioration at all. And then on IFRS 9 models updates, back to my initial comment, we have included a problem recalibration of the macro scenario weightings. and many more, including an additional scenario that is wasting 10% of supply shock. That's a downside risk scenario as a result of a supply shock. As a result of that, we are assigning 40 million of the overlays and we are having an extra impact on loan loss charges, approximately of circa 30 million. Thank you very much. The equity cover ratio 184%, NSFR 143%, and the loan to deposit ratio that although is growing as we are growing faster on lending than on deposits, but very comfortable levels. And all that compares extremely well with peers, as you may see below. and this is as a result of a strong and stable deposit base with two-thirds the weight of stable retail deposits and operational corporate deposits being almost two-thirds of our deposit base. M-REL, a few words on that, M-REL ratio at 27-26%, that's an M MDA buffer of 286 basis points. The MDA buffer is also in this slide, very comfortable, 339 basis points. And on the right hand side you have the performance of our issuance plan that we are executing More than 60% already executed and slightly over 40% issued in foreign currency, hence strongly diversifying our investor base. I would remark one billion Australian dollar senior preferred in May and two billion US dollars senior non-preferred in April. Also rating upgrades at group level. We already disclosed about Moody's last quarter, but here You have also Fitch with an upgrade also at group level to A plus from single A. And finally, capital. We have capital accretion this quarter of 69 basis points. We are investing into organic growth, 23 of those. Then we have for dividends and 81s, 42 basis points, no other impacts. So we are ending the quarter with a CT1 ratio of 12.54%. and finally on the right hand side of the slide you have the evolution of the book value per share up by 14.5% once adjusted for the DPS. My final comment is going to be that the board is planning to approve an interim dividend of between 30 and 40% of the first half net income to be paid in November. So thank you very much and I'm sure that we have a few questions. Thank you.

Operator, we are ready for Q&A, please.

Thank you. The first question is from Max Mission, JB Capital.

Hello. Good morning. Thank you very much for the presentation and taking our questions. Two questions from my side. So the first one is on loan growth. It seems that the growth in corporate loan book keeps on being driven by international business, as you mentioned. Looking forward, how large can this portfolio become and could you share additional color on geographical and sector exposure there? And the second question on NII in 2027, given the strong loan growth and the higher interest rate curve, what prevents you from becoming more positive on the NII guidance for 2027? Thank you.

Thank you, Max. I'll take the first question on international growth. Our loan book is currently around just above 40 billion euros. This is mostly concentrated in the four large branches that we have in London, Frankfurt, Paris, and Milan. And I would say Italy is a bit smaller, it's more recent, but the other three have similar weights. Basically investment grade lending where obviously we have good returns. We have risk adjusted returns around 20% in overall the branches, the international branches. And we're obviously being very selective, but we started there with basically nothing 12 years ago. We have grown our presence gradually over these 12 years to make sure that we make no mistakes. We obviously also have an attractive presence in both Poland and Morocco, but in terms of balance sheet it has a lower weight than the larger European economies. And we're very satisfied with it, but clearly the speed of growth is going to come down. We will keep building profitability of these branches, which I say already is quite attractive. In terms of giving exact numbers and percentage, I think it's something that I wouldn't Javier Pano Riera, Luis Javier Bulach, Marta Noguer, Oscar Calderon de Oya, Manuel Galarza That's really the plan, and again, it's good use of capital, obviously, otherwise we would not have undertaken that route. It's an attractive risk reward, no question, because it's very complementary to, very connected to our existing business, no?

Okay. Hi, Max. Well, on 2027, we are today reconfirming our Our targets for 2027 that you know that were revised upwards in January and that precisely on NII more specifically that target already accommodates quite a wide range of potential outcomes in terms of rates Javier Pono Riera So if you look at implicit rates for 27 by the end of June, we're approximately 30 basis points higher than by the end of December 25. So 30 basis points, OK. Higher rates is always a net positive. But in March it was higher than that, and now as we speak it's also higher again, but who knows how it's going to be in a few days or weeks or after the summer, no? So, well, we are reconfirming our guidance and we'll see, no? And this is also on the back of certain volumes, no? That are, by the way, for the time being are doing better than the initial expectations, mainly on the lending side. But well, we are talking about NII for 27 that we have to, let's say, plan what is going to happen a year from today. So I think that, as I say, by reconfirming our guidance, we are very comfortable and happy with that. and we need to be reconfirming the evolution of the yield curve, the flattening or steepening, volumes, etc. We are operating in an environment that is not exempt of certain volatility from a geopolitical point of view. So I would say that this is basically the rationale for keeping it unchanged. Thank you, Max.

Thank you, Max. Operator, next question, please.

Next question is from Marta Sánchez Romero, JP Morgan.

Thank you very much. My first question is a follow up on net interest income. So I understand that the scenario is complex, volatile. But if you gave us the tools to have a certain level of conviction or making sure that we are running the math well, with rates landing at 3 for your average 12 months and a curve Do you feel comfortable with the consensus number of almost 12.8 billion for 2027 and beyond the 13.6 in 2028? My second question is on revenues from services. You're running way ahead of your plan, 8% almost in the first half of the year. Your guidance is five. Why haven't you updated or upgraded your guidance. Related to this, I wanted to hear your thoughts on daily banking fees or your recurrent fees, what you call it, stripping out SRTs. You're down 1% year on year. You're running volumes at eight on the loan side, at four on the deposit side. You've been cleaning for years that line. I understand the environment is very competitive. When do you expect to close that gap between volumes and that income line if ever? Thank you.

Thank you, Marta, and felicidades as well for Santa Marta. Yes, felicidades. Anyhow, lots of guidance and consensus-related questions for you, Javier, and I would first make just a couple of comments on fees and revenues from services. Obviously, the speed at which we are operating now suggests there is a very clear upside. In terms of banking fees, the reality is, as you will say, Marta, that this line has its own weakness because we've been just sensitive to making sure that we do not lose clients as a consequence of fees when clients are overall profitable in a Javier Pano Riera, Luis Javier Blas Agueros, Javier Pano Riera, Luis Javier Blas Agueros Thank you very much.

Okay, if I may add, Gonzalo, a follow-up on that one. If you look at the evolution for the first half of this year on, let's say, recurring banking fees, that if I am right are down by 2.4%. More than half of that slowdown is coming from SRTs. So just to give you an idea of the impact, which is not that material, but it's there. Well, in terms of, let's say, consensus and guidance, Honestly, I think that we are providing a lot of information. So detailed information about sensitivity, hedges, maturities, yields, etc. So honestly, I am not going to comment on the consensus today. I did that last quarter about 2028 because it was the first time we were disclosing our internally compiled consensus and I thought it could be helpful. And basically what I wanted to emphasize back then is that NII is not flattening in 2027 and the positive evolution is continuing beyond that. I wanted to emphasize that. The pace of the impact of higher rates It's true that it depends a little bit on the stiffness or flattening of the yield curve, but at the end of the day, after some time, it has the impact it has to have. So that's my comment, Marta. Our guidance already accommodates an ample range of scenarios. and I think that when we are closer to that and for sure when we are presenting year-end results, we are going to be able to fine-tune. Thank you.

Thank you, Marta. Felicitades.

Next question, please.

Next question is from Cecilia Romero Barclays.

Thank you very much for taking my questions. The first one on deposits and the second one on capital allocation. On deposit, ECB data shows that the Spanish annual deposit growth remains healthy but has moderated somewhat in recent months, particularly in households. What do you think is driving down moderation on growth? And are you seeing signs of greater competition for deposits across the sector? What is driving the increasing cost of deposit quarter on quarter? Is that rates alone? And then on capital allocation with organic capital generation, How do you think about the trade-off between pursuing Bolton acquisitions and returning excess capital to shareholders? What hurdles would an acquisition need to meet to be preferred over additional distribution? Thank you.

Thank you, Cecilia. On deposits, obviously, we have had a very good three months and a year. When you look at the overall sort of quarterly changes, my experience is that sometimes we need to take sort of the I would say in the second quarter you have had higher inflation in most countries, certainly in Spain And I think from a macro point of view, it makes sense to see that the generation of excess deposits is lower in that environment because I think people tend to obviously save less in that environment, given that they pick up in inflation. Hopefully, we'll look at futures. Javier Pano Riera, Luis Javier Blas Agueros, This is a competitive market. We know it's very visible what various banks are pursuing different strategies. And I think that is not substantially different from what we've seen last year or what we have seen last quarter. So I wouldn't say there are structural or any other relevant changes from that point of view. Again, obviously on the basis of A very competitive market with respect to your second question and capital allocation We have said very clearly that we want to make sure that we grow organically, always subject to appropriate returns, and that is our first priority, organic growth. This is clearly the case this quarter, where I would say growth is probably even higher than normal because of some seasonality. and actually a very good quarter. But this is our priority. Then second priority and completely compatible with the first one is to maintain attractive remuneration policy in terms of dividend payment without 50% to 60% payout. And the reality, because we are fairly profitable at this point, is that we generate capital on top and as we generate that capital we have Thank you very much. Thank you very much.

Thank you, Cecilia.

Next question, please. Next question is from Francisco Ricoel Alantra.

Yes, thank you. My first question is about the long yield in Portugal, which fell nine basic points Q and Q. In Q2, Spain fell just one basic points in the long yield. So you mentioned non-recovering impacts, probably still to Portugal, if you can please elaborate. You also mentioned positive front book dynamics in Spain in Q2, but I wonder if you can also share with us front book pricing in Portugal so that we can reassure that this is only non-recovering technical impacts here. And also as a follow-up on deposits, I see demand deposits slowed down 6.1 in Q1 to 3.9 in Q2. I think the sector is growing over 5%. You are still printing market share gains in household deposits, but five basic points in Q2, but less than in Q1, 16 basic points. So you can comment on the increased competitive landscape in payroll deposits and how you are fending off your deposit franchise. And then if you can update on the cost of deposits going forward, how do you see that? And also, you see the customer spread exceeding 300 basic points in the second half of the year after these one-offs in Q2. Thank you.

Thank you, Paco. I'll leave Javier to answer on the third one. And Javier may elaborate because it seems I haven't been convincing enough, which is something perfectly reasonable. But again, I will not make a lot of sort of quarterly Javier Pano Riera, Luis Javier Blas Javier Pano Riera, Luis Javier Blas Agueros, Manuel Galarza Pont, Maria Luisa Martinez Gistau, David Lopez Puig Javier Blas Agueros, Manuel Galarza Pont, Maria Luisa Martinez

We are holding, on average, 25 billion of deposits, but with a lot of volatility. So I think that it's good to disclose the evolution, excluding those effects. And if you look at that, it's circa 5%. So I think that it's good. And gaining market share in households. So I think this is a positive development, and if you look at the evolution of non-interest-bearing by 5.5% year-on-year, I think also it's a positive development. I have to say, because you had questions about Portugal, This is a trend that is also happening there. Portugal's BPI is doing really a good management of the deposit franchise recently. Actually, the percentage of interest-bearing deposits is pretty much stable, circa 46%. You know that it has been structurally higher than in Spain. Thank you very much. As the accrual period for certain mortgage expenses has been shortened, so as a consequence there is some catch-up effect of this situation on a quarter-on-quarter basis. and that obviously as the amounts involved are clearly higher versus on a relative terms versus Portugal is what explains the evolution of the loan yield that you could see. Looking at the front book yield is also accretive in Portugal. So I would say that the situation in Portugal is pretty calm. So competitive, as always, with additional touch of competitiveness versus Spain. But BPI is defending the situation, honestly, pretty well so far this year. On the customer spread, what we saw this quarter is really rough. Javier Pano Riera, Luis Javier Blas Thank you. Next question, please.

Next question is from Ignacio Ulargue, BNP Paribas.

Thanks for taking my questions. Good morning and happy names day, Marta. I just have two questions for you guys. On the gains and losses on disposals of real estate assets, there was a big step up this quarter. I think, Onfala, you've lacked last quarter, but we should expect this to be positive in the future as you accelerate the disposal of assets from real estate for closed assets with capital gains. There has been a very big acceleration of decline in the assets. You have sold 400 million of gross assets this quarter versus an average. I think it should be around 200 million in the previous five quarters. How should we think about this? Is it a bit of a granular strategy or it's more that there was a big asset disposal in the quarter? Just to be mindful of how should we think about this line going forward. And the second question is, Don deposits, customer funds and the implication that also have into the fee guidance. So if I just look to your customer funds, they are growing in line with performing loans. While I understand that there is a bit of a shift of deposits into customer funds, I just wanted to get a bit of how should we think about that trend and what impact should we have that on inflows in wealth management. And linked to that, I don't know if you have replied to that, but I have lost the answer to it. But you are running fees, sorry, revenue from services growing 7.4 with a guidance of 5%. What prevents you to be not upgrading the guidance here? Thank you.

Thank you, Nacho. On real estate, yes, we had significant gains in this quarter. We had more activity in the quarter than you would typically expect for any given quarter. So as we said, I think this is relevant because this was consistently negative and it's going to be consistently positive. So I wouldn't just look at it as a one-off. The question, as you correctly say, is what's the level of the consistently positive, and unfortunately I'm not in a position to say. Clearly it's not going to be at the same level in principle than this quarter. There will be some volatility, ups and downs, but again, we're not expecting this line to be negative, and certainly there will be a contribution. What we're doing in terms of granular sales, and from time to time we do a block here and there where we see it makes sense. But granular sales, what we're seeing is close to 50% profit on what we sell. So it's fairly significant. The current book value of what we have in terms of foreclosed assets, if we exclude the rental assets, is $900 million. and then we have close to, and these are round numbers, but close to another 600 in rental assets which obviously are also coming down even if they may not come down Javier Pano Riera, Luis Javier Blas Agueros, Matthias Bulach, Marta Nogueros I take it, Jai Nacho. Well, on wealth management, my comments would be that the pace of inflows

Thank you very much. And you know that we have this kind of skills to manage adequately the flows between off-balance sheet long-term solutions, time deposits, obviously side deposits, etc. And I would say that everything is doing so far according to our initial expectations. And let's say assuming that there are no major changes, I would say geopolitically speaking, that always may result into markets correcting or volatility, et cetera, that can affect that pace of inflows into long-term saving solutions. We are pretty confident that we are going to be delivering volumes in line, let's say with last year, which was already like a record high year. As a result of that, and that connects to your last question, as a result of that, the evolution on wealth management and also protection, I would include protection in my comment, and all those not strictly related to your question is expected to perform in terms of P&L, if not at double digit, very close to double digit for the year. And it's true that we have not updated the guidance, but basically because We thought that we had the major part of our KPIs open-ended, basically the most important one, which is ROTE, and hence would be able to accommodate any outperformance coming from revenues from services, which I think that is going to be the case. Thank you, Nacho. Thank you, Nacho. Next question, please. Next question is from Alvaro Serrano Morgan Stanley.

Good morning. Thanks for taking my questions. Sorry, I've got another one on NII. And thanks very much for the disclosure. I do think your disclosure is probably one of the best in the sector. But you spoiled us. So, on the guidance, Javier, in previous quarters, you've talked about 150 basis points loan spread as kind of where the loan should settle. Obviously, you've already discussed the The moving parts in this quarter, but should we still think with the current curve that 150 basis points loan spread once the loan book reprices is kind of where things should settle? That's the first question. And the second question is on capital generation. Obviously, you've had very strong loan growth this quarter. Part of it is seasonal, which means the capital generation hasn't been Thank you very much for joining us. You would caution to expect more buybacks for the foreseeable future. Just want to get your thoughts on that. Thank you.

Hi, Alvaro. Good morning. Well, on loan margins, when I mentioned this kind of 50-50 between loan spreads and deposit spreads, it was like a broad message. But then if you If you want me to be more specific, if it's going to be 160 and 140 or 160 and 150, so now it's probably too early to say. But the general dynamics in terms of lending are good ones in terms of margin, so I would say that and all the new lending that is coming from our CIB international branches is lending that is meeting all our criteria in terms of profitability, of yield accretion, et cetera. So you have not to worry about that. On the other hand, there is a segment that is different, which is the mortgage segment, which I don't want to elaborate, but you know that it has its own dynamics. and to some extent is also impacting the overall end result. But yes, broadly speaking, I think that 150 should be the place to be around that level. But difficult to be more specific considering the dynamics and many more. And on capital, yes, we are more active on SRTs. I can already tell you that this second quarter we closed 2.5 billion SME S.R.T. that resulted into a risk-weighted asset released of slightly less than 1 billion. And you know that we are planning to be active on that front. So we have plenty of, let's say, projects on the table on that front. And we are on that. So the idea here is to deliver risk-weighted asset growth Javier Pano Riera, Luis Javier Blas On the other hand, it's true that you have some kind of reaction function here, because the long book is growing faster than our initial expectations, so then we need to catch up to some extent on SRT strategies. And we'll see, no? But the market is there, it's liquid, there are more and more market participants, costs are fine, so we think that there is room to keep doing, no? So, yes. Thank you, Álvaro.

Thank you. Thank you very much.

Thank you.

Next question, please. Next question is from Sophie Petersen, Goldman Sachs.

Yeah, thanks a lot for taking my question. Here is Sophie from Goldman Sachs. So my first question would just go back to the loan growth. It was very helpful, the comments you made around the international CIB loan growth, but how should we think about like loan growth in other segments? Mortgages look very strong, 6% year-on-year. Consumer loans plus 11%, corporate loans plus 10% year-on-year. How should we think about the upside risk due to your previous loan growth guidance? So if you could comment on this. And then my second question would be around wage inflation. How should we think about wage inflation in 2027 and 2028 given higher inflation? Thank you, Sophie. Maybe I'll comment on the second question obviously.

When we talk about wage inflation, the second part of the expression inflation is going to be very relevant. What we have is some uncertainty on that front, but basically we're seeing the ECB credible enough to contain inflation, and that's why long-term inflation expectations are still just above 2%. And I think that is very, very relevant. In the shorter term, obviously, Javier Pano Riera, Luis Javier Blas Agueros, Marta Nogueros, and many more. And this is going to be relevant and obviously you can estimate, depending on which macro scenario you want to run, where the number is going to be. What we've seen so far in Spain is salaries growing around 3%, which is in line with what The ECB is actually forecasting for the Eurozone like it was last year, but again, I guess this is going to be data-dependent, as the ECB said. Inflation may pick up or not, and there's some clear uncertainty, and that's the uncertainty around rate environment that we also commented on. I don't want to be more specific than that because there will be next year again a new negotiation of collective bargaining agreement both for former saving banks and former commercial banks and obviously that will have a typical negotiation dynamics. We are confirming our guidance in terms of the overall cost evolution for this year and next year. And that doesn't mean that there are no pressures here and there. We'll need to see how we deal with them, but we also have our own programs to contain cost growth in other areas. In other parts of the business, but both inflation environment and obviously technological expense are putting pressure. We're still confident that we can keep our guidance where we want it to be, which is where we have obviously guided you for growth, which is coming down next year significantly from the 4.5% that we have guided for this year.

Hi, Sophie. Good morning. Well, on landing, you are right. So we are doing better than our initial expectations. A year on year up by, let's say, circa 8%. Our initial expectation was more like 5-6. I think that considering the momentum, and always with the disclaimer about external circumstances, but considering the momentum and the pipeline that we have, I think that probably we are going to be ending the year closer to 7%. By segments, I think that mortgages maybe four, consumer lending, if not double digit, close to double digit, and then businesses with, to some extent, a little bit more volatility here from CIV, larger tickets, et cetera, but very probably, if not at eight, very close to 8%. So I think that that's a little bit the picture. And as I was saying to a previous question, in terms of margins, in terms of yield accretion, in line with the expectation on that front. Thank you, Sophie.

Next question, please. Next question is from Miruna Kirea Jeffries.

Good morning. Thank you very much for taking my questions. I just had two quick ones, please. Firstly, more of a clarification on the cost of deposits in the quarter. Will you help us understand if the increase in the cost of deposits in the quarter was driven entirely mechanically by the index deposits, or did you also choose to pass something on the non-index term deposits as well? And how do you see the dynamics from here for the rest of the year? Do you expect to have to pass on the non-indexed portion given any potential rate hikes from the ACB in the second half. And then just a question on your strategy in consumer credit. We remember that in your investor day a couple of years ago, you were targeting to increase your market share in consumer credit. We're seeing that is on track, but it still remains pretty low compared to our natural market share of 25%. So just curious, what are the active actions or campaigns that you are undertaking to organically growing consumer loans? Thank you.

Thank you. Thank you, Miruna. On the point of consumer credit, we have and many others. We have been very successful, given the information we have on our clients and the fact that we have the payrolls. On payrolls we have 6.4 million but then Javier Pano Riera, Luis Javier Blas Agueros and many others have pre-authorized lending to a very large universe of people which is very consistent with a low cost of risk but very convenient ease of disposal of consumer lending and that has worked very well for us and it continues to do and here a lot of the improvements we're doing in terms of facilitating Thank you very much. And again, the trends are quite positive. Together with that, we have made substantial improvements in terms of volumes in all what has to do with auto financing, the Facilitea coaches, we call it the Facilitea cars platform that we launched over a year ago. Thank you very much. and obviously a lot of automation around it. And that has allowed us not only to grow car lending in this platform, but also because auto dealers are very happy to be able to sell the second-hand used cars that they get when they sell a new one and sell it through our platform. What we are is obviously increasing the scope Javier Pano Riera, Luis Javier Blas Agueros, Marta Nogueros, Maria Luisa Martinez Gistau, David Lopez Puig Thank you very much.

A big part of those are indexed to the overnight rate, so actually it's not until the overnight rate goes up or down that You have a change, but there is also another part that is indexed to three months, or even six months, or even 12-month arrival. But I say the bulk is the overnight. So as the market was already pricing rate hikes before those happening, part of that is already being filtered on the indexed deposit part. And on term deposits, it's the same. So with market rates approaching 12-month arrival here, it's like the benchmark for time deposits. So as this yield is getting closer to 3%, if not at 3% at some moments, So obviously the new production of time deposits has to adjust. So you will allow me not to give you all the details about our strategy, our commercial strategy on that front, but it's clear that there is a pull upwards of higher market rates into the yield of the new production. This is going to happen. But having said that, to give you the broad picture, we expect a deposit beta. Back to the deposit betas and back testing how this is going. But we are expecting a deposit beta in the low 20s. So that's the plan. And we expect that the cost of our deposits ex-hedges to be slightly below 50 basis points as an average for the year. Thank you, Miruna. Next question, please. Next question is from Andrea Filtri, Mediobanca.

Thank you for taking my questions. The first is on the digital euro. You've been a pioneer in the project so far. Why are you not in the digital euro pilot? The second question is on the Danish compromise. Can you explain how the process works with the ECB in case of an acquisition of an insurance business? As a financial conglomerate with Danish compromise already approved, do you have to ask for Danish compromise usage Thank you Andrea. On the second question the most honest response is I don't know because we're not dealing with anything that is on the table but clearly look at what we've done in

In the past, we've maintained the Danish compromise without any special process around that. It is true that all the transactions that we've done didn't put into question the fact that we are inside the financial conglomerate sort of rules, no? So I think that's generally the guidance. But again, with all due respect, it's not something I am particularly at least now familiar with because we're far away from that sort of topic because it doesn't really affect us. On the digital euro, we have obviously supported the various efforts with the digital euro. We continue to be of the Thank you very much. Javier Pano Riera, Luis Javier Blas New services that people will base on the Digital Euro. We're certainly planning to be on that league. At the same time, Digital Euro is one of the new means of payment. We have stable coins. We have tokenized deposits, we're working with Agora, we're working with Pontes in Europe. We are obviously looking at our own initiatives, Kivalis on stablecoins. And this means that we have limited resources and we have directed those towards the areas where we think is most needed and most pressing. Thank you very much. So there's nothing different from that. I wouldn't say that Digital Euro is the game changer. I think that Digital Euro, the tokenized deposits, maybe stablecoins, obviously direct P2P that we have with the integration of Bizum and Vero and others and in Europa and Vips etc. The combination of all these is very much I think a very significant game changer for the industry and this is going to happen over the next years with the Digital Europe being obviously one relevant milestone but not the only one and we are To be honest, very well prepared to deal with all these various projects that are going to be a reality in the rest of this decade. So nothing else.

Thank you, Andrea. Next question, please.

Next question is from Britta Schmidt, Autonomous Research.

Yeah, good morning. Thank you for taking my questions. I have a question on your funding structure. This quarter, if I look at your average loans and bonds, they outgrew the average deposits in terms of Q and Q increase. And the marketable debt was actually down Q and Q with higher interbank usage. How should we think about your issuance plan in the second half? You've executed 60%. What is still due to come? And how should we think about the funding costs Given that the maturities have got a very low spread, those coming up in the second half, my second question would just be a clarification. What would be the underlying customer spread X1 or some technicalities that we should use for making our forecast versus the 2.89% reported? And then lastly, there was some media reporting about interest in a potential consumer finance book in Spain. Can you perhaps comment on that, whether there is any interest or confirm or deny any interest? Thank you.

Thank you, Britt. I made some comments and some indirect questions about the third topic and on sort of specific rumors that come to the market. We have a policy not to comment. I only want to reinforce the messages I gave before of what is very clear preference in our case for organic growth, which we have Thank you very much. With the benefit of hindsight, these were two very value-enhancing transactions, but we are not changing our strategy. We continue to have a strong preference for organic growth, and we will not comment on market rumors as a matter of policy. Thank you.

Hi, Britta. Well, on funding, well, we are executing our plan. What is pending for this year is maybe an additional senior preferred. And, well, you have all the details, what has been issued, what is pending. So for next year, we are going to be almost across all asset classes, because it's It's a question about rolling over maturities and eventually calling tier 2s and 81s, as you know, that we have not a predefined policy on the topic, so we'll decide I would like to mention two things here. First thing is that we are issuing in foreign currency. We usually do not convert that funding in foreign currency into euros. At the same time, we have to fund foreign currency loan books, basically coming from CIB. and mainly in US dollars. And my second remark on funding is that remember that we usually swap into floating all new issuances. So when you look at the cost of the funding, it's not only the spread, but it's also how, let's say, short-term market rates Javier Pano Riera, Manuel Galarza Pont, Maria Luisa Martinez Gistau, David Lopez Puig So we are constantly having new fixings now with higher short-term market rates. So that part is also the cost is moving upwards because it's swapped into floating. The clarification for the customer spread is the following one. The back book yield of the long book x non-recurrence and x this technicality for the day count should be higher by three basis points. Hence, the customer spread, instead of coming down by four, should be by one. Moreover, if you exclude Portugal and you look only at Spain, the customer spread should be flat, quarter on quarter, excluding, let's say, ex-Portugal, ex-non-recurrents, and, well, the non-recurrents are basically in Portugal, and the technicality of the day count in Spain is flat in the quarter. Thank you.

Thank you, Britta. Next question, please. Next question is from Ignacio Cherezo, UBS.

Yeah, hi, good morning. Thank you for taking my questions. The first one is on the commercial gap obviously being widened in the last two to three quarters, long growth accelerating, while deposit growth is decelerating. So just trying to understand actually how you're planning to deal with that, if it's use of excess liquidity, if you're planning to re-accelerate the growth of remunerated deposits, just having a feel basically on that. And the second one, is on the deposit hedges and basically asking whether it would make sense as a base case to be rolling over those hedges given the current yield curve. I mean swap obviously like 40, 50 basis points higher than necessary if we need to work under the assumption basically are those hedges are going to be rolled over. And then on the international lending book if you can give us a kind of a feel basically around the lending yield. It doesn't need to be a precise number but kind of what is the loan yield in relationship with the blended loan yield of the group higher or lower. Thank you.

Okay, thank you, Nacho. On the commercial gap, while you mentioned that deposits are growing at a slower pace, again, I would like to try to emphasize that excluding the public sector that is always more volatile are growing at 5%. It's true that it's slower pace than the loan book, but not by that much, okay? So considering the liquidity reserves we have, which we think is clearly a competitive strength versus competitors, we think that we are far from a situation where we need to change our, let's say, commercial strategy because of that situation. So we are not planning to do something different because of this situation. and many more. Thank you very much. Over time on how finally or actually evolve the different parts of the balance sheet. You know that we are growing on mortgages, which is a fixed rate. We are growing also on non-interest bearing, which is like a fixed rate also on the other side. And we have a forecast about the evolution of all that, but then reality may be slightly different than that. And we'll have to accommodate the hedging activity to the reality. But the base case is that the rollover of those hedges to a large extent is going to be needed. Maybe not 100%, but to a large extent, yes. And so, yes, you can assume that. But having said that, no. As of today, the yield curve is going to be really flat very soon because short-term rates are going to be, let's say, two and a half, two, three quarters. Long-term rates on swaps are going to be pretty much at the same level. So the extra yield may be there, but obviously in case of that eventually we have lower rates, definitely yes. This is why we follow quite, let's say, a strict hedging policy, because you never know what may happen. In terms of the yield at international branches, I would say that is pretty much in line with the average. So it's not far from that. We are comfortable, so it's a business that is gaining traction. I think that Gonzalo has already made plenty of comments about the topic. But in terms of yield accretion, it's perfectly in line with the average. So it's not having a material impact, nor positive or negative. Thank you. Thank you very much.

Thank you, Nacho. Next question, please. Next question is from Borja Ramirez, CT. Hello.

Good morning. Thank you very much for taking my questions. I have two, please. Firstly, on the NII one-offs, I understand that the impact from the days effect and also from from Portugal, one of our three BIPs in the loan deals. That, based on my calculation, it's around 28 million euros. So if you could kindly indicate how much is linked to the Portugal one-off, please. And then my second question would be, according to The holding company of the stake in CaixaBank from the Spanish government has been moved to the Ministry of Finance, the Ministry of Economy directly. So I would like to ask if that could have any potential implications. I understand the deadline for the disposal is December 2027. Is that still correct?

Thank you. Thank you, Borja. On the second question, Yes, what we see is, based on the public information and our understanding of the situation, is absolutely no impact on the sort of state stake. It's just been within the same ministry, the Ministry of Economy, rather than being a hold through the FROB, it's going to be a hold directly, the BFA stake. And the statements that have been made is that There's absolutely no change in the stance in which what we see is no interference in the management, no attempt to interfere in the strategy and a very high degree of satisfaction with the way things have evolved at CaixaBank to give you an idea The total shareholder return for the state since the conversations with Bankia started is basically in round numbers times 10. They've multiplied, including obviously the share buybacks and the dividends and the and the share price increased ten times their investment and as you can imagine that makes them very happy. With respect to the official deadline, it's not changed either. We know that it can be changed at some point in time through a decree the government can pass which is what happened in the past and I'm not here to speculate whether they will happen My expectation is that there will be no disorderly sale in the market.

Hi Borja, about the technicalities, just to reconfirm. So we have two different things here. We have some non-recurrence that are having an impact in Euro terms and the major part of that is coming from that accrual, a different timeframe on the accrual of certain mortgage expenses. And overall, the non-recurrence are slightly below 10 million, of which 6 million on a quarter-on-quarter basis is what I mentioned from Portugal, that different accrual period on mortgage expenses. And then, beyond that, it's more a technical effect on the way the yield of the loan book is calculated. Thank you Borja.

Thank you. That's all we have time for today. So have all of you a wonderful summer and thank you for joining us in our quarters. Thank you, Gonzalo. Thank you, Javier.

Thank you. Thank you, everybody. Have a good summer.