Unicaja Banco Sa Ord

Good morning, everyone, and thank you very much for attending Unicaja's Q4 2025 earnings presentation. First of all, as we usually do, let me confirm that this morning, before the market opened, we published this presentation, along with the rest of the usual financial information at the CNMV website and at our corporate website. Today, we are joined by our CEO, Isidro Rubiales, and our Chief Financial Officer, Pablo González. We have divided the presentation into three sections. Isidre will begin with the introduction which includes a summary of the financial year and a brief review of the first year of the strategic plan. Pablo will explain the financial earnings and after which Isidre will return to the stage to conclude with some final remarks before opening the floor to your questions. We expect the presentation to last just over half an hour. After the presentation, we will take questions from analysts and investors who are following us by telephone on the original Spanish line. And then we will move on to the English telephone line. So without further ado, I give the floor to Isidro. Thank you very much and good morning, everyone. It's a pleasure for me to be here again, sharing with all of you the key highlights of the 2025 earnings, which, as Jaime mentioned, is the first year of the strategic plan. And as you will see, we are making good progress. which is also beginning to be reflected in the entity's financial performance. The strategic plan is designed for the long term, and many of the results and returns we expect to obtain will take time to be reflected. But it's true that some of these measures implemented are already allowing us to move in the right direction with some clear results in the first year of the plan. On page three, we show our usual summary of the highlights of the financial year. The first item that we would like to highlight is the significant recovering in business activity that we have achieved throughout 2025. Two years ago, in the fiscal year 2023, performing loans fell by 9% the following year. In fiscal year 2024, the decline was 4%. In 2025, despite not growing in the mortgage segment, which is Unicaja's largest book, we managed to reverse that trend and achieve 2% lending growth. This turning point, as we will see later, is partly as a result of the diversification strategy outlined in the strategic plan that we presented to you a year ago and which is gradually beginning to take shape. Proof of this is that loan approvals have grown by 40% compared to the previous year. Another aspect that reflects the greater commercial momentum is the evolution of mutual funds which as you will recall was one of the strategic levers of the plan with balances rising by 23 percent during the year and a net subscription market share of nine percent which is higher than our structural share This positive performance has also been reflected in profitability, with net profit for 2025 improving by 10% to 632 million euros, thanks to the growth in gross margin and lower provisioning requirements. The increase in income boosts the ROTE, adjusted for excess capital to 12%, and maintains efficiency slightly above 45%, below our target of 50%. I would also like to highlight the continuing improvement of the bank's asset quality, an aspect to which the market may be paying less and less attention, but which we have been managing exceptionally well internally. And as a result, their balances have become immaterial, but continue to improve quarter after quarter. NPAs fell by an additional 25% in 2025, and additionally, leaving the net non-performing asset ratio at a symbolic 0.8%. Stock fell by 20% during the year, reducing NPL's ratio to 2.1%, below the 2.8% reached by the sector in November 2025, the latest data available. NPL coverage also improved during the year. increasing from 68% to 77%. This positive development is also reflected in the P&L, with a cost of risk below 26 basis points below initial guidance. Finally, I would also like to draw your attention to value generation, one of the most important aspects, as it's the consequence of all the above. The set one ratio driven by earnings ended the year at 16%, 90 basis points higher above last year, which allows us to increase the percentage of the 2025 earnings, which that will be allocated events from the initial 60% to 70%. This is a significant increase that will improve the dividend to 443 million euros, 29% higher than the previous year. and is the highest dividend paid in Unicaja's history. On the following page, we show you how the year ended compared to the initial guidance we shared with you a year ago. We believe it summarizes the year's performance very well. We expected net interest income to be above 1.4 billion euros, and it finally reached 1,495 million, which is 7% above our initial guidance. Due to the implementation of loyalty plans with linked customers, we expected fees to remain flat, but they ultimately increased by 3%, driven by growth in mutual funds and insurance, two of the commercial pillars of our plan. Costs remain in line with expectations, rising 5% due to investments, hiring, and the projects we are implementing to execute the strategic plan. The cost of risk was below our initial forecast, as were provisions Business volume also grew as expected. As a result of all the above, net income increased by 10% to 632 million euros, no less than 26% higher than the initial target, which was 500 million euros, which, as you know, we already exceeded in the previous quarter, leaving the ROTE adjusted for excess capital at 12%, which is 200 basis points higher than the 10% initially expected. As you can see, this page summarises very well the positive performance of the entity in the first year of the strategic plan, where we met all the guidelines we provided a year ago, and in some cases we significantly improved on them. On the next page, as I mentioned earlier, we show how the positive evolution of the entity's financial position and results allow us to present a very important milestone The board of directors has decided to update the dividend policy and increase the percentage of profits we want to distribute in the way of dividends, going from 60% to 70%. This is a significant increase in the distribution of earnings to our shareholders, which together with the Best earnings will mean the payment of dividends for 2025 of more than 17 cents per share, well above the 13.4 cents paid for 2024, and compared to around 5 cents that we paid in 2022 or 2023. The total dividend will amount to 443 million euros, 29% higher than the previous year. This is a significant increase, which, as I said before, has been made possible by the positive performance of the results and the bank's comfortable solvency position. Now, if we turn to page six, you will see some of the progress made on the strategic plan in the first year. Although we are in early days, we have begun to notice a significant change in the dynamics, thanks to the entire team's focus on the plan's initiatives, and we wanted to share some ones with that we are particularly excited about with you. In consumer lending, we aim to double arrangements by 2027. This year, we have already increased by 40%, maintaining our focus on working with existing customers and direct deposit income. With regard to new insurance premiums, we wanted to increase by 25% in 2027. In this first year, we have already increased by 17%, and we continue to see room for improvement to achieve our goals. Another noteworthy aspect is the off-balance sheet weight on total customer resources, where we have increased to 27% in the year, with a final target of 30%. We have launched products such as Unicaja Store and reached very important agreements with the management company that will help us to continue increasing and diversifying our income. In the corporate sector, we are very pleased with the improved performance of the business in the first year of the plan. We have turned around a business that was in decline and the book, after falling 9% in 2024, has grown by almost 4% in 2025. To achieve this, we have attracted 70% more new customers with lending, increased our own customer financing share by 5% points, and increased the weight of the current assets from 11% to 14%. All of this driven by our focus on improving customer satisfaction, with the MPS indicator improving by 10 points in the corporate business since we launched the plan. Across the board, as you will see later, we are working hard to improve our commercial and operational tools using artificial intelligence. We are rolling out tools across the entire organisation and loading use cases in different areas, such as sales, customer service, operations, etc. with efficiency improvements in many cases exceeding 50%. Finally, a very important part of our plan is to hire specialized and significant profiles for the bank in order to achieve our targets. In this first year, we have already achieved 65% of the talent acquisition that we had planned. In short, it has been an intense first year of the plan where we're gradually beginning to reap the rewards of its implementation. As a result of these advances, on page 8, we update our earnings expectations for the three years of the strategic plan. A year ago, along with the annual earnings for 2024, we presented the main details of the plan, in which we showed our intention to exceed 500 million euros in net profit in each of the three financial years, and an accumulated net profit of more than 1.6 billion euros, which was 40% more than the 1.117 billion achieved in the previous three financial years from 2022 to 2024. Today, following the positive performance in the first years of the plan's implementation, we're increasing this accumulated net profit earnings expectations by a billion taken to 1.9 billion, which is 70% higher than the accumulated net profit achieved during the previous three years. The interest margin, which we initially expected to exceed 1.4 billion each year, is now expected to exceed 1.5 billion. And net income, which I mentioned earlier, we initially expected to exceed 500 million each year, is now expected to exceed the net income for 2025. This is 632 million achieved last year. All of this will be accompanied by a cost of income levels that will remain below 50%. On page H, we provide an update on shareholder remuneration target of the plan. As you will recall, the objective is to allocate more than 85% of the earnings for the three financial years to shareholder remuneration. Initially, the idea was to allocate 60% through the ordinary dividend and the remaining 25% through what we call additional remuneration, which could be in cash dividends or share buybacks, with the intention of concentrating this additional remuneration in fiscal years 2026 and 2027. Following the update of the dividend policy, From 2025 onwards, we are increasing the structural remuneration from 60% to 70%. This reduces the percentage of additional remuneration for the period to 15% of accumulated earnings. as can be seen on the right. In order to achieve the aforementioned objective, the additional remuneration will represent around 25% of the earnings for fiscal years 2026 and 2027. In other words, for the three years of the strategic plan, we will pay 70% of the net profit in dividends, and for 2026 and 2027, In addition to that 70%, we will include an additional remuneration of 25% of the profit for those two years, which will be either paid in cash dividends or through share buybacks, something we will decide based on circumstances. Therefore, for 2026 financial year, if we pay part or all of the additional remuneration in dividends, we will make an additional payment in December. to which we will have to add the two usual dividends for 70% of the result, the first in September and the second in April of the following year, once approved in the General Shareholders' Meeting. As you can see, this would be the plan over the three years as a whole. Shareholder remuneration represents more than 85% of the accumulated net profit. Finally, and given its importance, I would like to take a moment to mention some areas in which we are making progress in the field of AI, which we show on page 9. We are convinced that this technology will change the way we do business and banking, not in the future, but right now. That's why we consider it an absolute priority. We are making progress in the use cases across all areas, including commercial operations, IT development, with very encouraging results that drive commercial activity, improve efficiency, and reduce the time required for many tasks. This is facilitated by a hybrid of modular architecture. This is adapted to both cloud on-premise environments with independent components that accelerate system and construction are ready to work with different types of models. We believe that innovation is essential to get the most of it. That's why we have created an AI hub with more than 50 multidisciplinary professionals, and we've launched joint chair with the University of Granada to promote research and attract talent. In short, we are promoting the adoption of artificial intelligence throughout the organisation, which is leading us to achieve efficiency improvements of over 50% in some areas. In short, as you will have seen, in the 2025 financial year has been very positive. Progress in the implementation of the strategic plan has led to an improvement in commercial dynamics, which in turn has boosted results by 26% above initial forecast, which together with a comfortable solvency position allows us, on the one hand, to increase the percentage of earnings that we'll allocate to dividends from initially 60% to 70%, increasing the dividend by 29% to 443 million euros, the highest in our history. And on the other hand, it allows us to improve our future earnings expectations. So with that, I'll hand over to Pablo, who, as usual, will give you more details on the financial performance for 2025. Pablo, whenever you're ready.

Thank you, Isidro. Let us now continue with the business activity on slide 10. As you can see, Total customer funds rose by 3.5% in 2025. Private sector deposits increased by 662 million euros, or 1%, with a continued shift in the product mix from term to demand deposits that rose to 55 billion euros, up 3% year on year, which explains the lower cost of deposits that we shall discuss later. of balance sheet performance remains very positive, posting an annual growth of 13.8%, driven by mutual funds, which, after reaching a market share of 9% of net subscriptions, grew by 22.6%. That is in the north of 3 billion euros. On the following slide, We disclose the details of assets under management and insurance. On the left-hand side, you can see that assets under management rose by 14% over the last year. Funds, in turn, climbed by 23%. Not worthy. is the significant increase in net fund subscriptions. As shown at the bottom, these subscriptions rose from 1.767 million euros to just over 2.8 billion euros, accounting for a 9% market share of net subscriptions according to Inverco. On the revenue side, as you can see on the right-hand side, These two lines of business rose by 9% in 2025, accounting for 18% of total revenue for the year. With regard to lending, during the 2025 financial year, total performing loan book rose by 1.9%, which is a very positive trend compared with the declines reported in recent years, as Isidro mentioned earlier. Broken down by business segment, corporates posted a very positive uptake and after rising 1.7% in the quarter, they reported annual increase of 3.7%. This is one of the most positive business aspects of the year. Thanks to the implementation of certain measures under our strategic plan, we have reversed the negative trend that this segment has been experiencing in recent years. In the case of individuals, growth for the year was 0.6%. because albeit we barely reduced the mortgage book by 0.2%, we were able to offset this with a strong increase of more than 8% in consumer lending. Again, driven by the measures set out in the strategic plan. which aims to diversify revenue streams. In short, this trend points to progressive improvement over recent quarters, which can be explained by greater diversification and better sales dynamics, together with a major increase in new production, as shown on the following slide. All new lending book segments grew markedly by 40% over the year as a whole from just over €7 billion to almost €10 billion in 2025. Growth in corporate banking is particularly noteworthy, with formalized balances rising by 46% to over 6 billion euros. Mortgages rose by 30% to over 3 billion euros, this amount leaving the book flat for the year given the pace of repayments. It should be noted that this more conservative growth in the mortgage book is mainly due to the high level of competition in this segment where prices are very tight. Finally. Although, in relative terms, their balances are less representative, I would like to highlight the increase in new consumer lending production, which rose by 40% to €822 million. In short, this positive growth is in line with the business priorities set out in our plan. On the following slide, you can see how we continue to make progress on our strategic plans sustainability commitments. This effort is being recognized by ESG rating agencies with six improvements having been granted in the latest reviews. Regarding environmental matters, noteworthy is the increase in the weight of Article 8 and 9 funds, which now account for 72%. We maintain and reinforce our strategy of financing ourselves through green bonds with high eligible collateral, while also advancing in the decarbonization of the portfolio, now targeted at six sectors, representing 81% of our lending to the private sector already. We would also like to highlight UNICA has social commitment, one of our identity hallmarks, which can be summarized in aspects such as customer proximity, commitment to financial education, and support for vulnerable groups. A portion of proceeds is returned to society through more than 175 million euros distributed in dividends to foundations, in addition to 371 million euros in taxes We are also committed to our customers by accompanying them in their own transition to this end. We are promoting new functionalities and agreements with third parties as reflected in the growth of the sustainable business where both the portfolio and new production are growing significantly. Finally, we would like to highlight our commitment to our employees with a focus on creating an environment that prioritizes people, governance, equality, and professional development. We shall now continue with the review of the income statement in the next section, starting with the quarter net interest income grew by 0.8% as the effect of loan repricing was offset by lower Funding costs both in retail and wholesale fee income improved by 4.1% over the quarter, bringing us to gross income of 1.3% higher than last quarter. Costs are rising due to the seasonality of the quarter. Overall, the quarterly margin before provisions rose by nearly 1%. Provisions as a whole rose sharply over the period, mainly because we have included a provision for restructuring costs in the amount of 27 million euros. Our aim is to implement a new workforce renewable plan similar to the one we announced last year. For the year as a whole, profit rose 2.6% reaching 2.095 billion euros. Total operating costs increased 5.4% in line with the previous year and the guidance. Overhead costs rose as a result of ongoing investments. while personal expenses increased by 4.2% in excess of the percentage agreed in the collective agreement due to new hires and variable remuneration. The operating margin improved by 0.5%. Provisions fell by 25% during the year, mainly due to lower provisions for legal risks. All of the above led to a pre-tax profit of €902 million, which after taxes on minority interests, including €26 million in sector-specific tax, amounted to €632 million, up 10.3% compared to the 2024 financial year. Let us now take a closer look at the income statement. Starting with net interest income on slide 18, we show the evolution of customer net interest income. As you can see, it fell by four basis points over the quarter as the decline in credit yields was partially offset by lower deposit costs. This is the same trend as reported in previous quarters, but increasingly moderated as the downward trend in lending is becoming more limited. Although we expect it to continue somewhat due to the annual evolution of the 12-month year report, which is still slightly below what it was a year ago. We also increasingly see less room for declining the cost of deposits, which continues to improve due to the mixed effect rather than the price effect. In any case, as we always say, for an institution such as Unicaja with far more deposits than loans, business performance is better reflected by the net interest margin and profitable assets. And this remains stable during the quarter, as you can see. The following slide shows details of the margins performance during the quarter, which improved by 3 million euros, or 0.8%. The lower return on loans mentioned above is offset by the lower cost of deposits and wholesale funding, as well as by the higher generation of liquidity. This quarterly performance is similar to that reported in other quarters this year, but as mentioned above, it is becoming increasingly moderate. Moving on to fees, we can see that they continue to perform well in the quarter, growing by 4.1%, mainly due to higher income from value added services such as mutual funds and insurance. over the year as the whole fees rose by 2.8%. As we have mentioned in the past, fees for collections and payments, known as banking fees, fell by 7% as a result of the implementation of customer loyalty programs. although some of these fees, such as car fees, are already showing positive growth in 2025. At any rate, this impact was more than offset by the positive performance of non-banking fees. These fees, which have greater added value, rose by 12% in 2025, driven by mutual funds and insurance, which, as shown on the right-hand side, now account for 49% of the total up from 45% in 2024 and 41% in 2023. Let us move on to the P&L account to show the rest of the income captions, which also show a positive trend in the financial year due to the changes introduced in the sector-specific tax, but also due to the falling non-performing assets and the growing contribution of investee companies. Of the cost side, as mentioned above, personal expenses increased during the year due to wage rises agreed with employee representatives, new hires, and also as a result of higher variable remuneration in view of the institution's positive performance. As for overheads, the figures are accounted for by the necessary investments we are making, largely for the implementation of the strategic plan. In any case, despite these increasing costs over the year, efficiency remains at 45.5% below the 50% target we have set in the plan. On the following page, we continue with provisions, which show another positive aspect of the financial year as they continue to improve. Total provisions fell from 319 million euros to 239 million, that is a decrease of 25%. The quarterly cost of risk was 27.5%. basis points and the annual cost of risk was 26 basis points lower than initially expected. Other provisions include restructuring costs for workforce renewal in both 2024 and 2025 amounting to $38 million in 2024 and 27 beginning 2025. Excluding this effect, they are in line with expectations showing a downward trend. On the following slide, we show a summary from a profitability standpoint. On the left-hand side, you can see different profitability metrics, all of which demonstrate the positive evolution of Onikaha's results. The reported return on tangible equity without any adjustments increased to 10%. If adjusted for excess capital above a CET1 of 12.5%, which is a level similar to that of other listed Spanish institutions, shows an improvement of 12%. At the bottom, we show the same metric calculated on regulatory capital. which shows an improvement of 70% in 2025. On the right-hand side, you can also see the evolution of the tangible book value, which, when adjusted for dividends, increased by 9% during the financial year. We now turn to credit quality. Another positive aspect of recent quarters, the balance of non-performing loans continued to decline. The quarterly decline was 4.3%, and the annual decline was 20%, bringing the non-performing loan ratio to a new low of 2.1%. At the same time, coverage of non-performing loans continued to rise from 68% a year ago to 77% at present. If we now consider total non-performing assets or MPAs, we see that in net times, they account for 0.8% due both to the significant 25% drop in their balances during the year and to the increase in coverage, which rose from 71% in 2024 to 77% at the end of 2025. Finally, I would like to review the bank's solvency and liquidity position with you. On slide 28, we show both. the quarterly and annual trends. In the quarter, the ratio fell to 16% due to two different factors. On the one hand, we have the impact of the dividend adjustment, which is slightly higher than the quarterly result. Since until September, we accrued a dividend of 60% of the result, which now becomes 70%. for the financial year. Secondly, we have the impact of the growth in risk weighting assets, which is mainly explained by operational risk and credit growth. Even so, the CET1 ratio closed the financial year 2025 at 16%. Over the year as a whole, we generated 90 basis points of CET1. On the positive side, we have the generation of earnings, which net of dividends and AT1 coupons amounted to 55 basis points, despite allocating 70% of earnings to dividends. In turn, we have another 77 basis points, mainly from lower deductions and market valuation including the impact of EDP which amounts to 21 basis points for the year. On the negative side we have the growth in risk weighted assets which as we mentioned are rising due to the impact of the update of operational risk and credit growth. On the following slide, we show the institution's position in relation to its different requirements. The minimum required eligible liabilities, or MRA, ratio stands at 27%, growing slightly over the year, with a greater weighting of subordinated instruments. On the right, you can see the buffers we have in relation to the minimum requirements, which, as you can see, remain quite low. And at the bottom, we show the liquidity ratios, which continue to be among the highest in Europe with the LCR standing out. And in 2025, about 300%. And finally, we show you the details of the debt portfolio, as you all know. In our case, this is relatively important because the low loan-to-deposit ratio translates into a high retail liquidity position, which we invest in this structural portfolio, mainly in the amortized cost portfolio. As you can see, the portfolio has hardly changed during the quarter, with the balance duration and rate remaining fairly stable. That's all from me, Sidra. Whenever you're ready, I give you the floor.

Thank you, Pablo. I'll continue on page 32 with some information about what we expect to see in 2026, which you can imagine will be fairly consistent with progressive improvements that we hope to see materialised as a result of the implementation of the strategic plan. Starting off with the net interest income, we expect some growth and therefore to end this financial year above the level reached in 2025. Fees should continue to grow at a low single-digit rate driven by value-added fees, mainly from funds and insurance costs. And we hope that the fees from the banking will contribute. Costs will continue to grow. at around 5% reflecting the investments we want to make to continue successfully executing our strategic plan. We expect the cost of risk to remain below 30 basis points. The business volume will maintain its current pace with growth of around 3%. And finally, as a result of the above, we believe that the net income will continue to grow in 2026, exceeding the result achieved in 2025. And to conclude, allow me to share a few quick conclusions with you before opening the floor to questions. Today we have presented excellent results for 2025, reaching a new historic high in both earnings and dividends. But as I also told you last year, we are not satisfied. We want to continue improving, something we hope to do by executing our strategic plan, a plan that in its first year is already showing some of the returns we expect. From a... Business perspective the 2025 financial year is a turning point as evidenced by the 2% growth in total loans with some strategic segments rising significantly such as consumer and corporate loans this change in trend has been supported by an incredible acceleration in the market of balance sheet resources, which grew by 40% driven by 23% growth in mutual funds, another of the strategic and priority products in our plan. All of this has led to a 3% improvement in turnover above the previous year's level. As we have mentioned, this turning point is driving results, which are up 10% to 632 million euros, 26% above the initial guidance, representing an excellent 17% return on our regulatory capital, improving by more than 100 basis points over the year. This positive performance, together with our comfortable sovereignty position, has enabled us to increase the percentage of profits allocated to dividend payments from 60% to 70%, resulting in a dividend for 2025 of €442 million, 29% higher than the previous year. Finally, as we highlighted earlier, this excellent performance means we can improve our earnings expectations for the period 2025-2027 by 19%, from the previous €1.6 billion to more than €1.9 billion. of which 85% will be used to pay out our shareholders while maintaining a comfortable financial position as we expect to meet these expectations with a CET1 ratio of over 14%. In short, 2025 is once again an excellent year that allows us to lay the foundations for further improvement in the future. Finally, I would like to thank all Unicaja employees... for their unquestionable effort and performance in executing the strategic plan. Without their commitment and support, as well as their shareholders and directors, these results would not have been possible. This concludes our presentation, and if you agree, we will now move on to the Q&A session. Thank you very much, Isidro. Thank you very much, Pablo. Let's move on to the Q&A session. Let's start with the telephone line in Spanish. Please introduce yourselves and please limit it to two questions so that we can answer the highest number of investors possible. So operator, thank you. Ladies and gentlemen, we will start the Q&A session. If you want to ask a question, please dial asterisk five on your keypad and if you change your opinion, press asterisk five again. Please make sure that your device is not muted before asking the question. The first question is from Max Missing from JB Capital. Go ahead. Good morning. Thank you very much for your presentation and allow me to ask a question. Two questions. One, it's about the restructuring costs. If you can get further detail on what these costs include. And secondly, if you expect to have them in 2026. And the second question is on the guidance on volumes. Can you give more detail on what you expect in terms of loans and deposits outside balance? That would be very useful. Thank you very much. Good morning, Max, and thank you for your questions. With regards to the first question and referred to the provisions for restructuring, you know that last year we did this exercise, these voluntary retirement plans or early retirement plans. We're not looking at saving costs, but to improving capacities regarding the environments where we are right now. The idea is to run it this year and we don't expect it to happen the following year in 2027. With regards to guidance and volumes, apart from the 3% growth in line with what we've done in 2025, we do see a more balanced mix between the asset growth and the resources customer growth around 3% in both segments. Thank you, Isidro. Operator, please, the next question. The next question is from Francisco Riquen from Alhantra. Please go ahead. Good morning. Thank you for your presentation. I would like to ask for an AI guidance. Could you talk about the rate scenarios that you have included in the guidance? Because 1,500 is very flat and the volumes are growing and the interest rates is what it is. And I think it's very conservative. If it's conservative, I don't know whether you can talk about the sensitivity in AI in terms of interest rates for year one and year two. and what you have included in the plan vis-à-vis margins. And my second question, is about the use how you're going to use excess capital. A year ago you asked for flexibility to consider M&A opportunities in the first part of the year. We haven't seen anything in 2025. And my question is whether you can give us an update on your ambitions for M&A for the next for the rest of the plan and how we're going to use the capital excess. Thank you. Thank you. I'm going to answer the first question with regards to the guidance as to whether it's prudent and what hypothesis we have used. With regards to the hypothesis, we've used the curve that we had at the end of November, which had a river of 2.35. at 12 months. We're around 2.22 at 12 months, and the expectation is to see a rise by the end of the year. The balance sensitivity and the ANI to interest rates at 12 months is quite low. And the volume growth impact is also low. It will be seen more in 2027 than in 2026. In 2023, we started to reduce the balance sensitivity, and we have increased this for 2026. But I think that for 2027, the higher interest rates or potential high interest rates will have a positive impact. And with regards to the volumes around 3%, the deposit cost is very similar to this year's. The deal of the credit investment is going down in the first quarter and will be flat in the second and will start to go up in the third with the new production and with the repricing, which will have no negative impact. which will make the margin behavior to follow that line. The first quarter will be a bit lower because you have the days effect and it will catch up up until we see it above. How much above? Well, it depends on the deposit cost evolution and on the volumes evolution if we are able to grow more in deposits. as we've seen this year in site deposits. This will improve a bit more and it will depend on those variables. But it will be as from 2027 where you will see a more significant increase of margin.

Good morning, Paco. As for the access in the use of capital, I believe that today we have explained to you how we are going to carry out that payment in excess of 85%. We also said that we are going to analyze new opportunities, and if capital is required, well, we will have to analyze its efficiency. In 2025, such opportunities did not arise. We didn't see any clear opportunity of an investment with a good return, for our investors, but should that happen, well, we might consider using capital more efficiently. And that's all I can say in this respect. Thank you very much, Pablo and Isidro. Operator, please, next question. The next question is by Ignacio from BNP Paribas. Please go ahead with the question. Thank you very much for the presentation and for allowing me to raise this question. I have two questions for you. The first question is concerned with the growth of deposits. How do you envisage this in 2026? You have shown an increase of 3% as for lending and customer funds. You have also reported some growth. Now, how do you think deposits are going to behave in 2026? And in line with the excess of capital question, taking into account the increase of payouts, what capital generation do you envisage going forward? And how much of that capital would come from DTAs? Thank you. Good morning, Ignacio. Thank you for your question. As for the growth in deposits, the first Question was already answered. We said that growth is expected to be at around 3%, taking into account the mix between assets and liabilities reaching or striking a balance in 2025. We draw a distinction between balance sheet items and off-balance sheet items. 2025 was an exceptional financial year, and even though we believe that This will continue to grow off the balance sheet. We believe that the mix is going to be more balanced, and we will continue to post growth. And we will continue to do so on the balance sheet. As for capital generation, concerning this question, next year we are going to distribute 95% of the results. Therefore, the capital growth leader, as I said before, is going to contribute less than this year. where it stood at 70%, but the DTA capacity will also be a variable whereby capital might be expected to grow over the years. So we expect capital to grow. No doubt that capital growth is going to be lower compared to 2025 due to the fact that the results generation will be paid out to our shareholders almost as a total. Thank you very much. Isidro, next question please. The next question is by Carlos Pisoto from CaixaBank BPI. Please go ahead with your question. Good morning. I have a question as to your forecast concerning fees and the growth of fees. Do you think that it's going to continue growing at a rate of 3% in line with the growth of values? I'm asking this in order to understand how these products are expected to perform. Do you think that there is any room whatsoever ever for fees to grow further in the next financial year. Carlos, we couldn't really understand your question 100%, especially the last part. We believe that the fees guidance is quite conservative, taking into account the performance of funds that pushed fees up in 2025. Well, as for our expectations concerning fees, This is based on our aim to continue growing both on the balance sheet and off the balance sheet customer funds. As Isidro pointed out before, we believe that mutual funds will continue to grow steadily due to customer demand, but we believe that deposits on the balance sheet will also continue to grow even more than in the current financial year. you should take into account that there's plenty of competition on the liability side and that's why we have these customer loyalty programs in place. Concerning payments, we already see some positive signs such as growing fees and significant card activity. We continue to grow, we continue to enhance transactionality with customers, and that is going to be offset by the different customer engagement or loyalty plans that we are going to continue to deploy to target more customers. So, hence, we believe that we should expect this increase in fees, but in the case of mutual funds, we believe that that growth is going to be even greater. Thank you very much, Pablo. I believe that there are no further questions. So operator, we can now hand over to questions in English.

from Barclays. Question, please.

Thank you very much, Pablo and Isidro, for taking my questions. The first one is on the VIVAC specifically. What would be the likely timing from here and what milestones need to be met before you can execute the next program? Is there a regulatory or any other approvals needed at this point? And then the second one is on competitions for both mortgage and deposit. On mortgages, how are you seeing the competitive intensity at the moment? At current pricing levels, what kind of economics are you targeting on new mortgage production? And how important is cross-selling to make those returns work? Are you being pushed to accept lower margins to defend volumes? And on deposits, are you seeing any renewed pressure on deposit costs? from competitors keeping attractive offers in the market for longer, to what extent are neobanks and online platforms influencing the competitive behavior on deposits? Thank you.

Good morning, Cecilia. I think that with regards to buyback, what we've said that the additional remuneration is dependent upon the fact that whether we're going to do it on cash dividend payout or on a buyback. But what's true is that the decision will be made at the end of December, whether it's cash dividend or within program of payback. We haven't made a decision. But in any case, we're not talking about significant volumes if we get to do it. And it will depend on whether it makes sense to do it on cash or whether to do a buyback program. But in any case, we would be talking about material amounts for those buyback programs. The second question is related to competition in mortgages. The credit growth, the lending growth after having seen negative rates in segments like public administration is the only segment where we haven't grown and we've been flat in the mortgage segment, which is the most representative segment, and that's why we've been applying policy based on two things. One, on having a good risk profile, and that's been a standard tradition and how we've granted credits and not going above a certain level of price. And so we've kept that flat over the year. A market that has so much pressure for lack of housing, it's having a big impact on competition, on prices. Our expectation is for this to improve. The key solution to improve the housing situation is somewhat complex, because the housing is not covering the social demand for new housing. So we will continue with a similar strategy. We will still have the adequate risk profile, and we will continue along the lines that we've been doing. The idea is to keep the market reasonable with regards to price. and we will be more positive in prices. Or we will find a balance between the credit given or the ability to link the customer. I think that in that segment, we could be able to compete with price. But if we find ourselves in a no way back, we could end up in a scenario that we went through in 2025. Cecilia was asking on the competition on deposits and what are the offers from other institutions. the competition in deposits and how we see the evolution in the deposit cost. As you know, the Spanish market is very competitive with regards to national banks. We've had very specialized banks in attracting liabilities. I think that will be the case, even getting higher. With regards to the strategy and the evolution of fees, we will continue with the loyalty programs. We have developed banks for our customers. We have very competitive digital solutions which are far better than our competitors in terms of neobanks. We have attractive solutions for our customers, and we consider that we'll keep that level or even go up in deposits despite the existing competition that we expect. Thank you. Operator, next question. Next question is from Sophie Peterson from Goldman Sachs. Please go ahead.

Yeah, hi. This is Sofie from Goldman Sachs. Thanks a lot for taking my question. So my first question would be on capital. Do you expect any regulatory headwinds in 2026 or 2027? And what are your thoughts on using SRTs? And then the second question would just be going back to mortgage lending. One of your peers is guiding for 6% mortgage loan growth or... Lending growth in 2024 to 2027. Why do you only see 3% volume growth? How should we think about the upside risk for volumes to perform better than expected? Thank you.

Thank you, Sophie. With regards to any regulatory impact for this year, we don't have other jurisdictions like the US where they're talking about a deregulation and talking about a reduction of the regulation. We don't think that we're not going to have any negative impact in the following years. I think that the... period of increase of capital requirements has gone to a reasonable level, and the solvency and the quality of financial institutions in Europe is strong enough to withstand the stress tests, stress scenarios that are analyzed, and we don't consider there's going to be any negative impact in that regard. And with regards to competition and the growth expectations, in the mortgage world, as Isidro has said, we will continue along our lines in the way that we will conduct the most reasonable analysis possible. we will look for customers with high credit quality, with linking ability, and we will be adjusted in price so that the performance of the customer, I don't think that the market will grow by 6%. That's why we don't have such a higher growth in the credits. We think that the credit growth despite that we come from significant deleverage, it starts to grow. It's still continuing under the nominal growth of the GDP. And we, as Isidro said, we need more production, more new housing, which won't happen in 2026 because it should have happened in the previous years, and this evolution will happen in a later stage if it happens. And we don't think that there's going to be a mortgage sector growth of 6%. But for us, mortgages are fundamental products to link the product, to provide global services to our customers, and we will put our stakes on it. and she was mentioning ARTIS. Given the solvency position that we have is not something that we have on the desk in the short term in terms of the SRTs. We look at the different options to improve our capital position and we also look at the SRT, but in the short term, we don't expect the conduct of any given the capital position that we hold right now. Thank you. Next question.

The next question is by Borja Ramirez from City. Please go ahead with your question.

Hello. Good morning. It's Borja from Citi. Thank you very much for taking my questions. I have two. Firstly, I would like to ask on the deposit growth outlook, you mentioned about the digital channel. I would like to ask what portion of your new customers are from the digital channel and also What portion of your deposit inflows would come from the digital channel? And then my second question would be if you could provide an update on your M&A strategy, please.

Good morning, Borja. Well, as far as digital channels is concerned, you should know that we are a bank with a strong territorial footprint with, let's say, on-site banking mainly. I don't have the exact percentages for the digital channel, however. we are starting out from a lower base. But actually, we have observed a growth in terms of deposits as well as consumer loans. Most of our production comes through the digital channel. We also have plenty of competition in digital channel, however. There was significant growth in 2025, and we expect that trend to continue to grow going forward. We continue to focus on a multi-channel model. All channels are interconnected, whether we talk about branch offices and the digital channels, as well as the contact centers. Any contact point with customers, including the web page, et cetera, everything is intertwined. So we continue to have great weight in the Our brick and mortar network, however, we continue to grow in the digital channel little by little. Let me add that we continue to grow in terms of the number of customers that hire deposits through the digital channel. There has been a growth of 5% in 2025, and we expect that growth to continue. in future years. As Isidro said, this is going to be important in the case of deposits. Again, we expect growth to be reported in the digital channel. The next question is concerned with the consolidation of the financial system. Let me reiterate what we already said in prior years, especially since we have embarked upon this new stage and since we have set out a new strategic plan. We are now focused on cutting out our strategic plan. Our shareholders do not want us to lose focus over the strategic plan and therefore, We believe that we will keep this project unchanged. The achievements over the past years ratify our strategic vision and the fact that we want this to remain as an independent project. This is what we have been reiterating again and again over the past years. We have time for one final question. The last question. is by Hugo Cruz from KW. Please go ahead with your question.

Hugo Cruz from KBW. Thank you for the time. I have two questions. First, on the usage of excess capital. If you don't have many opportunities, could you do a one-off payment above 100% payout? Or is the 100% a limit of how far you could go with one-off distributions? And second on loan pricing, I think you said repricing shouldn't have a negative effect on your NII, but I was wondering if you could give a little bit more detail product by product. So how does front book pricing compare with back book pricing for your mortgages, SMEs, corporates, consumer, if possible? Thank you.

Thank you for your question. As for the excess of capital related question, as we mentioned during the presentation, we are near 100% for 2026 and 2027. We undertook that commitment back in the day when we presented our strategic plan. And this, of course, means that we have to fulfill our commitment in excess of 85% of the strategic plan. Now that the payout is going to be 70% for 2025, the payout for the next two years will stand at around 100%, as you have mentioned. But now we are fulfilling the commitment that we undertook when presenting the strategic plan. For the time being, we do not intend to carry out any other payout other than the one that we announced today during the earnings presentation, Pablo. Now, as for the pricing impact-related question across segments, as for mortgages set at a fixed rate, the value is below what we expect to attain. As for SMEs and corporates, we are already rallying in terms of the front book compared to the back book with some differences. However, even though there has already been some repricing, The repricing impact is to be found only in the mortgage book at variable rate with a moderate impact during the first quarter with some tail effects in the fall. following quarter. However, we believe that the loan yield is going to or will remain steady as of the second quarter and will remain so also in the third quarter. We still have some long-lasting loans among corporates and the public sector set at low interest rates as they mature. the loan yield might be expected to grow even though we expect a great impact as of 2027 when significant improvement in margins is expected to take place. Thank you very much Isidro and Pablo. Thank you very much for attending this earnings presentation. need additional information, please do not hesitate to contact our investor relations team and we look forward to having you again attending this presentation for the next quarter. Thank you.