Welcome everyone to the BBVA second quarter 2022 results presentation. Thank you very much for your interest. I'm joined today by Onur Genç, BBVA's Chief Executive Officer, and Rafael Salinas, Group CFO. As in previous quarter, Onur will start reviewing the group figures, followed by Rafa, who will go through the business areas results. We will move straight to the live Q&A session. Now, I will turn it over to Onur.
Thank you, Patricia. Good morning to everyone. Welcome, and thank you for joining us. Let me jump into it. Start with slide number three. Before going into the details of the presentation, as you know, we announced a few weeks ago that we are applying IAS 29, which is hyperinflationary accounting in Turkey, in our business in Turkey, starting from January 1, 2022. All the results that you would be seeing from this date show the fully adjusted figures. On the left-hand side of the slide, you can see our recurrent net attributable profit evolution reaching EUR 1.877 million. One more quarter we are posting record results. This figure, this EUR 1.877 million, it excludes the negative impact of EUR 201 million in the quarter due to branches repurchase agreement with Merlin in Spain.
As you know, we have done this transaction. With these numbers, we are 45% above the results of the same quarter of last year and 41.5% higher than the first quarter 2022 results restated due to hyperinflationary accounting. Even after including the negative impact of the Merlin transaction, even after including that, this was our best quarter. These excellent results brings our earnings per share at the bottom of the page. Earnings per share up to EUR 0.28, 58% higher year-over-year. A higher growth rate than the net attributable profit due to the share buyback program that we are implementing, as you all know. In the graph on the right-hand side of the slide, it shows our capital position, our capital ratio at 12.45%, above our target range and well above regulatory requirements.
Moving to slide number four, you can see the incremental contribution of different business areas versus the same quarter last year. Basically breaking down the overall increase of 45% into different areas. As you see in the chart, especially South America and Mexico have outperformed, reaching very good results, as Rafa will explain later in the presentation. In the case of Turkey, it had a positive contribution in the quarter even after implementing the hyperinflationary accounting. It is worth mentioning that due to hyperinflationary accounting, we registered a negative P&L impact to, due to the value loss of the net monetary position of EUR 524 million in the second quarter. These results that you are seeing are obviously after all those impacts.
Moving to page five, I want to highlight the outstanding evolution in the quarter of our tangible book value per share plus dividends, which closed at EUR 7.5 per share, 18.4% increase year-over-year in tangible book value per share plus dividends, and 8.5% growth in the quarter. Regarding profitability, we continue to improve our excellent profitability metrics, reaching this quarter EUR 14.1 in return on equity and EUR 14.8 in return on tangible equity. We remain with these numbers, clearly one of the most profitable European banks, and we keep advancing on this metric, obviously. Slide six. What stands out in terms of the key messages for the second quarter? First, excellent core revenue evolution. In my view, this was the highlight. This has been the highlight.
30% versus the second quarter of 2021, supported by the strong loan growth across the board, 12.6% growth in loans at the group level versus the same period last year. Second, our leading efficiency ratio improving to 43.9% in the first half, six months of the year with positive jaws. Third, we are also reporting a strong operating income growth of 27.1%. Fourth, cost of risk at 81 basis points. Better than expected, better than 2021, and that better than pre-pandemic levels, thanks to solid underlying asset quality trends that we'll be discussing in a second. Fifth, our capital position is comfortably above our target range. Last in the page, the outstanding progress in key areas of our strategy, which then feeds everything else in this page.
Our strategy is moving very well. We are reaching new record figures with 5.3 million customers acquired in the last six months of 2022, of which 2.7 million have been acquired in the quarter. Regarding sustainability, another key component of our strategy, we have extended EUR 112 billion of sustainable financing since 2018. Again, a record in the quarter here as well. Given all this, we continue on the right path to achieve our ambitious long-term targets that we have disclosed to all of you in November last year. Slide seven, focusing on the year-over-year comparison with the second quarter of last year, this is the P&L. The second column from the left, that's what I would focus.
We can clearly identify the very positive evolution in all the P&L lines, both in current and also constant terms. I would highlight again the strength in core revenues, NII growth of 33% and fee growth of 1%, which coupled with the positive jaws, coupled with the solid underlying risk indicators, led to our best quarter with the net attributable profit growth, as I mentioned in constant basis of 45.7%. Just as a reminder, the negative impact of the hyperinflation due to net monetary position value loss in this P&L is included in the other income and expenses heading. That's what the hyperinflationary accounting is asking us to do.
Also, since 2020, since the beginning of this year, we are reflecting the contribution of the CPI linkers in Turkey, the inflation-linked bonds in Turkey, again, in the other income and expenses line, isolating it from NII as they serve as a hedge against inflation. The growth in NII would have been even larger excluding this change. Moving to slide eight, regarding the first half of 2022 versus the same period last year, I would once again highlight the very positive core revenues evolution, which increases 24% in constant EUR, led by the increase in NII 27%, and the fee income performance amazing or growing at 18%.
Again, as mentioned on the previous slide, the strong gross income growth of 16%, coupled with the positive jaws, coupled with the solid underlying risk metrics, led to an outstanding recurrent net attributable profit of EUR 3.2 billion. Moving to slide nine, sheds some light on the quarterly revenues breakdown again, which was the highlight of the quarter. Our net interest income at the top, on the left-hand side. Net interest income increased strongly 32.9% versus last year and 14.6% compared to last quarter. Again, strong activity growth and also customer spreads improvement in most countries has been helping on the side.
Next, on the right-hand side at the top, the positive evolution on the fees and commissions across the board again increasing 21.1% year-on-year and 12.4% versus last quarter. Also good performance in net trading income with another quarter above EUR 500 million. All in all, outstanding performance then in gross income, 21.7% growth year-over-year, and 12.3% double-digit growth versus last quarter. Slide 10. On the left-hand side of the slide, you can see the strong loan growth, which has been accelerating quarter-over-quarter, reaching a 12.6% growth in activity versus the same period of last year at the group level.
It feeds NII and fee income, and we do think that it will continue to feed NII and fee income going forward. In the center of the slide, you can see the examples of activity growth in Spain and in Mexico, both countries with very strong trends in loan growth, competitively also very strong growth. The growth in activity, and I would highlight here the profitable growth measured very closely at each individual client level, in our view, has been fundamental for our strong results. Lastly, on the right-hand side of the slide, you can see the improvement in the customer spreads only slightly in Spain and much better in Mexico in terms of evolution, where interest rates in Mexico obviously have been increasing for several quarters, and as such, lending yields have a longer track record of catching up with rate rises.
Positive trend in both core countries. Moving to slide 11, we continue showing positive jaws at the group level, thanks to the good performance of gross income, growing 15.8% in the first six months of the year. On the other hand, costs are growing 12% below the blended inflation of our footprint in line with our guidance. I mean, if you exclude Argentina and Turkey, the two very high inflation countries in our footprint, this 12% growth would have been on constant basis 3.8%.
On the right-hand side of this page, you can see our efficiency ratio the best compared with our European peers and further improving to 43.9% in the first half of 2022 from 45.4% in the same period of 2021. Slide 12, you can see the evolution of the risk indicators. Impairments decreased 7% in the quarter attributable to the positive evolution of the underlying risk performance of the portfolios, underpinned by very strong recoveries. Cost of risk closes at 81 basis points. This compares positively with the 93 basis points recorded in 2021. Even in this uncertain environment, we improve our 2022 cost of risk guidance to be below 100 basis points and to be in line with 2021.
Rafael will talk about it in a second, but at the group level, we are improving both of our cost of risk, as I mentioned, guidance, and obviously we are going to be improving our core revenues guidance today as well. Rafael will talk about it in every single country. Also, very good evolution in the rest of the asset quality indicators. NPLs decreasing to 3.7 and our coverage ratio improving to 78%. Slide 13, our capital, our CET1 fully loaded as of June 2022, stands at a very good level, 12.45. This level is 385 basis points above our requirements. Following the waterfall, after embedding the pre-announced impacts due to hyperinflationary accounting that we announced at the end of June.
The capital consumption associated with Garanti tender offer, and then the deal with Merlin. They were pre-announced. You see the numbers there. On top of that, in the waterfall, you see first our results generation that contributes 59 basis points to the ratio. Second, the dividend accrual at 50, 50% payout on this one, because according to the ECB mechanism, this has to represent the upper part of our internal policy. The AT1 coupon payments. After deducting all, they are all 29 basis points, as you see in the chart. Third, in the waterfall, 26 basis points from the RWAs bucket in a context of strong, and as I mentioned, profitable credit growth.
The last bucket is the bucket of others, 18 basis points, which mainly includes market-related impacts due to mark-to-market or held to collect and sell portfolios and the effects. That's the market-related impact bucket, and the positive impact in the other comprehensive income equivalent to the net monetary position value loss in hyperinflationary economies registered in P&L and added back to the capital. As you all know, all these losses in the P&L are capital neutral. Moving to page number 14, new customer acquisition. I'm always happy to discuss this slide, always happy to see this slide. We remain focused on profitable growth, and as we keep saying, the most healthy way of growing the balance sheet is through growing our franchise. Quarter after quarter, we continue to beat new records here in growing our customer franchise.
We acquired 5.3 million new clients in the first six months of 2022, up from 4.1 million customers last year, and more than doubling the client acquisition that we had five years ago. Digital acquisition of customers, it was 6% five years ago, and today it's 55%. Also here, we wanted to highlight that the quality of the customers acquired, their engagement is very high. In Spain, 72% of all the new customers acquired become target customers within six months. On slide number 15, you can also see how we are transforming our relationship and distribution model using digital, and how we are serving our customers in a much more efficient way.
As you can see in the slide, while customer acquisition has been growing very fast in the past few years, the number of branches has decreased substantially, leading to significant efficiencies in every single geography. Either in the form of much more customers with a similar structure, as in the case of Mexico, or somewhat more customers, but with a much smaller infrastructure, as in Spain, BBVA is leading the curve in efficiency through digital, as this page also highlights. Turning to slide number 16, another strategic priority. This quarter, we have hit a major milestone towards our sustainable financing goal. We have already mobilized EUR 112 billion since 2018, more than half of our revised goal of EUR 200 billion to be achieved by 2025.
In the second quarter only, more than EUR 14 billion, a new all-time record, and 50% more than in the second quarter of 2021. Finally, slide number 17 on our long-term targets announced in the investor day. To save time, I will not go into each one of them, but I can say that we are on the right path to achieve them all, as you can see on this slide. For the business areas, Rafa?
Thank you, Onur, and good morning, everyone. As anticipated by Onur, we are very happy to share with you another excellent quarter results in all geographies supported by very sound operating trends across the board. Starting with Spain, in slide number 19, another quarter with very positive business dynamics. The loan book is growing at 3.6% year-on-year, with a strong performance of consumer lending, where we are almost delivering double-digit growth, and commercial segments also growing above 10%, mainly in short-term lending due to the recovery of the activity, leading us to gain market share in both segments during the quarter. In line with activity, all headings of the P&L evolved very nicely.
First, core revenues grew close to 6% in the quarter, levered by high fees, mainly explained by banking services fees and a higher contribution from CIB, and a very positive NII dynamics, growing at 5.6% quarter on quarter, driven by loan growth and a disciplined price management, with a clear focus on profitability. Second, cost control efforts are reflected in the performance of expenses, declining by 4.8% year on year, in line with our guidance, widening yields and improving the efficiency up to an outstanding 46.7%. Third, on asset quality, we continue to see very sound underlying trends, with lower NPL entries and higher recoveries. The cost of risk stands at low levels of 20 basis points in the year below guidance.
Due to a better-than-expected performance of risk indicator, we are upgrading our guidance on cost of risk in Spain to around 25 basis points for the whole year. All in, very good results, with recurrent net attributable profit reaching EUR 1 billion in the first half of 2022. Based on the positive dynamics seen so far, we expect the loans to grow at low single digits in 2022, and the NII to grow around mid-single digits as the rates increase will start kicking in in the second part of the year. Let's move to Mexico, slide 20. Once again, we report excellent results. Net profit reached an impressive EUR 1 billion in the quarter, being this one of the strongest quarters ever. In Mexico, we are benefiting from a strong activity and credit origination dynamics, with balanced growth on both retail and wholesale segments.
Strong growth in consumer lending, supported by payroll and pre-approved loans as well as by the rebound of auto loans, our car sales has taken off. SME loans grow close to 20% year-on-year, supported by activity recovery and our differential value proposition for this segment in Mexico. Finally, as we anticipated last quarter, wholesale portfolios have regained momentum in the context of higher investment and working capital needs. Moving on to the P&L, results are excellent, reaching a new all-time record, driven by an outstanding growth of core revenues of more than 20% year-on-year. Strong NII growth supported by sound and robust loan growth and the continuous improvement in customer spend, benefiting from higher yield on loans while the cost of deposits remain contained. Based on those dynamics, we have upgraded our guidance for 2022.
We are now expecting loans to grow at double digits and NII to increase around 20% above loans growth in a context of higher interest rates. Also, a strong performance in fees, growing close to double digits in the quarter and by 17% year-on-year, leveraging on higher transactionality, cash management, and investment banking fees. Revenues growth is also benefiting from higher net trading income and insurance results due to activity and lower claims. All in, gross income growth more than doubles the increase in expenses, leading to widening jaws and improving efficiency to an outstanding 32.2% cost-to-income ratio. In Mexico, we foresee big opportunities to strengthen our lead. We will continue investing in segments with greater value. Additionally, inflationary pressures on our growth strategy in the country have led us to adopt a more cautious outlook on expenses.
We now see expenses growing slightly above average inflation in 2022, maintaining positive jaws. Finally, on asset quality, good underlying trends drive the cost of risk below 260 basis points. Low NPL entries and some recoveries make us upgrade our guidance for the year. We expect the cost of risk to end up around current levels in 2022. Regarding Turkey, in slide 21, as Onur already mentioned, we have had different events this quarter. As we announced by the end of June, we are applying hyperinflationary accounting in Turkey with effect from first of January. The main objective of the hyperinflation accounting is to reflect the real evolution of the activity, eliminating the nominal growth caused by the very high inflation.
As you can see on this slide, we are reporting a positive net attributable profit of EUR 160 million in the second quarter of 2022, versus an equivalent loss of EUR 98 million in the first quarter of the year in constant terms. This improvement is mainly driven by the positive evolution of revenues, positive yields, and lower impairments. In terms of activity, TL lending is contained and is currently growing by 54% year-on-year, which is below the annual inflation rate accumulated to June, with a 79% year-on-year inflation rate. NII growth is supported by loan growth in TL and improving customer spreads thanks to the higher loan yields. Excellent performance in fees across the board, but especially in payment services where we have a strong market share.
Record level of net trading income in the quarter, with strong results mainly related with FX trading. Finally, lower hyperinflation adjustment in the other income heading as the quarterly inflation has come down, which reduced the loss coming from the net monetary position. This loss also has been partially offset by the revenues coming for the CPI linkers, which will remain broadly flat quarter on quarter in current euros, despite a lower quarterly inflation, because during the second quarter the size of that portfolio has increased. In terms of impairments, the quarter shows a positive evolution, mainly due to strong wholesale recoveries, while we continue increasing coverage levels for foreign currency denominated loans. All in all, sound asset quality metrics with improving cost of risk and NPL ratio year to date.
Overall, we continue to expect very limited earning contribution from the franchise in 2022 due to uncertain macro environment. Finally, moving to slide 22, South America. This region continues showing very positive trends in terms of activity and results contribution. The net attributable profit was EUR 413 million, mainly explained by, first, core revenues are supported by sound loan growth across the region, positive asset mix evolution, and good price management. Fees evolve very positively driven by good activity dynamics in all the geographies. Second, despite the high inflation environment, efficiency remains stable. Third, good asset quality trends with lower impairments and cost of risk remain at low levels.
Derived from these good underlying trends in asset quality, we are improving our guidance for cost of risk in South America to around 160 basis points for the whole year. Now back to Onur to highlight the main takeaways.
Thank you. Thank you, Rafa. First, in the last page, the group's results continue showing the positive trend of the recent quarters. One more quarter we have reported very strong results. Second, excellent core revenue evolution, mainly driven by strong activity and customer spreads. Third, we continue with our commitment to accelerate profitable growth and value creation for our stakeholders. Our tangible book value per share plus dividend growing at high teens. We are enjoying one of the highest profitability metrics among our European peers, and we keep advancing on this. Fourth, we have made significant progress in the execution of our strategy, reaching record figures in digitalization, customer acquisition, and sustainable finance. Lastly, we are on track to achieve our ambitious long-term goals.
As a result of everything that we have said to you might have registered it, but we are basically upgrading our revenue expectations, core revenues in Spain, in Mexico. We are upgrading, improving our expectations in cost of risk in most of our geographies and at the group level. We are also, despite all the uncertainties that we would be living through in the second half of the year, we have a very positive, track record to come in our view. Now, back to Patricia for the Q&A.
Thank you, Onur. We are now ready to begin with the live Q&A session. The first question, please.
Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. In order to ensure audio quality, we recommend you connect from landlines and use a headset to ask your question. The first question today comes from the line of Francisco Riquel from Alantra. Please go ahead. Your line is now open.
Yes. Good morning. Thank you for the presentation. The first question is on Mexico. Impressive results this quarter, so congratulations here. Loan growth here in Mexico accelerated, mainly due to the large corporates, 6% up in the first quarter, now 15% in the second quarter. I wonder what is driving this growth and how sustainable could it be? And then also you can comment on the overall sustainability of the EUR 1 billion quarterly profits in Mexico. Interest rates are set to rise farther, and I wonder at what levels do you see a negative impact on the economy, loan demand, cost of risk? The U.S. economy is technically in recession. I wonder how do you see the correlation between the U.S. and Mexico in this economic cycle?
Second question on capital. Just if you can update on the regulatory headwinds left, that you mentioned, at least 35 basis points was the last guidance for the year. Thank you.
Thank you, Francisco, on both questions. On Mexico loan growth, if you only restrict the positiveness in Mexico to corporate segment, I would be a bit sad because that's not the case. Quarter-over-quarter and also year-over-year. Year-over-year, you already have it in the presentation. Quarter-over-quarter growth, I'm looking into the numbers here in front of me. Mortgages up 3.3% only in the quarter, so you can annualize it, obviously. Consumer 4.1%. Credit cards 5.4%. SME, which is a segment that we like a lot, we want to push a lot, 3.8%. Yes, corporate also 6.6%. It's very strong growth across the board. You also see the year-over-year growth in the presentation.
18% in SMEs, 18% in credit cards. It's across the board. But you asked specifically about the corporate. On the corporate, the investment numbers are coming a bit better for the overall economy. There is some investment driven trend here, but it's mostly, Francisco, it's mostly working capital loans in the short term. Because of the inflation, companies need that working capital financing, and working capital financing is driving the growth. With these numbers, and the final quarter numbers obviously haven't come out, but we are gaining market share. We are gaining market share across the board, 40 basis points, roughly 40 basis points. I think it's across the board. It's the strength of the franchise rather than some pure one segment or one product topic. The sustainability of EUR 1 billion you asked under this chapter.
We are very positive on Mexico, and I did mention this to you, to the analyst community last time as well. I really do think we have an amazing bank in Mexico. We have an amazing bank in Mexico. I mean, it's an amazing franchise. We have 24% market share in lending. Beyond that, the strength of the franchise, the talent that we have there, the customer franchise that we have there, the brand power that we have in Mexico, you cannot imagine the gap that you have with the second. NPS customer satisfaction that we have in Mexico, you cannot imagine the gap that we have with the rest. We are providing an amazing service because we have the best talent, best franchise in the country. In that context, is it sustainable in the context of U.S.?
There are uncertainties, obviously, but Mexico is gonna continue to grow. They're asking us that, well, the Mexican growth this year is gonna be less than 2%, so how come this is sustainable? Look into the last 10 years of Mexico. Unfortunately, I would say, the last 10 years, 15 years of Mexico, the growth rate of the economy is around 2%. It's not any different from what we have seen. The growth in Mexico for banking is not coming from, directly from the GDP growth. It's coming from the penetration. Banking debt, banking loans over GDP is one of the lowest in emerging markets landscape. It's around 39%. Brazil is 70%.
Independent of the economic growth, the penetration of lending and banking is gonna continue in Mexico, and that's gonna drive the growth, healthy growth of our balance sheet in our view. Then you asked about sustainability. The only two risks I would put on the table, obviously we have to manage costs, number one, and cost of risk. Cost of risk, that's the key piece that we have to be paying real attention to, which we are doing. In the vintages, in the new flows and so on, we don't see yet any signals of deterioration at all. That's why we have upgraded the cost of risk guidance for Mexico for this year. Regulatory headwinds, your second question, Francisco. Let me repeat where we were. At the close of the year presentation, it was I think end of January.
I said around 35 basis points. In the last quarter, we said to you, we guided you that it's gonna be slightly higher than 35 basis points. Today we have a positive news here as well. It's gonna be lower than 35 basis points as it seems. It's a process. As we were hoping it to close in the second quarter, it didn't close that process in the second quarters. It's an ongoing process. There are a lot of details on that program that we are aligning ourselves with our supervisor on the different models and so on. The expected results of that process is gonna come most likely for possibly third quarter, but very likely to be fourth quarter and maybe even next year, but most likely to be fourth quarter. We will see.
There is some uncertainty in that process, but today we want to highlight to you that the number will be remaining number will be less than, clearly less than 35 basis points. 'Cause we have in the first half of the year we have taken 15 basis points prudential provisioning for 15 basis points in capital from that. Now we will have less than 35 basis points. That's latest guidance that we have we can give to you. Please be aware that there's some uncertainty around this process, and the number will be finalized at the end of the year. The final message that I will have on this is, again, there is some uncertainty, but we are very clear and very comfortable with the fact that our upper end of our target range is 12 basis points.
We will be clearly above 12 basis points at the end of the year in terms of capital.
Thank you, Francisco.
Thank you.
Next question, please.
Thank you. The next question today comes from the line of Benjamin Toms from RBC. Please go ahead. Your line is now open.
Morning, and thank you for taking my questions. Two for me, please. You just printed an annualized ROTE of 14.8%, which you said in the presentation you'd hope to advance on. In this context, how should we think about your 2024 guidance of 14%, assuming that target is now obsolete? Can we expect you to come back with a new target at the year-end? What would the 14% target have been, do you think, if you'd advanced it in the current rate environment? Then on operating expenses, they're up 12% on a constant year-to-date basis. I think last quarter you gave us this number adjusted for a low variable comp base. Can you give the equivalent number this quarter, please, if you have it? I guess from your perspective, crucially, it's just below your weighted average inflation footprint.
What do you have penciled in for your weighted average inflation for your footprint in 2023? Thank you.
Very good. On the 14.8%, would we upgrade it or what would be our new number? That's what you're asking, as I understand, Benjamin. There was a cut in the line. We just set it. It was six months ago, and the investor day was in November, and we have a three-year plan. I see your appetite, but it's too early and we will revise it. We will look into it. At the moment, it's too early to talk about revising the goal after we set it six months ago. Just because the numbers are going so well, we should not be jumping to conclusions right away. We have committed 14%, and we are clearly on that point that we will deliver the targets that we have committed to the market.
On the OpEx, the variable compensation, I think the question was last time it was low. We are basically accruing it at the numbers that you see. It's slightly higher. The accrual that we are doing on variable compensation is adjusted every six months or so, and this time we have adjusted it to the levels that you see in these numbers. A little bit of the increase, not a lot, but a bit of the increase is coming from these great numbers that we have, and as a result, a slight increase in the variable compensation accruals. Weighted average inflation, as you see on page in the presentation, it's 13%. We don't.
I mean, the final number is not, we don't have it, but it's gonna be around this range because the inflation numbers that we see is quite high at the moment. There will be some slight decline in the next six months, but it's not gonna be creating a major change from that 13% that you see. That 13%, by the way, is the weighted average, with the weights being the OpEx of every single geography. It's the cost-weighted average of the geographies. In that context, Spain obviously is a big part here and Mexico, and given all that, I think it's gonna be around this range. Not much change from this.
Thank you, Benjamin.
Thank you.
Next. Sorry. Thank you, Benjamin.
The next question today comes from the line of Maksym Mishyn from JB Capital. Please go ahead. Your line is now open.
Good morning. Thank you for the presentation and the opportunity to ask questions. I have two if I may. One small follow-up on Mexico. I was just wondering if you think that part of the acceleration in growth comes from the fact that there is consolidation in the market and some of your peers might have lost the focus a little bit. The second question is on macro models. Macro estimates have been downgraded across the board for most of the countries worldwide, but you improved the cost of risk guidance for most regions. I was wondering if this is related to the fact that you have been more conservative with model inputs, and what kind of COVID-19 buffer do you still keep in your books? Thank you. Thank you.
Mexico, Rafa, please comment on this one as well, but I don't think it's only related. Obviously, it helps. There is a discontinuity in the market at the moment. One of our core competitors is in the process of being sold. It obviously helps the competitive situation for us. I wouldn't only tie it to that one, because when I compare our market share gains not only against that specific player, but others, I think we are gaining against others as well. It's broader than that in my view. Obviously it's helped. It's helped by this discontinuity. Regarding the macro models, if the question is, are we releasing any provisions from the macro models, the answer is no, obviously not, because the macro is not. We are not in a situation of releasing provisions due to macro.
There is a slight negative coming from the macro modeling at the moment for the future losses. The numbers that you see here or the guidance that we are giving that it's gonna be better is because the underlying risk parameters and the two components there, which is business as usual, what are the delinquencies and what are the NPLs. On that one, and also on collections from the NPL books and others, they are both still showing very positive trends. Again, I have to open this chapter of uncertainty going forward, obviously. I mean, the world is going through uncertain times at the moment, but the signals that we have at the moment is quite positive.
The reason that we have a better cost of risk than usual, and the reason that we are improving our guidance is purely because of the underlying risk metrics and the risk trends that we see. Regarding the buffers or regarding the overlays, I mean, we did discuss it in the past as well. The total overlays that we did during COVID and after, slightly after COVID, the total number was EUR 1 billion-EUR 1.2 billion beyond the other things, but that was the overlays, what we call PMAs, post model adjustments, EUR 1 billion-EUR 1.2 billion. Except the EUR 250 million that we didn't assign to any portfolio, EUR 250 million is basically unassigned, which is basically a pure buffers.
The rest, we assign them to specific, very specific portfolios, not because we see deterioration trends in those, but we do expect some deterioration in those specific portfolios going forward. They are allocated, but they are still overlays. We are posting our numbers today and our cost figures today without making any major release from those overlays. That's also important. Our guidance to you about the rest of the year is, again, I go back to my second comment, which is, it is driven by the pure underlying risk dynamics. In the guidance that we have, we are also not forecasting or projecting any releases from those overlays because they are assigned to certain portfolios.
The EUR 250 million that we have as a kind of an overall overlay, a pure buffer, in the next six months, we will probably assign them to different portfolios as well. We are not releasing anything from those overlays. Anything, you know Mexico very well as well, Rafael. Anything on Mexico? Is it because of Citibanamex, basically? That's the question.
No, no, as you said, I think there are more component than just a pure consolidation in the market. The dynamics of our bank there is just performing very, very well. Of course, the consolidation help, but is not the only factor.
Okay. Thank you very much, Maksym. Next question, please.
The next question comes from the line of Alvaro Serrano from Morgan Stanley. Please go ahead. Your line is now open.
Hi. Good morning. Couple of questions, one on capital. Can you give us a sense, because obviously there's a lot of moving parts, where you think capital may end up at the end of the year? I realize you already pointed out the 35 basis points may or may not hit, but maybe excluding that or give us some sense of the progression sequentially from the current level, given there's been a bit of movements. Maybe related to that, do you think you'll be in a position to consider buybacks? Your current buyback program is coming to an end, and I think it would be important to sort of make amends for, with those investors that were disappointed about Turkey. The first question is that on capital.
Second is on the bank tax. We've now got the details. I don't know if you have any early thoughts from the details that were revealed yesterday. Is there any intention to challenge it in court? Just your thoughts on the feasibility of the tax going ahead in its current format, just some early thoughts would be much appreciated. Thank you.
Okay. On capital, let me make it clear because I presumed that I wasn't very clear in the last one. The base case is very clear. The base case is we will get that additional impact from the supervisor this year. The base case is we will get it in the fourth quarter. There might be some changes in it because we told you two quarters ago or a quarter ago even that it will be in the second quarter, and it has prolonged. The base case is we will get the charge in the fourth quarter. With that charge, let me also repeat once again what that charge can be or will be. There is uncertainty in that figure because it's an ongoing process. That's why it's gonna continue until the fourth quarter.
As I mentioned, there's some positive news there. What we guided you before, originally 35 basis points, then slightly more than 35 basis points, somewhat more than 35 basis points, I think, was the language that we used last time. This time, we are telling you that it will be somewhat lower than 35 basis points. That's the base case. 35 basis points, somewhat more than 35 basis points, and now somewhat less than 35 basis points is our guidance to you. That will be in the fourth quarter. With that fourth quarter hit that we will be having, we will still be comfortably above 12%, is our expectation. Comfortably above 12%. The only uncertainty here, obviously, is the market component. The supervisory impact is more or less again, there is uncertainty there, but it's a manageable uncertainty.
The key uncertainty would be the market component, meaning what would happen to the yields and this and that. Even considering different scenarios on this one, we feel quite comfortable that we will be above the 12% range at the end of the year. You ask about the buybacks. On this one, our position is very clear. We have been very clear on this for all the quarters now, which is we will analyze things when they come along. As you know, we have increased our payout policy from 35%-40% to 40%-50% last year. As you also know, we have injected the flexibility of paying some of that payout, not the majority part, but some of that with share buybacks.
Depending on how the share price evolves and so on, there is always that flexibility within the policy itself. Beyond that, we will obviously always look into where we are, where we would be, and it's an ongoing discussion, ongoing decision, obviously. On the bank tax, any early thoughts? The early thought is a very simple one. We really think this is bad for Spain. I mean, you put a tax on a sector if you want to restrict the activity of that sector. Banking sector does not have a negative externality, as economists call it, which is we don't create a negativity in the economy. We don't create a bad GDP feed. We actually promote prosperity, and we push the growth of the economy.
As such, if you don't have a negative externality, why would we impose a tax on a sector that you need the most at the moment? At the moment, what Spain needs is manage the uncertain environment that we are in and manage growth. We have to grow in Spain, and this tax is gonna basically negatively affect, in our view, that whole process. You're asking the details, I guess, of the numbers and that. It's announced yesterday the latest proposal. It's gonna be discussed in different chambers, the parliament and so on. 4.8% on the fee income plus net interest income of banks restricted to, obviously to the Spanish business unit. You can basically very quickly multiply 4.8% with that number. It's around EUR 250 million.
There is a lot to be done, and it's not finalized today. Actually, there is a big meeting on understanding the details of this, so it's still too early to comment on the whole thing. I'm really sad on this one because I really think it's what Spain needs at the moment is growth, not taxing banks.
Thank you, Alvaro. Next question, please.
The next question comes from the line of Sofie Peterzens from JP Morgan. Please go ahead. Your line is now open.
Hi, here is Sofie Peterzens from JPMorgan . Just going back on the banking tax, from the outside, it seems a bit unfair given that the smaller banks are excluded. In Sweden, we saw a similar banking tax, although much smaller, but the banks actually pushed back, and it was kind of reviewed by the ECB. Do you have any similar plans of kind of pushing back and potentially saying that it's considered state aid given that smaller banks are excluded? Also related to the banking tax, do you see kind of any potential banking taxes in any other of your jurisdictions that you operate in? That would be my first question. Then my second question would be on Turkey.
I know you say that the earnings contribution will be quite limited going forward, but in the second quarter, you printed EUR 160 million net income. Could you maybe just elaborate a little bit more on how we should think about the Turkish earnings contribution going forward? And is EUR 160 million kind of a good run rate, or should we expect a smaller number? Then maybe just one final question. There were some press rumors about Onur you leaving BBVA. Anything you can say here? Thank you.
I feel, Rafa, I should, you should answer some of these questions, including my possible departure. Well, you don't want to take that one. Okay. I'll start with the first one, maybe Turkey question. Rafa, if you can help on the Turkey question. On the smaller players being excluded from the tax, the latest that we see, again, it's still to be finalized, let me say it that way. There are still details to be known. As I said today, there's a meeting to understand some of those details. But the latest is the net interest income plus the net commission income, the net fee income total. If it's less than EUR 800 million, you are exempt from this tax.
It basically exempts all the Cajas, the savings banks, and so on, from the tax. If you're asking what does that mean and would that affect competition? The answer is absolutely. I mean, there's no doubt about it that it will affect competition. It's not fair. If it's a sectoral tax, and as I said, even if it's a sectoral tax, that's also unfair. Also within the sector, if you create this competitive misalignment, that's very, in my view, unfair and also unproductive for the whole economy, and it creates bad competition dynamics. If the question is, what is it and is it that there is? It is as such, but we have to understand the further details before we can comment fully on the whole topic.
Do we see any other tax discussions like this happening in other geographies? Not at all. Once again, I underline it's not only true for Spain, for any country. Banking and taxing an industry, taxing banking, an industry that doesn't have negative externality, an industry that is actually that needs to grow to help the rest of the economy to grow. Taxing the banking sector is not good for any country. I mean, you can go to Google. You can just ask impact of banking taxes in any geography. You would see that there is empirical evidence on this. There is so much academic work on this. It hurts the economy. It doesn't help the economy. In that context, I hope that other countries also look into that empirical evidence and look into that academic work. What can I say?
On Turkey, the hyperinflationary accounting and the impact.
I mean, on Turkey, first I would say, Sofie, that, you know, the result of the second quarter reflect at the end of the day, the good management of the great bank that we have there. I think clearly if you see, I mean, the net trading income and also the fee income that we have got there, this is, you know, very brilliant results. Then also the team is clearly managing all the hyperinflation impacts, mainly through the management of the ALCO portfolio with the CPI linkers.
At the end of the day, you know, to the day-to-day business, they are just managing the reality that a net monetary position above EUR 5 billion is also just partially balanced or counterbalanced by a CPI-linked portfolio close to EUR 4 billion. At the end of the day, the results reflect well what is a good reality of business. Having said that, as a guidance for the future, the macro uncertainties are so high, then it's very difficult. It's very difficult to know how the evolution is going to be. That's the reason why we are conservative, and we are still providing a guidance that we assume that the contribution of Turkey in 2022 is going to be very limited at the group level.
Regarding the last question, the rumors about me leaving, it's a, Sofie, it's a complete fabrication. It's not even worth to comment because it's a complete fabrication of facts or things. It's not even worth to comment. There's no such a plan whatsoever.
No opportunity for the re-rating.
Huh?
No opportunity for the re-rating.
No opportunity for the re-rating.
Thank you, Sofie. Next question, please.
The next question comes from the line of Ignacio Ulargui from BNP Paribas Exane. Please go ahead. Your line is now open.
Hi. Thanks for taking my questions and thanks for the presentation. I have just two. One on what's your view regarding the Single Resolution Fund contribution and the other regulatory charges that banks have and they should come to an end in 2024. What should we expect there? Because, I mean, that could be a very good offset of the headwinds of the taxes that we have discussed before. Secondly, just wanted to understand a bit better, and I know that you don't provide guidance on fees in Mexico. Just wanted to understand the performance of fees, how sustainable they are, how sustainable you see them.
If you could comment a bit more on the trends in insurance revenues, because you made a comment in the call that insurance revenues were very strong in Mexico. I just wanted to get a bit of a sense what should we expect going on, going forward on these two lines. Thank you.
On SRF, Single Resolution Fund, as you know, I mean, we in this quarter we actually contributed EUR 251 million, if I'm not mistaken, which is close to EUR 60 million more than what we provided last year. So this is, as you know, there's a legal basis or a regulatory basis around this, which is you have to fund a pool until 2024 so that you would have enough funds to cover for potential losses going forward. This year, it is much higher than last year for two reasons. Number one, they increased the multiplier to be able to ensure that safety of this pool.
Also, there is this rule that when there's a consolidation within Europe, and in the case of Spain, there was a consolidation last year, the consolidated entity is exempt from this. The big part of the increase was the multiplier. I'm explaining all this detail to you because there's a fine and detailed calculation on how to fund that pool by the time that you have referred to as well. In that context, we do expect that given the regulatory basis is gonna be completely satisfied, and given the fact that there will be enough calculated funds in that pool, it will stop at that timeframe. Again, we'll see. Our expectation, our base case expectation, though, is clearly it will stop because there's a very clear framework around this.
The fees in Mexico, the core of the fees coming in Mexico is payments, and we are gaining market share, a significant market share in credit cards, in POS, in the TPV machines, as we call them, I mean, the acquiring business. Ignacio, the growth, year-over-year growth in the payment business in Mexico is 27%, 27%. Because we are gaining market share, and we are pushing a lot. I mean, there are a few of those, but if there's one of the few ones that I personally put a lot of focus on with the team, everyone, I mean our finance, our risk teams, our country, it's the payments business. We are pushing really hard on growing our business in payments. That's the reason, 27%. Is it sustainable, you are asking?
If we continue on the trends that we have, and this is a bit of a stock business, we have created that stock. I have very high expectations that the strength of the fee income generation in Mexico is gonna continue. Did I miss anything? Those were two questions, okay.
Okay.
Oh, sorry, there was the insurance topic. Insurance topic in Mexico, going again, extremely well, growing double digits.
Thank you, Ignacio. Next question, please.
The next question comes from the line of Andrea Filtri from Mediobanca. Please go ahead, your line is now open.
Thank you. The first question is on if you could possibly elaborate on your NII sensitivity beyond what you do in slide 44, giving us something we can all observe more on a regular basis. If you could give us by country what would happen to the NII if we plugged in forward rate curves with no deposit beta. Otherwise, it's difficult for us to reconcile your guidance there. Then you talk about cost guidance against a 13% inflation rate. Now, I just wanted to understand if we should start to factor in higher cost growth across the geographies given the higher inflation, or if you're thinking to be able to offset that in the different geographies clearly. Final one on Turkey.
Yes, the macro environment is very, very difficult, but the size of the impact to the group is huge line by line. If you could help us understand the sort of year-end basis, where you would expect the main P&L lines to end in ballpark figure. Thank you.
Maybe, Rafael, you can maybe start with the first one, yeah?
On NII sensitivity, you ask about all the euro visibility and the realities, I mean, the big NII sensitivity to interest rate in our case in the euro balance sheet. At the end of the day, we maintain the same sensitivity that between 15% and 20% to a parallel movement on the curve. Today, the forward curves are not indicating that parallel movement. At the end of the day, they are just projecting a growth in the very short term, just with some kind of inversion ahead. What is key for this NII sensitivity is on the asset side. In our case, it's just the higher weight of the mortgage portfolio compared with the system, clearly.
The second is just the hypothesis that we have in terms of the behavior or the deposit sides along the movement of the curves. Clearly there, we are expecting that of the total deposits with clients in Spain, we are not seeing in the very short term, as in 2022, a translation between demand deposits to time deposits. This is going to happen mainly in 2023. Second, I think we believe that this moment is clearly going to be seen because of the you know, the consolidation that we're seeing in the Spanish market.
Compared with the previous cycle, we need to see what is the behavior of the competition, how the competition move from the asset to the liability side. Thirdly, just, the pass-through, I mean, what we call the beta on this movement that we are expecting to be around 75%. The combination with both factors is at the end of the day, what is going to provide you the sensitivity that clearly we maintain. After the movements that we are expecting in the market, clearly we see that at the peaks that we are seeing on the markets, the sensitivity is going to be much lower, clearly.
After the movement that we are expecting on the curve, probably, I mean, this sensitivity from 15%-20% is going to decline to the 0%-5% levels.
On the costs question, Andrea. So first of all, you really have to, especially in the cost number, you have to decompose and isolate for the mix of countries. As I mentioned in the presentation, I wasn't sure if you were there, but the 12% growth in costs, if you isolate only two countries, which are relatively small in the grand scheme of things, but Turkey and Argentina with high inflation numbers. If you isolate those two countries, 12% growth in costs would have been 3.8%. Now, going forward, you're asking me going forward. On that one, we basically confirmed the Spain number. As you know, our guidance in Spain for costs was to decrease at mid single digits. We confirm that guidance to you, decrease at mid single digit.
In the case of Mexico, we are basically saying that it's gonna be lower than inflation. It's gonna be or around inflation. In the case of Mexico, we are seeing an opportunity. As you have seen in our results today, we are seeing an opportunity to grow. That requires a bit investment. We will be dynamic around this. So around inflation, maybe slightly above an average inflation, we will see. But we will be investing in Mexico at these times. We do have an opportunity that we cannot miss. There is an opportunity to grow our business healthily in the case of Mexico, and we will do that. But overall, when you look into the different guidances and so on, below inflation is what we are still saying. How below inflation?
It's so uncertain that don't ask us to granularize this even more. There are fine details around this, but we will be clearly below inflation for the whole group.
Turkey P&L perspective.
Turkey P&L perspectives. Rafa, do you want to take it?
On Turkey, I think we have commented in previous quarter. We clearly have a red line there that we don't want to increase our foreign denominated portfolio, so that clearly will continue decreasing quarter by quarter. In terms of the TL portfolio, clearly we are expecting to grow, you know, at similar levels that we did on the first part of the year and try to grow below the inflation rates. That's on the activity and on NII, our guidance is that we are expecting the TL growth of NII to be above the growth of the portfolio, the TL loan portfolio. In terms of expenses, clearly around average inflation rate.
The cost of risk, we are expecting to be around 150 basis points given the high macro uncertainty.
On hyperinflation, maybe Rafa it's because this is the first time we are talking about this in these calls. I would like to make sure that you all understand, because everyone says it's compli it's not complicated at all. The numbers are very clear. There are three changes that is happening to our P&L and to our accounts as a result of hyperinflationary accounting implementations. Number one, there is this concept of net monetary loss. I mean, our investor relations have a short, very clear presentation on this. If you don't have it, please do get it. The first impact is what we call net monetary loss position. Net monetary loss is you look into your net monetary position, and you just multiply it with inflation.
In the first half of this year, we have registered EUR -1.686 billion- EUR -1.7 billion in the other income heading for these losses. This is the other income, and then you have to take the minority interests and so on. The other income gets a direct hit from this net monetary loss, which is EUR 1.6 billion- EUR 1.7 billion in the first half. That's the first change. Number two, you move your CPI linkers from NII to other income. Again, in the first half of the year, we moved EUR 1.1 billion of CPI linkers revenue from NII to other income.
That's why the NII numbers that you see is completely isolated from the inflation in Turkey and so on, because it's everything, all of these inflation-related things move to other income. That's the second one. CPI linkers, the revenue associated with that moves from NII to other income. The third, which didn't create too much change, but for you to know, we restate the P&L, not with the average currency, but we restate it with the end of period currency, the fixing, and then we adjust all the line items by inflation. It didn't create too much change, this third one. The key two changes that you should know is net monetary loss that we registered.
Again, EUR 1.7 billion that we registered in the accounts in the first half, before obvious minority interests in other income heading, and then movement of the CPI linkers from NII to the other income. Those are the changes that you should be aware.
Thank you, Andrea. Next question, please.
The next question comes from the line of Ignacio Cerezo from UBS. Please go ahead. Your line is now open.
Yeah. Hi, good morning. A couple of quick things from me. Most of the questions have been answered. Fees in Spain, if you can give us a little bit more detail basically of the delta between Q1 and Q2. You're talking about like EUR 40 million increase in the quarter. You mentioned CIB, but if you can put numbers basically to the different segments. And then in Mexico, if I have a look at volumes, if I have a look at customer spread, I might have expected probably NII to grow a little bit more. So I'm not sure basically there is anything holding that growth back coming from treasury portfolios or any other aspect, basically, of the balance sheet, or maybe my expectations were a little bit too optimistic. Thank you.
I will start with the second one. God bless you, Ignacio. You're expecting more NII in Mexico? No, it's compared to your numbers, I understand. I was joking. In the first quarter, there was this BPA, inflation-linked bonds. It's not really tied to inflation, but if the real interest rate is negative, you get compensated on those bonds. In the first quarter of the year, there was a bit of that impact. The baseline, the growth is maybe, if you are looking into the percentages, partially impacted from that. In the second quarter, the BPA impact was much lower, basically none, EUR 3 million or so, very little. That's compared to EUR 40 million in the first quarter. That might be the reason on the Mexico number.
The activity has also been picking up. Maybe the average loans versus the end of period loans, the numbers that you see in the presentations obviously is end of period. The average loans was a bit lower throughout the quarter. If you like, we can do the spreadsheet with you afterwards, but it's maybe because of these average loans or the PMAs. Regarding fees in Spain that you ask, it's basically coming from what we call banking services and basically coming from within banking services payments. Again, we are pushing credit cards and acquiring business a lot. We gained a lot of market share in acquiring in the first half of this year. The year-over-year growth or quarter-over-quarter. You asked quarter over quarter, I think.
Quarter-over-quarter growth in payments, credit cards, including POS, the TPV machines, it's 24% in Spain. 24%. The gap is around EUR 15 billion-EUR 16 billion. Banking services was the key reason, 14% growth quarter-over-quarter. CIB, as you said, did a very good job, 19% growth quarter-over-quarter. Insurance in the Allianz deal is also slightly, it's a small part still, but it's also moving very nicely. The piece that we lost because of the market impacts was asset management. It's down 3%. When you sum them up all, quarter-over-quarter growth was 7%, despite the asset management softness because of the markets.
Thank you, Ignacio Cerezo. Next question, please.
The next question comes from the line of Daragh Quinn from KBW. Please go ahead, your line is now open.
Hi, good morning. Thanks for taking my question. First question would be just on the level of inflation in Argentina and Turkey. Do you feel at some stage it could be worth stripping them out of the P&L and just reporting their contribution in terms of cash dividends actually paid out of those countries as they significantly distort, you know, revenues and costs relative to the rest of the group? Then a second kind of broader question. You're doing a share buyback, profitability is improving, tangible book value per share is growing. No direct exposure to Ukraine and Russia, and yet your shares are underperforming the sector this year.
You know, what do you think the market is missing, or what do you think you need to do to do better to change that dynamic? Thanks.
Turkey, Argentina, any comments, Rafael, on the inflation levels? I mean, if it gets any worse than this, it's even a much larger crisis. They're already too high in my view, but any comments from you?
I mean, yeah, the comment, clearly. I mean, we have a base effect. I mean, the second part of the year is going to benefit in terms of inflation rates in both countries, because clearly, they are comparing with lower levels of prices in the first half of 2021. In the second half, we should see a slowdown on inflation. Having said that, in both countries, apparently, I mean, the dynamics are still going to be pushing on inflation. Additionally, in Argentina, because of all the political turbulence that we are seeing in the last few weeks. I'll say in terms of number, probably we'll see a slowdown in terms of inflation rate, but the dynamics are still there, so we'll need to see.
Regarding this, the share and the share price and so on, Daragh, I'm not sure whether we discussed this individually or in a separate session, but very quickly, I mean, there are multiple, but there are two important, very important in my view, cases or reasons why BBVA is a great stock to own and BBVA is a great company to tell you the truth. Number one, we do have unique franchises in the countries that we are in. We are diversified, but beyond that, in the countries that we are in, we have unique franchises. I say this with numbers, because everyone can say this. The ROE of our banks in the countries that we are present versus the ROE of the banking industry in that respective country.
Isolating for country differences, we have very meaningful positive gaps with competition, and this has been consistent year-over-year. We do have great banks, otherwise this result would not have been produced. That is amazing. In general, banks have to make money. If you have this meaningful positive gap with the industry, you will always do good returns on your capital in our view. That's the first thing that you should know about BBVA. The second is we are, in our view, far ahead or ahead, let's say, of others on certain topics, definitely on digitalization, and not because we are much more, much smarter than others and so on. No, we have invested in this much more and much earlier than others. Maybe that's the smartness, I don't know.
We put so much effort on this topic of digitalization, transforming our business, innovation and sustainability now. Those trends that shape our industry, we believe we have been putting much more effort, much more thinking, much more dollars investment into those areas. As such, and you have seen the number, 5.3 million new customers in the quarter. I really do think if a fintech makes that, number of customer acquisition in a quarter, if a fintech does this, the equity markets, will embrace that fintech like crazy. We are doing that with digital, with a very low cost curve, and we are not being even recognized or we registered on this. Okay, these are the two things though that makes us different. We are, we have great franchises, and we have invested in things that matter in our business.
As a result, we are delivering the results that we have. All what I've been saying might be rosy, grandiose words. No, in numbers, we are delivering this. If you look into our share price today. Dividend yield, the payout that I mentioned to you, if you do a simple back-of-the-envelope calculation, you would be getting close to double-digit dividend yield. Let alone the growth of the business in revenues is amazing in my view as compared to other banks. It's very easy to compare with other banks as well, the growth in revenues, which is the profitability is there, the growth is there. That should be the driver of the share price, I guess. We are close to double-digit dividend yields, and that's where we are.
Having said all of this, I mean, you pushed on my button, so, apologies for the long answer, but I really do think that our job is to keep delivering. If we keep delivering, at some point, it will be recognized, because at some point the returns will flow, and the returns, the share price will realize this, two things that I was mentioning to you before as well.
Thank you, Daragh. Next question, please.
The next question comes from the line of Carlos Peixoto from CaixaBank. Please go ahead. Your line is now open.
Yes. Hi, good morning. Thank you for taking my call. My question, sorry. The questions will actually be centered in Spain. One of them will be a bit of a follow-up. If you could just repeat what type of growth in NII are you seeing for 2022? A bit following up on that, you mentioned mid-single digits increase in loan volume taken. I was wondering how you're seeing this behaving through segments, whether you're noticing a lower demand on the market segments in light of interest rates movement, recent interest rates movement, and basically the concerns of higher interest rates capping demand on that segment. Overall, how do you see that evolving?
Another question would be on the cost side. I believe that your previous guidance was a mid-single-digit decline. Do you keep it or inflationary pressures probably should lead you to revise it or just how do you see things evolving on that front? Thank you very much.
Okay. We couldn't get all the questions maybe, Carlos, but the things that I got, number one, NII growth, NII discussion on Spain. Number two, the activity related to this. What is the latest on the activity growth? And the third one on the cost side. Maybe NII you take, Rafa. Let me start with the activity. You see it, Carlos, on the presentation, we are growing in the areas that we wanted to grow. Looking to year-over-year growth in Spain, consumer and credit cards, they are growing 8.6%. Their small businesses, the PYMEs, they are growing 3.8%. The BEC segment, the commercial segment, the core commercial segment, it's growing 14%.
Those were the areas that we wanted to grow, and we are growing very nicely in all of them. That's why we are upgrading or we are telling what we told regarding the activity growth expectations for the rest of the year. You are right. I mean, we are in this uncertain period. We shouldn't be too rosy on the activity levels going forward, in my view, because the rates would be going up. Given the uncertainty, given the impact on the companies, people might be shying away from taking that leverage, that additional leverage. There are only two things that we are seeing, which is basically leading us to give you the guidance that we gave, which is still relatively robust growth in Spain as compared to what we have been seeing in the past years. Number one, the inflation.
The inflation is also creating working capital needs in companies. That's absolute level, not maybe real, but absolute level that leads to growth, especially on the corporate commercial segment. The second thing is, despite all what we are seeing, the leverage in Spain is still much lower than what we have seen. This country has been deleveraging for the last 13 years, 14 years. Every single year, debt over GDP, household debt over GDP, corporate debt over GDP, it has been coming down. We now, I mean, it has come down 20 percentage points, close to 25 percentage points in household debt over GDP, and it has come down 35 percentage points in terms of corporate debt over GDP. It has been deleveraging.
Given that, there is room for companies to take that additional debt, and there is appetite on our side to acknowledge those good companies and to go and serve them. To cut a long story short, there are balancing factors. It's still uncertain. We have to be careful with the guidances these days, but we see positive trends for other reasons. As such, we are repeating our guidance as we have done today. On NII growth, Rafa.
On NII, I think we have upgraded our guidance to grow at around mid-single digits. You remember, we were at the beginning of the year, we were expecting an NII to be flat. We were more positive at the end of the first quarter, given the evolution of rates. Clearly today, when we have seen the initial increase in rates from the ECB and also how this is going to contribute to provide continuous providing value by the TLTRO. The dynamic that we are seeing in activity and the customer spread that we saw on the presentation clearly are guiding us to improve the NII guidance to this mid-single digits.
Costs, we reiterate our guidance. You said, given all these inflationary pressures, are you sure? We are obviously, again, there's uncertainty, but we are reiterating our guidance of costs decreasing at mid-single digits. This is mainly because of the ERE, the restructuring program that we did last year. It's the benefit of that program in the accounts. There are inflationary pressures, and we will see them in the rest of the year, but we are confirming our guidance.
Thank you, Carlos. Next question, please.
The next question comes from the line of Britta Schmidt from Autonomous Research. Please go ahead. Your line is now open.
Yeah, thank you very much for taking my question. My first question will be on Turkey. Given that loans don't really reprice with inflation, but with rates, how do you expect to manage the inflationary environment with your top line? Should we expect a greater focus on fee income, and is there a sort of feeling that you have for a CPI-linked portfolio, or should we expect that to go in line to balance out the net monetary position? The second question will be whether you can give us any color on the discussions you're having with the regulator regarding the analysis of recessionary risks on capital. Do you expect that to maybe change your perception of what management buffer is required in the near term? Thank you.
On Turkey, the priorities are very clear. We have been doing that for years now, but we are even accelerating the pace. First of all, before revenue line and CPI and this and that, we have to continue reducing the FX exposure that we have. We have been reducing our FX lending book, and we will continue on that trend. That's the. Then related to that, less FX wholesale funding and so on. Because the key risk that might be coming along is, as we said, every single quarter, you ask me about the key risk in Turkey. There are obviously many things. The final output that will be hurting our business there would be the currency devaluing, and that, with that devaluation, the FX lending book that we have might get hurt from this.
As such, that's the first priority, and that's what we have been doing. We basically cleaned out all or most problematic corporate exposures to FX, which are companies that don't have clear FX revenues and so on. As such, we will keep on that trend. That's the first thing that we are doing. More CPIs in the ALCO book. We are trying to get more CPIs, obviously, and then manage the spread. Manage the spread in such a way that we don't go at all long-term, and we go focus on short-term, so that we don't want to grow in long-term natured products like mortgages. In this environment, we have to see our front first before we can go long term. Those were kind of the key highlights on what we are trying to do.
Regarding the recessionary risks on capital and whether we would revise our management reference. Britta, our management reference, the 12%, let's say it's 11.5%-12%. The upper end, let's take the upper end versus our requirement is 340 basis points. This 340 basis points, 'cause when everyone looks into capital, for some reason the requirement doesn't come into the picture. But that's what matters, the gap. 340 basis points is much higher than the average of the big European banks, which is 307 basis points in terms of management reference. We are already above. More importantly, why is that requirement also so low? That feeds into that.
Our ability to generate capital, as you have seen the results of today, and we have guided in the investor presentation, we were saying EUR 1 billion- EUR 1.5 billion of organic capital generation every year, excluding corporate operations, which is one-off, so we don't know them, and excluding supervisory impacts because they are uncertain, and we don't know when they come along. Excluding those two, we would create EUR 1 billion-EUR 1.5 billion . We are looking into our numbers and our situation at the moment. We are, we have an upward thinking on that number. This year we are gonna be creating more than that organically.
In that context, if you create organic capital as such, and if the variability, the volatility of your capital generation, if you look into our CET1 evolution, annual CET1 evolution in the last 20 years, and the variability, it's a basic standard deviation of our capital evolution. You see that we are one of the least variable because we are diversified, and we do have these great consumer banking franchises all around the world. Given that, the variability is also low. As such, I don't see any increase in the management buffer in the short term.
Thank you, Britta . Next question, please.
Our final question today comes from the line of Carlos Cobo from Société Générale. Please go ahead. Your line is now open.
Hi. Thank you very much for the questions. Two quick follow-ups on what has been discussed. Could you just quickly clarify if the ECB, in your opinion, has any veto rights on the new bank levy? So can they stop it for good? I believe they don't, but I wanted to confirm it with you. Also a quick follow-up on what Rafa said before on the deposit beta. If I heard that correctly, he said that it may be around 75%. Is that the right number? And are you talking about term deposits only or for the whole deposit mix if you include the transition from term deposit? It'd be helpful to understand how you are thinking about that. And those are my main questions. All the rest I think answered already. Thank you.
Rafa, do you wanna take the second one before?
Yes.
You go?
You want me to, sir?
Yeah, why not?
Carlos, what I was saying is at the end of the day, we are expecting, you know, a movement from demand deposit to term deposits. You know, what happens when we have an increase in rates. We are expecting in those term deposits that we will transfer to the clients 70%-75% of the movement on the rates, on the rise on rates on average. At the end of the day, these are the assumptions implicit on the NII sensitivity that we provide. That is just on the term deposits, the amount that we are expecting to transfer to clients, to customers from the movements on rates.
On the veto rights, I don't know the answer, Carlos. I don't know. I should not mislead you or judge on this one. The only thing I would tell you is that ECB in the past have clearly presented strong opinions on this topic. There was one in 2020 in Lithuania. There was actually a paper or a position in 2019, basically saying what I said at the beginning of the call. I will quote from that thing. Any ad hoc taxes imposed on banks for general budgetary purposes would be undesirable to the extent that such taxes would place undue burden on banks, hampering the provision of credit with a knock-on effect on growth in the real economy. Their position, I think, is clear, but then beyond that, what does that mean?
At the moment, it's very tough to judge. Any other questions?
No, thank you. This was the last question. Thank you everyone for your questions, and we will end it here. Let me remind you that the entire IR team will be available to answer any questions you may have. Thank you very much for your interest, and have a nice summer.