Good morning, thank you all for joining BBVA's first quarter earnings call. As in previous quarters, I'm joined today by our CEO, Onur Genç, and the Group CFO, Luisa Gómez Bravo. First, they will walk you through quarterly figures, after which we will open the line for the live Q&A session. With that, I hand it over to Onur.
Thank you, Patricia, and good morning to everyone. Welcome, and thank you for joining BBVA's first quarter 2026 earnings webcast. Starting with slide number three, and as always, beginning with value creation. On the left-hand side of the page, you can see the strong evolution of tangible book value per share plus dividends, growing 5% in the quarter and 14.7% year-on-year, driven by our excellent results, as we will see in the following slides. It's also worth highlighting here that excluding the impact of the share buyback programs, the year-on-year growth would have been 18.1%. On this one, as you know, in the fourth quarter of 2025, we executed a EUR 993 million share buyback program.
At the moment, we are currently executing the nearly EUR 4 billion program announced in December 2025, of which EUR 2.5 billion has already been completed across two tranches. As you all know, as these buybacks have been carried out at a premium to book value, they clearly create value for our shareholders, but they have a negative impact on tangible book value per share. On the right-hand side of the slide, our profitability ratios have further improved, reaching an industry-leading return on tangible equity of 21.7% and return on equity of 20.7%. On Page four, on the left-hand side, we delivered another very strong quarter in terms of net attributable profit, reaching almost EUR 3 billion, as you can see.
This represents a 10.8% increase year-on-year and 18% growth versus the previous quarter. These results at the bottom of the left-hand side, it brings our earnings per share up to EUR 0.51, an increase of 12.5% year-over-year, higher than the growth of the net attributable profit, thanks to the share buyback programs. On the right-hand side of the page, our CET1 capital ratio, it improved by 13 basis points during the quarter, reaching 12.83 basis points. A strong quarter in capital generation, placing our capital ratio well above our target range and obviously regulatory requirements. Moving to page number five, as an introduction to the following pages, the key drivers of our performance this quarter.
First, at the top, net interest income, it grew by 20.2% year-over-year, driven by very strong business activity, loan growth at 17%. Second, net fees and commissions also showed an excellent evolution, increasing by 15.5%. Third in the page, our industry-leading efficiency ratio, it continued to improve, reaching 38%. Fourth in the page, sound asset quality metrics with a cost of risk at 154 basis points, showing relative stability in the current geopolitical context. Finally, at the bottom of the page, as mentioned, we maintain a solid capital position, showing further improvement in the quarter. Slide number six, as always, the summarized P&L of the quarter. You can see the year-over-year quarterly evolution in the second column from the left in constant, and next to it in the third column in current terms.
If I highlight something, I would highlight the strong performance of core revenues with excellent growth in net interest income, excellent growth in fees, leading to a gross income growth of 18.3% in constant EUR and 14.2% in current EUR. Moving to slide number seven and talking more about the gross income growth with more details on the quarterly progress in the last five quarters. As you can see, net interest income growth remains very strong, increasing 20% year-over-year and 2.9% quarter-over-quarter, supported by, again, robust activity growth, increase in lending. Worth mentioning, there is always a seasonality to take into account here in the first quarter, also due to the day count.
Net fees and commissions continued their excellent trajectory, as I mentioned, up 15.5% versus the same quarter last year, driven by payments, asset management, and we increasingly see a higher contribution from insurance and especially from CIB. Despite the seasonality also here, it has grown 0.9% compared to the previous quarter. Finally, net trading income delivered a very good performance, supported by positive momentum in our global markets business. All of the above leads to excellent gross income growth, 18.3% as mentioned year-on-year and 4.3% quarter-on-quarter. Moving to slide number eight, we wanted to share some perspectives on the evolution of our net interest income, the critical part of our revenues in our core geographies you would see in the page, Spain and Mexico.
On the left side of the page, loan growth, it remains very strong in both Spain and Mexico, with growth rates of 6.3% and 8.4% respectively. In the center of the page, customer spreads. As we mentioned in the past, our results are positively correlated to interest rates in both countries. As a result, customer spreads have declined in the last years in both countries. As you can see on the page, at a much slower pace than the reduction observed in the interest rates due to effective price management.
On the right side of the page, as a result of both activity and spreads, NII has grown by 3.6% in Spain and 8.3% in Mexico year-over-year. On a quarter-over-quarter basis, although not shown on the page, NII shows a slight decline, mainly due to aforementioned seasonality effects. Looking forward, it's important to mention that we are already seeing the bottom of the rate cycle in both countries. We have discussed it multiple times in the previous calls. If the rates have reached their bottom more or less in both countries, this implies continued NII growth, obviously with sustained activity levels. In conclusion, in short, despite rate compression, our strong loan growth and proactive price management continued to support net interest income growth, and with stabilizing rates, we are very positive for the future.
Moving to slide number nine, on the left-hand side of the slide, we continue to deliver positive jaws at the group level, supported by the strong performance of gross income, which grew, as I mentioned, 18.3% year-over-year, while operating expenses increased by 17.5%, reflecting continued investment in organic growth according to our strategic plan. It is important to note that expenses growth rate is impacted by the voluntary redundancies implemented in the first quarter, with a one-off restructuring charge of approximately EUR 125 million, mainly impacting Spain and corporate centers. Excluding this effect, cost growth would have been 13.9%. On the right-hand side, our efficiency ratio stands at 38%, improving 24 basis points versus last year.
Excluding the voluntary redundancy program, the ratio would have been 36.8%, clearly better than our guidance for the year. Turning to slide number 10, this page shows the evolution of our sound asset quality metrics in a context of strong activity growth, again, especially in the most profitable segments. On the left-hand side, at the bottom of the page, we see the evolution of cost of risk shown on a quarterly basis to allow for direct comparison between quarters. As you can see, cost of risk stands at 154 basis points in the first quarter, broadly in line with the previous quarter.
It's worth highlighting here that due to the current macroeconomic uncertainty and aligned with our prudent risk management approach, we have included a post-model adjustment of around EUR 100 million in our results this first quarter, of which the majority affects our impairment figures primarily in Spain and in Turkey. Excluding this impact, cost of risk would have been 147 basis points. On the bottom right-hand side, both our non-performing loan ratio and coverage ratio, they continue to improve year-over-year and also quarter-over-quarter. Slide 11 on capital and shareholder remuneration. Starting on the left-hand side of the slide, you can see the quarter-on-quarter evolution on our CET1 ratio, which increased by 13 basis points- 12.83 basis points. This is comfortably above our target range of 11.5 basis points - 12 basis points.
If you focus on the waterfall, our strong results, that contributes 75 basis points to the ratio. Second, the accrual of the dividend and the AT1 coupon payments, deducting 40 basis points. Third, on the page, 34 basis points due to the RWAs growth. This figure once again reflects our ability to reinvest part of our capital generation into profitable growth, while we also benefited this quarter, and as in previous quarters, from several risk transfer transactions, SRTs, which contributed 12 basis points to the ratio in the quarter. Lastly on the page, a bucket of others of 12 basis points, which comprises, as in other quarters, the market-related impacts and the credit in OCI, that accounting-wise neutralizes the deduction in the P&L due to hyperinflationary accounting.
Moving to the right side of the page on the nearly EUR 4 billion share buyback program that started in late December. As mentioned, we have completed the first and the second tranches, and we still have nearly EUR 1.5 billion spending on which we plan to start the execution early next week, and the date is May 6th. Needless to say, again, we remain beyond the share buyback programs. We still have excess capital, and we remain fully committed to distributing our excess capital above the upper end of our CET1 target range. Moving to Page 12, we continue to make strong progress in the execution of our transformation strategy. Today, we wanted to particularly update you on AI, one of our priorities in the strategic plan, as you know.
I mean, BBVA has always harnessed innovation as a critical lever to differentiate itself from competitors. We have proven it, in our view, through digitalization in the last decade. We are committed to do it again through AI. AI, a disruptive technology in our view, that has the potential to transform banking even faster and even deeper than previous technological disruptions. As you can see on the left-hand side, we are pursuing this across eight very tangible initiatives from the personal advisor for every client, which we call Blue in the bank, and the AI for the banker to other areas, to risk, to operations, software development, embedding intelligence across the entire organization.
Beyond the eight, which are again, very tangible initiatives, we are evolving towards a truly AI-driven bank, revamping our operating system by industrializing the creation, the governance, and the operation of AI agents at scale across the bank. This transformation is already reshaping how we serve clients, run our processes, and it also empowers our people. We are seeing some very early but very promising results to that end, and we will keep updating you as outcomes grow and consolidate in terms of what this means. Beyond these early results, once again, what truly will differentiate BBVA, is our ability to scale AI across the group, similar to what we did in digital transformation.
Moving to page number 13 before handing it over to Luisa regarding our ambitious financial goals for the 2025/2028 period that we announced last year in June. I will not read each of them, but I can very clearly confirm to you that we are performing in line or better than our original expectations in all of the metrics that you see on the page. Now for the business areas, I'll turn it to Luisa.
Thank you very much, Onur, and good morning, everyone. On Slide 15, let me start with Spain, which has delivered an excellent first quarter, with net profit once again exceeding the EUR 1 billion mark. This strong performance was supported by solid revenue dynamics, with gross income growing by 5.4% year-over-year and 4.3% quarter-over-quarter. Strong loan growth continues to support NII, up 3.6% year-on-year, with customer spread broadly stable in the quarter. On a quarterly basis, NII is affected by a day count effect. Adjusting for this, it would have remained largely stable. On fees, as is typical in the first quarter, they are impacted by the seasonality of asset management success fees booked in the fourth quarter.
Excluding this, fees grew 5.5% quarter-on-quarter, showing healthy underlying momentum supported by strong CIB performance and an increasing contribution from insurance. As Onur mentioned, costs are impacted by the voluntary redundancies implemented early in the year. Excluding the one-off restructuring charge, cost growth remains well under control at 4.8% year-on-year. The expected savings will be largely realized in 2026 and are already reflected in our guidance. On asset quality, trends remain very sound. As previously mentioned, and following a prudent approach in a highly uncertain macroeconomic context, we applied a PMA, a post-model adjustment, in the quarter, which led to a higher reported cost of risk. On an underlying basis, however, the cost of risk stands in line with our low 30s guidance, which we reiterate.
Overall, Spain has delivered a very strong start to the year, giving us confidence in our ability to deliver on our full-year guidance. Turning to Mexico on Slide 16. BBVA Mexico once again has delivered outstanding results, with net profit reaching EUR 1.45 billion in the quarter, up 4.5% year-on-year in constant euros. This performance is driven by strong top-line dynamics, with gross income increasing by 10.3% year-over-year, supported by strength across all revenue lines. Net interest income increased by 8.3% year-on-year, supported by strong loan growth, over 10% excluding FX, and resilient margins despite a declining rate environment. As shown on the slide, customer spreads show strong resilience even as the reference rate has declined by 225 basis points since March of last year.
We expect rates to bottom out this year at 6.5% from 6.75% currently. As in Spain, NII is also impacted by a typical first quarter seasonality. In this case, also affecting the credit card activity, which is very strong and typically is in the fourth quarter, and also the calendar day effect. Excluding the latter, NII would have grown above 1% quarter on quarter. Fees remain solid despite seasonality, again, on the credit card and payment fees following the commercial campaigns of the fourth quarter. Revenues are also underpinned by strong net trading income and good performance from the insurance business reported on the other income line. Overall, strong gross revenues performance continued to drive positive jaws, while we continue to invest in future growth and maintain best-in-class efficiency with a cost-to-income ratio of 30.8%.
Asset quality remains solid with stable underlying trends across portfolios. Cost of risk stood at 345 basis points flat quarter-on-quarter and in line with guidance. Looking ahead, we maintain our guidance for the year, now with an upward bias to loan growth supported by the strong momentum in activity across both retail and wholesale segments. Now moving to Turkey. Garanti BBVA delivered a strong profit of EUR 263 million, mainly driven by net interest income growth and overall robust revenue dynamics. Let me just highlight a few key points. Net interest income remains strong, supported by selective loan growth and wider TL customer spread as lower TL deposit costs more than offset declining loan yields in a falling rate environment. Fees also showed good momentum supported by payments, asset management, and CIB fees, while net trading income also contributed positively.
Hyperinflation adjustment, however, was somewhat higher this quarter due to higher inflation metrics. Finally, on asset quality, cost of risk stood at 253 basis points, broadly stable quarter-on-quarter, reflecting elevated but manageable provisioning needs in retail portfolios. The quarter includes a PMA for macro uncertainty. Excluding this, cost of risk would have been 238 basis points, above full-year guidance as anticipated in the first half, but expected to converge over the year. Overall, Turkey delivered a strong quarter. However, given the uncertain environment, we now see a downward bias to our guidance. The Central Bank is expected to remain tight until conditions allow for a gradual resumption of the easing cycle, presumably in the second half of the year. NIM improvement could be more gradual than previously anticipated.
Recall that Garanti BBVA has positive sensitivity to lower rates. Let's turn now to South America. On Slide 18, the region delivered a very strong performance quarter, with net profit close to EUR 250 million, up 16% year-on-year in current euros. These strong results were driven by solid core revenue growth across all geographies. Net interest income grew by close to 14% quarter-on-quarter, supported by healthy loan growth and customer spread expansion, particularly in Argentina and Peru. Fees also performed strongly, reflecting our continued focus on strengthening this revenue line. Solid gross income growth supports positive jaws and efficiency gains, with cost-to-income ratio improving to 41.6%.
On asset quality, cost of risk stood at 276 basis points, somewhat elevated due to still high provisioning needs in Argentina's retail portfolios, where we expect a gradual improvement only towards the second half of 2026. Trends remain supported both in Peru and Colombia. Overall, we confirm our full year guidance for cost of risk in the region below 250 basis points. The strong start to the year reinforces our confidence to deliver on our full-year guidance also, both for activity and revenue growth. Finally, let's move to rest of business. As you know, rest of businesses houses, just a reminder, houses the CIB business carried out by the branches and the digital banks activity. In the quarter, net profit reached EUR 236 million, driven by solid revenue growth, supported by strong activity momentum.
Loan growth remained robust and well-balanced across geographies, mainly driven by corporate lending, which represents 77% of the total book and grew by 10% quarter-over-quarter. Activity growth translated into solid revenue growth with solid NII, remarkable evolution of fees across the board, and higher net trading income supported by client activity. On cost, expense evolution continues to reflect the rollout of our strategic plan to support future growth and is in line with our guidance. Risk metrics remain very solid. Cost of risk rose to 30 basis points in the quarter, driven by higher provisioning linked to some specific exposures. Finally, given the strong performance in the quarter, we are upgrading our 2026 guidance, loan and gross revenue growth now above 30% year-on-year, while maintaining cost of risk guidance at around 20 basis points. Now back to Onur for the takeaways.
Thank you, Luisa. Lastly, for the main takeaways on Page 20, let me not take time by repeating all of the key messages, but in short, excellent results in the quarter, driven by the strength in core revenue evolution, further reinforcing our industry-leading growth, profitability, and efficiency ratios. Given our positive momentum at the bottom of the page, you can also see that we have upgraded our 2026 outlook for group return on tangible equity and the rest of business, reflecting improved expectations, basically. In terms of bias, we are also more optimistic about Mexico, activity in Mexico, while remaining due to macro parameters, prudent in Turkey in a highly uncertain macroeconomic context. Very well. We can move on to Q&A. We typically finish at the hour, let's do a positive surprise to the ones who join at the hour.
Let's start right away. Patricia?
Yes. Thank you very much. We are ready now to start with the Q&A session. Operator, please.
Of course if you would like to ask a question please press star followed by one telephone keypad. If you would like to move your question please press star followed by two. When it's your turn to ask your question please ensure your line is unmute. We ask you please to unmute to one question. If you wish to follow-up please re-join the queue. The first question goes to Francisco Riquel of Alantra. Francisco, please go ahead.
Thank you for taking my questions. I want to start with Mexico. Santander warned yesterday about asset quality in credit cards. I wonder if you can please comment on asset quality trends in your credit cards business in particular and overall in Mexico, and update on your cost of risk guidance for the year. You also mentioned upside risk to loan growth forecasts. I wonder if you can update on your revenue guidance as well. NII is growing in line with loan growth in Q1, I wonder what shall we expect for the rest of the year. In particular, the cost of deposits is picking up in a lower interest rate environment, if you can comment on that. Thank you.
The second question was also for Mexico, no?
Yes.
Okay.
Yes. Yes, sorry. Everything for Mexico.
Very good. Paco, on the cost of risk, we feel quite confident on our guidance. We gave 340. You see in the documentation that this quarter it's 345, which is exactly the same amount of the last quarter on a quarterly basis. As we did mention, in this quarter, we took EUR 98 million, close to EUR 100 million of a post-model adjustment in all the geographies, affecting mainly Spain and Turkey, but also slightly Mexico. The number would have been actually even better if that post-model adjustment wasn't there. As you know, Mexico is least affected from all what's going on geopolitically in the world these days. They are actually, in certain cases, positively affected from it. Underlying dynamics, and you asked specifically credit cards, we don't see any deterioration whatsoever.
On the second topic, on the overall, the upside on the overall NII and loans, as you can see again on the page that we shared regarding Mexico, in the 1st quarter, year-over-year growth in lending is 8.4%. 8.4%. More importantly, what we have seen, especially in March, you can see also the market figures because they publish, the regulator in Mexico publish all the figures of all the banks, but with a one month delay. The latest that you have publicly is February, but March was even better. When we look into the pipelines, especially on the corporate side, we are seeing some positive momentum there in the pipelines as well.
The first quarter macroeconomically, in terms of GDP growth, will come a bit soft in Mexico. In that environment, if we have delivered what we have delivered, which is 8.4% year-over-year, but let me focus on the quarter. Quarterly growth in the lending balances is 2.6% in Mexico for the quarter only. If you analyze it is actually even better than the year-over-year growth. In a relatively soft macro context, if we delivered 2.6%, if we see very positive momentum in March, if we see very positive momentum in the pipelines, and that topic of the pipelines is important because what we are seeing after a long while, actually, in Mexico, is that also the long-term funding needs are picking up a bit.
USMCA negotiations, it's going to be marking the second quarter, but we are seeing some momentum in the country, mainly driven by this Plan Mexico of the government. There is a lot of infrastructure and energy-related build being promoted by the government in the country, and we are seeing it in some of the projects that are coming in line, and we are seeing it in the pipelines. In short, the first quarter, even in a relatively soft macroeconomic context, was very good. In the new context that we would be seeing, triggered partially by Plan Mexico, we are quite confident that we will be delivering what we have guided you and the positive bias on the activity, which then would be reflected in the NII.
The spread component of NII, you see a slight decline in the quarter, but it's 19 basis points decline in customer spread. 7 basis point of that was driven purely by mix because we have grown in the quarter more in the enterprise side versus retail. That will normalize. It's pure seasonality. Credit cards do not grow as much in the first quarters after a very strong fourth quarter, typically. It's purely driven by mix. In the context of rates not coming down much more, again, as Luisa mentioned, our expectation for the year is 6.5 basis point. It's going to get to 6.5 basis point, the central bank rates, and will stay there. In that context, again, the spreads will be supportive. All combined, we are quite positive on Mexico, in short.
Thank you very much, Paco. Next question, please.
The next question goes to Maksym Mishyn of JB Capital. Max, please go ahead.
Hi, good morning. Thank you very much for the presentation and taking our questions. Two from my side. The first one is on Spain. Loan growth has slowed down slightly, seems mainly due to fewer corporate loans. Was just wondering what you expect in terms of growth for 2026 and how you see demand evolving per segment. The second one is on Turkey. You are now slightly more negative for 2026. How do you see the 2028 targets in the current macro context, please? Thank you.
Luisa, you wanna take the Spain?
Yes, sure. I mean, what we've been seeing in the market as you've mentioned, is resilient and improving dynamics in growth. The market was growing around 4%, last data, Bank of Spain of February. We think that that could be accelerating somewhat throughout the year. We stick to our mid-single-digit guidance of activity growth in the year. We have been focusing, as you know, consistently in growing the areas where we feel that there's more value. We've been focusing and growth has been structured, as you see, especially in consumer and credit cards, but also across the different segments in mid-sized companies and corporates and public sector as well.
I think that there's seasonality in terms of the corporate growth quarter-on-quarter on the CIB because the fourth quarter was quite strong. I think it has been offset with a good strong growth in the mid-sized company sector. In general, we're seeing a good dynamics. New loan production is also positive year-on-year with growth of 5%, especially on the consumer side, 11%, and the CIB sector, 12%. New loan production is in line to achieve the guidance that we've given. Just to mention that on the mortgage side, however, we have been, you know, losing market share in the quarter and in the year. It's down 27 basis points in the year. We do believe that the market continues to be priced, you know, inadequately.
We have been able to see more rationality in the last few months, still, our new loan production share of the market is below our natural share. As it, for the time being, we will continue to be selective in the mortgage in the mortgage growth. This is what is reflected in the 6.3% growth and the quarter-on-quarter dynamics as well.
Well, Maks, very quick add-on to this. Quarter-over-quarter, again, the loan book in Spain has grown 1.2%. In the mid-sized company segment, it grew 2.7%. You see the annual numbers in the presentation, if you go to the quarterly, you can deduce the quarterly figures, they're quite strong. 1.2% quarter-over-quarter growth, if you annualize it, again, it's quite nice. Coming back to your second question on Turkey, first of all, what I should say is that given all what's happening in the world geopolitically and all the conflicts that we see, the war in Iran and everything, Turkey is, in our view, withstanding quite well. The number is not because of anything else but what we already told you.
We were very clear in the fourth quarter's results presentation basically telling you that we are expecting EUR 1 billion with clear assumptions behind that on the macro parameters. You might remember this, but we told you that that number, around EUR 1 billion guidance, was driven by two very important macro parameters, 25% inflation, 32% December 2026 interest rate, and 19% depreciation of the Turkish lira versus EUR. Based on those assumptions was the guidance. We even, at the time, I remember it very clearly, that we have even provided you some sensitivities around this. Every single percentage interest rate point implies EUR 40 million. Every single inflation, which there are correlations in between, but every single inflation by itself independently is EUR 15 million-EUR 20 million negative impact, and every single depreciation is around, again, EUR 20 million.
Given the macro parameters have changed, you might have seen it, we recently increased our inflation expectation in Turkey from 25% - 28.5%. Given the change in the macro parameters, it's a reflection of that basically, nothing more. In the context that we are in, that's why we are saying it's a negative bias rather than a pure very clear downgrade. In the context that we are seeing, what we see is that Turkey is withstanding quite nicely. The economy, management is also doing the right things in our view. In the context that we are in, we are relatively positive, but we have to reflect those macro parameter changes into our guidance. That's the reason for the negative bias.
Very good. Thank you, Maks. Next question, please.
The next question goes to Antonio Reale of Bank of America. Antonio, please go ahead.
Morning. It's Antonio from Bank of America. Just two questions from me, please. The first one on Turkey. The macro outlook for the region has changed now with inflation going the other way and rate expectations suggesting we might have a higher for longer rate environment. My question is how should we think about your net interest margins and cost of risk going forward? I heard your guidance. I've heard your color. But if you can give us a little bit more context as to how we should think about particularly these two line items in Turkey. Maybe related to that, your costs in Turkey have been running somewhat higher than peers.
I'm wondering if you have any initiatives that we should keep in mind when it comes to sort of targeting further efficiency gains in the region. The second one is just really an update on capital distribution. You're about to launch the third tranche of your buyback program for EUR 1.5 billion. That's the EUR 4 billion total that you already accrued. If I look at your CET1 ratio, you're still running well ahead of your target range, 1.5%, 12%. If you could give us an update as to what's coming next when it comes to distribution. Thank you.
Very good. Thank you, Antonio. Let me start with the second one, which is an easy one. As we mentioned many times, and I also mentioned it today during the presentation, we will start the third tranche of the EUR 4 billion, which is around EUR 1.5 billion, next Wednesday. Is it Luisa?
Yeah.
On the May 6th. That will last until the end of June, July period. At that point, we will continue on our commitment, which is to deliver excess capital above the end, above the top end of our range of 12%. Above the 12%, we will return it back to the shareholders. Very simple, very clear. On Turkey, our guidance, you asked different components around this, but our guidance on Turkey, if you remember in the fourth quarter call, was around 200 basis points. At the time, if you remember it very well, I think it's also registered in the document that it's gonna be higher in the first half, and then it's gonna be converging to 200 basis points for the year. In the first half, it's gonna be higher.
Luisa has given you the numbers already. In the first quarter 2026, the cost of risk. How much was it?
2.
EUR 2.53.
53.
If you isolate for the PMA that we did, if you take out the PMA impact, it's EUR 238?
Yes.
2, 238, which is completely in line with what we have guided you. Higher in first half and converging in the, for the year to 200 with improvements in the second half. Antonio, we have to be cautious on what we say on what's gonna happen with the war. We are quite cautious in terms of the impact because we don't know. It's a different story every day. Turkey, together with Spain maybe a bit, but much more in Turkey, will be the ones who would be affected more from the war than anyone else. As I mentioned, as a response to the previous question, what we have seen so far, we are in the war since February 28.
What we've seen so far in Turkey is that the country is withstanding quite nicely to what's happening, again, relatively speaking. The government has taken the right reactions. They increased the interest rates. As you know, there's kind of a ban in Turkey. They raised interest rates effectively from 37% - 40%. They are supporting also some of the sectors. They are supporting the inflation through a fuel price management mechanism and so on. They are doing the right things, and it seems like they are less affected than they could have been. In that context, we are, again, as compared to an otherwise scenario, we are relatively positive on what we have seen. We have to see how the world evolves in the next few weeks and months.
If the war continues for a long duration, which we don't discard as a scenario, but which we feel is a less likely scenario because we do think also given the political situation in the U.S. and the midterm elections in November and so on, it's not to the benefit of anyone to continue the war. It can happen. It can continue. In that scenario, let's assume that the scenario that we don't discard, but we see less likely, which is an extended duration of the war. In that scenario, Turkey will be affected and cost of risk might go up. At the moment, we stick to our guidance, and that's why we have given you the numbers that we have given for the first quarter, and we are again maintaining our guidance.
We have to be cautious, and we have to see how the whole situation evolves in the coming quarters, in the coming months. You asked about the NII dynamics as well. When interest rates go up, it's a negative on the margin, as also Luisa mentioned. The 3 percentage point hike in the effective interest rate is going to be affecting in the second quarter the NII negatively. Again, it's a relatively small hit that we can absorb, and we are activating other levers. You mentioned one of them, cost. We are activating other levers to basically tell you that we have a negative bias on Turkey because we don't know how the situation will evolve in Iran.
Overall, we have been quite resilient in absorbing all the shocks that is coming as a bank in Turkey.
Thank you very much. Next question, please.
The next question goes to Cecilia Romero of Barclays. Cecilia, please go ahead.
Thank you very much for taking my question. My first one is on the USMCA you touched on before very lightly. There is obviously uncertainty around renegotiation. What is your current expectation on timing and likely outcomes? Is this potential increase in volatility already reflected in your business plan assumptions for Mexico? Are your targets still based on a relatively benign macro and trade backdrop? Amid higher geopolitical uncertainty, do you see any early signs of credit pressure anywhere? Is there any segment where you are becoming more cautious relatively to what you had assumed for the beginning of the year? You mentioned about the worsening macro scenario and that you have done some PMA updates. Could you discuss how have your macro assumptions that you had in your business plan changed in this update?
Thank you.
Very good. Maybe I take the USMCA, Luisa , you take the overall war-related risk appetite question more broadly. On USMCA, Cecilia, thank you for the question. On USMCA, for the context of everyone, as you all know, it was signed in 2000, this agreement. It's a 16-year agreement. Every six years, it's 2000, in 2026, there will be a revision of the situation, the parties will decide whether to keep the original 16 years arrangement, which takes the agreement to 2042. That's the context. This year, until July, there will be a decision on whether they extend it another six years, overall, a 16-year contract to 2042.
If the parties do not agree on the full terms and this and that, what happens is that there's going to be an annual periodic review without the extension of additional 6 years. Okay? That's also a possibility without the full extension. Every year, you continue with the contract, you continue with the agreement, an annual review is then the base case in that second scenario. There's the third scenario where the contract is basically discarded. They cancel the contract. We don't think that the third scenario of canceling the agreement is on the table at all. We do think either the first or the second one would happen, most likely the second one. Even on the second one, what we do see is that it's the continuation of what we have at the moment.
What do we have at the moment? We have basically an effective tariff of 7.2% from all the goods exported from Mexico to U.S. 7.2%. This compares very well with 18% for the rest of the world. Again, exports to U.S., rest of the world, the blended tariff is 18%. It compares very well to China, which is 45%. As a result of all of this, what we have seen is that the exports of Mexico is actually up 6% in 2025, and it continues to trend in the first two months of the year. Exports are up, and Mexico is gaining market share.
If you take the exports to U.S. or imports to U.S. from a U.S. perspective, as a market, Mexico has gained market share while Canada and China, which are the two other large competitors in that market, let's say, they are losing market share. Mexico has been gaining position in that positioning. Why did I say all of this? What I said all of this because in the second scenario that I mentioned, which is an annual review scenario, we do think it's the continuation of what we have. There might be certain different dimensions added to what we have currently, but that scenario is not a bad scenario at all in our view. Why is that the case that there is the intention if either the first or the second scenario would happen?
I think the key important thing, I'm not sure that you have seen it, some of you might have read it, the U.S. businesses, Mexican businesses for sure, the businesses of U.S., companies of USA, they basically predominantly in a very strong way, they have indicated their support for this agreement. They said, "If this agreement is not there, as the U.S. businesses, we cannot compete." Very strong words. In the reports of the trade commissioners. In short, we expect either an extension of the contract or continuation of the status quo. There might be some changes here and there, doesn't fundamentally change the underlying dynamics because of a vehement support with a very strong support coming from the U.S. businesses on the contract.
As a result, we are not changing or putting a negative tune to what we see already in the first quarter, and we expect the situation to continue as such. The macro or the war impact.
Yes. Well, we haven't seen in the cost of risk numbers that we've provided any signs of distress or pressure in terms of the outstanding credit. The PMA that we've done of around EUR 100 million is more on the cautionary side. We have very limited exposure to direct exposure to Middle East. The exposure more would be to potential second-round effects derived from the conflict. There are some sectors that we're monitoring closely. We've identified 12 subsectors that are most exposed, electric power supply, transportation, steel, cement, your typical sectors that would be more exposed to the context of elevated energy costs and weaker demand and higher rates.
We have conducted a detailed analysis of these clients in these sectors, and we have already started to strengthen risk analysis and new origination, assessing the potential impact of the conflict on relevant new transactions and limit renewals with particular focus on anything related to the interest rate sensitivity analysis and energy shocks. We've developed enhanced monitoring of what we call vulnerable clients that are, you know, with more leverage in some of these sectors. We are doing forward-looking risk assessments, stress testing ratings, in negatively could be affected subsectors. I think that we're doing the right thing in terms of being cautious and being, you know, disciplined in terms of risk, but we haven't seen anything specifically yet.
That's why we maintain our cost of risk guidance across the footprint, and we don't currently anticipate any downturn in the asset quality cycle so far with the news that we have on the table.
Thank you very much, Cecilia. Next question, please.
The next question goes to Alvaro Serrano of Morgan Stanley. Alvaro, please go ahead.
Good morning. Thanks for taking my questions. One on Mexico and the deposit yield. It's up 3 basis points in the quarter from what I can see in your slide, despite rates, the average rates are down, Central Bank rates are down in Q1. I know there's a bit of a change in mix in time deposits are up, but it seems like it's even so it's more of an increase than I would have guessed. Can you talk us through what's update us to what might be going on and if you've had any campaign outstanding remuneration savings, if savings is a term, any color would be much appreciated. The second question is around the redundancy plan, the voluntary redundancy plan.
Can you give us a bit more color how many employees have left the firm and do you expect in more of these further down the line? I'm conscious that you're automating a lot of processes, so there might be more down the line. Just to confirm, this restructuring chart is included in your full year guidance, of course, in Spain. Thank you.
Very well. Thank you, Alvaro, as always. Regarding cost of deposits in Mexico, if you see the page that we have provided as part of the presentation, the answer is hidden in the increase in time deposits. If you also look on the right-hand side of that page, you see that the time deposits have grown by 26% year-over-year, and also in the quarter it has gone up. We have been basically pulling in some deposits, especially from the corporate side.
We said it before, I think we were very clear on this in the previous calls, saying that we would rather, when interest rates are quite high, we would rather fund ourselves from wholesale funding from the market rather than pure deposits because we don't want to be triggering too much of deposit price competition in the market. When rates come down, which is the case at the moment, as you know, in two years, nearly two years, the interest rates in Mexico have come down from 11.25%, the central bank rate, to 6.75% at the moment. We do think the bottom of that curve is gonna be 6.50% or something around that. We are already close to the very bottom.
When we are in this environment of relatively low interest rates in Mexican standards, we told you before that we would be a bit more competitive and get more deposits because we can afford the increase of prices in the market in that sense. In the last six months, in the last three months, a bit more, we wanted to get more deposits, and we were very selective, especially on the corporate side, corporate or midsize companies side. We pulled in some time deposits, which then reflected in the cost of funding to 2.12% versus 2.09% of the previous quarter. In the same time, you would see that our market funding, wholesale funding, is much less than what it would have been otherwise. That's the reason for the deposit in cost in Mexico. Restructuring topic, Luisa?
Yes. On the restructuring topic, the restructuring has affected around 750 employees group wide. The restructuring charges have been mainly booked in corporate center and Spain, where the payback is around three years. It's a very attractive investment. All the charges and the savings were already accounted in the guidance that we gave at the beginning of the year. That's one of the reasons why the guidance in Spain was high to, sorry, mid to high single digit growth in expenses. We were already including in the guidance this voluntary redundancy charge.
Thank you very much, Alvaro. Next question, please.
The next question goes to Benjamin Toms of RBC. Benjamin, please go ahead.
Hi, both. Thank you for taking my questions. The first one, on Slide nine, you show group costs growth in Q1 was 14% year-on-year, ex redundancies. That's above the weighted average inflation footprint of 9%. Are you comfortable in operating with that gap over an extended period as long as you have the positive jaws? Secondly, you upgraded your ROT guidance this morning for 2026. Your 2025-2028 guidance is for an average ROT of 22%. Can you just remind us of the expected shape of your ROT through 2026 - 2028? Should we expect improvement in each year of the plan? It's just interesting to know where the exit rate might be. Thank you.
Very good. Thank you, Benjamin. Very quickly, just to pick up some speed on the second question. 22% is the average over four years. As we said it before, we don't foresee a hockey shape there, we do see a continuous, relatively continuous improvement with higher return on tangible equity every year. Again, we don't have many more years to count on that, on that period. Last year it was 19.3%. This quarter we did really well. 2026, in our view, would be better than 2025 as we are guiding. 2027 and 2028 would be even better. Not a hockey shape, not like coming at the last quarter or last quarters. It's gonna be continuous improvement.
We said it before many times that the key driver of the numbers and the strategic plan is the fact that we do expect rates will be bottoming out in Europe and Mexico in the four-year period. Once rates bottom out, as we were expecting at the end of 2025, in early 2026 for Mexico, then spreads will not be declining anymore. Activity growth will be directly flowing to the bottom line, helping us on profitability. That's the key driver of the strategic plan. Given that, we see a continuous improvement every year. On the cost, our key focus has always been, the jaws.
If you exclude the restructuring charges, Luisa has mentioned it, EUR 125 million in total, EUR 100 million of that is basically in the Spain geography, EUR 60 million roughly in the holding corporate center and EUR 40 million in Spain. If you exclude those, practically all the areas have positive jaws, even the smaller countries. We do have this jaw notion as a management discipline in BBVA. If you grow, you have to deliver that growth. You might be increasing your costs, you have to deliver that cost increase by having more revenues. We are not very short-term oriented. We can wait, that has to happen. Every growth should lead to capital, organic capital generation. That's the mindset that we have.
As you can see, again, the jaws, we have this page every single quarter in I don't know how many years. That's the clear management discipline. Comparison with the revenue growth is very clear to us. Comparison with inflation obviously is less relevant as long as you, again, drive that growth with the organic capital generation that comes with it.
Thank you very much, Benjamin. Next question, please.
The next question goes to Marta Sánchez Romero of JP Morgan. Marta, please go ahead.
Good morning. Thank you very much. My first question is on capital allocation. We've read headlines about potential disposal of Atom Bank. You've recently announced the disposal of Garanti Romania. Does this all mean that you are taking a harder look at the footprint? Have you identified how much capital you could release from the disposal of non-core assets? I got a second question on NII Spain. Your deposit growth on an annual basis is quite impressive, 8% year-over-year, so you are gaining market share. Can you explain what is driving that? Is that corporate deposits, or is it more evenly split between retail, corporate, public sector? With that, what is the balance of risk of NII in Spain?
It looks like with a steeper yield curve where, with rates are today, I think we, you probably, your current guidance is a bit short of what we could see. Thank you.
Very good. On deposit growth, maybe Luisa can take it. On the capital allocation, you mentioned names, Marta, the ones that are not public or already happened. We don't comment on any of those, as you know well. We can comment on Romania. You said it's the harder look. It's a new exercise. To us, it's an ongoing exercise. We keep doing it all the time. If you don't feel that we have the competitive power to be able to deliver above our cost of equity in any market, we always look into it. It's not a one-off exercise to us, but it's an ongoing exercise.
In that sense, Romania, it's very consistent with what we have been saying to you all along. We do believe local scale in the traditional business model that we have, which is we have all the segments, we have all the channels, branches, and so on. In that traditional business model, we do think scale is important, local scale is important. In Romania, we do have 2% market share. It's subscale, and as a result, it doesn't deliver the cost of equity for us. We actually tried a process, it was public at the time, so I can mention it, back in 2020, and now we tried again. When the situation arises, when the market allows for it, we go for it. Otherwise, we are not also very.
We also take our time, and we are patient in these decisions. In short, it's an ongoing exercise for us, and we always deploy capital where we do have a competitive edge to deliver above cost of equity returns, and if not, we always look into alternatives. On the deposits?
Yes, indeed we've been growing quite strongly on deposits year-on-year. That 7.9 number is driven by demand deposits growing 5.6%. This is supported really by customer growth. You know that we always talk about these numbers. Last year, we grew close to 1 million clients. This year, we've, in the first quarter, grown around 250,000 clients. What we see is that when we onboard clients, 30% of the onboarded clients after six months bring either a payroll or pension product. These clients become active clients, what we, you know, more valued clients, you know, 70% of them after six months.
Really this goes back to our bread and butter of customer acquisition, where we are number two bank in Spain in client acquisition, also this year and last year. Strong growth on the back of customer acquisition. On the time deposits, where we have also grown significantly year- on- year, this has been more driven by our wholesale segment, both commercial banking, corporate banking, CIB, where you know that we've been also very active, and that has spurred the growth on the time deposit side.
Very good. I think there's also this question on NII guidance at the end for Spain.
Yeah.
Marta, that page is very important to us. That page we put at the end typically in the fourth quarters, which is the guidance page, and then if we do an update on it, whatever that page that we put. We discussed a lot whether in the guidance upgrade page we should include something also related to Spain NII. We decided at the end not for a reason. Because at the moment that upside would come from rates, from customer spreads. We do see at the moment that there is that upside, but that upside is completely driven by what's going on in the world. In the case of Mexico, we put it there as a clear upside for a reason, because it's more activity driven, which is within our control. We can manage that.
We do see very clear signals again in our pipeline and in the activity in March and so on. We felt comfortable, and we put it there. Given the fact that whatever we put there, we feel obliged, more or less to deliver. Obviously, we will always do the right thing, but we will deliver those numbers. Given the situation that the situation in Spain is dependent on the market developments and whether the situation changes or not, we felt uncomfortable to do it at the moment. We do have that obviously relatively positive outlook. If rates stay as such, if EURIBOR levels stay as such, we do have the upside. We don't know whether that's gonna be the case, and we don't know whether the EURIBOR levels will be sustained or improved.
Given that dependency, we decided not to put anything into the page.
Thank you very much, Marta. Next question, please.
The next question goes to Ignacio Ulargui of BNP Paribas. Ignacio, please go ahead.
Thanks very much for the presentation. I just have two questions, one on capital. Just wanted to get a bit of your thoughts on how much SRT or risk transfer usage you think you can do into the year, and whether the performance of the quarter can be extrapolated for the next three quarters. The second question is on rest of businesses. I mean, I've seen a very strong loan growth accelerating a lot in the first quarter, 50% year-on-year. I just wanted to see whether you will prioritize the NII or fees on that. I mean, I have seen NII is growing slightly below that level.
Just wanted to see how should we think about revenue growth in that 30% growth that you have given, above 30% growth that you have given, how should we think between NII and fees? Thank you.
Very good. SRTs, you wanna take, Luisa?
Yes. Well, I think that you've seen that we've done 12 basis points of SRTs this quarter. Last quarter, the first quarter of last year, we did around 13 basis points. We are not changing the guidance that we gave to the market, which is to do between 30 basis points and 40 basis points this year, and that's what we are on track to do. We're seeing the deals being very well received by the market. We've done, you know, we've closed very good deals in the quarter with improved levels on the levels that we saw last year. We will move forward with our SRT and asset mobilization plan throughout the year and in line with the guidance that we've given to the market.
[Foreign language]. On rest of business, I would give you a very conceptual response, and apologies for that, Nacho, would we prioritize NII or fees? Really, we would prioritize the client, whatever the client needs are. In some cases, it's like debt issuances, which we are very active in many of the geographies. It's very much fee driven. We also bank with the client in many other ways, NII is also gonna be very strong. The numbers that you see in the page, it's very obvious that fees are growing much higher than NII. It is not because of the rest of business or the CIB business that is underneath. As you know, rest of business, that page covers two main areas, CIB, beyond the footprint plus the digital banks. Digital banks affects the NII evolution in a negative way.
In that sense, NII is not growing as much as fees because of the digital bank impact. We should acknowledge that fact to you first. Beyond that, we are expecting. We have a clear fee bias in as much as possible. We would like to increase the fee percentage of that business, but it's gonna be across the board. In the pure CIB business, it's gonna be coming in AI and in fees, both of them.
Thank you very much, Nacho. Next question, please.
The next question goes to Sofie Peterzens of Goldman Sachs. Sofie, please go ahead.
Hi, here is Sofie from Goldman Sachs. Thanks a lot for taking my question. My first question would be if you could, it's going back a little bit to the previous question, but if you could elaborate a little bit on your performance in Italy and Germany, would you consider kind of expanding into any other European countries? My second question would be, could you just remind us how much of your net income and capital is hedged in Mexico and Turkey? Thank you.
Very good. Hedges, we know the numbers by heart, but Luisa, why don't you take that one. On performance of Italy and Germany, Sofie, we only provide at the moment the customer numbers. In Italy, we are at 900,000 customers. We launched it in 2021, practically. 900,000 customers in this period, in our view, is very good, much better than our business plan. In Germany, we launched in June, July 2025, nine months ago, and we are already above 100,000 customers. Again, much better than our business plan. I did mention this to you before. These digital bank proposition, it's going much better than what we originally thought. It's better than business plan in both countries. These are relatively long-term plays.
Typically, digital banks in a certain market, not only us, but others, it takes them nine, 10 years to break even. In our case, it's gonna be much earlier than that. In the countries that we are in, we are seeing so positive numbers that it's gonna be earlier than that. At the moment, they are still obviously posting losses. Once we have some maturity in these businesses, we will start also making it transparent to all of you on what the underlying numbers are. On the second question, Luisa?
Yes. Sofie, well, starting with Turkey, we maintain at the capital level hedges of around 43%, which is flattish quarter-on-quarter. We maintain a sensitivity of around 2 basis points negative to a 10% depreciation of the Turkish lira. And here, just to remind you, the cost of hedging is around 0.5 basis points per month. On the P&L side, we usually in Turkey have a level of coverage of around 33%. In Mexico, the capital excess capital that we are hedging is around 44%. It is slightly lower than the number that we had at December of 2025. We had a 57%, 55%, 57% number. The sensitivity to a 10% depreciation remains the same. Why?
What we've been doing is basically putting on more option structure into the hedges in order to achieve more optimization on the cost side. Which means that the sensitivity to a 10% depreciation of the Mexican peso would still be around 15 basis points, the same as last quarter. The cost of the hedges now, instead of being 0.5 basis points, is around 0.2 basis points per month. We think it's a better strategy in terms of cost optimization of the hedges while protecting the capital in the same level. As for the P&L in Mexico, we are hedging around 37% of expected next 12 month results in Mexico.
Thank you very much, Sofie. Next question please.
The next question goes to Britta Schmidt of Autonomous Research. Britta, please go ahead.
Yeah, thanks for taking my question. two questions on Mexico, please. With the positive bias on the loan growth outlook, should we also read that across to the net interest income were previously guided to NII growth slightly below loan growth? Also considering that you're still growing quite strongly in consumer finance. Secondly, on Mexico, the jaws here are flat. They were flat this quarter, year-on-year, partly thanks to stronger trading income, but the cost growth still remains very high. Maybe you can comment a little bit on the cost drivers here, what the outlook is, and whether you expect flat jaws for the year as well, or whether that could deteriorate a little bit. Thank you.
Very good. Thank you, Britta, for the questions. On NII, slightly below loan growth still holds because as you can imagine, the average customer spreads last year versus this year would be a slight decline in any case. It's gonna be lower than the activity growth. Given the fact that we are positive on activity growth, that's gonna be reflected obviously into the NII as well. We don't have a now more negative view on the spread at all. The only thing is last year versus this year, as we were guiding in the previous quarter, it's gonna be a bit lower. That's why it's gonna be lower than the activity growth. On the Jaws, you said it's slightly positive, it's very important to us. It's a dialogue that I have with all of my country managers all the time.
It is positive. It might be small positive, but it is positive, and we will keep that discipline of management discipline of jaws in that geography, as well.
Very good. Thank you very much, Britta. Next question, please.
The next question goes to Andrea Filtri of Mediobanca. Andrea, please go ahead.
Hello?
Andrea, please check your lines unmuted.
Oh, sorry. Can you hear me now?
Yeah, Andrea. Yes, please go ahead.
Thank you. Could you please provide a recap of the breakdown in each unit in this quarter for the PMAs you have taken and the restructuring charges that you have booked? The second question is, do you foresee any improvement in the EU regulation for banks, given the ongoing revisions and reassessments? When do you expect the approval of the Danish compromise from ECB for BBVA? Thank you.
Very good. Thank you, Andrea, for the questions. On the PMA, we don't provide the full detailed breakdown, but what we have already said is more than half is basically two countries, Turkey and Spain. The two of them. Spain because of the size, Turkey because of the sensitivity to the crisis much more than other geographies. The second question, the Danish compromise, as you might have seen, EBA, European Banking Authority, has published the list, and we already have the financial conglomerate. It has to be reflected into Danish compromise by an authorization from the ECB. That process is ongoing. It is ongoing as part of a normal procedure. We expect in the second quarter to have the full qualification.
Thank you very much, Andrea. Next question, please.
The next question goes to Borja Ramírez of Citi. Borja, please go ahead.
Hello, good morning. Thank you very much for taking my questions. I have two. Firstly, on LatAm macro, yesterday one of your competitors indicated that LatAm economies should be relatively better shielded as they are oil producing and, around 50% of your net profit last year came from LatAm. I would like to ask if you could provide more details. Into this, I think the Mexican peso has performed better than your business plan expectations. Maybe there could be some upside to your ROIC target for this year. Secondly, on Spain NII, following up on the point on the deposits, where I think there was actually a decline in cost of deposits in the quarter despite your market share gains.
I saw that your ALCO also increased in Spain. I think your NII sensitivity to higher rates in Spain is higher than your peers at 4%-5% of NII for every 100 basis points rates. Maybe you're better positioned in case of higher rates in Europe.
Very good. Thank you, Borja, for the questions. The first one, you are 100% right. I mean, we keep saying it all the time, so sometimes I feel like I'm repeating myself, and some of you have been in this job for so long. Sorry for the repetition, but there are two strengths of BBVA that is not very easy to replicate. Actually, we call them the three of them, but let me count all three of them. Number one is the diversification. Diversification, being in different countries and being in countries where the leverage ratios are relatively low, which means there is room for growth in lending, in banking, in those geographies that we are present.
The second thing that we always say, which is very different from other banks in our view, and which makes a big difference in banking, which is we are very large wherever we are. We have the best ROEs in the countries that we are in. Having the best bank, having the largest bank in the countries that you are in always is the best thing that you can have in banking. The third one is we think we are great in embracing innovation. We have done it in digitalization, and as a result of that, our customer acquisition engines, our sales engines work much better because we are, in our humble view, better than competitors in digital. You touched upon the first point of this, which is the diversification. The macro situation, there is a lot of uncertainty still out there.
Again, every day is a new day. When we look into the potential impact of an extended duration crisis in the Middle East, what we see is that in terms of different geographies, Latin American geographies are either neutral or positive. Argentina and Colombia would be positively affected because they are, in general, oil exporters. Obviously there are gonna be other transmission mechanisms that might be hurting them. Inflation might go up, consumer sentiment might go down, and so on. We still think they would be relatively well-protected and even positively maybe if impacted from this. Mexico and Peru also. Latin American geographies are relatively isolated from this, and they might benefit in terms of tourism flows. They might benefit from supply chain redirections. They might benefit from the fact that, again, they are exporters in general of commodities.
In short, LatAm, we have a relatively positive perspective from the impact of the crisis on those geographies, which is again talking to the strength of our diversification. You asked related to this, whether Mexican peso will stay at these appreciated levels. We don't know, obviously. In our plan, we still see some more depreciation to come along, but if it continues at these levels, that's an additional upside that you can put into your models. Then the second topic about interest, NII, and interest rate sensitivity, Luisa, do you want to comment?
Yes. Well, first, on the NII, on the customer spread topic and the evolution of yields and costs, I would say that, and I think Onur has mentioned this as well, that we expect, you know, quarter-on-quarter spreads to remain stable in the year, perhaps picking up at the end of the year. This is because, primarily, most of the mortgage book has already repriced. As you know, we, different to other players in Spain, we tend to reprice quite quickly our mortgage book. 2/3s of it is reprices every 6 months. That yield compression is on the floating rate part of our mortgages, which is around 46%, is already mostly achieved.
On the NII, customer spread side, more or less stable unless 200 points interest rates change. That's more or less what we have in the guidance contemplated. With regards to the ALCO portfolio, the ALCO portfolio is contributing positively on the quarter with the NII. We have increased the ALCO book in the quarter by EUR 1.7 billion. We were actually able to purchase bonds at yields above 3.2%. I think it was a very successful strategy. Nevertheless, I think that we're maintaining our interest rate sensitivity within the same levels that we had at the end of the year, between 4%-5%.
As you know, typically our balance sheet, if we don't do anything, generates through time a higher sensitivity because of the weight of our site deposits. What we're doing now basically is maintaining this sensitivity of 4%-5%. We will see, depending on what the, you know, policy rate environment and the EURIBOR does, whether we decide or when we decide, if we decide to increase the rate sensitivity of the book, at the, you know, or not.
As compared to our Spanish peers, we have a better higher sensitivity, and it might help us if rates continue to go up, for example. Very good. ?
Yes. Next question, please.
Final question. Perfect.
Final one.
The final question goes to Ignacio Cerezo of UBS. Ignacio, please go ahead.
Yeah. Hi, good morning, and thank you for taking my questions. The first one is on trading. I know it's probably a difficult one to answer, but if you can give us a bit of a breakdown basically of why the figure has been so strong across most geographies, where that strength is coming from, and kind of any comment you can make around recurrence and sustainability, seasonality. I mean, just a bit of color basically on how recurring that number might be. The second one, follow-up actually to what Britta was asking about the cost growth in Mexico and the jaws. I mean, do you think there is part of the cost growth today which is based on kind of frontloading investments and the jaws actually can start improving over time?
Do you think there's the cost growth you need to incur to generate the revenue in Mexico? Thank you.
Jaws in Mexico and trading income. I take the trading income, you take the jaws, Luisa, if that's okay. Trading income, it's mainly global markets, Ignacio. Mainly global markets. We have been mentioning this. We do think we can create value by increasing our size in the CIB business in a very cautious way, in a risk-conscious way, but also in the way that we do it, which is cross-border-focused, sustainability-focused, banking on our clients in their business outside our core geographies. We mentioned it in the strategic talks that we did with most of you a few months ago. 40% of our business in the CIB business now, 40% is coming from cross-border. Basically deals, things that we do for our clients beyond their own geography, but they're our clients in their core geography.
40% of our business in CIB is global transaction banking, as we call it, which is transaction banking focused. Our CIB growth is basically focused on corporate banking rather than pure investment banking, and that is helping us. That is also helping us in the net trading income. Because in this first quarter, our clients, not only it's the leverage, but it is the topic of our clients trading, and that is helping us as we grow that business. One number there in the trading number, 40% of the global markets revenue that we have in, roughly, I'm giving you the rough numbers, 40% of the global markets revenue that is booked under NTI is basically the FX business. Given the volatility in the market, our clients have traded, especially on the FX side. We are in many geographies.
We are an emerging markets bank as well, and that has helped big time on the global markets business. There is also one other component, which is a smaller component, but an important one. Given the steepening of the curves in some geographies, especially Spain and Mexico, we have extended the duration. You can see it also in the presentation in the appendix that in the ALCO book, we have extended the duration a bit, which meant we sold short end of the curve, which was NTI, and we bought long end of the curve. NII would not be affected that much because of the steepening of the curve, but that also brought some NTI. The core driver was the global markets business. On the jaws in Mexico, Luisa?
What I would say is that, I mean, we always invest at different horizon periods. There's some investments that we do now that, you know, we expect the payback will be, you know, this year, next year, or even sometimes two or three years. I think that, more than specifically how much is front-loading or not, I would just say that our commitment is to that efficiency level in Mexico that we have at low 30s. Efficiency is 30.8%, that's the guidance that we've given also for our midterm, long-term goals, and I think that's what we're committed to delivering.
Yes. Thank you very much, Ignacio. Thank you all of you for participating in today's call. As always, the investor relation team remains at your disposal for any additional question or clarifications. Have a great day. Thank you.
Thank you to all of you.
Thanks.