Great. Thank you everybody for coming to this session with BBVA. I'm delighted to welcome one more year, Luisa Gómez Bravo, CFO of BBVA. Thanks for coming one more year, Luisa.
Thank you, Alvaro, for having me.
As usual, we're gonna start with a polling question to set the scene.
I'm nervous now with the polling.
Well, it's not oil related. What's the primary catalyst of BBVA stock to outperform over the next 12 months? Number one, further buybacks on top of the EUR 4 billion announced in December. Number two, margin in Mexico to prove more resilient in 2026. Number three, positive outcome of the USMCA negotiations between Mexico and the U.S. Four, Spain outperforming operating trends, and number five, Turkey making more progress towards the end of hyperinflation accounting.
I don't get to vote?
I'm gonna ask you now. Great. Margins in Mexico. That's not a complete surprise, but what would you have voted?
I would say that, Mexico probably is a good supporting, story for BBVA in terms of performance, especially because last year was quite challenging, but we'll get to that.
I'm sure. Yes, we're definitely gonna touch on that. Why don't we start with the overall guidance you gave the full year results. It was seen as cautious. We can start on how you see the overall outlook of the bank. Not an easy environment, of course, at the moment. How impactful do you think the sort of Middle East instability will be on your business, do you think? How are you seeing things today with the complexities of the current environment?
Yeah. Well, obviously, let's start with that, you know, with the geopolitical risk. I mean, the dimensions to geopolitical risk are numerous. It's, you know, you can talk about Venezuela, Ukraine war, now the Middle East. And even within the Middle East, there are a lot of angles to the geopolitical risk situation. But the central scenario that we have at BBVA is that this is more of a short-term duration situation than a long-term duration situation.
We can qualify that in a minute. But within that context of this being a short-lived, you know, conflict, short-lived meaning weeks, not months, we haven't fundamentally changed our outlook in terms of the macro impacts on our footprint.
We can, you know, we remain quite positive in that outlook, even with a, you know, with a complicated first quarter of the year in terms of energy prices, you know, as we're seeing, you know. In that context, I would say that Turkey is the geography in our footprint that is more exposed to energy shocks and prices, especially on the path through to inflation.
As you know, the importance and the commitment of the government has been to decreasing inflation. That's the geography within our footprint that would be more negatively affected.
In general, I think that we don't see, even in that case, in a short-lived situation, a scenario that derails very much from the view that we had on the macro side of Turkey of decreasing inflation towards the end of the year and decreasing rates. Now, if the conflict is longer, you would see a little bit more of a slowdown in the economies.
Again, Turkey then would probably see a level of inflation that doesn't decrease and a situation in rates that doesn't decr ease as well. Spain is a geography that is also exposed to energy because it's an importer of crude. Spain has buffers that could cushion that in the sense that energy mix in Spain has significantly changed over the past few years.
Then as you know, it's a service economy versus the European Union. It would still be, I think, a positive performer in that context. You have tourism as well, that we think could be a positive catalyst for Spain as well in terms of GDP growth this year. I think the rest of the footprint is not that significantly impacted even in a prolonged conflict, because Mexico, and we'll talk about Mexico now, Mexico dynamics are more driven by the U.S., the negotiation of the USMCA and the dynamics, internal dynamics of Mexico than, you know, than the energy shock or the conflict, which is, you know, very far away.
I think, you know, in the context of what we're seeing, that central scenario where, we don't see a significant change in terms of our outlook, or in a, you know, an alternative, risk scenario, BBVA, I think, will perform, very well versus the peers be cause I think we have three basic structural advantages. The first one is the diversification.
As we're talking now, the economies in the footprint behave differently. We saw that in the price crisis. We saw that in the Ukraine war as well. The diversification of the footprint is a point of resilience for BBVA and outperformance, in these scenarios. In addition to that, we are in low leverage economies. The economies and the private credit is low, and that has been support for continued growth going forward.
That is what we are expecting as well. The first structural advantage is the diversification of BBVA in low leverage economies that promote growth with an adequate asset quality. The second structural advantage, I think, and we've talked about this very many times, is that we have leading franchises in the countries where we operate.
Having local scale is very important to ensure sustainability of profits going forward. We have the adequate scale in all the countries, and we have superior ROEs versus the average of the system as well, sometimes in a very significant fashion. Again, going back to Mexico, we have an ROE of around 26%, and the average of the system is around 16%. But you take that to Turkey or you take that to Spain, and that outperformance is still there.
I think that's a very relevant part of our equity story, is having leading franchises and adequate scale in the countries where we operate. The third structural advantage has to do with our strategy. It has to do with the strategy that we've been developing around sustainability and the business opportunities that provides. It has to do with the digitization strategy that we've been investing and deploying and leading all along.
It has to do with the innovation mindset of BBVA and how it is embracing now the challenge of AI in a very positive fashion. I think that is also a structural advantage. That allows us to be, I think, very positive, even with this uncertain outlook and the capacity of BBVA to continue to deliver outperforming the peers with growth, superior profitability.
With that guidance that we gave around 20% of our ROTE this year and continue to deliver, you know, shareholder remuneration to our investors. Very in that sense, quite positive.
Resilient sounds like it. Another obviously very big topic, even greater than last year's, everything around artificial intelligence. From an operational point of view, how's BBVA thinking about it? We had a polling question in the morning where this audience sees it as a net benefit, but of course, the market has doubted around disruption and even task quality. How does BBVA think about it?
Well, first of all, we do believe that this is gonna be a tremendous disruption for all the sectors, not just banking. I think that we definitely perceive that it's gonna be disruptive and a very significant transformation. I think the difference to prior transformations is the speed of change. That generates more tension because generally sectors need time to adapt to, you know, changes in transformation, and this is happening at a very quick speed. Within that transformation, I think the banks, as a sector, is probably gonna be not the first in line to be disrupted.
Probably, when people manage their money, they tend to be cautious of, you know, giving an agent complete, you know, capacity to manage, your money, versus, for example, buying sneakers through an agent, right? You know? Having said that, I think that, the banks themselves are gonna be very much disrupted. There is a question, again, of finding the winners or the losers, right? Across the sectors. BBVA intends to be a winner of the situation.
We definitely believe that this is an opportunity for us. I think the winners are gonna be characterized, I think, by three things. First of all, do you have a trusted client relationship? It's very important when clients manage their money, to put the trust in the right agent, bank, financial services provider.
Do you have a brand that acknowledges and represents that trust? Have you put your client first in terms of relationship building? Have you been, how far ahead are you in your digitization strategy? Because that allows you to be able to leapfrog a lot with AI. The second thing is, have you been investing in data? Have you been doing your homework, with regards to data? In that sense, BBVA, again, sees this as a tremendous opportunity on the back of our experience in digital banking. It's true that sometimes, and the questions that we get asked are very specific in terms of impact, et cetera, and it's very difficult, and we don't know.
What we do know from being leaders in the digitization in the past is that fast-forward, you know, 10 years down the line, we've been able to scale the bank significantly. We're acquiring 11 million clients. Two-thirds of that is done end-to-end digitally. We have the capacity to deliver on the customer experience. We are following this is my name a triple A strategy. Triple A. No, this is my name. It's not, you know, how we call it internally. It's basically based on the agenda. We've talked about the focused agenda. The second thing has to do with adoption, especially employee adoption. The third thing has to do with allocation of resources. Let me be a little bit more explicit in that sense.
This, again, follows on the playbook that we followed with digital banking. The agenda is, it's very important because it has to be as we are driving it top-down. The management of the bank is very significantly involved in this top-down agenda with regards to AI. We have monthly meetings where we look at the review, and this is a holistic agenda for the whole group.
In that context, we have been working on a three-pronged strategy that has to do with customer and how we're seeing the agentic relationship of our customers with the bank. The second thing has to do with employees and how we can support our employees to leverage on the commercial relationships much faster and better.
The third thing has to do with productivity and productivity gains, which are probably the soonest to capture in that regard. No, but it's that three-pronged strategy with a very focused agenda driven top-down that I think is the first part of our very much driven strategy. The second thing has to do with adoption. When we started the digital strategy and transformation of the group, t here were a lot of you know trials and errors, as with any journey. But one of the things that we decided very early in the beginning is that we didn't want to have a separate online bank, which I respect very much the peers that do. At the beginning, we did have an online bank, you may remember Unoe.
Unoe, yeah.
Yeah. We decided that in order to capture the transformation, especially with regards to client and client relationships and putting the client at the center, you had to transform the whole bank. That means transforming the branch relationship model and the way you are interacting with your client. Adoption for us is very important. We have 75,000 of our employees; we are a 127,000 employee bank. 75,000 of our employees are using Gemini. We also have ChatGPT licenses, which we are also rolling out. I would say 60% of our employees are using these tools on a daily basis.
This is very important because you need to build on that to be able to provide that capacity to roll out and embrace the opportunity, in a, in a much, larger way. That is, I think, very important adoption. From adoption, you go and you move on to best scaling, best practices, and so on and so forth. That is the second point I would say that is important.
The third thing that is important for us is allocation of resources. This doesn't mean multiplying by X the investments that we do. It means that we need to allocate, resources to this priority. Now, we again, taking on the playbook of digital, we developed something that we call the Single Development Agenda, which is the way we allocate resources globally within the group.
Our cash out is driven by the strategic priorities that we have on a global level. If you don't have a tool that allows you to deploy the cash out adequately in a focused and targeted way, what tends to happen in general, and I know this from experience, is that the initiatives that are starting never get to move on because there are so many other pressing issues that you wanna invest in on a day-to-day basis that, you know, people tend not to have that focus. We have this, the Single Development Agenda has allowed us and allows us to prioritize resources in an efficient way to allocate them now to what we're doing in AI. I think that is, you know, the strategy that we have.
Again, we are exactly, you know, very, very excited about this opportunity because we think it's gonna be a source of more scale, more client engagement with BBVA and more business opportunities and profitability going forward.
Right. Got a few questions on the regions. Let's start with Mexico. You got it to mid- to high single-digit% NII growth. What assumptions are you factoring in, given the strong loan growth, the strong growth we saw in 2025, at least we think that looks very conservative. I don't know to what extent fintech competition is part of that. How do you see that playing out?
Okay. Two questions in one, but I'll tee them up. First, I think it's important always to start with the macro backdrop, which again is, I think, important. Mexico is the only geography in the footprint that we've upgraded in terms of macro GDP dynamics this year. We started the year thinking that GDP growth was gonna be 1.2% higher than last year.
We've upgraded that to 1.8%. We're seeing quite positive macro dynamics in Mexico stemming from you know salary and minimum wage increases that continue to support private demand. We're also seeing investments in the country being quite more positive this year, contributing to GDP around 7% versus last year, it was a negative number.
This is on the back of the Plan Mexico that was announced and tangibilized by Sheinbaum recently. We're quite positive in the dynamics that we're seeing in the market on the macro side. Also this is coming from last year, and I wanna remember last year was so complicated on that front because remember we had Sheinbaum was the new president.
We had a peso that had depreciated significantly in 2024. We had obviously the tariff discussion on disruption. On the back of that, you had Mexico actually delivering not only with a better macro performance than we were expecting at the beginning of the year, but with FDI increasing by almost 14% in the year, right? Record numbers of foreign direct investment in Mexico at around EUR 41 billion.
We saw exports increasing close to 7%. We saw an effective tariff rate below 8%, obviously much better in relative terms than any others, including obviously the main competitor to Mexico, which is China. We saw an increased share of imports from the U.S. into the U.S. at 15.8%, the largest trading partner increasing its market share into imports. That has been, you know, in a year that was very, you know, volatile for Mexico.
We are quite positive in what we're seeing now, and obviously we're now geared towards the USMCA discussions. We're seeing in the conversations that we're having with Mexican government officials, with Mexican business owners and business people, quite a constructive mood regarding the USMCA.
This is not just on the back of Mexico, it's on the back of the U.S., sectors lobbying the Trump administration to renew the USMCA, with a recent letter signed by 69 lobbying associations to Trump promoting the discussions and the further improvements. Of course, you never know with how things could go. I think today we are seeing quite a constructi ve mood around the USMCA. The backdrop in terms of the macro is important, but also we always say with regards to BBVA Mexico, how important it is to be in a country where the leverage ratio is 35%, which is one of, you know, the lowest in, you know, in the emerging market economies and how that can support and sustain growth in a structural way going forward.
As I was saying before, even in the context of a situation where there is a prolonged conflict in the Middle East, Mexico is more driven by what's going on in the U.S. and what's going on with the USMCA and what's going on with the Plan Mexico and internal dynamics, than today by this situation. That's the macro backdrop, which I think is important, and it took a little bit longer, but I think it sets the answer to the first question that you were saying about our guidance with regards to Mexico. When you look at the NII, we did give a guidance of mid- to high-single-digit growth. Why is that? On the activities side, we are seeing positive dynamics.
The beginning of the year has been quite positive, very similar to what we saw at the end of the year, double-digit growth in retail portfolios, slower wholesale portfolios, but also driven by, I think, something that has been a positive surprise to me, which has been the performance of the Mexican peso. The Mexican peso has appreciated 3% year to date. We, in our guidance, had expected the Mexican peso to depreciate. That's a factor that also weighs down the evolution of the wholesale portfolios because of the dollar loans in Mexico. Overall, I would say that, you know, positive views on the beginning of the year of the dynamics that we're seeing in Mexico.
Rates is the second bucket in the NII, and that's what more conditioned our mid- to high-single-digit growth in NII, because remember, we had a high-single-digit growth in activity. Why is that? Because rates came down 300 basis points last year. Obviously you still have some average margin compression that needs to feed through the customer spreads this year, and that's why we gave that guidance. On the back of that, I would also say there's a third component in NII, which is the ALCO portfolios. We have been managing the ALCO book to extend durations in Mexico, and that has also been the case at the beginning of the year. Obviously as rates come down, the positive contribution from the ALCO is also embedded in that guidance.
That explains a little bit the mid- to high-single-digit guidance on NII. Last but not least, on the neobank discussion. I think we've said this many times. I think BBVA Mexico is definitely the best bank in Mexico. It's one of the best banks, I think, in the world, but it is the best fintech in Mexico. I think that it is obviously not just us saying that. I think it's the data that you know walks the talk. You see that we have been acquiring clients, around 4.7 million clients acquired last year. 81% of that was done end-to-end digitally. We are selling around 58% of our value on digital as well. We are competing head-on on the digital front.
not just that, also with the UX, obviously we have a value prop in terms of UX frictionless access to the bank, that supports an NPS score of 70%, 70%. That is the highest NPS score in the bank, in the country. Actually better than the neobanks, which are monoliners, and we're a universal bank. Achieving those high scores is not by accident. It's about over 10 years of investment in digital and the UX experience of our clients on the digital side.
Third, I would say also highlighting the capacity that we've had to compete against the neobanks, especially on the monoliners and the credit card side, where last year we remained the largest player in the market with a 31.4% market share, including the neobanks, and gaining 50 basis points market share also on the back of a previous year when we also gained market share. Very focused on defending the overlapping clients that we have with the neobanks. What we've seen, and we monitored the cohorts, and we see that 12 months forward, when we start to see a client moving, you know, their transactionality on the card, let's say to the neobanks, we put focus on that, and twelve months later, we're recapturing and regaining that expenditure on card.
Very focused competition there. On the bank, again, on a very significant cost advantages, which is being transactionally to the clients, which ensures funding growth for the future. We have a cost of funds that is 2.5% compared to 4% of the average of the sector, not even within considering the neobanks. With that 44% market share in payrolls and a 38% acquiring market share, which supports again the scope of growth going forward to support and fuel the opportunities that we're seeing and continued growth on the lending side as the economy formalizes, and we're able to capture that growth with sustained low levels of cost to income, even better than some of the neobanks at 30s, you know, low 30s, which is our guidance for our midterm goal.
Very positive across the board with Mexico.
Okay. Really switching regions, Spain. In Spain, your loan growth has been pretty impressive last year, 8% growth. How do you see the outlook from here? And is that growth driving part of the cost evolution that was very much debated?
Yeah.
for the full year results?
Yeah. Well, again, two seconds, not two minutes on the macro backdrop of Spain. Again, the performance of Spain has been surprisingly positive versus, you know, the European Union with that delta quite supportive today. We have a view of GDP growth of 2.4% for this year in Spain, the same number for next year. What we see is that the dynamic is supported by private internal demand, good job employment dynamics. Obviously, immigration has helped as well in this regard, and improvement in investments also in the country, especially as construction of housing continues to add to the GDP growth going forward. In that sense, I think positive macro backdrop to Spain.
In addition, again, I talk about leverage because Spain has been deleveraging for over 15 years. It's true that last year we started to grow. We've been growing above the market, you know, for the past few years. Structurally speaking, you're starting from a point of low leverage in the economy, definitely lower leverage in the private side on the households and corporates than our European Union partners. I think positive macro fundamentals also with a good backdrop in Spain. In that context, we have been focusing on growth in specific pockets of where we see value. The first one is the enterprise segment. In the enterprise segment, we have been working over the past few years in growing our share of the enterprise segment.
We have seen that is an area of profitability and profitable growth for us. Last year, we grew our market share around 58 basis points, but on the back of the past five years, we've been growing around 260 basis points all in. Really a focused strategy that hinges on ensuring that we are the primary bank to our enterprise clients. When you are the primary bank to an enterprise client, you get twice the level of gross revenues than when you are not a primary bank. Primary bank means that you have to be in the transactionality of those clients, and we've put a lot of focus on segmentation and putting focus and RMs devoted to, you know, midsize, especially midsize companies. We've put a lot of focus in digital, pre-approved loans, time to cash.
Time to cash is important. We're able to make sure that the approval process of our credits is more frictionless. It all ties in sector-driven approach. It all ties into being able, again, to deliver on growth. We do expect this year, we started the year, I think, again, similar to Mexico, with very good activity dynamics in Spain. We expect the same similar behavior into this year with our guidance of mid-single digit growth and activity, supported by increase in enterprise, but also increase in consumer loans. In consumer loans, we have a 60% market share above our 14% market share overall. This is again a focus of many years of work, again, digital backed with pre-approved loans and instant cash.
I think that has allowed us, again, to grow in a profitable segment that is not very material overall, in the lending books of the banks in Spain, but we've put a lot of focus on that side. In that sense, I think we're very comfortable with the dynamics that we're seeing supporting our guidance again this year. It's of that low- to mid-single-digit growth in NII. With regards to the cost, I think, you know, we are going to continue to be very cost disciplined in Spain, again, on the back of, you know, the best efficiency levels in Spain against the rest of the banks.
The guidance that we gave this year, which was mid- to high-single-digit growth and cost, is basically driven by the last year's one-off impact that we had on our VAT impact. We had an inspection of VAT. As a result of that inspection, we recognized, you know, a new criteria in the way we were looking at VAT, and that meant that we had lower expenses, and that.
It was right back in Q2 last year.
Yes, in Q2 last year. That's why, you know, with the comparison basis, we had to ensure that the guidance we gave was taking that into account. Overall, I'd say you can expect the bank in Spain, excluding that impact, to grow its expenses around 3%-4%, which I think is reasonable with the context of investments that we need to continue to do, and with the efficiency levels that we want to target to, which, as you know, in a midterm plan is around low 30%. I think that's pretty consistent as well.
Right. Got a couple more questions. I want to leave time for the audience. On Turkey, at the beginning, you touched on the impact from the energy situation. How do you see the inflation disinflation path in the country? You're aiming for EUR 1 billion profits this year. Maybe you can discuss the underlying sort of margin revenue dynamics there, and what's the longer term earnings power?
Yeah, well, again, the macro, I would say that in general, I mean, the macro is always important when you're in the banking industry, but I think in Turkey, it's especially so because we have been looking at the normalization of the economy on the back of lowering inflation rates. I think we've been very vocal in saying that we do believe that the current economic team in place, both at the central bank and at the administration, has been very supportive and committed to decreasing those inflation levels. I think they have been, you know, delivering on that over the past couple of years, in, you know, a complicated scenario, as well, you know.
This year, again, with the short-term duration cycle, we do expect Turkey to continue to lower its inflation targets and lower its interest rates. This is a macro scenario that is very sensitive to the current dynamics, again, on the energy prices, tourism, right? The situation there, as you know, is that for us, it's very important that inflation continues to come down. You may remember that, I think it was a couple of years ago, 2023, the impact that we had from our hyperinflationary impact in our accounts was above EUR 2 billion. Last year, it came down to EUR 0.9 billion. Even with hyperinflationary accounting, the decrease in inflation will be supportive for improvement in Garanti's earnings.
To your question, we need to see that inflation continue to come down. That is important for the contribution of Garanti to BBVA. Again, the commitment is there from the government to act. What we saw actually at the beginning of the crisis when the situation started to develop, we saw Turkey put forward, you know, an increase of overnight rates from 37% - 40%. It also intervened in the market in terms of stabilizing the lira, which has a very strong pass-through to inflation. The energy prices, it was only translating 25% of the increase in energy to the population. It's been quite quick to react, and we expect Turkey to be able to quickly react to the situation. You were asking about the underlying trends.
I think what is more relevant for us on the underlying side is that you see Turkey outperforming its peers in terms of profitability. It had a local ROE of 30% versus the average of its peers of 20% last year. It has been very focused on the management of spreads, which has been quite complicated, I would say, because of the macroprudential policy in place in Turkey. In that context, what we're seeing at the beginning of the year again are adequate, you know, good activity dynamics. As you know, there are caps on activity in Turkey, but a very good management of the spread. I think that especially on the cost of funding, I think that's the critical element to see in Turkey.
That has been, you know, quite supportive at the beginning of the year, I would say. Then you have the asset quality dynamics. As you know, asset quality had been increasing in terms of cost of risk, but still in a normalized level. We did guide this year to a higher cost of risk at the beginning, the first half of the year, as rates continued to be high, and we need to see those rates come down to be supportive of asset quality, improved asset quality dynamics, which we're expecting to be better in the second half of the year. That's where we are today with the context of the information that we're seeing.
Last one from me, and then I'll open up. Obviously, in December, you announced the EUR 4 billion buyback. You reduced the CET1 to 12.7%, and you've been very firm that you can run the bank with 12%. That also you made it clear that it won't take you very long to get there, I think were the words more or less, that I heard during last year. Should we expect further buybacks then later this year? Because with your level of profitability, you can comfortably fund organic growth, so you're gonna still be building capital.
Yes. I think. Well, first of all, on the current share buyback, as you know, we completed the first tranche. We expect to move on with the next tranches. We need to explain or, you know, present the execution of the next level of share buyback to the governing bodies. Hopefully that will, you know, that will move quite quickly in the next few days. Moving on, from then on, when we do see that, as you were saying, with the capacity of the bank to generate profits is significant. We are guiding, you know, as you know, this year for a 20% ROTE.
The average that we committed to the market over the you know the four years when we started the midterm goals was at 22% ROTE. With that consideration, investing organically in our footprint is gonna be obviously the first priority because we're able to generate capital on the back of that. We've also stated on the back of that, by the way, the contribution of earnings, just when you look at just the P&L contribution of capital, was 255 basis points last year. First and foremost is deploying capital to grow organically at those levels of profitability. We've also been very clear about not wanting to structurally hold any excess capital.
We are committed to delivering, you know, shareholder returns on the back of that capital generation going forward above the 12%, which is, as you know, the high end of our target ratio. That's what we're focused on. That will be obviously a dynamic process as we're seeing how our footprint grows and we determine, you know, we do our capital planning exercise. We will be, you know, obviously returning capital as we go along in that gradual way towards the 12% target, which is our commitment. Yes, we are definitely committed. As you know, we guided in our midterm goals that we were gonna be able to, in that period of time, over the four years, be generating around EUR 49 billion of capital.
We said that around EUR 13 billion is gonna be devoted to growing organically our franchises and the rest of EUR 36 billion would be available to distribution. We still see that environment going forward.
Okay. I'll open it up for questions. Who's got a question from the audience? I've got more questions. I just don't wanna monopolize the debate. It's been a quiet room.
I see.
Don't take it personally.
Maybe I talk too much. I don't know.
There's a question at the back there.
Hello. One question on Spain on your lending growth there, which has been impressive. How are you managing to reach such a level of growth? What does this mean in terms of your pricing policy on spread management?
Yes, very good question. Well, I think that when we are growing market share and growing, it's because we have a targeted approach to the areas where we wanna grow. The competition dynamics in Spain are very intense. I would say in general, it's a very competitive banking market. Banking is a very competitive market. But the ability that we've had to grow in these areas, again, is because of the sustained investment that we've had on the different strategies in the segments I was highlighting before, the enterprise segments where we've been developing pre-approved loans in a significant broadening the scope of pre-approved loans, targeting better the segments, deploying you know, relationship managers, improved relationship managers to the segment.
It's a holistic view, and especially promoting transactional services, which is at the core, again, of the management of spreads. When you look at the evolution of a customer spread, and again, it depends on the mix of the business and comparability with our peers. We saw spreads that had been compressing and despite the Euribor rates still following through with compression this year now, what we're seeing is that the customer spread should be stable from the fourth quarter customer spread point of view. We have our mortgage book reprices quite fast versus our peers, for example, two-thirds of our mortgage reprice every six months. We're seeing that level of the floor of customer spread having been reached.
I think probably it will take a few more quarters to see spreads coming up. Obviously, it depends on the rate situation. We didn't expect Euribor to be at 2.5% on a 12-month basis. We'll see how that evolves. Generally speaking, I would say that the ability to grow our market share has been driven by the strategy behind each of the segments, and again, on the consumer side as well, very much driven by digital and open market strategies, with an adequate risk approach, rather than pricing advantages in themselves because that is short-lasting in terms of market share gains.
Great. The polling question this morning also suggests that there's not a lot of conviction in the room around the 2.5%, sort of around the ECB. Next question, please. I'll take it. I'll follow on from my last questions around-
That was the Euribor.
Yes.
Anyway.
Yes. On distribution, capital allocation, and we've seen plenty of sort of further M&A announcements in the sector, even sort of a bit this week. With Sabadell in the rearview mirror, how do you think about M&A in the future? You don't have any obvious sort of gaps in your businesses. How are you thinking about that?
I think that the first thing is what do we need, you know, in terms of equity stories? I started at the beginning saying how important it is to have leading franchises where we operate. Scale is very important. When you're looking at opportunities, for example, out of footprint that, you know, we don't see anything that is relevant because again, you would need to go to a large country with a large, you know, scale.
We think that it's better to, for example, in Europe, as you know, go into markets through our digital bank strategy like we did in Italy or like we've done in Germany, which we think is a better long-term strategy than deploying capital in, you know, in markets that are out of our footprint.
Looking into our footprint, as again, we mentioned scale was important and the deal with Sabadell last year had to do with that scale and how relevant scale is. If you go market by market, as you say, Spain, the deal that made sense for us was Sabadell. It was strategically the adequate fit for us, and it had the adequate size. Doing M&A for smaller targets is a very significant disruption. Why? This is important because it's not about execution risk, which you may have. It's actually we are a bank that's continuously, I mentioned before, investing in digital and it's AI. When you're doing M&A, you have to freeze that because you have to integrate IT.
There's a cost of opportunity embedded in doing M&A, in the view that we have of, you know, again, delivery of organic growth and investment in, you know, in data, AI, and technology. It has to make sense to do M&A with the right size. Again, in Spain, we don't see that any targets in that sense occupying or willing to take that cost of opportunity in terms of doing M&A, and therefore we don't see any space there. When you look at Mexico or Peru, countries where we have significant market shares, we wouldn't be able to do any M&A deals just because of the size that we have already in those markets. Turkey, it's, you know, too early. We need to see Turkey normalize. We need to see Turkey deliver on its inflation commitments.
That is still not the case in Argentina for that matter. Colombia is a place where we would, you know, I think appreciate more scale. The scale that we have though today in Colombia allows us to generate profitable growth going forward. We haven't seen any, you know, reasonable opportunities in Colombia as well. I would say overall, M&A is always something that, you know, the bank will look at because things come to our table. I would say generally speaking, our story is about organic growth, where we do continue to believe that we have opportunities ahead.
Again, leveraging on digitization now AI, we think that there are opportunities to scale the bank in a very profitable manner, aside from, you know, deploying M&A or capital for it to M&A.
Thank you. We can squeeze one last question if somebody's got one.
Thank you so much for taking the question. My question is about CIB, and you've recently hosted strategic talks on that matter. You've indicated your ambition to grow in certain regions, North America, the UK. You talk about several growth opportunities there. What are some of these growth opportunities that you can share with us? Is it, for example, I don't know, like Latin American investors and entrepreneurs that are willing to invest in these geographies? How do you see the flow of capitals, and how would you be best to serve the position of your clients in that matter?
Right. Thank you. No, it's a very good question because when we have a reporting angle, you see only a part of it, which is the rest of business, but the CIB business is a broader business that we are investing in because it's a strategic priority. There, our focus or our strategy is very much driven by client relationships. Within that, there are basically two relevant specific investment opportunities. One is the one that you signal the cross-border opportunity. When you look at our CIB business, 40% of our revenues come from transactional banking. We're connecting the dots to franchises in a much more focused way. That means that we find clients that have interests in the countries where we operate.
Having a local bank there means that you're not only doing payments, but collections. This is a distinctive factor from other peers or competitors that do transactional banking that don't have those collection capabilities on the ground and allow us to compete more effectively. Again, a relevant source of our CIB revenues comes from transactional banking, which is the core of our cross-border revenues. 40% of the revenues, again, 40% is the magic number. 40% of our revenues come from cross-border in CIB. That was around EUR 2 billion last year, growing at around 24% CAGR. Again, very focused on accompanying our clients.
Obviously, when we're looking at the activities in order to accompany our clients, having you know branches in the U.S. or in Continental Europe or in the U.K. allow us to serve those clients better that want to operate on our franchises. The U.S. doing business in Mexico, the Latin Americans wanting to go to the market in the U.S., institutional investors wanting to buy Mexican pesos. On the back of our right to compete, on the back of our strength, we are trying to cover more space than we had in the past. The second thing has to do with sustainability.
I know that in some geographies, it is, you know, not as relevant a topic as in the past, but we are very committed to our sustainability efforts, not just because it's good for the world, which we believe it is, and we have this responsibility towards the actual numbers and what's going on. Actually it's because it's a business opportunity, and we see this regarding energy. We've been focusing on accompanying those clients in their energy transition because their business models are at risk. First of all, it's a business opportunity, but it's important from a risk management perspective. The sustainability topic has allowed us to grow on energy, on infra, on hard asset financing, which we were very good at before, and we continue to develop in a more specific structured way.
I would say that it's a very focused growth in CIB, and you're seeing it grow more, because the base was lower. That's why we're, you know, we think that that's a good opportunity. Last but not least, we, I can assure you allocate capital on the back of profitability. The profitability levels of CIB, excluding the hyperinflationary economies, is around 19.4% of the CIB business for the group. Again, because it's a lot of this transactional banking business. We're allocating capital if we ensure that we can get good levels of returns on that capital as well in CIB.
Great. Thank you very much. It's a very interesting session, and thanks again for coming one more year.
Thank you.