Good morning. This is Laurie Shepard from the Bankinter Investor Relations team. We welcome you all to Bankinter's Earnings Presentation for the Fourth Quarter and Full Year of 2024. All related financial statements were posted with market authorities early this morning, and as usual, these materials can also be found on our corporate website. Today, we are joined by Bankinter's Chief Executive Officer, Gloria Ortiz, and Chief Financial Officer, Jacobo Díaz. At the end of the presentation, we will be available to respond to analyst questions in a live Q&A. Please refer to the disclaimer in the presentation and note that this call is being recorded. I will now turn over to Gloria Ortiz to review the highlights, after which Jacobo will review financial results and the performance of our business segments across the group before handing back to Gloria to close the presentation. Gloria, over to you, please.
Thank you. Thank you, Laurie, and good morning to everyone on the call. I am very happy to be able to share with you the excellent results achieved by the Bankinter Group in my first year as CEO. Another record year of historical results. We continue to be very consistent with our strategy to achieve superior results through diversified organic growth across all the geographies we operate in, growing our loan book by 4%, increasing customer deposits by 5%, and assets under management up 22%. This means we have grown total customer volumes in 2024 by 9%. For the core revenue lines, we closed the year with a 3% increase in net interest income, as well as an extremely strong 15% increase in fees. Also, improving efficiency and asset quality ratios, reaching 36% in the cost-to-income ratio and 2.1% in the NPL ratio.
By maintaining a consistent strategy with a clear focus on increasing customer activity, we achieved a record level of 18% return on equity. Moving on to the next page, our consistently strong commercial activity has translated into increased customer volumes year on year. Business volumes have grown 68% since 2018, a compounded annual growth rate of 9%, reaching EUR 223 billion at the end of 2024, up EUR 17 billion. On the right side of the page, you can see the breakdown by customer volume type, where each volume category has achieved excellent annual growth rates over the six-year period, with loans up 6%, deposits 9%, and assets under management 14% each year. Moving on, the volume growth achieved year after year is quite remarkable since we have grown in shrinking or relatively stable markets, gaining market share year after year in Spain, Portugal, and Ireland.
Starting on the left of the page, you have two graphs that show the evolution of loan and deposit growth rates for the sector and Bankinter in Spain. We continue to outperform competitors in our core market, where we have grown 26 percentage points above the industry in loans, as well as in retail deposits since 2018. In the middle of the page, you can see this growth differential in Portugal, 49 percentage points above the industry in loans and 90 in retail deposits. In the case of Ireland, we launched our mortgage business in 2021, capturing market share of close to 3% in five years in a shrinking market. By focusing on our business activity and customers and avoiding any external distractions, we can achieve incredible organic growth rates. On page eight, our core revenues, comprised of net interest margin and fees, have nearly doubled in six years.
This represents a compounded annual growth rate of 12%. Fees contribute 24% of core revenues, a direct result of our focus on wealth management activities, and the intense commercial activity drives transactional fees. I've mentioned on the first page, the fee line has increased 15% in 2024 without any extraordinary events. As we close this reporting period, I wanted to highlight on this call the importance we give to adequate and targeted technology investment over time. Since 2018, on average, we have designated approximately 10% of our operating income to technology spend. This investment has allowed us not only to increase the customer volumes managed by employees, which is represented in the orange columns, but also drives the reduction in cost over business volume, the blue line on the graph. Productivity has improved 37% since 2018, where on average, each employee now manages EUR 33.5 million of business volumes.
Costs over business volumes has decreased 13% over the same period, providing that our targeted technology investment allows us to continue to scale up and improve business efficiencies over time. To close this section of the presentation, on page 10, we proudly share the excellent cost-to-income ratio of 36%, best in class indeed. Asset quality under control and very low, with NPL ratio at 2.1%. We have also reinforced our coverage ratio through prudent provisioning to a historical high of 69%. 2024 ends with record profitability levels, resulting in an excellent return on equity of 18%. Well, Jacobo, we'll talk you through the financial results for the year now, and it's over to you, Jacobo.
Thank you very much, Gloria. Good morning, everybody. Let's start on page 12 to talk through the P&L for the year. A record net income of EUR 953 million, with all lines performing very well. On the following pages, I will go into the movement of each of the lines. However, I wanted to highlight that in the fourth quarter of 2024, we have initiated the accounting integration of the EVO Banco in preparation for the final merger during 2025. In the one-off column, we have separated a EUR 28 million other asset impairment relating to the removal of intangibles, of which the majority is IT software and development, mostly offset by a registering of a post-tax benefit of EUR 17 million of historical carry-forward losses, which were not previously used or registered on the EVO Banco balance sheet, and through the merger, will be able to be used in Bankinter Group.
On a pro forma basis, when excluding these two one-off adjustments relating to Evo, net income grew by 14% on EUR 119 million on a net income after-tax basis. Moving into slide 13, you can find a table with the quarterly results, including all activity in the fourth quarter. Net interest margin has continued to slightly reduce quarter on quarter. However, the decrease in NII is well compensated with increased fees and other revenue lines to achieve revenue growth of 1% quarter on quarter. In the other income expense line, you can see the benefit of EUR 89 million on a year-on-year basis, mainly related to the removal of a Single Resolution Board charge, as well as a material reduction in the Deposit Guarantee Fund in Spain. We have increased cost of 5% on a year-on-year basis, ending the year within our annual guidance.
On a quarter-on-quarter basis, there is some seasonality in the cost line with higher incentives. Moving down to cost of risk and other provisions, we have very similar results on a year-on-year basis, albeit with some seasonality in the fourth quarter due to the NPL sales in the consumer finance business, around EUR 15 million of loss, and a prudent approach to some additional provision for litigation processes in the future. In the other asset impairment and corporate tax lines, you can see the movements related to the preparation of the EVO balance sheet integration, which I previously mentioned, of EUR 28 million and a positive variation of EUR 17 million of benefit on tax impact in the quarter, with an overall net impact of EUR 3 million in negative. However, still with a very positive year-on-year net income variation of 39%, EUR 222 million for the last quarter of the year.
Now, on page 14, net interest income finished the year with a 3% increase. Customer margins for the year remain resilient at 281 basis points on average for the year, even with the driver decreasing in the second half of the year around 120 basis points. If we move on to the next page, we can see that in the last quarter of the year, deposit cost has begun to decrease, reducing seven bps to 140 bps . The asset yield, which reprices at a faster rate than deposit due to the repricing profile, decreased 19 basis points to 414 basis points, contributing to a softening in customer margins down to 274 basis points in the last quarter.
On the next two pages, I will talk through some structural dynamics of the balance sheet, which will provide some comfort to NII levels over the coming quarters, as we expect rates to continue to gradually reduce levels around 2%. On page 16, and talking about the ALCO portfolio, in order to offset NII impacts driven for the variable portion of assets on our balance sheet in anticipation of rate movements, from the end of last year, we have gradually increased the size of our ALCO portfolio. This has increased 27% from EUR 11 billion to close to EUR 14 billion at the end of 2024. This size continues to be well within our risk appetite, now representing 2.4 times total equity.
The yield of the portfolio has increased to 2.5%, and the duration now close to five years, which will provide some tailwinds for us in the coming quarters as rates continue to decrease gradually. For the first part of 2025, we expect assets to continue to reprice slightly faster than liabilities, leading to some additional margin compression on a quarterly basis until reaching a normalized interest rate environment around 2%. Under this scenario, we expect to maintain customer margins around 2.7%. However, it is important to understand that impacts in the NII trajectory will also be supported by increased loan volumes, as well as a decrease in our cost of deposits, where we still have a long way to go, supported by reduced duration. Let me remind you that in 2023, our cost of deposits started at 30 basis points.
We continue to drive down new front-book pricing in terms of interim deposits. Regarding fees, on page 17, fee growth continues to support overall revenue growth and will be a tailwind to help offset any NII pressure in 2025. Net fees have increased by 59% since 2018, resulting in a compounded annual growth rate of 8%. In 2024, we closed an exceptional year with a 15% increase in fees, now contributing 24% of total gross income. Both on the right and left-hand side of the slide, we share the high level of diversification between asset management and brokerage, transactional, as well as insurance. In 2024, all three lines performed very well, with notable results in the wealth management and brokerage activity growing 21% and 12%, respectively.
According to our commercial track record and current macro environment, we do expect to keep delivering a strong set of fees in the following quarters. Moving on to the other income and expenses lines on page 18, the main differences in 2024 were reduced regulatory charges that I previously mentioned, partially offset by an increase of EUR 18 million in the banking tax charge booked in January 2024. On page 19, total operating income increased to EUR 2.9 billion, a 9% increase versus 2023, and an 11% compounded annual growth rate when looking back to 2018. Portugal and Ireland now contribute 15% of total group income in 2024. Moving on to operating expenses, on page 20, operating expenses grew by 6% in 2024, below revenue growth of 9%, and again leading to an exceptional cost-to-income ratio of 36%.
For 2024, we plan to be able to maintain these relevant efficiency gains and maintain our cost-to-income within the 35%-36% range. Moving on to page 21, related to credit risk, loan loss provisions were very similar in 2024 to those in 2023, with cost of risk within our guidance at 39 basis points. These figures include some additional losses in the fourth quarter relating to some NPL sales of consumer finance assets, as I did mention before. Again, with a very prudent approach that supported a new record in our coverage ratio, up to 69%. In other provisions, we continued with a prudent approach in 2024, and therefore we have increased slightly our provision for prudent purposes, expecting in the coming quarters a more accelerated decrease.
On page 22, in summary, total group net income reached record levels of EUR 953 million, up 13% versus 2024, and an excellent commercial and financial year. Let's move on to talk through credit risk, liquidity, and capital management. On page 23, non-performing loans ended the year at EUR 1.9 billion, up just EUR 72 million from December 2023, and EUR 53 million lower than September 2024 after the year-end consumer finance NPL portfolio sales mentioned before. The group's NPL ratio remained very stable at 2.1%, and in Spain, NPL ratio also stable at 2.4%. This ratio continues to be clearly below the sector average at 3.4%. As shown in the chart on the right, the NPL ratio in Spain dropped again by 20 basis points to 1.5% for households and is slightly up to 3.1% for corporates and SMEs.
Total provision for non-performing loans closed the year at EUR 1.3 billion, which continued to strengthen our coverage ratio up to 69% from 65% in 2023. With a longer-term view, since 2018, the total risk exposure increased by 33%, whereas our NPL growth was well contained below that level with an increase of 19% over the same period, demonstrating the robust asset quality of our asset franchises. We do not perceive any change in our view about credit risk in the market. Moving into liquidity, the loan-to-deposit ratio in the year ended close to 95%, similar levels than a year ago, and wholesale funding below EUR 7 billion, the lowest level of many years, accompanied by a comfortable long-term maturity schedule, strong LCR ratio at 188%, and an ample available issuance capacity of EUR 7 billion.
Moving into capital, on page 25, our fully loaded CET1 ratio ended the year within our anticipated range at 12.4%, well above the minimum requirements of 8%, leaving an ample capital buffer of 440 basis points, as well as an adequate MREL and leverage ratios. Main movements in the year related to retained earnings contributed a total of 117 basis points capital consumption of risk-weighted assets of 79 basis points and 20 basis points in operational and market risk. In December, the annualized SREP process confirmed an improvement in our Pillar 2, our Pillar 2R requirements for 2025, which have been reduced by 9 basis points, down to 1.30. Only 15% of European banks improved their minimum requirements, and we continue to benefit from the fourth lowest P2R requirements across 110 European entities.
Finally, the year-end ratio of risk-weighted assets for MREL was 24% ahead of the regulatory requirement for 2025. To close this section, on the back of strong commercial activity reflected in solid customer volume growth, excellent efficiency ratios, and sound asset quality, we have been able to achieve superior return on equity levels of 17.9%, expecting to maintain very high levels in the coming quarters. Let's move into a review of geographies and businesses. We will start with Spain on page 28. In Spain, loan growth continues, reaching a EUR 66 billion book with higher growth rates in the corporate business of 7% versus the retail book ending at 2% growth. Customer deposits increased 4% year-on-year, reaching EUR 76 billion. We continue to see strong wealth management activity with reallocation to both assets under management as well as assets under custody, with an excellent combined growth rate of 20%.
For the P&L, strong fee growth of 15% with gross operating income reaching EUR 2,547 million and increase of 9%. Positive operating jaws delivering a controlled cost-to-income ratio at 35%. Profit before tax up 10% at EUR 1.2 billion, a great year of growth and income contribution from our core business lines in Spain. Moving into Portugal, Portugal ended the year with an exceptional business volume growth across the board and increasingly solid financial results. Loan book increased 8% in the year with similar growth rates across retail and corporate SME banking. NPL ratio stable and very low at 130 basis points, half of the current industry level up to 60. On the deposit side, Portugal continued to close our commercial gap in 2024 through increased deposit gathering by 14%.
Both assets under management and assets under custody also continued to grow up 11% and 9%, respectively, this year, building out the wealth management franchise, driving a 13% increase in fees. As for the P&L, gross operating income grew by 13%, supported by double-digit growth both in NII and fees both by 13%. Excellent efficiency levels with costs growing below revenues to maintain a cost-to-income of 32%. Profit before taxes of EUR 195 million, an 18% increase year to year. In Ireland, next page, we now have the authorization to open a branch of Bankinter in Ireland, and we plan to complete the launch over the coming quarters and expect to start gathering deposits by mid-2025. We continue to see solid loan growth in mortgages up 31% and consumer credit, mainly consumer loans, up 17% both year-on-year. Asset quality indicators remain exceptionally low and stable at 0.3%.
Gross operating income up 6% with profit before tax of EUR 41 million, 23% increase. Again, a very successful growth year for the business and exciting plans for 2025. Moving into the corporate and SME loan book in the group that continues to grow year-on-year by 6%. Growth in Portugal of 9% versus industry growth of 3%. In Spain, growing by 7% again versus a flat sector and allowing for the increase of market share up to 6.4%. The corporate and SME loan book now represents 43% of the total group loan book with a solid compounded annual growth of 6%. Let's touch now a little bit in the next few pages. Let's talk about our franchise and growth potential for our investment banking division that contributed to the growth operating income of EUR 231 million with a significant growth in fees and investment valuation and yields up 24%.
Since 2018, the business has tripled gross income through focusing on delivering alternative products which invest in real assets to our wealth management, retail, and corporate banking customers. Bankinter Investment is managing 28 different vehicles of alternative investment, with five new vehicles launched in 2024, with EUR 5 billion in committed capital raised with almost 15,000 banking customers. This is a strong, growing, and stable source of fees in the coming years. On the next page, you can see the strong diversification of the different vehicles for alternative investments across 11 sectors and in 14 countries. Moving into wealth management, on page 34, we ended the year with an increase of EUR 14 billion in incremental wealth, half from net new money from our customers and the other half due to market effects. Both contributed equally to driving a 12% increase in total customer wealth under management in the group year-on-year.
These incremental deposit inflows, assets under management and assets under custody are driving force for the exceptional fee revenue growth figures that we have seen in assets under management, brokerage, and custody. On slide 35, total off-balance sheet volumes reached EUR 58 billion as we continue to develop and offer a highly diversified mix of proprietary and third-party funds to our customers, a result of our open architecture environment with healthy growth level across our products, leading to an increase of EUR 11 billion in 2024. Another significant part of our wealth management business that drives recurrent fee growth are our assets under custody. These assets closed the year with EUR 74 billion in equity and fixed income securities, up 18% from the previous period. Both together grew EUR 22 billion in 2024, providing increased volumes to sustain and grow our asset management, brokerage, and custody fee income lines in 2025.
Let's turn to the last page in this section and talk through continued growth trends in our retail banking franchise. Retail commercial activity continues to perform well, with salary accounts growing 4%, new mortgage origination, high market share in Portugal, Spain, and Ireland between 6%-7%, and total group mortgage book that continues to grow, surpassing EUR 36 billion, a solid 5% year-on-year growth in markets where the sector is relatively stable or slightly contracting. Before handing back to Gloria for closing comments, I would like to review our expectation for 2025. First of all, related to loan volumes, we expect continued growth in all geographies and businesses. Portugal, in all three businesses, mortgage, corporate, and consumer loan books are expected to grow. In Ireland, continued focus on mortgages and growth in consumer credit, as well as the launch in deposit gathering in the summer.
For Spain, we continue to see a pickup in mortgage lending and continued growth in the corporate loan book. Overall, we aim to be able to grow our loan book in 2025 again by mid-single digit. Next year, sorry, this year in 2025, we believe NII will be flattish or slightly positive in 2025. We aim to defend net interest income levels through customer margin management, decreasing deposit cost and offsetting additional volume growth. We target customer margins around 2.7% level, like as I mentioned before. And in terms of the quarterly evolution, the NII in the first two quarters may still drop comparing to last year, although we expect the recovery post-second quarter in 2025. We have confidence in our business model and fee income drivers and aim to achieve high single-digit growth in 2025 in fees.
With higher fee growth and flattish or slightly positive NII, we aim to grow revenues in 2025. We will continue to invest in our franchise and in technology, and therefore group's costs will grow around low to mid-single digit, leading to a resilient but low cost-to-income ratio between 35% and 36%. In terms of quarterly cost growth expectation, we aim to end the year with the stated low to mid-single digit guidance. However, we are balancing the volume of cost over the quarters and expect a double-digit increase of cost in this first quarter of the year comparing to the previous year in 2024. Finally, cost of risk with prudent provisioning and coverage ratio achieved in 2024, we expect to finish the year 2025 in the low range of 35 and 40 basis points.
In summary, we expect 2025 with new record figures in gross income, efficiency, and overall net income. And now, I will hand back to Gloria for any closing comments. Thank you.
Thank you, Jacobo. Well, I'm very happy to be presenting my first annual results, which are the consequence of flawless execution of a consistent organic growth strategy. We will continue to invest in projects and initiatives that allow us to keep up with the pace of business growth while maintaining our leadership in efficiency and also improving productivity to deliver sustainable results to our shareholders. Earlier this year, I shared with you three of our strategic priorities. On page 39, on the right, our focus on digital mass market in Spain, as well as a continued expansion and investment in Bankinter Ireland and Portugal.
On the left, you can find our more mature franchises where we will look to grow tactically through innovation in products and different segments to exploit pockets of opportunities as they arise. We will remain focused on our business and our priorities, avoiding distractions, and to support longer-term growth, we will strengthen some key capabilities like technology, cyber protection, the organization and talent, as well as support sustainable business growth through ESG initiatives. On the digital transformation front, 2024 was an exciting year where we delivered new innovative features, experiences, and services to our customers like a new online broker. We have also implemented a set of targeted and applicable artificial intelligence innovations with our customers, as well as in internal projects to improve productivity and achieve process efficiencies. Moving to the next page, 2024 has been a year in which we have given a considerable boost to sustainable businesses.
Like, for example, we closed new deals linked to renewable energies for EUR 446 million through Bankinter Investment and its alternative investment vehicles. We also originated sustainability-related operations worth EUR 337 million. In our investment funds, we made significant effort to reach close to EUR 10 billion in sustainable assets managed. This represents more than half of the total volume under our management. And in third-party funds, sustainable funds amount to EUR 15 billion. This is 73% of total. In addition to sustainable businesses, I would also like to highlight that in the climate field, we are on track to meet the decarbonization targets set for our total corporate book. Our 2024 results continue to grow, reaching a historical high of EUR 953 million, 13% higher than in 2023.
We continue to increase value to shareholders, both in terms of dividend yield, which stands at 6.7%, and in retained value in the business, with a tangible book value of EUR 6.18 per share. Both combined lead to an increase of 11% versus last year. Our ROE reached a record level of 17.9%, and we are optimistic to continue to reach new record results in 2025. In 2025, as we demonstrate that we can sustain customer margins around 2.7%, and with continued strong volume growth and increasing fees, we will be able to grow our revenues and provide high returns to our shareholders. Now, a recap of the year. Strong commercial activity and business volume growth across the board, with extremely positive results in our wealth management business, driving exceptional fee growth.
Record revenue on financial results, a robust set of management ratios, and delivering solid shareholder returns that we aim to continue to grow and improve in 2025. This was all from my part, and it's now on to you, Gloria.
Thank you, Gloria and Jacobo. We'll now move into the live Q&A session. As per the instructions previously sent, please remember to press star five on your phone to be able to submit a question. We kindly ask you to please limit your questions to two. The first caller we have is Nacho Ulargui from BNP Paribas. Nacho, please go ahead.
Hi, good morning. Thanks for the presentation and for taking my questions. I have just to, if I may, I mean, the first one is on NII.
If you could elaborate a bit on what initiatives are you taking to accelerate the decline of deposit costs? If I just look to 3Q23, where you had a lending deal, which was more or less at the same level that we had this year, the cost of deposits at that moment was around 1%-1.1%, and now it's at 1.4%. So I just wanted to see how fast do you think in that guidance that you have provided on a kind of quarterly basis for NII, how fast deposit costs will go down. Also, on the corporate loan book, how much of it has been already repriced at current loan rates? You have given us in the past a guidance that the corporate loan book reprice is very fast. I just wanted to get a sense of how much of that has happened.
The second question is on guidance on fees. In that high single-digit growth for fees, I just wanted to get a bit of a sense of how relevant the market performance is. And also, what would be the main driver of the growth? It would be asset management and brokerage like this year, or do you see something catching up on that side?
Thank you. Hi, good morning, Nacho. Taking your first question about what are we doing, if I understood, in order to keep reducing the cost of deposits. As you know, we are shortening the duration of all the deposits. The level, the percentage of term deposits, I mean, the current offer of term deposits is permanently reducing the cost. And that means that the front book is quite below the back book. And this is something that is happening since the last quarter.
We are updating our digital account pricing as well, and also, as you will see, there is a much lower level of competition in the market. That means that the speed of the reduction of the cost of deposits will be accelerated in the coming quarters. Related to the corporate book, as you know, that the corporate book has quite a proportion of credit lines and working capital facilities, and that means that I would say that around 50% of the book has already repriced. Okay? So that means that the speed of repricing of the corporate book is quite fast, in opposition to the mortgage books that, as you are aware, reprices a little bit more slowly. Regarding the guidance, I think, and correct me if I'm wrong, related to the fees, the high single-digit in fees. Again, I think we've gone through the presentation.
We think that we can keep the very strong track record that we have in bringing new assets under management and new assets under custody to the group. We've seen excellent results in 2024. We know that we see there is still a benign macro outlook for Spain, and we are benefiting from economic activity, either in the corporate activity, either in the retail activity, which is driving fees up. So, as you see in the slide, just not only anything related to markets like investment funds or brokerage, etc., is moving up, but also things like payment and collections or endorsements. I mean, all these fees are moving up. Okay? So this is quite a strong line of business for us. You've mentioned before about the cost of the deposits, but bear in mind that for us, we have a very strong business just switching from deposit into fees.
So that's, again, let me remind you that this is one of the reasons why the cost of deposit of Bankinter is probably higher than the others. It's because for us, this is a strategic issue, and we pay quite strong attention to it.
Thank you, Jacobo. We'll move on to the next caller now. Our next caller is Maksym Mishyn from JB Capital Markets. Max, please go ahead.
Hello, good morning. Thank you very much for the presentation and taking our questions. I have two. The first one is on loan book growth. A question on volumes. I was wondering if there are any opportunities already coming from the potential consolidation in Spain, and what kind of opportunities, if you do, and how should we think of for loan book growth in Spanish operations, as in 2024, growth came mostly from Portugal and Ireland.
The second question is on capital position. Could you explain the reason behind the 20 basis points adjustment in market and operational risk? Does it already include the Basel IV? And if not, what impact do you expect? And should we think of any additional headwinds for 2025? Thank you.
I will take the second question. First? Okay. Now you can hear me well? Okay. Yes, I'll take the second question. I mean, the 20 basis points in the fourth quarter in capital, it's just basically the operational risk consumption. This is something that happens every fourth quarter of the year. And it's a consumption related to the increase in the income, basically. Okay? So this is a quite straightforward calculation. And it's basically operational. I mean, market risk is quite limited. Basically, all of the 20 basis points is related to operation.
This has nothing to do with Basel IV impact. As we mentioned, Basel IV impact should be around 20 basis points in negative. This is something that we will see in the first quarter of 2025. You want to answer?
Yeah, I will take the first question, which, if I'm not wrong, relates to the growth of the loan book in Spain. Listen, we see opportunities for growth in all the markets and almost all the segments of business that we are operating in. In Spain, as you've seen, we have grown strongly in enterprises, in financing enterprises, at 6%. We have been growing also in the loan book for individuals. Looking for next year, we think we will have similar growth rates in corporates. We have been able to grow in shrinking markets.
The market is now stabilizing, and we think we'll be starting to grow. And this is a big opportunity for us. Obviously, everything that has to do with ESG is a big opportunity in the corporate book. With regard to funding individuals, the mortgage market is recovering. And obviously, due also to lower interest rates, the early amortization rates have gone down as well. So we think we will be growing in the mortgage book as well, and also in the consumer credit operations in Bankinter clients. In Portugal, we think we can continue beating the market and growing at the same pace we are doing now. And in Ireland, we also think we still have a market share that will allow us to grow. So we think we really can continue to grow or even increase the pace of growth this year.
Thank you, Gloria.
We'll now move on to the next question coming from Álvaro Serrano from Morgan Stanley. Álvaro, please go ahead.
Hi, good morning. Thanks for taking my questions. I think they're really follow-ups. I think you've explained in Q3 that 65% of the term deposits I seem to remember were in reprice in Q4. The mix, as far as I can tell, is also slightly better, but the cost is not coming down. Can you, Jacobo, maybe give us a bit more detail of that front-book/back-book differential and why it seems to be taking a bit longer? Maybe it was towards the end of the quarter. But maybe a bit more detail that can reassure us, give us a sense of how quickly it's coming down. And second question related to that is the guidance of stabilization or growth in the second half of the NII.
What's the rate assumption? Are you assuming the rate stop at two and deposit rate stop at two? Or maybe you can give us some color on your average, your Euribor assumption. Thank you.
Hi, good morning, Álvaro. I'll start with the second one. I think basically what we see is that overall in 2025, we have a better outlook for many reasons. The first one is that there is a more benign outlook for Euribor 12 months. I think you've mentioned it in your question, but basically, we see that Euribor 12 months should be around 2 to 2.5% across the year. And in fact, forward curves are expecting today to end the year in December at 2.30 basis points, 230 basis points.
This is the base assumption that we are working on today with an average Euribor curve for the entire 2025 of around 2.5%, which is what the forward curve is telling us today. The macro outlook for Spain is also quite positive. And in fact, it's been improving. And as I did mention before, I mean, this macro outlook is supporting strong activity in fees, containing cost of risk, but obviously the volumes that Gloria has just mentioned. The other thing is related to the ALCO portfolio. The ALCO portfolio has grown to EUR 14 billion. And today, we have also a more equilibrated structure in balance sheet that reduces the NII sensitivity, which is, as you know, very close to negative 3% for a 100 basis points decline.
So just basically, these repricing effects are the one that, coming back to your first question, I mean, the speed of reducing the cost of deposits is the one that will allow us in the overall picture of the year to achieve the guidance of flat or slightly positive NII. We perceive, as I mentioned in a previous question, less pressure for deposit remuneration, and this is allowing us to reduce our deposit offer at a much faster speed than in Q4. And also, as I mentioned, I mean, we are updating our digital account and, in the coming days, reducing the overall cost. So I think this is one of the supports. So we have a very, I mean, very strong feelings about growth, like Gloria has just mentioned. We have good feelings about the speed of the cost of deposit remuneration.
We think that we have a good ALCO portfolio size and yield that is providing a good compensation for that. And of course, I think we have a good macro outlook and good expectations of rates for 2025.
Thank you, Jacobo. Our next question comes from Borja Ramírez from Citi. Borja, please go ahead.
Good morning. Thank you much for taking my questions. I have two, please. Firstly, on the NII guidance for 2025, I would like to ask what is the assumption for the migration of deposits? If I remember well, in the last quarterly results, you were expecting the decreasing migration. And linked to this, if you could kindly update on the sensitivity to interest rates.
Okay, Borja, thank you.
I guess I'm not sure if the migration of the deposit that you mentioned is the speed of the repricing, which is, again, a 65% basically in the next quarter. So again, the speed of repricing is fast. I'd like to come back to the fact that for us, deposit gathering is a strategic issue and allows us to transform them in assets under management or assets under custody and bring in new volumes. And this is what fuels our fee income line. So again, we are targeting both things at the same time. So we are reducing the cost of deposits with a quite strategic view. And we are also strengthening our fee income line. Okay? So this is basic. And regarding the sensitivity to the NII, I did mention it before.
It's around minus 3%, as I mentioned before, for a 100 basis point decline, which is quite similar. And then with this, when you see the level of growth that we are targeting, the level of protection that we have in our structure of balance sheet, this is something that is supporting our guidance.
Thank you, Borja. Our next question comes from Nacho Cerezo from UBS. Nacho, please go ahead.
Thank you for taking my questions. One is a follow-up on just the question from Borja on the deposit migration. I think last time, actually, you said that you were expecting some degree of reversal of time deposits back into current accounts as rates were coming down, actually. So asking whether some of that is embedded within your net interest income guidance, actually, for 2025. And the second one is in the consumer lending book in particular in Spain.
I mean, there has been a very significant deceleration in the last three, four quarters, actually. Just curious to see what they respond to, if it's just an asset quality issue or do you think, actually, the demand for that type of product is also slowing down? Thank you.
Hello, Nacho. Thank you for your question. I will be answering both. I mean, about migration, I mean, the natural thing is that this 29% that we have now of time deposits within our total retail deposits will go down naturally towards the 10%. But probably in 2025, we will end up in the 15% or something like that. But let me remind you that we also have current accounts that are remunerated, like for instance, the digital account. So it doesn't mean that everything that is your current account is not paid for. So this is one of the points.
The second point, I think your question was what was the reason why we decreased the book in consumer financing? Well, basically, what we are doing, this has to do with our risk appetite framework, okay? So there is a limit for consumer lending. We have almost achieved that limit. What we are doing is actually reducing the weight in Spain and then, obviously, letting some space for growth for Universo in Portugal.
Thank you, Gloria. Our next question comes from Paco Riquel from Alantra. Paco, please go ahead.
Thank you for taking my question. Follow-up on Nacho's question. So you mentioned that you plan to reduce the weight of time deposits from 29% to 15% during 2025. So that's almost half. But the growth in deposits has been muted in 2024. Just private sector deposits are up 1%, barely.
So do you feel you have the pricing power to reduce these time deposits and preserving them into sight accounts so that the loan-to-deposit remains below 100%? Or you think you will have to finance the asset growth through tapping debt markets, or you will have to give up also on the migration of the balance sheet? So just your views on this. And my second question is on Ireland. You mentioned that you will start selling deposits from mid this year, 2025. So what impact on NII from gathering deposits locally and reducing external or intra-group funding? And then medium term, what are your ambitions in the Irish market? Thank you.
I will take both questions if you want to make any comments afterwards, Jacobo. Well, first, I have no doubt that we will have loan-to-deposit above 100% next year. Here, it has to do with competitive forces.
I mean, we will have, obviously, margin compression with lower interest rates, but this will happen to all competitors, and they are starting from lower costs than we have, so it's a simple mathematical question. We can reduce more than they can, so I'm sure that no one is going to become crazy and start a deposit war in this interest rate environment. So I have no doubt about that, and as I've mentioned first, the split between time deposits and current accounts doesn't have anything to do with the overall cost of the deposits because we have current accounts that are remunerated both in corporates and also in individuals like the digital account. Actually, in Spain, in the last years, what competitors have been doing, and we have been doing that as well, is actually remunerating current accounts rather than deposits.
So it is not so important to go down from 29 to 15. What is important is reducing the overall cost and the individual cost of deposits and current accounts. So we are quite sure that we will be pushing down the cost and that we will have a comfortable loan-to-deposit ratio. So that was the first point. The second in Ireland. Well, Ireland, we will be starting selling the first deposits in the summer. That is our idea. But 2025 is going to be a transitional year. So don't expect masses of volumes in Ireland in deposits. So it's not going to have any material impact in the overall cost. Actually, our idea is to have EUR 100 million or EUR 200 million at the end of the year of deposits. So it's going to be a trial year where basically we will be starting our value proposition for Irish clients.
So it won't have any impact. At the beginning, yes, of course, it will have a higher cost because that will be part of the marketing cost of entering the market. But the same I've mentioned in the Spanish market will happen in the Irish market or even more accelerated. In the Irish market, they are not remunerating a lot the deposits, but they don't have the efficiency ratios that can allow them to have higher cost in deposits with a curve that is actually sliding down. So we don't think we will have to overpay significantly for those deposits, not in 2025, I'm saying, looking forward. What is the objective in Ireland? Well, the objective would be like the one we've had in Portugal. I mean, we would like in eight years' time that Ireland actually almost funds itself with their own deposits. Thank you.
We'll move on to the next question now from Carlos Peixoto from CaixaBank. Carlos, please go ahead.
Yes. Hi, good morning. Thank you for taking my call. My question, sorry. So a couple of questions from my side as well. So the first one would actually be on your expectations on other provisions, so charges for litigation and other purposes. How do you see that evolving during next year? And the second one would be focusing on return on tangible equity expectation. I'm not sure if you gave any guidance, but I was wondering how you see it evolving into next year. You already mentioned you expect earnings to improve, but do you see the same thing happening on return on tangible equity, or there we should expect some stabilization? And also, sorry for going forward with the question, but how do you see RWA evolution into this year?
Thank you. Okay. Hi, Carlos. Good morning. Regarding the provisions, as I did mention regarding the credit risk provision, we are targeting to be in the low range of the 35-40 basis points in the credit risk provision. This is something that I did mention before, and regarding the litigation, basically, there is an expectation of accelerated decline of those. That's why we've been more prudent in this part of the year. We do not provide guidance in return on equity, as you know, but basically, we think that in 2025, we should achieve similar levels of return on equity than the ones that we've achieved in 2024. I mean, high levels of return on equity and quite above the 15% reference, so very similar to what we've done this year.
Regarding risk-weighted assets, I'm not sure if your question was based on 2024 or on 2025, but bear in mind that in 2024, in the last quarter, there is always a very strong seasonality in our business, and that's the reason why there is a higher growth than normal in their risk-weighted assets. I mean, there's nothing special in that. We have growth in the corporate banking business, growth in the consumer banking, in the consumer finance business, and those are the ones that consume the most. So that's why there is an increase, I would say, stronger than other quarters in the risk-weighted assets in this fourth quarter.
Let me interrupt a moment because I think Paco, when I said Paco Riquel, when I said well above 100%, I was referring to the deposit-to-loan ratio, which is the one we use here internally for liquidity. Okay?
So that was only.
Thank you for the clarification, Gloria. And we are coming up to the hour, and I'd like to pass one more question to yourselves. And this one comes from Pablo de la Torre from RBC. Pablo, please go ahead.
Hi. Thanks for taking my question. I just had a follow-up on your operating leverage expectations for 2025. I believe last quarter you mentioned you expected your group costs to grow below revenues in 2025. And I guess besides the NII and fee-income growth that you expect this year, I just wanted to check if there are any other moving parts that we should think about, and in particular, your views on the new Spanish Banking Tax. And secondly, just a small follow-up as well on Ireland.
I guess, do you see last year's new production level of around EUR 1 billion to be sustainable, or is there any upside here for growth as rates fall in Ireland as well? Thank you.
Good morning, Pablo. Yes. I mean, we do expect to keep a higher level of increase in revenues versus costs for 2025. And that's why we provide some guidance regarding that. We do expect cost -to- income to be somewhere between 35% and 36%. So this is a slight movement, a positive movement. Anyway, we are not targeting at any time to go below the 35% reference in terms of cost to income. We think that we need to keep investing in our new franchises in IT, and that's more or less one of the reasons.
You mentioned the banking tax, and as all of you know, there is a new methodology, which is still, there are still some things to be finally designed or defined. But as you know, there is a reduction in the banking tax for the coming year. And regarding Ireland. Oh, the EUR 1 billion, yes. Sorry. The EUR 1 billion. Yeah. I think we are expecting a similar new production for next year in Ireland in terms of mortgages. So yeah, that's fine. This is a good reference. I mean, this year has been quite a strong year, and we are expecting, again, a quite strong year in Ireland in the mortgage new production.
Thank you, everyone. I apologize, but we don't have time to take any more calls. Felipe and myself will be available after the call to reach out for any further questions.
I thank everyone for your attendance today and also wish you a very great start to a new year. Thank you very much. Have a great day. Thank you.