Good morning. This is Laurie Shepard from the Bankinter investor relations team. Thank you all for joining us for this first quarter earnings presentation. Financial statements were posted with market authorities early this morning, and all materials can also be found on our corporate website. On the call today, we are joined by Bankinter's Chief Executive Officer, Gloria Ortiz, and Chief Financial Officer, Jacobo Díaz.
Please refer to the disclaimer in the presentation and note that this call is being recorded. I will now turn over to Gloria to review highlights for the quarter. Jacobo will then talk through the financial results and performance of our business segments across the group before handing back to Gloria to close the presentation.
Thank you, Laurie, and good morning to everyone on the call. Bankinter initiated 2025 with significant commercial activity, resulting in higher volumes across all its businesses and regions. We continue to consolidate a trend of increased profitability and strength through the diversification of revenue sources, segments, and business products and services. This strength in commercial activity is reflected with solid growth of all customer volumes, increasing 9% in total, with our loan book up 5%, retail deposits 7%, and assets under management increasing 17%.
As our strategic focus is to deliver innovative products and services that add value to our customers, like our wealth management services, for example, we have been able to maintain high fee growth levels above 13%, partially offsetting interest rate compression, leading to the impressive achievement of an 11% increase in revenues this quarter compared to the first quarter of last year.
Supporting these strong growth trends and the underlying aspects of are the underlying aspects of both our risk quality and strict cost controls, both very essential to maintaining high levels of profitability through all types of economic cycles. This quarter, we reported EUR 270 million in net income, which is a 22% increase compared to the last quarter and an even higher 35% when compared to a year ago, resulting in our return on tangible equity or ROTE at an all-time high of 19.9%.
Now let's look more into the details behind these results. First, with volumes on page six. As you can see, customer volume growth is well diversified between types and geographies. Customer volumes grew EUR 18 billion or 9%, this past 12 months, reaching the current sum of EUR 224 billion. Our more mature businesses have reached high single-digit growth, Spain 9% and Portugal 8%, with Ireland delivering an impressive 23% increase in volumes.
On the next page, revenues increased by EUR 73 million, up 11%, supported by strong fee income to offset net interest income pressure. Our core revenues only slightly dropped by 2%, with fees increasing EUR 22 million, covering 60% of the net interest income compression. Additionally, after applying available deductions in the new tax methodology, we have been able to save EUR 95 million this year versus last and do not expect to incur any additional material banking taxes this year or next.
Moving on now to review the asset quality of our loan book, we wanted to share with you the distribution of the loan growth by asset classes. On the left-hand side of the page, you can see that close to 70% of our incremental loan book is backed by real warranties, the majority mortgages, and very well distributed between Spain, Portugal, and Ireland. Less than 15% of the new loans are unsecured, with a minimal amount of 2% in new credit card volumes.
On the right-hand side of the page, asset quality of our book remains strong, well below sector averages in all three countries, given our disciplined approach, applying common risk criteria, and underwriting policies across all three countries.
On page nine, I would like to begin by sharing my views on our outstanding cost-to-income ratio, which continues to improve and has now decreased to 36.7% on a rolling 12-month basis. We rank in the top quartile among over 100 European banks, as well as significantly below the average of 48% of 30 European peers.
We achieve this best-in-class efficiency level through stringent cost control of typical non-productive expenses within the organization, as well as by prioritizing essential new costs. This approach ensures that we adequately support our growth with new technologies and investments, enabling us to continue scaling and improving productivity levels.
Our strategic focus on diversified organic growth, risk management, and efficiency optimization has resulted in unprecedented profitability levels, achieving a ROTE of 19.9%, an ROE of 18.8%, new record highs that exceed the European average of 12.2%, and position us within the top quartile across Europe. These figures summarize quite well the debate about the sustainability of our current profitability levels. I will now hand over to Jacobo to review the financial performance. Please.
Good morning. Thank you, Gloria. It is a pleasure to present our financial results for the first quarter of 2025, where we have achieved a 22% increase in quarterly net income compared to the previous quarter and a 35% increase year-on-year. These results reflect our continuous commitment and effort.
As already mentioned, we have seen strong commercial activity driving strong fee income growth, which has partially compensated pressures in customer margins. In addition to this, the absence of the bank levy expected to the entire 2025, and of course for the past 2024, has fueled the growth of our overall income.
Gross operating income reached EUR 732 million, an increase of EUR 73 million, or 11%, compared to the first quarter of last year. Net income was EUR 270 million, indicating a strong beginning of the year and strong expectations to break the EUR 1 billion ceiling of net income in 2025. Over the following pages, I will talk through each of these P&L lines.
On page 12, the pace of net interest income compression seen in previous quarter has strongly slowed down despite having two fewer days than last quarter. In terms of customer margin, we remain within our target at 271 basis points, demonstrating our ability to efficiently manage margins in a challenging environment. Credit yield continues to decrease in line with interest rate movements, basically Euribor 12 months, at 395 basis points.
We have seen a notable decrease in deposit costs this quarter of 16 basis points, bringing down the average cost for the quarter to 124 basis points. By continuing to decrease the duration and pricing of front-book deposits by around 50 basis points, and with more than 70% of rate sensitivity deposit maturing next quarter, we are confident in our ability to continue to manage and maintain resilient customer margins this year.
Cost of deposits at the end of the quarter is, of course, below this quarterly average. We are conscious that with recent volatility and some market uncertainty, it is very hard to predict future interest rate movements, but we are still not changing our previous guidance on NII.
Moving into the ALCO portfolio, additionally, to mitigate the impacts of NII from rate compression, we have also gradually increased the size of our ALCO portfolio up 22% to EUR 14 billion, now representing 11.4% of total assets. The yield of the portfolio stands at 2.5% with a duration of five years, providing some good tailwinds in the coming quarter to support NII levels. Since most of the portfolio is classified as held to collect, approximately 95%, we have limited exposure to valuation adjustments on the fair value portion of the bond portfolio.
Moving to fees, on page 14, fees increased by more than 13% on a year-on-year basis, reaching EUR 188 million this quarter. On the right hand of the slide, strong results this quarter in the categories of fund management and brokerage, increasing 15%, as well as good growth in transaction and insurance services. This quarter has also been a good quarter for foreign exchange services. The strong commercial activity and the robust macro environment where the group is operating will continue to support the strong fee growth. We continue to expect fees to be a significant contributor to overall revenue growth in 2025, even if the current market scenario might be volatile.
On page 15, regarding the other income and expenses lines detailed in this slide, the primary change this quarter is the already mentioned absence of the bank levy, resulting in a reduction of EUR 95 million. The new tax methodology includes some potential deduction related to the effective tax paid, permitting up to 25% of the total corporate tax paid to be offset by the final bank tax amount, which in our case is within this threshold. According to our estimates and based on current legislation, no impacts are expected from this new tax for the 2024 period, and with minimal or even negligible impacts anticipated for the 2025 and 2026 tax periods.
Moving into page 16 on expenses. On our year-end earnings call, we disclosed our intention to balance cost volumes over quarters. This quarter, we have initiated this cost normalization with cost totaling EUR 269 million, which equates to a 2% increase over the average quarterly cost in 2024. In 2025, we aim to continue balancing costs over the quarters and to the end of the year with our target of low to mid- single-digit cost growth, as well as to achieve a year-end cost-to-income below 36%.
In this page, we provide you an overview of the distribution of costs by geography and category. The primary driver of our change of cost seasonality or normalization has been personnel expenses, with a 23% increase compared to the first quarter of last year, due mainly to variable remuneration normalization across the year, avoiding the peak in the fourth quarter that we saw in previous years. Since our workforce grew by less than 2% last year, most of the expenses increase is due to provisioning for potential year-end incentives.
On page 18, credit risk, we have seen a notable decrease in loan loss provision this quarter, down to EUR 79 million, or EUR 71 million excluding EUR 8 million in profits from a portfolio sale in Portugal. This has resulted in a cost of risk of 32 basis points, below our target range of 35-40 basis points. However, we forecast that by the end of the year, we will be, as we mentioned in the previous presentation, in the very lower end of this range. Other provisions, also under control and performing well, down to 7 basis points this quarter, below what we believe a normalized range around 8 basis points.
In summary, on page 19, we report EUR 270 million in total net income, very close to our record quarter of EUR 273 million in the second quarter of last year. This reflects an increase of 35% compared to the first quarter of 2024, indeed an excellent start to the year.
Let's move to the credit quality, liquidity, and solvency ratio section. On page 20, non-performing loans ended the quarter slightly up at EUR 1.94 billion, with a high and prudent coverage ratio of 69% from 64% a year ago. During the last 12 months, credit exposures increased by 5%, with NPLs only increasing by 1.5% on the same period, resulting in a very low NPL ratio at 2.16%.
On the right-hand side of the slide, we share the NPL ratios across our three geographies, all consistently low and well below average industry levels. In Spain, 2.5%, in Portugal, 1.3%, and in Ireland, just 30 basis points. We do not perceive any change in our view about credit risk in the markets we operate and confirm that we have limited corporate exposure to sectors potentially impacted directly or indirectly due to the U.S. tariffs.
Liquidity. T he loan-to-deposit ratio stable this quarter at 95%, similar levels to last quarter, LCR ratio at comfortable levels around 180%, and additionally, we have no more wholesale funding maturities in 2025. Regarding capital, the evolution during the quarter included the impact of the first application of CRR3 or Basel IV, estimated at 20 basis points. The main impact of the new capital regulation is due to the new requirements for operational risk. The impact in credit risk in portfolios under the IRB approach is somewhat positive, but it is offset by the impact of the portfolios under the standardized approach.
Other movements this quarter relate to a positive increase with retained earnings and organic growth, resulting in a net increase of 11 basis points. A strong start of the year in IT investment is reflected within the impact of intangible that will have a much more moderated behavior in following quarters. We closed the quarter with a CET1 ratio of 12.35%, well above the minimum requirements of 7.94%, one of the lowest across Europe, and again with a quite ample buffer of 4.41%.
Before we move on to review the performance across individual geographies, I wanted to share a summary of the excellent volume growth and financial results across all franchises. First quarters traditionally display low seasonality in terms of volume growth. However, on the back of consistent, robust commercial activity, customer volumes grew 9% in Spain, 8% in Portugal, and an impressive 23% in Ireland during these past 12 months. In terms of financial results, all three regions achieved double-digit pre-tax profit growth of 15% in Spain, 18% in Ireland, and 19% in Portugal.
Moving into Spain, on page 25, we can see the individual P&L and volume growth figures for Spain. In Spain, loan growth remains strong, increasing 5% year-on-year to EUR 67 billion, with corporate loans growing 6% and retail loans 5%. Retail deposits have steadily supported loan growth, increasing by 7% and totaling EUR 77 billion at the end of the quarter.
We continue to see extremely strong wealth management activity in assets under management as well as assets under custody, with a combined growth rate of 16% during the past 12 months, reaching total combined volumes of EUR 127 billion.
In terms of P&L, strong fee growth of 14%, with gross operating income reaching EUR 615 million, an increase of 12%. Profit before tax up 15% to EUR 312 million, a promising start and a strong income contribution from our core business lines in Spain.
Now moving to Portugal, on page 26, Portugal ended the quarter with a strong growth in the retail loan book up 10%. On the corporate side, a very short-term exposure to a large government facility was reduced in the second quarter of 2024, resulting in a net decrease to the loan book in that quarter. Excluding this short-term effect, there was a 9% increase in the combined loan book compared to the first quarter of 2024. This is the figure that we will see in following quarters.
On the customers' deposit side, we continue to see strong deposit gathering capabilities, up 19%. Both assets under management and assets under custody also contribute to growth, up 3% and 25% respectively, as we continue to build out our Wealth Management franchise in Portugal.
Out of the P&L, income grew by 7%, supported by high single-digit growth both in NII and fees, up 7% and 9% respectively. Excellent efficiency levels of 33% this quarter, even with increased costs as we normalize the volumes across quarter, as I did mention before. Profit before taxes of EUR 56 million, 19% increase, providing a relevant income contribution to the group.
Moving into Ireland, earlier this month, we completed the conversion of Avant Money into a fully licensed legal branch of Bankinter, permitting us now to roll out new deposit- capturing capabilities later this year. We continue to see exceptional loan growth in mortgages, up 24%, and consumer credit, up 15%, both on a year-on-year basis, reaching EUR 4 billion of loans in the market.
Despite these exceptional growth levels, asset quality indicators remain considerably low and stable at 30 basis points as a result of a disciplined underwriting criteria, high-quality book, and customer profiles. Operating income up 9%, profit before taxes reaching EUR 11 million, a strong 18% increase.
The Corporate & SME loan book continues to deliver strong results, up 5% in the group and 6% in Spain against the flattish sector backdrop. One of the businesses that promises growth prospects is still the international business with our Spanish customers. This business segment currently accounts for 32% of the Corporate & SME loan portfolio in Spain and is experiencing double-digit growth with an increase of 14%. Furthermore, the international business accounts for close to 40% of new origination. We are confident that our innovative and flexible product offerings in the international segment will remain a significant growth catalyst for the Corporate & SME segments, not only for Spain, but also for Portugal.
Moving into our Wealth M anagement franchise, on page 29, we continue to see a step up in quarterly incremental wealth with a EUR 4 billion increase these first three months of the year. Half of this EUR 4 billion is from net new money into the bank and half due to market effects. The growth across our Private and Retail Banking franchises is quite similar, with a total increase of 11% versus March last year.
On the next page, we can see how these incremental deposits flow into an increase in assets under management and assets under custody. Here in slide 30, the group's off- balance- sheet customer volumes reached EUR 136 billion at the end of the quarter. EUR 59 billion are classified as assets under management from our proprietary mutual funds, pension plans, and alternative investment vehicles that we manage internally or distribute from third parties. On average, we generate approximately 60 basis points per year for these products. We have included a slide in the appendix with the diversification of assets under management across asset classes.
Another significant part of our Wealth Management business that drives recurring fees comes from our assets under custody. These assets reach EUR 77 billion in equity and fixed income security and generate around 8 basis points annual custody fees, as well as traditional brokerage and effect fees with the trading activity.
Both together grew 15%, EUR 18 billion, compared to the first quarter of 2024, providing increased volumes to sustain and grow our asset management, brokerage, and custody fee income lines in 2025, as well as increased customer loyalty through a full set of diversified and innovative investment products.
Moving into commercial retail banking on the last page of this section, retail commercial activity continues to perform well, especially from our digital network, with increased new client acquisition through our salary and our fully digital accounts, growing 7% compared to a year ago. On April 1st, we also integrated EVO Banco in our books, although all their clients will migrate to Bankinter's IT platform at the beginning of the third quarter.
Mortgage origination remains as strong as last quarter and well above the first quarter of 2024, with consistently solid market shares in Portugal, Spain, and Ireland, between 6% and 7%. The mortgage back book also continues to grow, surpassing EUR 37 billion, a solid 6% increase year-on-year, well above the sector.
Now I will make some closing remarks. Before handing back to Gloria, I would like to reconfirm our expectations for this year. Related to loan volumes, we expect continued growth in all geographies and businesses. In Portugal, main growth will come from mortgages, corporate, and consumer loans this year.
In Ireland, we will continue to deliver strong growth in mortgages as well as in consumer credit. We also expect to be able to launch deposit gathering capabilities in the summer, although we should expect relevant increases of volume by 2026. For Spain, we continue to see good trends in mortgage lending and continued growth in the corporate loan book, with the main catalyst being our international business segment.
We remain on track to be able to grow our loan book in a diversified and profitable manner around mid-single digit. We do not expect to increase our volume growth above this figure as our target client profile and our risk profile remains unchanged. We also understand there is significant volatility and uncertainty around interest rate assumptions. However, we continue to believe that we will be able to achieve our flattish or slightly positive NII in 2025.
We are maintaining net interest income levels through customer margin management by decreasing our deposit cost accordingly to rate movements, with additional income from loan growth as well as from our larger ALCO portfolio. NII in the second quarter should begin to show signs of recovery. Our current assumption is that we will end the year with 12-month Euribor around 2%. For all these reasons, we remain committed to defending customer margin around 2.7%.
We also remain confident and optimistic with fee income drivers and look to achieve high single-digit growth in fees this year. With higher fee growth and NII assumptions, we aim to continue to grow revenues each quarter this year, with 2025 total revenues above 2024 levels.
We will continue to balance cost volumes over the second and the third quarters, yet still target full year annual costs to grow around low to mid-single digit, leading to a resilient but low cost-to-income ratio at the end of the year between 35% and 36%.
Finally, for cost of risk, as I mentioned before, we expect to end the year in the very, very low range of the 35 and 40 basis points, benefiting from a very positive first quarter. We anticipate that gross income will achieve new record results this year, with a target to exceed EUR 1 billion of net income in 2025. Gloria, please, back to you for any closing comments.
Thank you, Jacobo, for the performance review and the insights. A year ago, I shared with you my first three strategic decisions as CEO, and today I wanted to recap the progress made in these three areas as well as talk about the longer-term ambitions for each.
Firstly, with EVO Banco, we completed earlier this month the legal integration into Bankinter. The combined talent now leads the digital organization within the bank. The new organization aims to drive over 50% of new retail customer acquisitions for the bank.
This initiative enables expansion into areas beyond our current physical locations, providing a full suite of 100% digital retail and wealth management products to the affluent mass market segment. This strategy also supports the growth of a more granular deposit base while simultaneously utilizing a cost-effective framework for operations and expansion.
Secondly, with Ireland, in April, we have also completed the legal conversion of Avant Money into a fully licensed legal branch of Bankinter. This will not only allow us to initiate deposit- gathering capabilities later this year to begin to finance their loan growth locally, but also provides promising longer-term optionality in terms of creating a universal full-service digital bank in Ireland. With this strategy, with this strategic project, we approved the implementation of a new state-of-the-art flexible platform that could potentially be exported to other countries in the future.
In Portugal, we invest in growing our joint venture in Sonae to become the leading consumer finance platform in the country, as well as continued investment in our technology platforms for improved customer interactions and streamlined internal processes, ensuring essential business capabilities for longer-term success.
To conclude, I will recap our successful financial results this quarter. Strong recurrent and growing income levels, supported by strong commercial activity in all businesses and geographies, increased shareholder remuneration and record levels of profitability. I am confident that we can repeat and improve on the success of 2024 after this strong beginning of the year.
Many have heard that I have my eyes on breaking the glass ceiling of achieving more than EUR 1 billion in net profit after tax this year. Having said that, since the beginning of April, we are living under higher levels of market volatility and uncertainty that might be present for several months during 2025. The announcement of the imposition of tariffs to all U.S. imports has initiated a commercial trade war with unforeseen impacts to the global economy, which will depend on the results of the negotiations that are taking place.
Spanish exports to the U.S. amount to around EUR 18 billion, which represents 5% of our total exports or 2.5% of the Spanish GDP, a very modest figure when compared to the 10% in Germany or Italy. The most representative Spanish exports to the U.S. are olive oil, wine, automobile components, refined petrol, and pharmaceuticals, being the last excluded from the announced tariff measures for the moment.
The situation in Portugal is very similar, with the vast majority of its exports made to Spain, France, and Germany. Finally, Ireland's main export market is actually the U.S., but more than half of these exports are related to the pharma sector, currently excluded once again from these tariff announcement measures.
Direct impacts on companies will depend on their capacity to absorb these tariffs into their margins to find new markets or to reconvert, for instance, into the defense sector and look to add increased value to their exported products. Moreover, Europe has announced very significant investments in defense infrastructure that will strengthen the U.E. economies and also the bank credit, and therefore will help to compensate potential impacts that tariffs may have. There are also opportunities for companies to transform their industries, like I've mentioned before, for the automobile sector.
This is at a macro level, but when we delve into our loan book, we have a very small exposure of close to EUR 1.2 billion with the most affected industries and an overall exposure of close to EUR 1.4 billion if we include the whole European automobile sector. This is a total risk exposure of only 2.9%, with main counterparties being solid corporations that will navigate well the crisis.
Bankinter has an outstanding, efficient business model and a superior credit quality and has been so through the different cycles. Our client base is more resilient than average, and our coverage ratio, as well as our capital buffer, are more than comfortable at present.
With respect to interest rates, they may be volatile and lower than expected in the coming months. However, we have been working to reduce the sensitivity of balance sheet to interest rates, which stands at 3% for a parallel downward shift of 100 basis points in rates. We have ample room to reduce the cost of deposits, as shown by trends that we have reported in this first quarter. We are therefore confident that we will be able to maintain client margins around 2.7%.
Moreover, we have a diversified and dynamic fee business. Asset management average fees might compress slightly as clients take refuge in lower-risk funds, but the foreign exchange and the Brokerage business will provide upside risk with increased volatility in the markets.
In short, I believe that we are in a good position to navigate through this period of uncertainty and volatility with determination and flexibility to preserve our consistent growth and performance. With our excellent team at Bankinter, our target is attainable. We will continue to focus on organic growth, consistent commercial momentum, offering high-value products and services to our customers, underpinned with disciplined risk and cost management across all regions. I leave you now with the key KPIs for the quarter and pass back to Laurie to initiate a Q&A session. Many thanks again for joining us in this call.
Thank you, Gloria. Thank you, Jacobo. Let's now move on to the live Q&A session. As per the instructions sent previously via email, please remember to select or press star five on your phone to submit a question. We kindly ask you to limit your questions to two, please. The first caller that we have on the call today is Francisco Riquel from Alantra. Francisco, please go ahead.
Yes, hello. Thank you for taking my questions. The first one I want to ask is about the deposit mix, which has not changed much in the first quarter, and you were expecting a major shift out of time deposits during 2025. The number of payroll and digital accounts is not growing either quarter- on- quarter. If you can update on trends here on the deposit mix. A nd where do you see the cost of deposits landing in the coming quarters with your assumptions that the Euribor will finish at around 2%?
My second question is on fees. Market-related fees account for over 50% of the total asset management and brokerage. This is driving most of the growth in fees. As you mentioned, markets have changed in April with a sharp increase in volatility. How do you see inflows mix transactionality for the coming quarters, and how does it change your guidance on fees for the full year? Thank you.
Thank you, Paco. The first thing, I'm going to answer probably the second one first. I mean, we're not changing our guidance on fees for the second quarter because we think that we can still achieve our targets in terms of gathering volumes. There is a strong commercial activity, and we think that really we can keep growing in assets under management and assets under custody in the coming quarters.
There is a good inflow of new clients on board. The other thing which is important is that brokerage activity is also very strong, and they bring us not just trading income but also FX income. We think that maybe there might be some transition from one fees into another fees, but the overall picture for the time being, we are not changing our views on how fees will behave at the end of the year.
Moving to your fourth question, I think the deposit mix has moved slightly in Spain. We know that the term deposits in Spain account for approximately 22% of all the deposits. It has moved almost 1 full point, but in Portugal, it has moved already by 5 f ull points. The trend is there. Since rates are continuing to go down, we expect that this mix will continue to move probably at a higher speed in the coming quarters.
We do expect that by the end of the year, the current proportion of term deposit will continue to slide down probably somewhere 5 to 7 full points below the current situation today. This combined with the reduction of the cost of deposit that we are already achieving and that I did mention will drive down the cost of deposits probably at the similar path as we saw in this quarter.
You also mentioned the payroll account. I think we're still having good figures in growth in current accounts and digital accounts. We are, as you know, quite active in commercial activity with digital accounts and the Cuenta Inteligente. Honestly, we are very happy with the current results. The cost of these accounts will be managed across the year to find a better or the best possible balance between the financial performance and the commercial performance.
Thank you, Jacobo. Our next call comes from Sofie Peterzens from JPMorgan. Sophie, please go ahead.
Yeah. Hi. This is Sofie. Thanks a lot for taking my question. Just on the net interest income guidance, you assume roughly a flat net interest income in 2025. Could you just discuss if rates were kind of somewhere closer to 1% or 1.5%? How should we expect your net interest income guidance to change? If you could elaborate a little bit more on this. The second question, if you could just give a little bit more detail why you do not expect any banking levy in 2025 and 2026, if you could just detail a little bit more the kind of corporate tax offsets. Thank you.
I will take the second question that relates to the bank levy. The bank levy, as you know, changed last year. First, it was a tribute. Now i t was a levy, sorry, and now it is a tax. That is the first difference. Why is it important? Because this means that you have to recognize it along the year rather than when you paid, which was the case last year. This is the first difference.
The second difference is that it is progressive. It is not 4.8% for everyone. It is a progressive tax. When we make the calculations for the tax that was due in January that was calculated over the figures of 2024, applying the new scale for the tax, we had EUR 54 million of tax. Okay? This is the gross figure of the tax that we had to pay in January.
There is a deduction to this tax. Okay? The deduction is 25% of the effective, I want to say, the effectively paid corporate tax. In Bankinter, in 2024, the tax that we actually paid to the taxman was EUR 300 million. This means that we could deduct from the levy or the tax up to EUR 75 million. If you make the calculations, EUR 54 million less EUR 75 million makes that this year we do not have to pay anything in January.
What happens in the tax that we have to pay in January 2026? Exactly the same. What we are doing is projecting the gross figure, which will be slightly higher, obviously, but the effective tax paid, we expect it to be around the same figure. Okay? This is why we are saying that the tax that we have to accrue this year and to pay in January 2026 will also be either zero or very near to zero. I hope I have explained it properly. Otherwise, I can explain it again.
Good morning, Sofie. I'll take the first question. I think that you were mentioning that we were keeping our NII guidance flattish and what was supporting this hypothesis. First of all, of course, growth. As we mentioned, we are achieving excellent levels of growth, and this is probably th e main support to our assumptions.
The second one is the resilience of the client margin. I think we have demonstrated this quarter that the pressure in client margin has almost been compensated. We are very, very similar level the one that we had in Q4. We think that we are able to keep it in similar levels in the coming quarters, basically, because there is plenty of room for reduction of customer deposits. There is room for still moving, as I did answer in the question before, the percentage of term deposit representing the total of the overall deposits.
I did mention also that we are increasing the size of the ALCO portfolio. That is another good inflow of NII. The overall NII sensitivity has not changed. We keep our - 3% for 100 basis points decline. That means that we should not expect much more decline in rates. Therefore, whatever movement in rates will be largely compensated by those two items that I just mentioned.
The yield of the ALCO portfolio, still at 2.5%, by the way, above the level of ECB rates. Therefore, we are very confident that whatever happens with rates, we will compensate and we will have a resilient client margin, but also a resilient NIM.
I'd like to remind that we have a very strong proportion in our balance sheet of client activity versus others. That will drive much more resilience in the NIM as well. Whatever the yield of the loans will do according to the level of rates, that is exactly what we will replicate in terms of cost of deposits, just making sure that the overall client margin stays quite resilient.
Thank you, Jacobo. Our next call comes from Alvaro Serrano from Morgan Stanley. Alvaro, please go ahead.
Good morning. Hi. Good morning. A bit of follow-up on NII and then one on Ireland. On the NII trends, can you just clarify or give us a bit more color on what kind of deposit growth you think you can achieve this year because Q1 was obviously very good and the mix improved?
You've already touched on the mix, but what kind of deposit growth you think you can have for the rest of the year should we analyze Q1? Is that what's giving you confidence? I guess your guidance implies that the bottom in NII is basically Q1. I just wanted to confirm I got that right. In Ireland, Laurie, you've confirmed that now you're fully licensed in Ireland. Can you give us an update of what your plans are to launch a deposit offering and what should we be looking out for? Thank you.
Hello, Alvaro. I'll answer the second question about Ireland. In Ireland, our plans are to be able to start commercializing deposits by the summer, but we will do it slowly and trying to test our capabilities there. I think we should expect greater activity in 2026. Do not expect big increases in deposits in Ireland or an aggressive campaign this year or massive aggressive campaign this year because we are going to be testing our capabilities on the market.
Good morning, Alvaro. I'll answer the first one. As you know, deposit growth is quite linked to the growth of the loans. We managed the loan-to-deposit or the deposit-to-loan to stay in similar figures where we are today. That should be the expectation of growth in terms of deposit.
However, I want to remind you that our commercial activity brings to the bank approximately EUR 7 billion, EUR 7 billion, EUR 8 billion of net new money every year. This is something that part of it will stay as deposits on balance, but strong volumes will be transformed in value-added products in assets under management or assets under custody. Therefore, for us, deposit is quite a very relevant tool to generate fees as well.
This is exactly what we will do. We will try to do as much commercial activity as possible. We will generate as many fees as possible as well. At the same time, we will make sure that we have a proper equilibrium in terms of growth, making sure that we keep strong and comfortable levels of liquidity.
Thank you. Our next call comes from Maks Mishyn from JB Capital. Max, please go ahead.
Yeah. Hello. Good morning. Thanks very much for the presentation and taking our questions. I have two. The first one is on the outlook for loan book growth. I was wondering if you've seen any impact of macro uncertainty on demand for corporate financing. A nd what are your expectations for the rest of the year? What drives growth in your corporate loan book? Is it more short-term lending, or you also see recovery in investment loans? The second one is follow-up on Sofie's question. Could you remind us the sensitivity of your NII to moves in interest rates, please? Thank you.
Yes, Maks. The sensitivity is - 3% for a 100 basis points parallel shift down, negative parallel shift. Okay? This is the sensitivity. Regarding the loan book, I think the loan book, we have a slide where I think it's well explained. The growth in this quarter has been around 2/3 with real assets or guarantees and 1/3 in personal loans. I think it's quite well diversified.
In terms of the corporate side, the corporate side, I would say, a good equilibrium between short term and long term. As you know, we have government facilities that are trying to incentivize long-term funding and the EU, European funds, etc. I would say there's a good equilibrium between short term and long term.
Thank you. Our next question comes from Britta Schmidt from Autonomous Research. Britta, please go ahead.
Yeah. Hi, there. Good morning. Thank you for taking my questions. One of my questions is regarding the cost of risk. You're guiding to end the year at the lower end of your 35-40 basis points guidance. Does that include any IFRS 9 impacts? Are you seeing anything relevant for your business? Are there any overlays that you can deploy in that?
The second one is one on the banking tax, just to understand what you are actually booking, because obviously, with the numbers being basically zero, it's very hard to tell. The 2024 would have been therefore reflected in your accounts as well as the 2025 accrual for 2025. Is there a difference in the timing? Thank you.
Hello, Britta. We have booked fully the 2024 tax, which has been zero. The result has been zero. We have booked 100% the accrual of one quarter of the 2025 tax, which our estimation now is zero.
Hi, Britta. Regarding the cost of risk, no, no, no, we are not releasing anything, no overlays, no IFRS 9, anything, n othing weird, nothing extraordinary, apart from what we mentioned, a sale in a Portuguese portfolio that has an extraordinary result. That is it. I mean, apart from that, no changes. In fact, we do not perceive any changes in the risk profile or in the trends on cost of risk in the following quarters. Basically, we just prefer to be sort of prudent and make sure that the guidance stays in the very low range of these 35-40 basis points.
Thank you. Our next question comes from Carlos Peixoto from CaixaBank BPI. Carlos, please go ahead.
Yes. Hi, good morning. A couple of questions from my side as well. The first one would actually be on fees. You had a pretty strong performance in the first [audio distortion] full year, but considering the pace of growth in the first quarter, basically, my question is, do you expect this pace of growth to hold on throughout the year? What would be the levers for that?
A second question on Basel IV. I noticed that the final impact was around 14 basis points, a bit lower than the 20 you had guided before. If you could give us a bit of color on the reasons behind that. Also within the impact, do you see there things related to operational risk, namely related to litigation charges, that could be reverted or have lower impact in the future if litigation charges go down? Do you think the impact is relatively stable and should not be reverted? Thank you very much.
Hi, Carlos. I'll go through the Basel IV first. Indeed, in the slide, there is an impact of 14 basis points. We were expecting around 20 basis points. The reality is that it is not always very easy to isolate the impacts. There might be some impacts in the RWAs column that might have been mixed, and it is basically impossible to isolate. The impact might be probably a little bit more than these 14 basis points, which is identified in the column of business.
Yes, I mean, the main Basel IV impact is operational risk. Operational risk is a function of the income. Basically, the new rules or the new formulas make this operational risk much more demanding in terms of capital consumption.
And then I am linking to the litigation. The litigation risk is more in the it has no impact in this Basel IV impact. The impact is in the other provisions line, which has had a very good behavior this quarter. We still think that probably the normalized basis points should be around 8 basis points instead of the 7 where we are today, but basically better than the years before.
Regarding the fees, we think in our guidance, it was like a high single-digit guidance at the end of the year. Today, we are sharing with you a double-digit growth in fees. At the end of the day, we do expect that we will stick to our guidance of high single-digit by the end of the year.
Again, since the macro environment is still robust and benign, we think there is good economic activity in the country where we are operating. That means that, the transactional fees, we will expect to be supportive. In the market-related fees, assets under management, etc., we'd still have a very strong commercial activity.
We might think that there will be, as you see in the slide in the appendix, some positions in terms of fixed income securities versus equities, etc. That might be some difference in the coming quarters, but a t the end of the day, we have very well profiled our clients into the different types of investment funds. We do not expect strong movements there. We still expect income in terms of net new money coming to these two businesses, so w e do not have any reason why we should expect or we should change our guidance as of today. Thank you.
Thank you, Jacobo. Our next question comes from Ignacio Ulargui from BNP Paribas. Ignacio, please go ahead. Sorry. Ignacio, we cannot hear you. Are you on mute?
You hear me?
Yes, we can now. Thank you.
Thanks. Thanks for the presentation and for taking my questions. I have two questions. The first one is, given the relevance that your international business is getting, I mean, have you got any sense from customers about lending appetite and potential growth opportunities during April? Have you seen anything in the last weeks in terms of all this uncertainty with the tariffs? Is that giving you any sense that things are going to be more resilient than what people may think?
The second question is linked to your NII. I mean, you have said in the call that we should expect an improvement in Q2. Just wanted to get a bit of a sense of how much of the loan book is already repriced to the current level of Euribors what kind of path of rates you are incorporating in that expectation. Is it going down and then rates going up? Just to get a bit of a sense of how we should see the NII evolving from here in the coming quarters. Thank you.
Hello, Ignacio. I will answer the first question regarding tariffs and the impact in our business. Really, for the moment, I mean, I agree with you that it's a moment of uncertainty and a lot of volatility. We haven't seen great impacts. Actually, we have seen non-impact in the business at all. I mean, the international business products continue to grow.
I mean, here we have to take into account that really the export of Spain to the U.S. are very small. We are not really very much into the agriculture business. The percentage, as I've mentioned before, of the risk that we have on our books that is related to companies that export or companies that are in a sector that exports to the U.S. is of only 1.4% of our total risk. It is very small, and we haven't seen any impact so far.
We haven't seen impacts either, for instance, in the assets under management business. Actually, there continues to be net new money going into the funds. It is true that we have seen some refuge of our clients in funds of lower risk and therefore also lower fees. The impact of this has been not even 1 basis point of average fees.
On the other hand, what we have seen that is positive is doubling the transactions in the broker online, which means, well , that we will see this impact also in fees. We have also seen very active the corporations hedging their U.S. exposures. This will also, of course, boost fee income. As I have mentioned, longer-term trends, we have not seen anything for the moment. We are very attentive. Obviously, we will have to wait and see what happens in the next 90 days.
Hi, Ignacio. I will answer the other one. As you know, Euribor closed yesterday already at 2%. All our assumptions are made based on Euribor in the following months around 1.92%. Okay? We have taken into consideration the current forward curve of Euribor, which is quite flattish around 2%.
We did the reprice as of the end of March, almost the vast majority of the corporate banking book was already repriced. The mortgages, I would say they were halfway. Since we have again a step down in around 30, 40 basis points comparing to the figures of the 2.4% Euribor 12-month average in March compared to the current 2.0% in Euribor, there is a 40 basis points again that all the books and everything need to start to reprice in the coming quarters.
I remind you that cost of deposits are reducing at quite higher speed, a lthough the front book obviously is much below the back book. A gain, that is why we are assuming that we can preserve this 2.7% client margin levels in the coming quarters. Supported by growth and supported by ALCO, supported by hedging activities, everything should start recovering in the coming quarters.
Okay. Thank you very much. Our next call comes from Marta Sanchez from Citi. Marta, please go ahead.
Thank you very much. My first question is a follow-up on the cost of deposit. I think, Jacobo, you may have said that you expect a quarterly drop similar to what we have seen in Q1. That means a cost of deposits around 75 basis points by the end of the year. That is my first question.
My second question is on your cost-to-income target, 35%-36%. I understand that is kind of a binding constraint. If for whatever reason fees are lower, you will have the ability to pull back on your cost investment. Thank you.
Good morning, Marta. Yes, I think our assumptions are that every quarter we should reduce the cost of deposits somewhere between 10-15 basis points. That is correct. We did 14 in the first quarter. Somewhere between 10-15 every quarter, this is the target.
You mentioned we end up the year at 75 basis points. That probably will be the end of year or the last month of the year. That could be a good assumption. Again, the speed will be related to commercial strategies and also based on the level of repricing of the loan book.
I think basically the assumption is that we should end up the cost of deposits in the last quarter quite below 1%. Regarding the cost of income, of course, this is something which is quite relevant for the return on equity and ROTE. Basically, yes, we are very committed to this efficiency ratio.
Okay. Thank you. We just have a couple of minutes left. I ask our last callers just to limit their questions to one, please. Our next caller is Ignacio Cerezo from UBS. Ignacio, please go ahead.
Good morning. Sorry for coming back basically on the customer margin and the cost of deposits. If you can give us the exit number for Q1 on both customer spread and the deposit cost. Thank you.
Sorry. D o you want me to tell you the exact number of what, o f the cost?
The exit, yes.
Of March.
Yeah. On customer spread and deposits.
Yeah. It has been around 5 basis points lower than the average of the quarter.
The deposits.
The deposits.
But not the client margins. The client margin?
The client margin, it's at 2.70%, 2.71%. Yes.
Thank you. Our last question comes from Cecilia Romero from Barclays. Cecilia, please go ahead.
Thank you very much, Jacobo, for taking my question. This is just a quick follow-up on Britta's question. You mentioned that there was no extraordinary items on cost of risk this quarter. Hasn't your growth outlook across markets weakened? Would you be updating your models to reflect that? When do you typically revise your provisioning assumption in your models?
Thank you, Cecilia. We review them always at the beginning of the year. I guess that your question is if we update our models based on the macro environment, macro expectation, etc. If I properly understood your question, the answer is this is something we do every first quarter of every year. Having said that, we are not expecting to change anything in our models until 2026.
Thank you.
Thank you very much, Cecilia. That now concludes our call. On behalf of the entire Bankinter team, we want to thank you for your support, interest, and participation in this webcast. As a reminder, both Felipe and I will be available from the investor relations team after the call to answer any questions you may have. Thank you all very much and have a wonderful day.
Thank you. Bye-bye.