Good morning, and welcome to CaixaBank's financial results presentation for the third quarter of 2021. I hope you and your families are well. For today's presentation, we are joined by the usual management team, consisting of our CEO, Mr. Gonzalo Gortázar, and the CFO, Javier Pano. Moving on, just a reminder that we plan to spend around 30 minutes presenting, with 45 minutes-60 minutes afterwards available for a live Q&A session, for which you should have received instructions via email. Let me just say that my team and I are available after the call to discuss any events that remain unanswered. Without further ado, let me hand it over to our CEO.
Thank you, Eddie. Good morning, everybody. Thanks for taking the time. Let's go directly into the presentation. The highlights, and I think the highlights are that we have made substantial progress in our merger project. It's now almost a reality from an operational point of view. We have now planted the seeds to get to those EUR 940 million, which we announced that we reviewed upwards last quarter. For a substantial part of that 80% to be delivered in 2022, which is the first year after a transaction that closed in March. I think this is very important. The one message I would like you to go out of this presentation today is that we're very confident about how things are going.
At this stage, we have plenty of research to be confident. If at any point people have seen execution risk associated to these, cost savings or merger, I think it's time to be completely confident that we're gonna get there. That in the context of all the work that we are doing, our performance in our commercial activity, I think it's quite noteworthy, particularly and obviously, you see here, we were doing in the area of long-term savings, 8.9% growth year- to- date. We're gaining market share in long-term savings, despite all, what the merger is, it means a lot about what franchise we have. New MyBox Premia up 140%.
Those engines are really firing 100%, even in the context of this complex integration. Our core revenues are stable. Obviously, we have very strong headwinds on NII. One might think, given what you see in the market, that those NII headwinds may be close to their end. We'll have to see, but certainly, we're starting to see different expectations for rates, and I'm talking about just what you can see in the markets. In any case, we continue with that very strong growth in the insurance and fee related areas, which is gonna continue whatever happens in the area of the evolution of rates. Cost of risk is doing very well.
You have that 30 basis points over the last 12 months on a combined basis, obviously on a quarterly basis is even lower. We keep having good news, and we've decided to improve our guidance for this year to less than 30 basis points, not to 30, but to less than 30 basis points, for the totality of 2021. We've kept asset quality very stable. In the quarter, and then capital is another strong point. We reached 12.7% on a fully loaded ex the transitional basis, 12.7%, well above our rate, our targets, and that is obviously after deducting our 50% payout that we have announced. Very strong capital generation.
If you look at what we've done here today, 88 basis points, it actually means a lot to us, and I think it also means a lot because we see it as something that is whatever the right number is, but is gonna continue on a sustained basis in the future. That will allow us to appropriately reward our shareholders. MREL is very high levels already complying with what is required from us for the year 2024. I spent a couple of slides talking about the integration because I think the achievements so far are great, but also we still have a couple of quarters of great challenges ahead of us. That's clear.
What is most important is that all what we've done these six months has been to put in place all what is needed to have a very successful and a very quick, fast integration. This bank is going to be in an extraordinary position starting probably six months from now, once the vast majority of the execution work has been done to capture revenue scenarios and to benefit from a tremendous platform, tremendous workforce, and a great opportunity in Spain, which we have been doing for quite some time as CaixaBank, and we are going to be doing even more further as CaixaBank plus Bankia together. People integration has gone extremely well. The teams have been put in place since the beginning.
We've done over 6,000 interviews, over 2,000 management appraisals with external people, so that we actually had a very clear decision process on which meritocracy is and has been the name of the game. That's done, and it's been done in a fair way so that people are part of one integrated bank at this stage, even if it's only six months after the merger. We agreed the restructuring with unions, finally with all voluntary redundancies. People are starting to leave, actually the first of November this year, and will be leaving very fast, as you'll see on the next page, you know. The model, the business model has been integrated very quickly from all points of view.
Some of the businesses have been integrated already, like CIB or business banking and private banking. There you might have seen some impact of that very fast integration at the beginning of the second quarter, but it means people are done with integration and on a great position to benefit from what we see ahead of us. The retail network has been operating as one, even though with two separate platforms. That's gonna end mid-November when we finalize the IT integration. We have already integrated the payment business into CaixaBank. The asset management companies have been merged.
The insurance are well advanced, and we expect to have it finalized during the fourth quarter with the sort of breakup of the joint venture with Mapfre and sort of a steady state on that front. We have rebranded branches. Clients have been advised of what's coming. Everything is prepared. We are also prepared on the IT integration. We've been working for 12 months on that since the transaction was announced, as opposed to since the moment the transaction was closed. We're well prepared to go ahead and have a successful integration. There's a lot, that's my point, that we have achieved in these last six months. So, it's approximately 15,000 activities that we have completed.
Fortunately, I'm not gonna go through them or put a number of slides explaining each of them. This is working like a clock. Ahead of us, in this quarter, we have the integration, which I discussed, the fact that people start leaving in the first of November. We have 1,200 people leaving. Then the bulk of the exits are going to concentrate in the first quarter, so that by the end of the first quarter, 70% of people will have left. That's what obviously helps to make sure that we deliver this very high number of cost savings already from next year. The branch network, we have around 1,500 branches to be closed or integrated.
We're gonna do 80% of that by the end of the first quarter. Half of that will actually be done in December, right after the IT integration. Very speedy. We are prepared to do that and to get the organization again ready for the next phase. On the joint ventures, I discussed it already. We're making good progress. All this is relevant because obviously we are going to be able to focus on delivering the revenue synergies as soon as all this heavy lifting of integration is done. The numbers for the year to date on long-term savings, I mentioned it at the beginning, they are pretty good.
Look at this EUR 15.7 billion of assets under management and long-term savings. Very significant increase, both market and new inflows. There's also an increase in liquidity, and I would say a very good trend. Having gone through all that we are going through this year, the fact that we're growing faster than the market is something that speaks by itself. New inflows, you have some data on that. You have data clearly on the revenue growth from AM and savings insurance. Our market share, you can see there the 22 basis points of increase from 29% to 29.2%. The success we're having on the management of portfolios on a discretionary basis.
MyBox, you heard a lot about MyBox this quarter. Have been fantastic again for MyBox, consolidating itself as a very, very successful commercial offering. With a lot of future for us. It's a very ample concept in which we can not only do what we're doing, extend it to Bankia customers, which is obviously a great opportunity, but also develop new ideas, new products within the MyBox. It's captured the attention of our people. It's captured the attention of clients. It's a great commercial tool. Now you can see how Bankia is already accounting for 20% of sales. It should, in theory, account for 1/3, given the relative sizes, but obviously that is in due course where we will get.
Probably, honestly, two levels above that because the opportunity is even higher. I talk about revenue synergies. Obviously, IT integration is a precondition for that, and now we're getting to the moment in which that will be a reality. You see the difference in long-term savings. Those numbers you've seen in the past, but still 6 percentage points of penetration of long-term savings is a huge difference. There's a lot of money to be made there. In the case of life risk, the numbers speak for themselves. On non-life things like health insurance, where we do 7x more at CaixaBank than at Bankia, gives you an indication this is going to happen.
It's a matter of obviously closing the negotiations with Mapfre, then having a unified platform and this will give us great tailwinds for the coming years, you know. Remember when we closed the joint venture with Mapfre and we acquired 100%, we had announced approximately EUR 75 million of pre-tax income that would immediately accrue to our results. For that reason, into next year already, as we expect to close this during this fourth quarter. The loan book is obviously the other side. We have significant reductions in the loan book. This quarter is also aided by seasonality. We have this EUR 3 billion of pension advances for a few days at the end of the second quarter every year, so that really doesn't compare.
We still have 1% decrease of the loan book in the quarter. The same seasonality as well there in September, which is usually a weaker month than June, but there is obviously some impact. Mortgages, we continue to see similar trends with our focus on pricing and value of mortgages rather than volumes. We've seen better trends in consumer lending in terms of new production, but still the loan book is slightly down. I am quite convinced that is going to change soon. On the corporate side, obviously you've seen a relatively weak year. I have to say, this is after a strong exceptional performance the previous years, and particularly post-pandemic.
Now we looked at our market share in business loans on an organic basis, and we gain much more market share in 2020 than the market share we are losing in 2021. Part of this means that our clients had enough liquidity or more than enough liquidity that we had provided them during 2020, so that they are actually having a lower demand of credit during 2021, in which obviously you see our numbers are reasonably weak. I said I was optimistic on consumer lending. Here you have on the graph what we've seen in terms of consumption patterns during the last quarters. As you know, because of our market share and our credit and debit card spending is a very good thermometer of what's going on.
We're seeing now in this third quarter that consumption has been around 14% above the equivalent period pre-pandemic. There's a complete change of tone here. We've seen it already in our numbers. Maybe we don't see it in balances, but you can see some of the things on car leases, which we've been very successful. We're at 17,000 this year. It's up 19% from last year. Obviously, last year was weaker, but we are on a run rate that should put us on a record year. You see what we do through [WeBuy] up 38%. We're selling and funding TVs, mobile phones, other sort of white label, other white goods, et cetera.
We have increased the number of MyCard. MyCard is a card that acts as a debit or credit card, depending on how a client wants to use it. It can also convert into revolving, and where we've made a lot of progress in increasing the number of cards that our clients have. This is not showing today in the numbers because you're just changing a card, but it's giving you a much more powerful tool that will eventually engage in sort of deferral of payments and hence a great source of profits for us. We have increased now the numbers of customers with pre-approved loans, which we tightened after the pandemic.
I think, other than the numbers that are positive on new production, I think we have put the seeds for better performance into the future in consumer, which is not so relevant for volumes, but it's quite relevant for NII, as you know. The comparison for the nine months, obviously, you see how we are offsetting the fall in NII through fees and ensuring revenue so that we have stability on core revenues. The big gap is the difference in provisions, which is no surprise to you and very well explained. We continue to have a mix of core revenues that is shifting gradually and more and more towards higher quality fees and insurance revenues.
It's at 42%, but obviously we would like to see NII growing as well in the future. NPLs, coverage, liquidity, and capital, Javier will get into the detail, but those are excellent numbers. Again, I want to emphasize how much capital we are creating quarter after quarter, which is obviously something very important for us and I'm sure for our shareholders. One final note on ESG. Just to remind you all what we do on this front, we're excellently positioned to benefit from ESG trends and to benefit from a market that is increasingly more and more sensitive to what banks and other corporates do.
Just one specific point of information, we've been the largest European bank in terms of ESG issuance this year by a very large margin with both green and social bonds because we have, obviously, the activity, the collateral. We can do more, but we can, and we will, put in value all what we already do, which is a lot. With that, Javier, your turn. Oh, Alder. Thank you.
Okay, thank you. Good morning. From my side, also, I'll try to be brief on my comments on the P&L and the balance sheet. Well, first, on the income statement. The income statement for the quarter, core revenues, as commented, slightly down by 0.9%, although flat year to date. As commented, it's NII that is putting some pressure on that front, affected by lower asset yields and average volumes. On fees, although we have some quarterly seasonality, we have a better landscape with growth mainly driven by assets under management. On insurance revenues, we keep improving this third quarter, and as Gonzalo commented, we are quite optimistic for this into the future. Nothing specific to remark on non-core revenues this quarter.
On costs, broadly stable, quarter-on-quarter and evolving in line to meet our guidance for the year. On loan loss charges, clearly, a lower figure, EUR 165 million, this third quarter, clearly below our initial expectations for a cost of risk for the last 12 months at 30 basis points. It's a quarter where we have also some M&A impacts, already expected and in line with our initial plans, for net impact of minus EUR 124 million, mainly related to the incoming restructuring of our network. Taking into account those 124 million euros, on an adjusted basis, net income has been, this third quarter, EUR 744 million, up by 33% compared to the situation last year.
Some words on BPI, where we really have solid operating trends, as you may see. Core revenues there up significantly year-on-year, year-to-date, quarter-on-quarter. Very good evolution of the loan book in Portugal, up by close to 6% across all segments. As a consequence, we keep gaining operating leverage with a core operating income that improved by 28%. Net attributable profit of EUR 42 million. Also on the credit front, we are doing well. Loan moratoria has already expired almost totally in October, and so we only have left EUR 100 million, and credit metrics really sound, with an NPL ratio of 2.2% in Portugal. Let's go into the detail NII.
NII down by 4% year to date, as we saw before. Quarter-over-quarter, -2.9%, mostly impacted by lower loan yields and loan volumes, mainly on the SME sector, I would say. We can comment later. Also, on the ALCO front, we are having the negative impact from excess cash, as we have been waiting for the reinvestment of the portfolio, as we commented last quarter. The variable rate book yield has been negatively impacted by variable repricing and comes down by 4 basis points this quarter to 163 basis points.
The fixed book yield, quarter-over-quarter, also comes down by 13 basis points to 198, but in this case, due to a higher weight of the new production of corporate lending this quarter, approximately 40% of the new production. On the ALCO book, as commented, we have been in a wait and see mode for the third quarter, although you could see that the market is moving towards what we were expecting. We are clearly having a backup in yields in recent weeks, and well, that's offering some opportunities for the reinvestment of this portfolio further down the road.
So far, as of the end of September, the metrics remain stable. Also the sovereign exposures and our wholesale funding cost, nothing to remark for the third quarter. I would like to highlight a couple of measures we have taken in recent times to mitigate NII headwinds. First, we are charging for some corporate deposits, EUR 38 billion, by the end of September. As you may see, this is increasing steadily by the quarter, and we think that we still have some room on this front. Importantly also, this shift from fixed to variable annuities. On this front, in the past, we have been almost distributing a product with a fixed income component, but nowadays, we have been moving towards also a variable component.
That's resulting into a higher contribution from fees, while at the same time, as you may see, the size of this savings insurance portfolio has been increasing steadily. Some comments on non-NII core revenues that grow strongly on the back of asset management. On this front, year to date, on fees, we are up by 5.2%. You may see the breakdown. Recurrent banking fees gradually recovering. On this, I would say that is still on payments below the pre-COVID levels. Still we need to gain some traction on that front. Obviously, on asset management, we are much more than compensating this with growth at over 16%.
Also, insurance distribution clearly improving year to date by 6.7%, and despite seasonality that always affects here in the third quarter. On wholesale banking, we are having a weaker year compared to last year. In this case, I would say that last year was exceptional in terms of taking advantage of some opportunities we had in the turmoil of the COVID situation. Look, including or excluding, better said, the CIB related fees, our fee pool is growing by 6.8% year to date. A look on the right-hand side chart on other insurance revenues. On this front, this is the combination of the equity accounted from. On loan loss charges, finally, well, much lower than initially expected, at least a few quarters ago.
Only EUR 165 million this third quarter. I would also like to remark that we keep unused EUR 1.4 billion of COVID reserves that have remained stable this quarter. We have made some minor adjustments to our forecasts for GDP growth in next years. Still, as you may see, in 2022 and 2023, we are quite a bit on future evolution. No major changes this quarter on the different stages of our loan book. As commented with this very much positive backdrop and positive evolution and performance of our exposures, we are upgrading our cost of risk guidance to less than 30 basis points from less than 40 basis points for this year. Let's move now to the balance sheet.
Commenting first on our non-performing exposures. You may see that non-performing balances remain broadly stable. Actually, in euros, slightly down. The NPL ratio is stable at 3.6%. The breakdown by segments is pretty stable, only some minor denominator effects. The coverage ratio also stable at 64%. And as I was commenting, you know, there are some parts of the portfolio that are evolving better than initially expected. One clear case is moratoria. It has already expired almost completely. Only EUR 1.4 billion left, once considering those that have already expired in Portugal during the month of October. Well, the credit metrics on this portfolio continue to be really sound and at the same levels we had in the previous quarter. On ICO loans, some comments.
35 of them are already repaying principal, 97 are performing, and only 1% asked for or applied for some kind of changes on this front. I would say that is really a low amount up to now. Finally, liquidity and solvency. On liquidity, well, first, on the upper part of the slide, you have the MREL ratio at 25.6%. This is 350 basis points over our current requirements, so really a comfortable position. We keep issuing, as you know well, this quarter successfully, EUR 750 million 81 at record low coupon levels for a Southern European bank.
Well, you know that in the future, we will be a recurrent issuer as we are already facing the rollover of plenty of the instruments already issued in the past. Below our liquidity metrics, the liquidity coverage ratio over 300% and the net stable funding ratio at 151%. Finally, solvency. It has been a quarter of very strong organic capital generation, 45 basis points in one quarter. Remember that we keep accruing a 50% cash payout in our solvency ratios. Those, the structuring impacts already expected have resulted into a negative impact of 8 basis points this quarter.
Remember that we commented that we were expecting that on a net basis, we were already done last quarter. This means that for the fourth quarter, probably we will have some positives on this front. Finally, markets and other almost no impacts this quarter. We end the quarter with a CET1 ratio at 12.68%. When adding additional 35 basis points from IFRS9 transitional, this is a CET1 ratio already over 13% and an MDA buffer already approaching 500 basis points. Finally, on the right-hand side chart, you may see the evolution of our tangible book value per share, up by 6% year to date. It's now at EUR 3.72.
I think that with this is for my part, so we may be ready for questions. Thank you very much.
Indeed. Thank you, Javier. Thank you, Gonzalo. It's time to move now to Q&A. I'd just like to remind everyone to keep your questions brief for the benefit of everyone on the call. We have a queue of around 12 people. With that, operator, please proceed with the first question, including the name and the company of the caller, please.
Thank you. The first question comes from the line of Mario Ropero, Bestinver Securities. Please ask your question. Your line is now open.
Hi, good afternoon, everybody. My first question, well, a couple of questions around NII. Do you think the yield pressure should be over now? I know that there may be some still marginal pending effects from Euribor, but you're also producing loans that yield above the back book. And then also related to NII, if you could update us on the contribution from CIB. What is your base case expectations regarding what the ECB may do about this into next year? Then the second question is regarding cost of risk. Seems very low now. You improved your guidance. You think that you still have room to improve impairments, credit impairments in 2022 versus 2021?
Also somehow related to this is, you can update us on the amount of provisions you have for COVID and whether you could consider some release in 2022 once ICO grace periods expire. Thank you.
Well, thank you, Mario, good morning. Let me take the second question and probably Javier can take the first and add anything he wants. On cost of risk, we feel fairly upbeat. What we're seeing is positive from all angles. We are a fairly conservative institution. As you know, we are very well provided. With that 64% coverage ratio, we have the COVID provisions, and we have the PPA. The reality is surprising us on the positive every single quarter, no? That means that looking into 2022, and I think the big milestone in 2022 is going to be the second quarter with the maturity of many of these or the conversion of many of these ICO loans into sort of principal payment loans.
I think at that point is when we, with the information we have now, when we will have all the evidence on, in terms of, what is the potential or likely excess of provisions that we have accumulated. Up until that moment, we will be conservative, but the good news is the actual running of the business is being very, very positive. You know, both second and third quarter, I don't see that changing unless there's any significant move on that front. I think we should look at not just 2021 but also 2022 on a very good metrics. We're not gonna be specific on what happens in 2022 in terms of our recurring cost of risk, less so in terms of potential write-backs.
We'll have to wait until the appropriate time comes. The tone is quite positive, quite upbeat about it. Javier, maybe you can take the NII.
Yes, Mario, hello, good morning. Well, on NII, some general comments that I'm sure will touch on what you commented, no? In terms of Euribor repricing, still we have some for next quarter and probably into the first quarter. For next quarter, I mean fourth quarter and first quarter of 2022, still some lagging impacts from Euribor repricing. Although, in our view, this to some extent may be compensated with better performance in terms of volumes in general, no? In general, in the loan book, but also on the ALCO portfolio, no? I commented in the presentation that clearly the market has moved a lot since before the summer.
That's offering us some opportunities to start rolling over maturities and also probably increasing the size of the portfolio compared to the figures we saw by the end of September, no? This is one thing. On ECB and TLTRO, what yesterday ECB said is that they wanted to avoid a cliff effect. This is what we thought before, but I was happy to hear yesterday from ECB that they think the same. Our base case assumption is that there will be some kind of rollover of the, let's say, the funding benefit of the TLTRO. Otherwise, more banks could decide to redeem in advance the TLTRO that's resulting in liquidity impact in the system, no?
I think that clearly the message from ECB is this one. We need to wait until December to know the details. But I think that this will be the case, no? Well, with all this in our mind, because at the end of the day, the question behind all this is: When is the trough for NII? In my view, it's gonna be at some point between the fourth quarter and I don't know when in the first half of next year, no? This will be a little bit market-dependent, no?
Market-dependent, depending on the steepening of the yield curve, to what extent we decide to increase much more or less the size of the ALCO portfolio, to what extent the repricing on Euribor ends before or later. Because, as you know, nowadays the forward yield curve is already considering that 12-month Euribor is gonna be at 0% by the end of 2022, which is quite a change of what we have seen previously. You need to take all this into account before assessing when the trough is gonna happen, no? Also, back to my first point on volumes, and Gonzalo already commented, no, we are quite optimistic on future evolution on consumer lending.
Clearly, this is a key part for us because, you know that, yields could be higher than the average and are having a clear positive impact on NII, as it was in the past. We are expecting to be in, let's say, pre-COVID mode as soon as possible in order to regain traction in terms of new production of new lending. I would like here, if I may, I'm sorry, because I probably taking some time, to update you on our interest rate sensitivity. Our positioning is clearly towards higher rates. According to the latest figures, we have interest rate sensitivity of approximately 20% for a repricing of the Euribor yield curve of 100 basis points.
This plus 20% on NII would happen once you have all the repricing in the portfolio, so after one year. The impact in year two will be approximately 20%. As I say, as of today, the market is telling us that the Euribor is gonna be at zero by the end of 2022. We know that markets change, and they have done in the past, but clearly there is a different tone on this front. We have clear potential if this happens. I think that this provides, Mario, some information to your general question.
Mario, on the figure you were asking, the EUR 1,395 COVID provision remains unchanged from last quarter. Sorry I didn't mention that in my answer. Let's go.
Okay, thanks, Mario. Let's move on to the next question, please.
Thank you. The next question comes from the line of Ignacio Ulargui from Exane BNP Paribas. Please ask your question. Your line is now open.
Thanks very much for the presentation and for taking my questions. I just have two questions. One is on NII, just coming a bit back on the excess liquidity. I mean, I think it's a huge issue for CaixaBank because of a strong reach into the retail portfolios. I mean, you're gathering a lot of deposits. I mean, is there any way you can then accelerate beyond charging more to corporates? I mean, I understand that would be a big driver of the drag in NII in this quarter. The second question is on the capital return outlook. I mean, what are the milestones that we need to sort of like to be completed for the bank? Just to update a bit on the shareholder remuneration, and would you consider at some stage buybacks as an option? Thank you.
Thank you, Ignacio. On these two, obviously, there's many things we can do, but we can do it and we have to do them in a sensible manner, and making sure that our customers benefit from that. One very obvious thing is to continue to move money that is on balance sheet to off balance sheet products. That is something where you could expect a continuous movement.
Obviously, depending on market conditions, depending on our ability to develop new products, particularly if the long end of the curve starts to rise, we're gonna be able to deliver more solutions to clients that are more attractive than saving on a current account at zero. Even if saving at zero is a loss for us, certainly if they move into other products, it'd be a clear profit. Yes, there are things that we can do, and obviously we're also looking at again reinforcing our position in CIB, where we have the opportunity to deploy part of this liquidity and where we have a team that has been reinforced after the integration of great professionals from Bankia to the super team we have in CaixaBank.
We're gonna keep doing reasonable things beyond charging for excess deposits. There's all the financial management that ALCO can do and that Javier has mentioned, and I'm sure he will elaborate during the call. In terms of capital return, let me be very clear. We are well above our limit, our targets.
Capital. We had our target, and we are now well above. We're generating more and more capital over and above that target every quarter. We're about to complete the IT integration, the sort of heavy lifting of the branch restructuring over the next few months. Then we're planning a capital markets three-year plan for the second quarter. We will update after sort of detailed debate in our board on what we are going to do with that capital, but certainly it is not our intention to do any other thing than return it to shareholders. One way or the other, we can discuss the quantum and the timing. But this is excellent news, and we certainly see that we can be more and more ambitious on that front the way the business is running.
We have had excellent news on Basel IV, even though this is a 2025 to 2030. With the ILM now set at 1, we're not expecting any material impact from Basel IV. Actually, there's no clouds on the horizon here. It's all good news. It's a matter of us coming to how much, when, and how. For that, I can only explain that we're gonna need some time because we're in this 3-year planning process after completion of the merger and completion of our operations this quarter and the first quarter. I think you should be optimistic.
I certainly agree that the part of the business and of our growth history is going to be really making a difference going forward and during 2022.
Okay Ignacio, thanks a lot for your question. Operator, may we move on to the next one.
Thank you. The next question comes from the line of Alvaro Serrano from Morgan Stanley. Please ask your question. Your line is now open.
Hi, good morning. I've got a question on NII first. It's a bit of a broader question to start with. What's proving so difficult to forecast NII? Because in the last quarter, you said you were expecting a trough in Q3. Now Javier is talking about later this year or even the first half. It's proven quite tricky to gain confidence on that. Maybe high-level thoughts and the more concrete sort of question is, if I look at your corporate books, they're down 4% year to date, non-mortgage lending 5% year to date. How are you gonna meet the TLTRO benchmark?
On my sort of very crude numbers, it looks like you would need to grow loans EUR 7-8 billion in Q4, which sounds very, very difficult. I know it's not done on consolidated basis, but maybe some reassurance there. The very short kind of second question is IFRS 17. Some of the U.K. banks use embedded value accounting, and they've sort of got it to pretty meaningful impact on P&L. Just wanted to confirm that your expectations there and that you don't use embedded value accounting. Thank you.
Thank you, Alvaro. I can confirm that we are not using embedded value accounting, so hence we're not gonna have a problem. We're not gonna have a material impact from IFRS 17. We're still calculating all the details. It's fairly complex, but no, we are not gonna have a material impact, certainly on profitability. Obviously, the first one is a big, big question for you, Javier.
Okay. Álvaro. Well, the trough. I remember actually saying that this would be by the fourth or very early into the next year, no. This is what I remember from my notes. Anyhow, it's about volumes. I think it's clear, no. We did a lot in terms of SME lending with the ICOs. We think that this was the right thing to do back then to provide liquidity to our clients. It was good for them. It was good for us. We needed to do it at the moment. Now we are feeling a little bit the pain of having done so, no. Because those same clients have plenty of liquidity.
They are to some extent waiting for news about the next generation funds, et cetera. We are a little bit in a standstill. If you look at our new production figures, it's actually this segment, the one that is having the most impact. To your question about TLTRO, no worries about TLTRO. We have a sufficient buffer. There are plenty of adjustments to the final figure. When you compare the headline to the final figure, there are adjustments for borrowers that are not residents in the Eurozone, adjustments due to asset-backed securities, adjustments for portfolio sold. There are plenty of things. I understand that from the outside, it's difficult for you to follow, but the situation is comfortable.
It's in our plans, and there is not an issue on that front. Also, to my first point, no, the situation in the market is changing. Other times has already had this, if I may call it, false dawns, no? Now it looks. It seems that it's gonna be for real, no? Clearly, just by stopping the negative repricing on Euribor is gonna be a clear improvement if we will be on this, and we start having positive repricings, which looks increasingly likely.
As we leave this, let's say, period of the integration behind us, and we are back to business fully, I think that we will be on track as we have done in the past to keep growing on SMEs, on corporates, on consumer lending, and well, on mortgages. You know that we have had a different approach always focusing on pricing, et cetera. Time will tell because if the yield curve changes, our strategy on this front also may change. We are quite confident that the future is positive for us on this front, and although in the very short term, it's true that we're still feeling some pain. Thank you, Alvaro.
Alvaro, if I may add, we're seeing a fairly good month of October and trends from now to the year-end, I have to say, across business lines, no? It is positive from that point of view. Certainly, well, you know, Javier, if there was any risk that we would not be meeting the TLTRO, he would have warned you long ago, no? We're very confident on that.
Okay. Thank you, Alvaro. Let's move on to the next question, please.
Thank you. The next question comes from the line of Sofie Peterzens, JPMorgan. Please ask your question. Your line is now open.
Hi, here is Sophie from JPMorgan. I would like to ask on Erste Bank, what's the rationale for considering selling down your stake in Erste Bank, given the limited capital benefit, but the kind of easier downgrade that we potentially are going to see here? If you could just talk a little bit about that. Then my second question would be on capital, if you could just kind of remind us what capital headwinds you potentially have on the regulatory side, and also what your view on kind of potentially doing share buybacks going forward, given that that seems to be the trend in Europe. Kind of how we should think about the moving parts on your capital and how that might be distributed to shareholders.
Thank you.
Thank you, Sophie. I would say on Erste, the rationale, not you personally, but you as a community and investors, have always been asking us what is the rationale of holding it. We never have seemed to be able to convince you at least fully, no? I think markets look at us wanting to own the banking business and operate the banking business or not be in that banking business, no? History for us, the last few years, we've divested out of Bank of East Asia, Inbursa in Mexico, Boursorama. We turn our minority stake of Portugal into a control and then eventually 100% ownership. This was the last step in this trip.
We're just saying we want to have control of the banking businesses which we operate, and those are in Portugal and in Spain. Erste is a great bank, actually has good prospects, I have no doubt. We have had a great relationship, and I'm sure it's gonna continue to do well, but I don't think our shareholders expect from us to be minority shareholders in other banks. We are now preparing, starting to prepare this three-year plan. I'm sure if we present the plan, we'll have a lot of questions on that, so we've decided to say, "Listen, we are going to create EUR 1.2 billion of pre-tax additional earnings from synergies of this merger, including revenues.
Let's part now with this great partnership, but seen more as a sort of additional financial results of lower quality because we do not operate it, even if the bank is certainly a higher quality. That's the rationale. Nothing to do with Erste, a lot to do with our own strategy and thinking this is the right time to finalize that trip, which was started some years ago, right? This is what it is. In terms of capital, I just want to, because I might not have been clear enough, Javier will, I'm sure, elaborate on the evolution in the future, but we are already having substantial excess capital. We want it to be given to our shareholders.
Yes, I personally think a share buyback makes a lot of sense. We're gonna have to make these decisions at the appropriate time by the board, which may or may not have the same views that I do, and then announce them in the second quarter. I would say this is definitely the direction we want to go. I think it's highly likely that in this direction, some of the capital return tools that we will use will include the share buyback. That has to be decided in due course. I'm just asking for a little bit of patience, but also confirming the capital keeps accumulating, and that's good news. There's more to deal with at the right time, which is going to be 2022. Sorry Javier, because
No, probably some more details on incoming impacts from M&A and what you mentioned, the regulatory front. Remember that we commented that we were expecting that from the M&A part of the equation, we were expecting that on a net basis we were already done. We have had those minus 8 basis points this third quarter. Now, what is pending on this front is, and I'm sure that you remember it, is the transfer to Comercia of the merchant acquiring business of Bankia, and this results into a positive impact of 11 basis points. Then, there is pending an agreement with SegurCaixa Adeslas, in order to, as we enlarge the perimeter of clients available to SegurCaixa Adeslas, and this is gonna be a positive also.
We will have still some minor pending, let's say, restructuring impacts, the costs related to the integration. Then there is also an impact pending from the breakup of the JV with Mapfre. Those are the pendings. Our view is that the net of all those, in this next fourth quarter may be slightly positive, okay? This only reinforces the message Gonzalo is giving on capital. To add on this front is that, in terms of regulatory, so I mean, on risk-weighted assets, pending internal model inspections, et cetera. The net of what is pending, in our view, is gonna be pretty neutral. The only caveat here is that the timing is quite uncertain, and we may have some quarters in the
During even not only next quarter, but also into 2022, some quarters where we may have some positive impacts and others where we have some negative impacts. The positives have to do mainly with the release of some limitations we had on some internal models, and the negatives may come from the adjustment of the homogenization of the models of Bankia with CaixaBank, and you always have some adjustments here on them. The net impact in our view is gonna be pretty neutral. To add on this front, remember that in the past, we have been commenting about the potential risk with asset inflation because of rating migrations.
Well, this risk, in our view, although probably we will suffer some very slightly, is that it's gonna be really low. I think that as the economy is doing better and better, what we feel that the risk of high impact on RWAs, on risk-weighted assets because of rating migration is fairly limited right now. With this only to reinforce the message that we have really a strong solvency position and not much worries. Already Gonzalo Gortázar mentioned about Basel IV. He said that the impact was suspected to be non-material, but non-material is really very low material. I think that we can give a figure here that is in our expectation is gonna be around 10 basis points, if any. Thank you.
Okay, Sophie, I hope that answers your question. Let's move on, operator, to the next one, please.
Thank you. The next question comes from the line of Stefan Nedialkov from Citi. Please ask your question. Your line is now open.
Yeah. Hi, guys. Good morning. It's Stefan from Citi. Just a couple of quick ones. On fees, on the custody fees, you are now at EUR 38 billion. Not sure if you mentioned, what's the scope to do more here. Number two, on the IFRS 17 impact. If I heard correctly, you said immaterial impact on profitability. Is it immaterial on the book value as well? And the last question, on the Erste stake sale. Just taking a very simple calculation of the earnings that you book in the P&L compared to the capital consumption, it's obviously a pretty interesting investment to have on your balance sheet. On the other hand, you do have the strategic considerations of not wanting to have stakes anymore, significant stakes.
How do we reconcile the two? Could you be investing the 15 bps that you're releasing in, say, consumer lending, where your profitability is quite a bit higher? Is there an overall strategy to replace the lost earnings overall from the Erste stake? Thank you.
Thank you, Stefan. Good questions obviously. On Erste, I was trying to say we are gonna generate EUR 1.2 billion of pretax additional earnings for our shareholders. When we look at the EUR 150 million of net income that we equity account from Erste, which only part is paid as dividend, in terms of what I would replace it with that, obviously money is fungible. But certainly, the fact that in our core business, we are increasing efficiency and generating savings for this amount means that I think we can take out of our balance sheet something that is a bit of a paradox, and that it's gone well, but I have to say, at the end of last year, we had to book a EUR 300 million-plus provision because of the pandemic.
Fortunately, it wasn't needed, but we had a very significant drop in book value. Anyhow, this was turbocharging our earnings, which is nice when you look at the amount of earnings. I have spoken to so many people over the years that would say to me, "Listen, this is poor quality earnings," not because it's Erste. Erste is a great bank, but any financial investment that you have, minority investment in another bank is poor quality earnings, looks like it's cash earnings. It's not, because we're equity accounting, and then it's subject to variability. This actually increases our cost of capital. That is what I have heard for quite a few years. Obviously, when you do the projections, the numbers, you're gonna take out EUR 150 million.
If you had already accounted for all our cost savings, et cetera, you're rightly asking, "So what do I do with this EUR 150 million?" I shouldn't be doing it, but maybe you should reconsider what's our cost of capital, because certainly our profits are of higher quality when we actually own, operate, control them. Other than that, we are actually at an inflection point. We're closing a very rapid, very successful merger, and this will extend towards this fourth quarter, first quarter of next year. We have a tremendous platform to grow, to benefit from revenue synergies, from our great market position, maybe from a change in the direction of rates. Let's do that. That's what we do.
Let's not do other things that after 12 years have not led us to more than a good or a reasonable financial investment, because obviously, for the last 12 years, financials in general have not done very well in Europe. I wouldn't look at what else we're gonna do. I think you, depending on when we exit, but one of the reasons that we wanted to explain this was that in advance of May, if in May next year we continue to be shareholders of Erste, which is a possibility, we'll clearly will not include the earnings, so that three years from now, in 2024, we'll be there, and we'll give you return on tangible equity targets, including those revenues, you know?
There's, I think, a strategic decision, one that I feel very comfortable with. It's with sadness that we depart from Erste. We have great personal and professional relationship with them, but it's the right decision, I think, for shareholders. I'm sure that the timing is not bad from the point of view of the many opportunities that we have ahead of us to replace those earnings. With that, Javier, maybe you can take the other two.
Yes. On custody fees, well, we are charging with different thresholds and different amounts because you know that this is not coffee for everyone. Also, there is a tailored approach to every customer because every customer has different needs and circumstances, no? We are charging to EUR 38 billion, and as you could see, growing every quarter. I don't think that there is any reason to think that this is gonna stop, so I think that we have some room there. Last quarter, we made, like, EUR 25 million on that part. Remember that those are fees. I think that we still have some room. On IFRS 17, you are right.
According to our preliminary data, our expectation is that we are not facing a material impact on the profitability of the insurance business, nor on the ability of our insurance company to pay dividends to the parent company, okay? Moreover, we also expect that the initial application impact on capital ratios and book values is gonna be manageable. We are finalizing all the process and all the modeling. We are undergoing the pre-assurance review with our external auditors, then also with supervisors. This is the information we can provide you as of today. I am sure that when we have more details, we will be able to share with you.
In our view, despite there will be some changes in the classification or in the P&L account, you know that, some revenues are moving from one part to another, but the net value of the business keeps being the same. Thank you.
Thank you, Stefan. Operator, can we move on to the next one, please?
Thank you. The next question comes from the line of Marta Sánchez Romero from Bank of America. Please ask your question. Your line is now open.
Good morning. Thank you very much for taking my questions. I've got a couple on net interest income. The first one is on VidaCaixa. It contributed EUR 214 million to your NII so far this year, and that is down 6% year-on-year. How do you see that income line progressing in 2022, 2023 and so on? The second one is on the ALCO portfolio. Thank you very much. You've given us a lot of detail about how you're thinking about it, but can you be more specific? Spanish and Italian 10 -year bonds are up nicely so far this quarter. Have you already started rebuilding your portfolio? And where would you like to take the EUR 56.4 billion that you have today? What is the structural size of your bond portfolio? Thank you.
Hello, Marta. On NII and VidaCaixa, precisely this quarter, we included on a slide that probably answers a little bit your question, no, because it's true that the NII on annuities is, I would say, pretty much stable or you say 6%, but actually in euro terms is not that much. This is much more than compensated with the fee revenue we are obtaining as we are moving this portfolio from fixed to variable annuities, no? This is the combination with a fixed part plus a unit-linked that is diversified in international equities. What is true is that on NII terms, there is this small negative in euro terms.
Overall, I think that we have been able to build, let's say, a commercial solution for our clients, that by the way, has been very profitable for them, that also results into profitable for the bank. On the ALCO, well, after 30 years in markets, I have learned that it's good to never pre-commit about market levels because when the market reaches a certain level, it's because something has happened, and then you reassess the situation again. Well, to your question, if we have already started to do something, the answer is yes. We have already started to do something. There is plenty to do. I would say that in this situation in markets, it's never black or white. You need to move in the area of grays.
We really think that this time there is quite a clear chance that we may see higher yields, thus the opportunity to build a portfolio, no? You asked me about the size, so I think that we have a portfolio excluding the Sareb bonds because the Sareb bonds are not actually managed. This is a legacy situation that is approximately 10% of our total assets. I think that when you compare this to other banks not only in Spain but also across Europe, I think that we can have a larger size, probably between 10%-15%.
I don't know when this will happen and when we will decide this, but we think that we have room if market conditions are there to increase the size of our portfolio. You know that we have had some exposures historically in Italy, and well, obviously, we have a natural tendency to have a large exposure in Spain and Portugal because it's our origin. It's what we know well and also it's what our investors, our shareholders understand that is a risk they can share with us. Thank you, Marta. I hope this helps.
Okay. Thank you, Marta. Let's move on to the next one. Operator, please.
Thank you. The next question comes from the line of Britta Schmidt, Autonomous Research. Please go ahead. Your line is now open.
Yeah. Hi there. I've got two quick questions. One is, I think last quarter you expected 112 million synergies to come in 2021. Do you still expect that to take place? Secondly, with regards to your comment of having control over businesses, where does that leave SegurCaixa Adeslas, which I guess is then the one remaining large equity holding that you own?
Britta, on SegurCaixa Adeslas, the question is, as you know, we own 49.9%, and it's something we consider as core business. I didn't understand the question on SegurCaixa Adeslas.
Yes. The question was more about would you ever consider buying out the business again?
Oh, right. Well, I will certainly not comment on that. The relationship that we have is working very well, and this is a core activity for us, and it's also a core activity for Mutua. I don't think it makes sense to touch or change any aspect. It's been working so well over the last 10 years. So when something is working, don't fix it. No, that's the old sort of saying. Certainly, that's how we feel about it. So I would not think of a question. I know that we don't own 100%, but we own 49.9%. We have a very strong shareholder agreement. Three-quarters of the production comes through our branch network.
Obviously, we keep 100% of the margin of distribution because it's distributed through us. Overall, I think the structure is one that is good for us. On the synergies for 2021, we're on track, aren't we, Javier?
Yeah. I think that this figure is in line with our expectations, yes.
Okay. Well, that was brief, Britta. Thank you very much. Let's move on to the next one, operator.
Thanks a lot. The next question comes from the line of Andrea Filtri from Mediobanca. Please ask your question. Your line is now open.
Hi. Good morning. Just two follow-ups, really. The first is I completely agree with your elaboration around the business model of CaixaBank in relation to the Erste Bank stake decision. Could you give us the risk-weighted assets attached to it? And could we then not make the same extended rationale for the Telefónica stake?
The second thing is very quick. The line was very bad and broke down when Javier was giving the details, future impacts known on capital, what is pending. I think he started talking about the transfer of Comercia merchant acquiring, and then the line faded. If you could please repeat it. Thank you.
Well, let me on Telefónica, we are not making the same rationale or extending that rationale to Telefónica. There are a few differences. One is what we're doing with Telefónica has been done in our core market in Spain. We have a very successful joint venture, Telefónica and Consumer Finance, some others in factoring, strong cooperation with them. And then from a financial point of view, the stake is smaller, 4.6%, has a lower weight on our capital, and we just reflect dividends. We do not feel that this is actually increasing in a significant manner our profitability, and hence we feel comfortable with what we have. Javier, I think you may wanna...
Yes. Andrea, you had a question on risk-weighted assets. This asset is risk-weighted approximately at 100% right now. On what I commented on, pending let's say restructuring or M&A-related impacts, it's positive of approximately 11 basis points from the transfer to Comercia of the merchant acquiring business of Bankia. There is another pending, not quantified yet, about the fact that SegurCaixa Adeslas will have to pay for in order to be able to operate with a larger pool of clients, okay? This is gonna be a positive. There are some minor restructuring impacts in terms of some costs pending, mainly related to IT and other expenses.
We have another impact pending, which is the breakup of the JV with Mapfre. What I said is that the net of all this for the fourth quarter will probably be positive.
Okay, Andrea, hope that answers your question. Operator, let's move on to the next one, please.
Thank you. The next question comes from the line of Ignacio Cerezo from UBS. Please ask your question. Your line is now open.
Hello, and good afternoon to you. A couple of questions basically from me. The first one is on the recurring banking fees, excluding the CIB, part of it. They've been kind of stuck around EUR 500 million since last year. What is missing there? Can you actually break it down a little bit between the different items? I mean, that number seems to be slightly underperforming actually most of the other domestic peers. How far are we basically from being able to normalize that number at a higher level? Second question, basically follow-up clarification on the TLTRO discussion. Under the numbers you have, obviously, which are significantly more details than the one we have, do you actually need volumes to grow in Q4 to meet the target, or you can actually have the leverage and still meet it?
The third one is a little bit of color, basically, on the corporate lending book. If you can break it down between large corporates, small sized, and basically give us a little bit of information around how each of those books has performed, year-to-date. Thank you.
Okay. Ignacio, good morning. Well, on recurring banking fees, we have still some headwind in terms of the payments business. Although volumes have clearly recovered, still there are some parts of the business that are not doing as well as in 2019. Everything related to foreigners, for example, ATM use in general. On that part, we are still approximately 5%-6% below the levels of 2019. I think that this is a little bit the situation. On top of this, we have in terms of risk-related fees or in the origination of loans, there is many cases, mainly on SME lending, a fee attached, as the new production on that front is below clearly the levels of last year.
On that front, also we are having some negative impact. On other parts, I would say that we are doing well. Well, as volumes recover in general, so loan volumes recover, also there is some part of this part of the business that lands into fees, and we expect that will recover also, and the same with payments. On TLTRO, you mentioned if we need volumes. Well, I would say that we need business more or less as usual, no? We don't need to rush into, let's say, extra lending in the fourth quarter in order to meet TLTRO, no? You had some questions about volumes or the evolution of different segments, no?
I think I mentioned in a previous question, but this is mainly the SME world, no? What is having a more negative impact. If we look at the new production rates, we see, for example, that year to date, I'm gonna give you figures year to date. On corporate lending, we are approximately down by 10% compared to 2020, and this has to do also with some front-loading of lending for as a liquidity buffer for some corporates back in 2020. On SMEs, this reduction in terms of new lending is more clearly, because we had the impact of the ICO loans last year.
In this case, the reduction is in the range between 40%-50%. It has to do with ICO lending I mentioned before. On the other hand, on consumer lending, we are slightly up in terms of new volumes. On mortgages also we are slightly up. Although, as I think that Gonzalo already mentioned, I would like to add that during the fourth quarter, we are seeing a much more positive trend in terms of new lending during this fourth quarter across different segments.
Yes, indeed. The reality with respect to TLTRO in the fourth quarter is we think our ordinary activity is gonna lead us there. The fourth quarter seasonally is higher. Working capital use is much higher, and hence you cannot compare all quarters equally. Even if we don't necessarily need it to meet it, we are seeing Javier re-emphasizes good growth. In fact, we expect to grow our loan book on the business front in the first quarter, you know. Sorry, not in the first, in the fourth quarter. Yes, we expect growth in that part of the book. That's why I think, you know, we have to be very confident on that front.
Okay, gentlemen. Thank you very much. Let's move on to the next one, operator, please.
Thank you. The next question comes from the line of Carlos Cobo from Société Générale. Please ask your question. Your line is now open.
Hello. Thank you very much for taking the questions. I'll try to be brief. One is on your guidance for NII and in particular, if you could explain a bit that negative impact is still in Q4 and maybe Q1 from Euribor. Because when I look at the curve, it's been so that the spot rate has been flattish for almost one year now. Bankia, from memory, used to reprice the mortgage book by each six months, or at least part of their portfolio. I mean, I'm just trying to understand that, how material it is, because I understand there could be a few basis points here and there, but how material is that negative impact from Euribor still coming through in following quarters?
Second, if you could just update us on the litigation charges and what is the run rate we should expect going forward. Have you seen some easing trends in new lawsuits or what do you expect there? Thank you.
Okay. Well, on the Euribor repricing, you need to take into account that there is a lag of approximately two months. This is why what you observe in one quarter actually is not having an impact until the following quarter. No, but, it's only very few basis points of negative repricing during the first quarter of next year. In terms of litigation, I would say that we are more or less in the same place, those EUR 50 million-EUR 60 million per quarter. Obviously, now we have a larger balance sheet, more clients, more things can happen. Obviously, we took care of what we could know ahead of the merger with adjustments on the PPA. Then obviously things happen, and there is obviously new circumstances.
Probably you can think that we might have like a recurrent impact on other provisions between EUR 50 million and EUR 70 million. This is my best guidance on that front, although obviously always subject to some volatility. But the usual suspects are the same. It's about set-up costs on mortgages. It's about some floor clauses. IRPH is not an issue. Well, you always have things here and there on this front.
Carlos, just to add, even if we have a few basis points at the beginning of 2022, for the whole of 2022, as based on the latest Euribor forwards, we will not have a negative impact. At this stage, what is negatively repriced at the beginning of the year is positively repriced later on. On the whole year, we're neutral. Obviously, this changes because forward futures change, and then when we get there, we'll see what the actual Euribor rates are. But certainly, the recent movements have been all very positive.
Okay. Thank you, Carlos. I think we have one last caller. Operator, could we please have that one?
Thank you. The last question comes from Fernando Gil from Barclays. Please ask your question. Your line is now open.
Hi, thank you very much for taking my question. My question is on mortgages. If I heard correctly, Javier, you was thinking about changing the strategy and investing in mortgages. Am I right on here? If so, the question is, I mean, what is your current market share there? What target market share would you be looking? Will this strategy be an alternative to the ALCO volatility that you're seeing in rates? I see the yield in your portfolio is 0.6. Obviously, new production in mortgages is higher and would be accretive to margins. But I just want to understand how you're thinking on that. Thank you very much.
Well, thank you, Fernando. What I mentioned is that if the shape of the yield curve changes or has a clear change, then we can rethink our strategy on mortgages, you know. It's not something that we are thinking right now, no? Time will tell. Obviously, if long-term rates go up and we still have plenty of demand at fixed rate, then we can rethink, but we are still not there. To what extent this is a substitute of the ALCO. Well, it's true that it's actually there is a clear connection, no? It's a fixed rate exposure.
When managing the sensitivity of the whole balance sheet, obviously we are taking into account the new production of mortgages, the size of the portfolio, the average maturity, and all metrics that obviously affect our interest rate risk. On share, now we have the stock. For the stock, we have a market share of approximately 26%, which is quite significant. It's over 40% of our loan book. This is why we have been moving from mortgages to diversifying into other segments in the past. On the new production we are making approximately 16%-17%, depending on the month.
Okay. Thank you, Fernando. I think that's it actually. Thank you very much for watching, and see you next quarter. All the best.