Good morning, everyone, and welcome to CaixaBank Results Presentation for the Fourth Quarter and the Full year of 2023. As usual, we are joined today by our CEO, Gonzalo Gortázar, and our CFO, Javier Pano. In terms of logistics, we plan to spend about 30 minutes with the presentation and about 45 minutes to one hour with the Q&A. The Q&A is live, and you should have received instructions by email on how to participate. Let me end by saying that my team and I will be at your full disposal after the call. And without further ado, let me hand it over to our CEO. Gonzalo, the floor is yours.
Thank you, Marta, and good morning to everybody. Get straight into the first and highlights of today. I would highlight three ideas when you look at the title: sustainability, profitability, and distribution, no? We have clearly made a significant improvement during 2023 in terms of net income, up of 54% core revenues. That's leading to a lower efficiency ratio, or meaning obviously better one, that is at 14.9%, and a return on tangible equity of 15.6%. It's been a very significant move over one year, almost six percentage points, and obviously, that pleases us, I'm sure it pleases shareholders, as well. We feel this new level is a sustainable one, as we will discuss during the presentation.
We remain strong in terms of balance sheet. Non-performing loans have been stable year to date. In fact, slightly reduced in terms of absolute numbers and is stable in terms of NPL ratio. Equity and CET1 core equity Tier 1 at 12.4% gives us a very significant MDA buffer. Which is allowing us that combination of profitability and strong capital generation to announce our payout at 60%, the top of the range, in our policy for this year, 2023. That's EUR 0.39 as a dividend, and we're also announcing the intention to conduct a new share buyback in the first half, subject, obviously to regulatory approval.
We are confirming our payout policy for next year, 50%-60%, and we are adding the payment of an interim dividend, as you will see, that we expect to be paid in November, and based on a range of 30%-40% of the first half net profit. So next year, rather than having one single dividend payment, as we will be having this April with that EUR 0.39, we will be having two, an interim and then a complimentary one. Capital distribution capacity, we said it was going to be above EUR 9 billion at the time of our three-year plan.
We are upgrading that level to EUR 12 billion, approximately EUR 12 billion, that we should be able to generate in terms of capital that is distributed and that is above the 12% Core Equity Tier 1 that we have set up as our target. We expect, as I said, for profitability to be sustainable, and we are upgrading our target for ROTE for 2024 from +12% that we had in our plan, to +15%, i.e., very much in line with what we have achieved this year. With that, I'll have a brief comment on the macro, which is well familiar to you, but it's been... In terms of relative overperformance of Spain and Portugal versus the Euro area, it's been quite an extraordinary year.
These two percentage points is quite a gap. We expect that to continue into 2024. Still see it as a year of as relatively a slowdown. You see Spain coming from 2.5% - 1.4%. I have to say, these projections are a few months old, and all the data that we have been seeing, particularly the data we saw earlier this week on GDP for the first quarter, it have been much better and hence, I wouldn't be surprised if these numbers are revised upwards in the future, because what we're seeing is even more strength. And certainly, relative to Europe, but again, a pretty good picture.
That has implied more employment, 780,000 jobs created this year in Spain, despite the slowdown, which is quite remarkable. Consumption doing very well. The external sector, again, another year with current account surplus. Inflation throughout Europe coming under control. So all that is obviously provided as a positive backdrop. We all know there are risks, we all know there are geopolitics and other threats, but I have to say, at this stage, we remain quite upbeat about 2024 for the reasons I mentioned. Commercially, 2023 has been a good year for us. Obviously, it's been a year of relatively low volumes in the industry, both on the asset and on the liability side.
A year ago, we were all concerned about what would happen with cost of deposits and whether deposits will flow out of balance sheet or not. When we look back, I have to say, business volumes on the right-hand side here are up 1.2%. And as you can see, and we will see later today, customer funds have done particularly well. Long-term savings, and particularly the insurance business, up 8.5%, but insurance, protection insurance, consumer lending, business lending, Portugal BPI, again, continues to do very well. It's all going in the right direction. And by the way, we are also doing fairly well in terms of sustainable finance. We will see that later. So deposit franchise, market shares, basically stable in the year.
Payrolls, pension deposits very high at 36%-34%, and deposit balance sheet closer to 25%. That has stayed quite strong during the year. And at the same time, beta of deposits have obviously been evolving better than expected, with the fourth quarter beta at 16%, showing some gradual increase during the year. And also showing that our strategy in terms of launching deposit open to the public has worked well in all senses, both for the customers and in terms of our own financial management of beta. Commercial gap continues to go and evolve in the direction of higher deposits.
I was going to say in the right direction, but at some point, you wonder which one is the right direction, because we obviously have quite a lot of liquidity. We're very happy to deploy in further lending, but demand is limited, though we expect that to change gradually during 2024. On customer funds, I said, particularly, off-balance sheet inflows have been growing strongly from EUR 4 billion- EUR 5.3 billion. And as you can see, actually, two-thirds of that has been into savings insurance, the other has been AUMs. But looking at the right hand of this page, our market share in savings insurance is now 36.5%, which is quite remarkable.
Also, as you can see, the evolution in the last 10 years is defying gravity, you know? In fact, looking at the industry on the bottom left of the page, you see the industry has been basically stagnant for 13 years, from EUR 121 billion - EUR 125 billion. All the growth has been CaixaBank. We've been really expanding this industry. And while the industry has been extended stagnant, we've actually multiplied our volume by almost 3.5 x, which is quite remarkable. And I think this is relevant because this is actually likely to continue. This is not just a one year; it's a decade. It's a structural trend. We're doing something right, and we plan to continue doing it, certainly, as you can see.
There's plenty of potential compared to the Euro area, for us, and we're planning on capture that, and make sure that all the strong growth of profits this year does not hide the fact that we have here a quite a unique characteristic that is obviously very good news for shareholders. Protection insurance, an amazing year. This is in light of a significant reduction of the production of mortgages, which has been generally in the market. Despite that, our protection insurance premia are up 7%. And if you look at the total portfolio, they are in premia, up 9.6%. Pretty balanced between life risk and non-life, and non-life health, auto, and home being the most significant parts of our activity.
Again, just trying to provide you a longer picture. This is not that dissimilar to what we saw on the page before. Obviously, there's been some growth in the market, in this case, but fairly limited over the last 13 years. While again, we've almost multiplied our share or our size, or in this case, by 4x, no? Market share above 25% and a significant increase year-on-year to 178 basis points. Again, pretty good potential. Here, just to remind you, we still have a significant opportunity to continue converging clients from the former Bankia to the current average penetration of CaixaBank clients.
But actually, there's plenty of potential in both, both existing CaixaBank clients and clients coming from, from Bankia, have plenty of potential, obviously in the latter, even, even further. A look at, new lending. One thing that is quite relevant is the fourth quarter has been pretty good, and, you can see here, particularly, noteworthy on, business, consumption, consumer lending, and mortgages. In all three cases, significant increase, very, relevant, the one on, on mortgages, which has not necessarily been the case for the market. I think we have now a pretty good, trend, on that, on that, segment, and expect to, obviously, continue to maintain it. BPI, as I said, pretty good year again.
Obviously, when we look at efficiency coming down from 2018 was at 60, and before that, 2017, 2016 was at 70, is now below 40. It's obviously a very successful and nice journey for BPI and for us as owners of BPI, and obviously the similar journey in terms of return on tangible equity up to 17% this year. Market share continues to go up in a significant manner, particularly on the asset side. You see the figures there for mortgages and business lending. And as always, in terms of balance sheet, credit risk, capital, it's a pristine balance sheet for BPI. Very important piece of the group for us.
Sustainability, mentioned it before, we're very happy in terms of the what we call mobilization of sustainable finance, including lending and also assets that we manage, that we're at EUR 50.8 billion. We're clearly well ahead of our target for this three-year plan. We have completed now five sectors where we have announced decarbonization targets. We'll continue to do so in line with our commitments as a founding member of the Net Zero Banking Alliance. I have to say, generally, the sustainability agencies put us at the very top of our peers, and when you look at the overall picture, it, it's a very compelling one.
Obviously, it reflects our DNA and our character, but I think long-term, it's a competitive advantage, and certainly in terms of financial inclusion, micro lending, housing policy, social projects. You have some of the data. I'm not gonna bother you or bore you with reading them, but they are absolutely unique and different. P&L for the year, Javier will be discussing the quarterly numbers, but for the year, you can see obviously a big jump in NII. After all, when we add up fees and insurance, we actually had a positive year, 1.5%, despite some of the headwinds, including the custody fee that we stopped charging as rates became positive. And again, continue to feel pretty good about our potential there.
Operating expenses are under control, and pre-im pairment income is up 52% and net income also 54%. So, obviously, a very good year in terms of financial results, which is not a surprise to you, because we've been just going on that line through the last quarters, no? Just a couple of reflections. One is, again, as we look forward, we have clearly the strongest financial position since 2008, since the great financial crisis. In terms of pre-provision profitability, which is quite remarkable, in terms of efficiency and profitability, our balance sheet with NPLs contained and a very high level of coverage.
You see, we've kept a very significant EUR 800 million stock of unassigned collective provisions. Liquidity, we repaid the TLTRO in full and stay at 215% in terms of LCR and capital. We've decided we have ample room to continue to be very generous in terms of capital distribution for our shareholder, which is precisely what you see on this page. We're increasing dividend per share by 70%. So, we will be paying again EUR 0.39 next April. We completed the second share buyback in this plan, and we are, as I said, now announcing our intention to conduct a third one, and to start that third one during this first half of the year.
Very happy to see that this profitability is obviously supporting a very strong capital distribution capacity. RWA growth is, as you know, fairly limited, so we have again, where we said EUR 9 billion, we are now saying 12 billion, which, as you know, six and a half, sorry, EUR 6.9 billion, I've already paid or executed or announced, no? So, that's what I had to say, and I think now Javier will take us from here.
Okay. Yes, thank you. And good morning. So for my side, further details on the P&L, the balance sheet, and later on, guidance, the much-awaited guidance. Let's start with customer funds. Well, on that front, we are ending the year in good shape. You may see customer funds up by 1.8% quarter-on-quarter, of which long-term savings up by 3% on the back of strong markets in the latest part of the year. Deposits also doing well, up by 1% quarter-on-quarter.
Overall, in euro terms, as you may see on the bridge below, customer funds up by 3%, for the year, of which plus EUR 13 billion of positive market effects on long-term savings, plus EUR 5.3 billion on net inflows, and then deposits that are, as I say, flattish. Then on the chart, bottom right, you may see the evolution of long-term savings, up by 8.5% year to date. As you may see, in the latest part of the year, a strong recovery that obviously is a very positive starting point, looking into 2024. With this, let's move to the loan book.
In this case, on the quarter, we have an almost flattish performance, down by 0.4% quarter-on-quarter. And the trends remain broadly the same as in recent quarters. Positive evolution on business lending, up by 1% quarter-on-quarter. Consumer lending, slightly positive. And residential mortgages are still deleveraging, but I have to say that, as the CEO has already commented, a better performance in the latest part of the year, and also, early redemptions that are reducing the pace gradually, you know. So all in all, the loan book for the year down by 2%. And on the chart on the right, you may see the evolution of the floating mortgage book index resets. That is continuing.
Still, as you may see, approximately 17% of the book yielding less than 3%, that obviously is gonna reprice higher very soon. With that, let's move to the P&L for the quarter. Net income EUR 1.15 billion, strong revenues continue. You may see NII up by 40% year-on-year. Also, positive evolution on the quarter, despite 0% remuneration on the minimum reserve requirement. That has, on a quarter-on-quarter basis, a negative effect, but despite this, we have had a positive performance. Fees year-on-year, reflecting the lower account maintenance fees, something that we have been highlighting recently, but quarter-on-quarter, better performance from asset management, insurance, and also CIB. The insurance service result continues to do well.
It has been the case throughout the year, and, as you may see, even this quarter, a positive evolution up by 8%. On other operating income and expenses, you know well that, this fourth quarter, we have the charge of the Deposit Guarantee Fund, that as also we have been highlighting, is gonna be reduced very significantly for 2024. Recording operating expenses in line to our compared to our guidance. Loan loss charges, also, we are meeting our guidance below 30 basis points at 28, and not much to comment from my side on the income statement. With that, let's move to the NII to the details. You may see for the year, up by 54%.
Looking at the quarterly evolution, on the bridge on the right, you may see that we have a slight negative contribution from client NII. This is basically due to lower average loan volumes, but also reflecting higher beta, this 16% for the fourth quarter compared to 13% in the third quarter, and also the total amount of deposits now being remunerated at 20% versus 16%. On the other hand, we have positive contribution from ALCO, basically due to higher cash balances. Below, you may see the evolution of the customer spread that continues to progress 358 basis points.
On yields, the backbook yield of the loan book at 447 basis points, an increase of close to 25 basis points in the quarter. Then, the cost of our deposits, ex structural hedges and foreign exchange deposits, progressing to 65 basis points. Let's move now to the other core revenues. This is a combination of net fees plus insurance revenues. The combination goes up by 1.5%. You know well, fees down for the year, excluding cash custody fees, minus 3.2%. But on the other hand, extremely positive result on insurance, close to 20% on the year, and also revenues from our insurance investments up by 50%, although in this case, as you may remember, with some inorganic positives earlier in the year.
On the core revenues in euro terms, besides the extraordinary contribution from NII for the year, looking at insurance plus fees, ex cash custody fees, you may see that also, we have a positive contribution. You have here all the details. I will not go across all of them, but basically on insurance on the left, for the year, up by close to 25%. And remarkably, here, life saves-- life savings insurance, up by 30% on the back of what has been commented before, almost two-thirds or circa two-thirds of inflows in long-term savings into annuities. So this has obviously had a strong tailwind on that P&L line. Life risk insurance also growing over 18%.
On the right, fees, the well-known impacts from lower account maintenance fees on recurring banking fees. But on the other hand, quarter-on-quarter, you may see good progression on asset management, insurance distribution, wholesale banking, that leads to a quarterly evolution for fees that is up by 2.5%. Moving to costs, everything in line with our guidance. Costs for the year up by 5.2%. The most remarkable here probably is our cost to income. You may see that keeps falling down to below 41%, although it includes close to two percentage points, as you may see on the bridge, bottom right, from the banking tax.
Cost of risk, finally, on comments on the P&L, we have kept a prudent provisioning approach, through the year. 28 basis points is the, the final, cost of risk on a 12 trailing, months, and we keep, by the end of the year, still unassigned collective provisions, for 800 million EUR, and the NPL coverage remains pretty much unchanged, during the year, 73%. NPLs we have been at historically low levels throughout the year. So you may see between 260 and 70s, we end the year at 2, 274 percent, and 274 percent, sorry.
You may see an increase on NPLs, but this is basically driven by the alignment with the prudential definition of default, the new definition of default, and still some of that process into 2024. A few words on ICOs, 55% already amortized. Only 4.4% classified as a stage three, and we keep with our steady reduction of our REO exposure, down to EUR 1.6 billion by the end of the year. Liquidity, you know well about our ample liquidity position. This has allowed us to prepay in full all our TLTRO funding. This has been EUR 8.5 billion, repaid this fourth quarter. Including that impact, you may see that we closed the year with really strong liquidity metrics.
Liquidity coverage ratio, 215%. Net stable funding ratio over 140, and loan to deposits below 90%. Liquidity sources, EUR 100 billion of HQLAs, and adding other facilities and covered bond issuance capacity, liquidity sources over EUR 200 billion. And in terms of the mix of our deposits, it keeps pretty much unchanged during the year, as you may see. Still retail having the strong weight, 80%, wholesale corporate, 20%, and 64% of our total deposits being insured. As we are at the year-end, a few words on MREL, our MREL ratio ends the year on a pro forma basis at 26.44%.
That pro forma includes issuances, early calls, or tender offers we have executed during the month of January, mainly 2021, as you know, probably well. That ratio results into an MDA buffer at 213 basis points by the end of the year, which is quite a comfortable position. 2023 has been a year of continued and successful market access, over EUR 10 billion issued, of which slightly over one-third in foreign currency. This mix in foreign currency is our intention to continue, although at a slower pace, because as you may see here, the funding plan for 2024 is contemplating only EUR 5.5 billion only for MREL purposes, and of which already EUR 700 million of a 2021 that has already been issued.
In terms of maturities or potential calls, you may see on bottom right, that our calendar is comfortable. And with that solvency, we are ending the year with a CET1 ratio at 12.37%, for the quarter. 39 basis points of positive organic capital generation, -34 from the dividend accrual, AT1 coupons, +14 basis points from markets and other. This results into a comfortable MDA buffer at 380 basis points over versus the 2024 SREP requirement. And resulting finally on a tangible value per share that keeps progressing at EUR 4.20. That is including the dividend, over 18% in the year.
Now finally, guidance, but before that, let me comment on, highlight the new presentation of revenues we are planning to implement from the first quarter. This aimed at underscoring the evolution of the key business engines, basically, besides NII, wealth management, and protection insurance. So it's known information, does not affect the gross income, income or total core revenues. It's the breakdown. We are classifying those in a way that better reflects the way we are running the bank and our commercial strategy. We have on the appendix all the reconciliation and the quarterly evolution for 2023. Now, yes, guidance for 2024. NII expected to be in line with the NII of fiscal year 2023, that has been EUR 10.1 billion.
Then, for wealth protection and banking fees, according to the new way to present those revenues, expected to grow by low single digits. Recurrent costs to grow by less than 5%. Cost of risk expected to be circa 30 basis points, and to end the year with an NPL ratio around 3%. As a reminder, the upgraded targets already commented on ROTE over 15, and this distribution capacity over the span of our strategic plan of EUR 12 billion, while maintaining a strong capital position, 11.5%-12% CET1 ratio as management target. So thank you very much, and ready for questions.
Operator, we are ready for the Q&A. If you can please let the first caller in.
This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. The first question is from Maks Mishyn with JB Capital. Please go ahead.
Hello, good morning. Thank you for the presentation and taking our questions. I have three. The first one is on deposit beta, even though it remains low, it seems that there was a pickup in quarterly growth. Could you shed some light on what was the driver for this pickup? And also, would be good to know what are your expectations for customer spread in the coming quarters. The second is on loan book growth. You are gaining market share in corporate and consumer loans, while it seems you are losing some of it in mortgages. I was wondering what is the strategy for 2024, and what kind of demand do you expect on growth per segment? And then the last one is on fees.
I was wondering if you could break down the guidance for fees and insurance by fees and insurance, and what are your expectations for fees and insurance revenues separately? Thanks.
Thank you. Thank you, Max. In terms of first, deposit betas, I'll let Javier comment, as well as on the third question on the breakdown on fees of and insurance. On loan growth, to be honest, our strategy, we're very big in the market in Spain and also fairly big in Portugal. And what we are trying is to do good business in all three areas, no? It's not that because we do well in business, we shouldn't be doing well in mortgage or in consumer lending, no? It's the three areas we're interested in. And obviously, this year, what you have seen is a good performance on both business and consumer, I agree.
I look forward, and I don't see any reason for that to change in 2024. In fact, the sense I have generally is that we're going to speed up commercially. It has been a fairly good year, but don't forget that the previous year, 2022, was a year of heavy integration for us, no? And hence, the franchise is gaining momentum. And in fact, figures for the fourth quarter in terms of activity suggest that momentum is materializing, and you can feel it. So I would expect to gain market share next year, both in businesses and consumer lending. I think the environment is good, and we're in an excellent position.
When we look at mortgages, we have had a fairly strong fourth quarter, as you saw in terms of new production. I haven't been able to see all the comparative numbers for others, but my sense is that we clearly have gained market share. Certainly, the figures up to November, we're gaining market share in new production relative to where we were. And our expectation is to continue and be sort of above 20% in terms of new lending production in 2024. So that should be also good news, no? What it is true is that our mortgage portfolio tends to be more seasoned than others. That's great news in terms of its asset quality, I have to say.
But it also means that it tends to have a decay in terms of amortization that is slightly higher. So we tend to see the stock coming down slightly faster than the market. But relative to 2023, I think we're going to be doing better in the mortgage segment, and hence, higher market share in terms of new production and lower reduction in the overall portfolio. And the sense we have is, at this stage, strong fourth quarter for us in terms of activity, the pretty good numbers for the economy, the fact that it starts to be fairly likely that we will have significant decreases in rates during the year. We're gonna be surprised by the level of activity on the upside.
That's my, that's my sense. So we will try all three, really. We don't have 10 markets to compete. We have two, and in these two, we wanna do everything that is in financial services and, and do it well. And, maybe Javier.
Yes, hello, Maks. Well, in terms of deposit beta, I would not say that there is nothing different this fourth quarter compared to others. So the progression in terms of the percentage of deposits that are being remunerated, and that includes, remember, in our case, in addition, a decent amount of corporate deposits, sight accounts that are actually at a cost, is gradually progressing. I would say that over time, as you are more time in a higher rate environment, already with rates at 4%, I think that probably you should not expect a linear performance or a linear pace in terms of of beta. No, but it's completely in line with our revised expectations in terms of beta evolution.
Remember, we commented last quarter that we were expecting a deposit beta this fourth quarter to be well below 20%, so has been actually 16%. So it's perfectly in line with our expectations, no? Going forward, we are expecting to give you more insight into next year, because actually, it's what probably matters for you, is that we are expecting deposit beta to keep progressing to low 20s, eh? So this is our expectation. Keep in mind that rates are expected to come down. So actually, deposit beta also goes up, not because costs go up, but because also the reference rate also comes down, no? So there is here a mixed effect from that situation, no?
In terms of customer spread, as we are guiding for NII to be in line with 2023, you should expect a customer spread also to be pretty much in line. So this is basically the message on that front. Shifting to fees, insurance, et cetera, no? So here, my comments will follow this new way to present the P&L, no? Because in our view, better reflects the businesses, no, because otherwise we had some, let's say, long-term savings-related P&L lines, you know, on fees, other on insurance result. So thinking with the new way to present this, on what we are gonna be calling wealth management, that includes AUMs plus annuities, basically, savings insurance, we are expecting to continue to do well.
I'm not gonna give you specific guidance, quantitative guidance for every line, but the message is that at least we're expecting inflows at the same pace than 2023, eh? Our expectation is probably if markets do well or are more stable. Remember that 2023, we were coming from a 2022 where that was a bad year for markets. This at the beginning of the year had some impact, no? To some extent savers were a little bit more cautious. And I think that as markets stabilize, start to do well, the pace of inflows into AUMs will also improve as we go into the year.
In annuities, as we have been commenting, and well, really, that super strong performance we are having compared to our competitors is expected to continue. So I think that on that front, we are gonna do well. In terms of insurance, this now is a life risk plus non-life, right? So the combined for two. It has been such a positive year in terms of life risk, that I think probably that close to 20% probably is challenging to be repeated, no? So I think that this will be my message. Although, you know that this is a key business for us, we have a key strength.
We still have plenty of ground to cover in terms of synergies with former Bankia clients, et cetera. So I think that in any case, we are gonna do well. On fees, on recurring fees, and non-recurring fees, let's say CIB. Here, on recurring fees, probably, is still some pressure, some headwind in terms of current account maintenance fees. But you know that this in a higher rate environment, there is a trade-off between charging clients those fees and keeping a low funding cost. And there is some more to go on that front. So I think that we have not finished on that.
But on the other hand, we are expecting much better performance in other business compared to this year on, for example, on payments and also on CIB. So I think that overall, that makes you an idea of the mix. I could say that basically, wealth and insurance very well, and probably fees are still to some extent impacted by those maintenance fees. Thank you, Max.
Just to make clear, make sure it's clear, the low 20s expectation for beta refers to the average for 2024.
Oh.
No, just to make clear. Thank you, Maks. Next question, please.
The next question is from Ignacio Ulargui with BNP Paribas Exane. Please go ahead.
Thanks, good morning, everyone, and thank you for the presentation and for taking my questions. I have two questions and one clarification. The first one is on NII. If you could just give us a bit of the rate assumptions that you have behind the flat NII guidance that you have given for 2024, in terms of the forward curve that you are taking, you are using for our guidance. And also looking to the deposit, you have said in the past, you have an ability to lower the deposit beta when rates go down. So I think it's quite important just to understand how confident you are in managing the deposit costs when rates come down on those that you are paying this stage.
Second question is on a Basel IV impact, and other regulatory impacts that we could expect into 2024, and what we should expect in terms of allocation for the year. Just one clarification, if you could just update on the EUR 38 million other income in Portugal, and whether we should expect that to be recurrent in 2024.
Thank you, Nacho. I would just say as a way of introduction, we are fairly confident in our ability to manage our beta in order to meet the guidance we have given you. Now, obviously, we'll be working to deliver further. Actually, that's what happened last year. But certainly, on a qualitative basis and, having looked at how the market has evolved and how we have managed over the last 12 months, we're confident that we will be able to certainly to accommodate beta to the environment, no? With that general comment, I'll pass it on to Javier.
Thank you, Gonzalo, and hello, Nacho. Well, on the NII assumptions, let's start with volumes. On the loan book, the assumption is that the pace of origination will gradually pick up as we progress into the year. We have been in a during the summer and after the summer, probably in a more subdued situation, although as we have commented, we have been positively surprised, but by a better pace in terms of new origination during the fourth quarter, and basically on also mortgages. And also. But the assumptions are probably, in that sense, a little bit more conservative, not incorporating that more positive momentum we have had during the fourth quarter. So what is underlying here is a loan book that is flattish at best, eh?
So this is, this is the situation. In terms of mix, a little bit more of the same, better performance in general on SMEs corporates. consumer and, still deleveraging on, mortgages, but less, than in 2023, as, we have lower prepayments that, we are seeing those stabilizing, clearly and probably already into 2024, probably coming down vis-a-vis, 2023, no? So those are the assumptions, but I concede that probably, according to the, trend we have seen in the fourth quarter, there may be, a little bit more upside, obviously, to be confirmed in, in coming quarters, no? In terms of, deposit volumes, we are assuming a slight increase, in line with, what is expected for the market, macro-wise.
So I would say that, on that sense, keeping our market share would be the broad message. And my comment here is that actually, in terms of NII, keeping your deposit volumes is as important or even more compared to loan volumes, eh? Because obviously, margins also on deposits are really significant. Then on deposit beta, and back to the clarification by Marta, we are assuming a deposit beta on average for 2024 in low 20s, gradually progressing. Here, keep in mind what I commented to a previous question, no?
Rates come down, so the average deposit facility rate, according by the end of the year, which, by the way, is what we have used to make our forecast, is the yield curve by the end of the year, is expected to be circa 3.3%. So just by keeping your costs stable, your beta increases because the reference rate goes down, no? Just to keep this in mind. And, well, that's the plan, no? Beta gradually progressing and, well, eventually, as Gonzalo was commenting, obviously managing the situation in a way that already plants the seeds for 2025 in terms of deposit cost management, no?
Lastly, for rates. I've already said this. We have used the yield curve by the end of the year. That is, like, 2.00, 2.80, 2.75-2.80 for 12-month Euribor, that as an average for the year. And then, on all those comments, just to add that this is, let's say, the message at group level, although in BPI, we have a slight different situation with, generally speaking, a higher betas, you know, a more competitive environment in terms of deposits in Portugal. So you can expect in BPI to have a little bit a faster pace of beta evolution. And then you had a question on the charge from BPI.
No, this is part of the national guarantee fund that formerly was, let's say, placed as collateral and already deducted from capital. And now we have been asked to pay it in cash. So basically, there is no impact in terms of of solvency, and there is—does not result into an increase going forward. Actually, it's the opposite. I take the opportunity to comment and to update you that the impact from the much lower contribution on the resolution fund and the deposit guarantee fund overall at group level are expected to fall year-on-year by close to EUR 600 million, yes, which is a very relevant figure. So thank you, Nacho. Hope this clarifies-
Basel IV, Javier. Impact from Basel IV, an update.
Ah, sorry, Basel IV. Yes, Basel IV, no impact. Nothing. We're expecting no impact at all.
Okay. Thank you, Nacho. Operator, next question, please.
The next question is from Sofie Peterzens with J.P. Morgan. Please go ahead.
Yeah, hi, here is Sofie from J.P. Morgan. So I also had two questions. So maybe first of all, on just going back to net interest income, did I understand this correctly, that it you assume Euribor twelve months around 270-280 basis points at the end of the year? Could you maybe also walk us through, just on net interest income, what kind of hedging you have in place, both on the asset side and liability side, and how these hedges work, the size, notional, kind of interest rate? That would be my first question. And then the second question would be on the interim dividend. What was the rationale to move to an interim dividend from a kind of one dividend previously?
Yeah, if you could just talk about the thinking around that and how we should marry that with the share buybacks. Should we expect basically some announcement, either on interim or on dividends or share buybacks every quarter? Thank you.
Thank you, Sofie. I'll take the second question, and let Javier deal with the first one. In terms of the rationale for the interim dividend, we have now announced EUR 0.39. That is based on where we were trading, and we're still trading. It's really 10% dividend yield, so it is indeed a very, very significant one-off payment. Given that, back to my first comment, we've recovered profitability, and we think it is sustainable, and it's not just profitability that is sustainable, but it also flows into shareholder remuneration. Within, given the size of payouts, it makes sense for us to split it into two payments, no? And, as you know, there's different practice across different countries really in Europe on this.
But it's been a typical case in Spain, as has been in other places lik.e the U.K., to have an interim dividend. So we think that it makes more sense to, as we generate so much capital that is distribute to shareholders, to be able to do it earlier, yes, makes sense, makes sense to us. Now, that's one story. It's a parallel story that we, on top of our ordinary sort of dividend policy, we keep generating more capital, and hence, we're also looking at other ways of returning that capital to shareholders, which is a commitment that is unchanged from now many years, as you know well.
And in that front, as we have finished the year with 12.37% of core equity tier one, we have enough space to execute a share buyback, and hence, our intention is to do it, subject to the corresponding regulatory approval. Now, when we announce our last share buyback of EUR 500 million, we said we would like to move into more frequent buybacks, but of lower amounts than the EUR 1.8 billion we did in 2022. And you should expect that to continue. That's the comment I would make on dividend. I think it's all, mm, pretty good news, I have to say, you know? The extent of shareholder remuneration is, well, speaks by itself. Javier?
Hi, Sofie. Well, to your point on the Euribor rate, no, this is not a year-end Euribor. It's the average for the year. And this is actually, you take the yield curve, December 29th, which is the last day of the year, so this is the implicit rate on average for 2024. To your question on hedging, yes, well, we have not made a decision. So we have not changed our hedges during the fourth quarter, first thing. And then about taking decisions on that front, it's a little bit market dependent, no? So we don't exclude to do this.
Here, just as a reminder, we have those EUR 20 billion of deposits that are hedged to floating, so we are receiving a fixed rate, and we are paying basically Euribor for EUR 20 billion, of which EUR 5 billion are maturing by the end of this first quarter 2024. As I say, we have not made a decision. The EUR 15 billion remaining will still have a maturity of close to three years. On that front, taking into account the maturity we have had of those EUR 5 billion, plus the implied rates for 2024, you may expect a positive impact on a year-on-year basis of approximately EUR 140 million. So this is this is my message. Time will tell. We can do both sides of the balance sheet.
We can hedge into fixed, floating mortgages, or we can receive fixed against deposits. So, we have all options. What I can say is that, probably I already highlighted this on the previous quarter, is that from now on, probably we will be more keen to use derivatives in terms of the ALCO portfolio, to manage our sensitivity of the balance sheet. Thank you, Sofie.
Thank you very much, Sofie. Next question, please.
The next question is from Alvaro Serrano with Morgan Stanley. Please go ahead.
Good morning. Two questions. The first one is kind of a follow-up to what you just mentioned, Javier. I didn't catch the updated rate sensitivity. Sorry if I missed it or I think it used to be minus 5% for 100 basis points lower rate. Is that still the case? And do you have room to reduce that rate sensitivity based on what you've just said of using more swaps? And maybe related to that, we haven't talked about deposit volumes. In a lower rate environment, I know this has been a huge focus last year, but would you expect deposit volumes to grow or total deposit balances to grow, or them being more channeled to off balance sheet?
So those are multi-part question on rate sensitivity. And the second one, on the dividend, you've obviously announced 60% payout and another buyback. When you think about that 60% dividend, how do you decide between the mix? Because if I look at EUR 0.39, if your profits do go down, you risk having to cut the dividend in a couple of years. Do you think there is that risk? And how have you thought about it, or are earnings gonna be more resilient than consensus fears? Thank you.
Thank you, Alvaro. My expectation is, yes, our earnings will be resilient. So that's what I tried to convey today. But in any case, obviously, let Javier comment on the first point. But in any case, our dividend policy is based on a payout, and a payout is a percentage of profits. So we are by definition, and I think it's a good practice in the banking sector to talk about payout and not absolute dividend per share. 'Cause I can remember a few institutions, and this tends to be ten years and older, that were too attached to dividend per share and eventually had trouble.
I think the payout as a percentage of profits is the right way to look at it, and hence dividends have plenty of upside when profitability goes up, and they have a downside when profitability goes down, no? Having said that, I would say I would not take for granted that profitability is gonna go down, certainly not in 2024, although you point correctly to sort of further down down the line. We will have an impact, and Javier will comment on the sensitivity, the 5%, which is correct. As you said, we'll have an impact down the road, but this is not the only driver, I think, of the statement. We have great business. We're gonna grow volumes, and we're gonna grow volumes off balance sheet.
So we need to put that all into account. And then one which point and one factor you are very familiar with, Alvaro, but for the benefit of everybody, we're reducing the share count. We have already done two share buybacks. We're announcing another one. So when you look at dividends, and you look at dividend per share, you need to look at our profitability on per share, and there will be lower shares certainly in the future than today. So there is that additional factor to look at dividend per share on the long term. And I think generally, given the level of capital we are generating, sometimes we need to look at. Let's imagine you look at net interest income per share.
If NII is in line, obviously NII per share is gonna go up because number of shares. And then you can go down the P&L and keep that in mind because it's a and I know you do, you all do because you follow us closely. But sometimes we're so used to look at absolute numbers in the P&L. When you add this additional engine of looking at the P&L per share, and particularly when you project it going forward, it's quite an interesting story. With that, Javier.
Yes. Hi, Alvaro. Well, comments on rate sensitivity, yes, you are right. Actually, we have added to our presentation on slide 47, if I am correct. Some further information about this. Our sensitivity has come down markedly since December of 2021. Let's say we have had an upward sensitivity of circa 30%, and now it's 5%, no? What is behind this? Basically, here you have gradual but a steady increase of the percentage of fixed-rate assets, that is like approximately EUR 20 billion more in that period. This is basically fixed-rate mortgages, also a slight increase on the ALCO portfolio.
And then, also, you take into account that, with higher rates, it's like having a higher percentage of floating liabilities because you have deposits that are now variable. So, that is even indexed to an index rate, a rate index or time deposits that eventually, at maturity, you are gonna be able to reduce the cost of if rates go up, to unfortunately, to increase the cost. So this reduces the sensitivity. Also, there is a base effect because NII, back in 2021, was lower, was lower, so now it's higher. So in terms of percentage, there is an effect from that, no? And we are happy with this positioning. We can reduce it a little bit further, I agree.
I see that when other peers face this question, more or less everyone has a slight positive sensitivity, and probably I can explain you why, no? So imagine now that we fully hedge that sensitivity, and with that, we start receiving fixed rates by a large amount to close that sensitivity. And you do that into a negative yield curve, so you are actually fixing on the asset side much lower rates in the future. Imagine that eventually this does not happen, so what is priced in the market does not happen, and finally, rates are higher. What happens then?
So you are locked on the asset side with low rates, and then on the liability side, you cannot manage the situation because you have higher beta, higher beta, and eventually, you have a negative evolution on NII if rates go up, no? So yeah, we, you, you need to be careful in terms of full hedge that sensitivity. For the time being, we are fine within that. To a previous question, I answered that, yes, we can, we can contemplate additional hedges, but probably not to the extent that fully hedge the sensitivity, okay? So that would be my message here. And in term of deposits, well, time will tell. At the end of the day, the summary of for 2023 is a positive one for us.
So the first quarter was a little bit like the uncertainty, what is gonna happen? We're gonna have a strong outflows from deposits to off-balance sheet, treasury bills, whatsoever. At the end of the day, this has happened to some extent, but very well contained, no? So I think that we have already this situation well under control. We are happy to see that at system level, in Spain at least, the situation is comfortable. So there is not any single player or major single player that is to some extent into some kind of pressure to gather deposits.
So we think that the situation will evolve in line with your macro projections that well, in nominal terms, yes, deposits will to some extent grow, and we are happy to have our market share on that, you know? But, well, you know that we are good on that front. We are good deposit gatherers, and I think that, in any case, will be a strength for us. Thank you, Alvaro.
Thank you, Alvaro. Operator, next question, please.
The next question is from Britta Schmidt with Autonomous Research. Please go ahead.
Yeah, hi there. Thank you for taking my questions. I've got a few. On the wording regarding the share buyback, bringing the CET1 closer to 12%, do you intend to keep a margin above that? And do you expect there to be any headwinds other than Basel IV being nothing? The second question will be on the guidance. You guide to a flat ROE, but the ROTE is guided to a number that could potentially be lower than last year. Do you expect there to be any changes in, for example, intangible deductions? And if so, would that also impact capital? And then maybe you can just update us on the underlying cost of risk baked into the 30 basis points, less than 30 basis points, guidance.
Where does that stand right now, excluding overlays, and what overlay usage have you implied? And then just a clarification: Thanks for slide 47. That's very useful. Could you just split the sensitivity into the Spanish and to the Portuguese balance sheet separately? Thank you.
Thank you. Thank you, Britta. In terms of the closer to 12%, it means exactly that. We are 12.37, so we're gonna end up somewhere between 12.37% and 12.00%. And, as you know, that is mostly reflecting the desire to keep our excess capital flowing to shareholders, and also the need to do it in some kind of orderly process, where we are probably going to be doing round numbers. And beyond that, it gives us a range of an amount that is fairly narrow in any case. But no, it is not the fact that we are leaving some capital for some unforeseen or foreseen event.
We've said no impact from Basel IV, no further regulatory impact, year of pretty good profitability, both past and ahead. So, let's feel good about that. And obviously, the story will not finish with this additional share buyback. We're gonna keep generating capital and keep coming back to you with news on how we will, how and when we will return that excess capital. In terms of return on equity and return on tangible equity, I'm sorry, we have somehow misguided you, but message is the same. When we talk about return on tangible equity above 15%, this year being above 15% because it's 15.6%, I didn't want to put return on tangible equity above 15.5% or whatever.
You should take as two ways of saying the same, the same thing. We shouldn't see different evolution between return on equity and return on tangible equity. No, nothing to look in terms of intangibles or any funny stuff out there that we're expecting. Absolutely, no. These should be evolving in line, both return on tangible equity and return on equity. Cost of risk, we're saying again, around 30 basis points. We have EUR 800 million in unassigned provisions. This is something that we expect to partially use during 2024. The extent to what this is used is obviously something that we will see during the year.
When you look back for the last 12 months, 24, 36 months, actually, we've always used much less than what we had. Let's see how the year goes. We will be using, my expectation we'll be using, part of that. What exact amount, we're not, at this stage, venturing, into, a public disclosure. But, again, it gives us a pretty good confidence that we can, meet our cost of risk, guideline, for the year. And then there was one-
Yes.
One final point.
Hi, Britta. Thank you. Hi, Britta. On sensitivity in Portugal is higher, because Portugal has a higher percentage of, floating rate, assets. And, well, you could see already this in 2023, better progression, even better progression in Portugal in terms of NII than in Spain. And, and although in Portugal, we are, already originating, fixed-rate assets, they started, later, and, so the sensitivity is a little bit higher, Britta. Not, significantly higher, but, but slightly higher. Thank you.
Thank you, Britta. Operator, next question, please.
The next question is from Andrea Filtri with Mediobanca. Please go ahead.
Yes, good morning. Just a clarification on the very detailed guidance you have given on NII. Are you therefore expecting deposit remuneration to fall with rate cuts happening? I also wanted to thank you for the new disclosure on insurance. It is much appreciated. And finally, on your CET1 target, more of a strategic question here: Why insisting on undergoing share buybacks above tangible book value, instead of carrying some buffer for when balance sheet growth will return and eventually many opportunities would come along? Given your valuation, would these alternatives not be more accretive to EPS than a share buyback capital deployment? Thank you.
Thank you, Andrea. It's a very good point you make here. I would say our first objective is to grow our business organically, and capital has never been a constraint for us on that front. Because we have ample capital today, and also we generate so much as we go forward. So certainly, if there's good organic use of capital in the business, that's always the first priority. The reason why our RWAs are not growing or growing slowly is not because we want to pay capital to shareholders, it's because there's no further demand. And if we find further demand, we certainly will use the capital to grow the business on an organic basis. So I absolutely agree there.
My expectation, when you look at 2024, we're gonna have better news, and hopefully, that should accelerate beyond that level with the current macro environment. So we will be certain we will be giving the first priority to that. In terms of M&A, we are not active. M&A is something you know we've done, because actually the last big transaction has been ours with Bankia. And if you look at cross-border transaction, actually, acquisition of BPI is also the most significant one since the SSM is in place, no? So we know how to do it, but we know in order to do one, you need to pass on many.
At this stage, to be honest, we don't see synergies or value to be created in acquisitions outside of our core markets. In our core markets, we've done a lot, and I think we'll benefit from continued focus on our operations, certainly in Spain. If you look at BPI, the growth it has, and it has had for now seven years in a row, we have gained 200 basis points of market share in the last five, six years in Portugal without any acquisition. That is tremendously accretive to valuation, no? And that's why our return on tangible equity there is now 17%, and it was single digits only a couple of years ago, no? In fact, last year.
So, a lot of focus on organic growth, capital, priority would be to fund that, in 2024 and beyond. No M&A that we see, creating value, and hence, we have plenty of capital to distribute to shareholders, even though the focus might be, the other one. And, the other one meaning organic growth. And obviously, buying above tangible book is what we would like, because we would like to be our stock price higher. But tangible book now is 4.2%. The share price is below 4, so we are not there. We're at 0.95. But if...
Something that obviously you do and you know, Andrea, but for the benefit of, for the sake of everyone, you take EUR 0.40 or EUR 0.39 out of our share price, you move from the 4 area, 3.95 to 3.55 or so, you need to take it off our tangible book as well. But then you get. Again, we're trading, and I'm saying take EUR 0.39, because obviously in April, we're gonna pay this thing. And once you do that pro forma, we're again trading at 0.9 times tangible book, and less than 0.8 times, closer to 0.7 times book value. And this is where we are saying, and we feel we can actually sustain profitability that is this year above 15% of tangible equity.
So we continue to see very high value in our, in our shares. But, obviously, we know we are biased, and, and the market is, is the one that needs to judge what's fair value for our shares. But we see plenty of value, to be honest, today, and clearly we are still below tangible book, particularly when we're just for our, dividend. And I don't think tangible book is, is the right valuation for us. There's plenty more when we have 15% return in a, in a market that is mature, we have a sound balance sheet, and, I think we can have, stability and sustainability around those levels.
Andrea, well, first, thank you, and thank you also for your comments on our new breakdown on the P&L. Thank you very much for the feedback. And to your first question, I think that is a very good one, because actually, it's what matters, no? The remuneration. We have been used to talk about betas when rates are going up, but now when rates go down, keep talking about betas is a little bit more confusing, no?
More precisely, to your point, we are not considering that the average cost of our deposits is coming down in 2024, compared to the cost we have had in the fourth quarter 2023. If I remember well, it was 65 basis points. Well, note that I am commenting here excluding hedges, okay? Hedges is another angle. But if you exclude hedges, we're talking about the real underlying beta. We have had a cost of our deposits at 65 basis points. We are expecting the average for the year to be slightly higher than this, and at that level. And if you do the math, this results into a 20, low 20s beta, which is the guidance we have provided to you.
But I agree with you that probably at some point next year we should start talking directly about the cost of deposits instead of linking it to deposit beta. So thank you.
Thank you, Andrea. Operator, next question, please.
The next question is from Carlo, Carlos Cobo, with Société Générale. Please go ahead.
Hi, thank you for the presentation and for the clarity on the dividend policy and the share buyback , which is very much appreciated. I have three quick questions. One is on cost of risk, one is on Basel IV and the swaps. One, the cost of risk, I wanted to understand your thinking. It's not that you—I'm asking for your forecast for cost of risk in 2025 or 2026, but thinking about how IFRS works, in theory, you should be putting through your models now a more severe, you know, macro scenario, because people is consuming liquidity buffers, and in theory, asset quality dynamics should be more challenged now than on the stronger GDP and lower rates in the future.
So if IFRS is front, front-loading, these type of risks, do you think that the normal trend should be for cost or risk to normalize lower? I'm just asking because consensus seems to be a bit more defensive in that sense, due to the lack of visibility. But if everything progressed for the better and lower rates and lower inflation, should that mean that cost to risk should fall, normalizing at a lower level than, you know, historical average, because we are now, you know, operating on the, a less leveraged economy? I wanted to see if that's your thought. The second one, very quickly, it's on Basel IV. You said no impact.
I wanted to understand if this is just the balancing impact of different moving parts, but you still have some operational risk, negative impact, or this is simply that your models already were conservative enough. And lastly, if you can share the, what is the... I think you said you have some receiver swaps in the mortgage portfolio, or that you are planning to add them. If you were to, what's the average duration that you can get in those swaps, considering the, you know, the risk that Javier mentioned about fixing too much assets? Thank you.
Thank you, Carlos. I'll take the cost of risk one. I say I completely agree with you. We have been seeing, actually much better cost of risk now for a number of years, in Spain and in other countries, but certainly in Spain. I think there's something that is different about the current situation when we look at, normalized cost of risk going forward. I, I don't think that looking past this is the right, way to, to do it, no? The level of leverage in Spain is, again, in the private sector, is much lower than in the Eurozone. It's been reduced from basically almost 100 basis points, it's now 131% of GDP. This has been an issue for us in terms of, new loan production. You know that well.
But, I mean, both companies and families at 48% and businesses at 83%, they are much less lower leverage than the European peers, and certainly compared to historical standards. We have a strong private sector in Spain in terms of asset quality, and my conviction is that we're gonna have a long cycle of good cost of risk from that point of view. Absolutely. You could look at BPI in Portugal, they've done extremely well for a pretty long time. I am looking forward to see that same figure reflected across the whole group.
Hi, Carlos. Yes, on Basel IV, we have some rebalancings, basically impacting some of our affiliates, basically insurance, that moves from at risk -weighted 370 to 250. So this obviously helps, but besides this, there is not much negative impacts on the other side of the equation, no? In terms of the swaps, you can do whatever you like in the market. So there is market, there is size, but you are right, in case of executing something, probably will be problem in terms of maturity. So tying us for a shorter period than the underlying asset. You are right. Thank you.
Thank you, Carlos. Operator, next question, please.
The next question is from Marta Sánchez Romero, with Citi. Please go ahead.
question is on the FROB stake. Have you discussed an exit plan with the FROB? If you keep doing buybacks and the FROB doesn't tender, as it's been the case so far, the government will end up owning more than 20% of your shares, and it's gonna complicate a future exit. And then my second question is on 2025 NII, 'cause I don't want to extract guidance from you, just comfort that we are not facing a cliff edge. So the NII guidance for 2024, EUR 10.1 billion, looks low, but I guess a couple three hundred million could be explained because of your more conservative forward curve assumption. But how do you see 2025? How do you see rates?
So is that your assumption, that rates kind of stabilize at that level that you've suggested, or that the headwind is, is smaller than what the market is factoring in today? Do you have in mind, putting in place structural hedges at some point, as we've hinted, or I don't know if you can help us with the amount of deposits that priced one for one with the moves in your Euribor. Thank you.
Thank you, Marta. On the first question, I'm not gonna be able to comment as a policy, don't wanna comment on conversations we may or may not have with our shareholders on that front. We have obviously a very large bank, a liquid share, and shareholders can decide what they want to do at any given time. To be honest, our job is to continue to try to and manage the bank for the better, create shareholder value, make it obviously more and more attractive for anyone who is a shareholder, whether they wanna stay or they wanna sell. Better on a higher share price will be surely facilitate. Javier?
Hi, Marta. Well, on 2025, it's further down the road, but, I will try to give you some insights. I think that precisely this, sensitivity, remember that our sensitivity we're providing you and you have in this, page 47, is what we call the 12, 24-month sensitivity. So it's the sensitivity of one year, one year, one year forward, okay? And actually, this is already 2025. Okay, so, this is kept, pretty much unchanged, circa 5%. And here, my comment would be, if I see, the updated consensus, for 2025, that we had, after our results presentation last quarter, but already updated with our results presentation.
And before the strong fall in the yield curve, we have had basically during the second half of November and December, you know that the yield curve has implicit rates for 2025, have come down by circa 85-90 basis points as we speak. So what I see is that that consensus has been updated according to that sensitivity. So that delta, the delta that of the consensus for 2025, updated consensus, I mean, because consensus, you have plenty of inputs that are not updated. But when you consider updated consensus, I see that it has moved in line with that sensitivity, which is our in line with our internal—That delta is in line with our internal estimates, no?
Well, I think that we have been clear on the sensitivity. We see that the market is adapting to that accordingly. In terms of further hedging, to a previous question, I have already given some ideas, no? Yes, we can do more, probably will do. Time will tell. It's a little bit market dependent, but I insist probably not hedging fully, because if you are wrong, you are really in a very bad position, eh? Because you don't have any further positive repricing on the asset side, and your liabilities start costing more and more, and you face negative NII in a very bad moment, no? So we'll see, eh. It's something we can do, and time will tell, no?
In terms of the managing of our cost of our deposits, I think that we are gonna be able to do so, as a starting point, our liquidity position. So we are not, let's say, with a constraint of having to retain deposits at any price, because otherwise we will have a problem. So I think that this is a key advantage in this environment. And second, I think that I think that we do pretty well several businesses, but the deposit gathering probably is one of them, no? I think that in that sense, our ability and commercial ability to manage this situation is gonna be a really good one, as has been the case on the way upwards, no? So Marta, I hope this helps.
Obviously 2025, there is plenty ahead and plenty of things will happen, for sure.
Thank you, Marta. Operator, next question, please.
The next question is from Hugo Cruz with KBW. Please go ahead.
Hi, thank you. I just... A lot of great answers already. I think there's clear upside to your NII estimate, do tell me if you disagree. But I just wanted to ask on the timing of the buybacks and the size, because if I consider the EUR 12 billion capital return target, I understand that implies around EUR 2 billion of buybacks that will have to come by, you know, the middle of 2025. So, now, how should we think about—you know, let me know if you disagree, but if my numbers are right, how should I think about the timing of that? Should it be, you know, EUR 1 billion and EUR 1 billion, or, you know, more than two buybacks because you wanna have smaller numbers each time and more regular? How do you think about that? Thank you.
Thank you. On the timing of buybacks and capital distribution, as I would refer to our previous comments on trying to do them more often of lower amounts. And obviously you're right, there'll be some lag between the year end of 2024 and further capital distribution, because it has to be that way. We need to create the capital before it is distributed. But obviously, as we are creating capital quarter-over-quarter, we'll keep updating you on this.
I think that obviously the next piece of news would be once we get a regulatory approval on the current one, and then I think by June the second half, we will be updating you on plans on this matter of capital. Thank you.
Thank you, Hugo. I think we have time for one last question. Operator, please.
The next question is from Fernando Gil de Santivañes with Bestinver. Please go ahead.
Hi, good morning. Thank you for taking my question. Just a question on the MREL requirement. What is included in your assumptions for the MREL for this 2024 and 2025? Are your expectations that these might be going up from this 1%? Thank you.
Thank you, Fernando. We are assuming what we have now? So, this, the 1%. Our expectation, we have been commenting this, it was really, a question that was, in the market, after the summer. I think that since then, situation is much quieter. My expectation is that there will be no changes, but, obviously, I know that ECB is, proceeding with, a framework review, that, will update, before the summer. So let's see what comes from that, but, in our guidance, it's, it's as it is. Thank you.
Okay, so I think that's all for today. Thank you very much for joining us, and have a wonderful weekend.
Thank you, everybody.
Thank you.