Good morning and welcome to CaixaBank Results Presentation for the first quarter of 2024. We are joined today by CEO Gonzalo Gortázar and CFO Javier Pano. Just a brief reminder in terms of logistics for first-time viewers: we plan to spend about 30 minutes with the presentation and about one hour with the Q&A. The Q&A is live, and you should have received instructions by email on how to participate. My team and I will be at your full disposal after the call, as always. Without further ado, Gonzalo, the floor is yours.
Thank you, Marta, and good morning, everybody. Get into the highlights of the quarter directly. Good in terms of activity. Obviously, we've seen also now the GDP figures for Spain for the first quarter, which have all surprised to the upside, and good figures from the Eurozone with respect to our expectations indeed as well. In that context, we had a pretty good quarter in terms of activity. You see in terms of new lending up 3.5% year-on-year. Particularly, you'll see later on in mortgages and consumer lending doing very well. Wealth management up 4.4% in the three months year to date. Good level of net inflow, so nice feeling in terms of commercial activity to start with. In terms of profitability, just above EUR 1 billion, 17.5% growth in net income.
Obviously, if you look at this year-on-year, it's NII that is driving the improvement with that 27.4%. But when you look at the detail, particularly of our fees and insurance revenues, you see wealth and protection are growing 12% year-on-year, even quarter-on-quarter if you adjust for the seasonality of the fourth quarter. There's also a good level of growth. So again, good sense in the short term, NII is the driver. Mid-long term, obviously, the rest of the revenues are going to be a key driver as well. Asset quality under control, 2.8% NPLs. We'll get into some more detail on convergence to new definition of the fund later on. And most important, we keep a very high level of coverage of non-performance. And then capital according to plan.
Obviously, it's been a quarter we've paid the dividend and, well, not in the quarter but in April. Also, the share buyback is well underway. So we're in good course to meet our commitment, our EUR 12 billion that we updated recently up from EUR 9 billion in terms of generation of excess capital. Return on tangible equity, slight growth to 15.8%. We're upgrading our expectations for the year for this return on tangible equity to be above 16%. And that's mostly a consequence of the upgrade in our guidance of NII, where we're moving from basically in-line to mid-single-digit growth. And obviously, the strength of NII in the first quarter is a good reason that justifies that move. Economy, I said we just had numbers for GDP this morning, 0.7%. That was way above what we were expecting for this first quarter.
So our GDP estimate of 1.9% is likely to be revised upwards. Just I think mechanically, the revision of first quarter to current levels, if all the things remain equal, would mean that closer to 2.5% than to 2%. But we'll see. But we have certainly good news there. And we had already upgraded our projections, but the reality is turning out to be better than expected. And it's also lifting levels in the Eurozone, which is obviously very good for us as well, that there's not so much gap between Spain and the Eurozone. And we had 0.3% growth in the Eurozone, so that sounds also a good start for the year. You see some of the indicators, composite PMIs of Spain, and clearly indicating expansion, not recession. Eurozone just about dividing line. Employment continues to do very well, close to 3% job creation last year.
Then we are having a spectacular boom in tourism, not just in the number of visitors, but also in the payments or expenditure from tourists, as you see in the page six shown . Good environment, much better than the Eurozone, and no indication that this is slowing down, quite the opposite, I have to say. Let's see how things go. A good framework indeed. New lending, as I said, is the 3.5% growth over last year, 11.6% over the fourth quarter. Then when we look at residential mortgages, 24% in the first quarter, which was a weaker quarter for us, but this quarter has been very good, even better than the fourth quarter of last year. Consumer lending, best quarter in the last eight or nine, 15% growth versus last year, 12.5% versus previous year.
Obviously, consistent with what we saw in terms of the economy, both in mortgages, where we have also seen an increase in the number of transactions yearly for the market, and initial leading indicators of good price performance as well. And then on the new business lending, you see obviously more volatility because it sometimes depends on large ticket items. So when you compare it to the last year, it's actually a decrease, 3.5%, but it's a 13.8% increase over the fourth quarter. And as you will see later on, actually balances are going up. So again, the picture obviously is one of modest growth, but it is certainly better than what we expected. Here you have the loan book. You see the growth in businesses. Large part of that relates to our international exposure. Consumer lending, again, doing well, and mortgages coming down.
But if you look at the right-hand side, it's actually half the level which we had a year ago in terms of deleveraging. So looking forward to that changing trend and inflection point in the mortgage portfolio, that may actually come much earlier than what we had anticipated initially. Some small, but some growth in business loans, in market share, which is obviously also a positive. Customer funds, good quarter in terms of market impact. You see EUR 6.8 billion. Also in terms of net inflows, another EUR 3.4 billion of net inflows. That has more than offset the outflow in deposits. There's been mostly transfer from deposits into mutual funds, in these monetary mutual funds, in this quarter, but with some net growth. And then there's some other volatile transitory seasonal items that this quarter resulted in minus 1.6%. So all in all, 1% growth.
Again, a highlight obviously is wealth management. Worth saying, we always discuss about beta. I'm sure we'll have some discussion about beta as we move into a market in which rates are likely to come down. We are increasingly trying to just give you the information of how much are we paying for deposits. That means what portion of our deposit base is remunerated. You have it there, 21%. Obviously, what is relevant is what's the increase quarter-on-quarter. You've seen such a substantial slowdown in this first quarter, just from 20%-21% in round numbers. It's a little bit more than 1%, which is much less than what we had seen in previous quarters. Obviously, we need at least to wait until later in the year. Certainly, the trends are pretty good on that front. Javier will obviously elaborate on that.
In terms of wealth management, EUR 246 billion at the end of the quarter. Again, pretty good level of increase. Savings insurance, 1/3. Two-thirds, I would say, mostly monetary mutual funds off balance sheet. Just giving some information on synergies, revenue synergies, convergence of penetration of former Bankia and CaixaBank clients. We'll do that on this page and on the next one for protection. You can see how clients from former Bankia are growing in terms of the number of them that have wealth management products, gradually converging to the rest of our client base. Still some room to go, but clearly the good direction. Obviously, in any case, plenty of growth given the levels of penetration of Spain vis-à-vis the Eurozone. Similar story in terms of protection insurance. You have growth of 8.6% in premiums.
And again, with a balanced distribution between life risk and other non-life, where health, auto, and household are the key drivers of Premia. MyBox continues to be a great success. And again, same story in terms of synergy potential and how the penetration of non-life insurance products have grown for former Bankia clients vis-à-vis the levels that we have at CaixaBank. And obviously, the fact that there's further room to continue growing so that eventually we get those levels to converge. And certainly, in any case, for the whole of our client base, given where it is, Spain versus the Eurozone. We're gaining market share, and we expect to continue to do so in this important part of the business. BPI has presented the results today.
I'll be very brief, but obviously, if things continue going in the right direction in terms of deposit competition and rates, the market is tougher there. And Javier will comment on that later on. But all in all, we see a very significant increase in profitability, with return on tangible equity having improved very sharply over the last 12 months. Cost income in the 40% region and asset quality at very good levels, generally gaining market share. So again, very happy with the way things are developing at BPI. In terms of our results, obviously, mostly result of increasing revenues. In turn, mostly a result of higher NII. You see that waterfall of net income. And the reality is that we're seeing increasing costs as expected. We're confirming guidance there as well.
Cost of risk remains in line with what we guided for, so contained, hence this improvement of return on tangible equity and profitability. Finally, just a comment on our sustainable strategy. You know about social, the S part of the ESG for us, and some of the numbers that we wanted you to be reminded of on this page in terms of financial inclusion, microcredit activity, other solutions with social impact, and the volunteering program and the partnership with the foundation. That makes us very unique. On the E side, this quarter has been particularly relevant because we have published now decarbonization targets for five additional sectors, completing what was our commitment and the Net Zero Banking Alliance. You see some of the figures there. We continue to be recognized for our very large and good progress on sustainability. That is all for me for now.
And Javier, your turn.
Okay. Thank you and good morning. Well, from my side, as always, further details on the P&L and the balance sheet, starting with the P&L. Here you have the consolidated income statement, net income of EUR 1 billion. You know it well already, up by close to 18% year-on-year. Strong revenues continue to support profitability, underpinned by NII, but also our key business engines, wealth management and protection insurance. NII positive quarter-on-quarter, and wealth management up by close to 16% year-on-year, quarter-on-quarter impacted by the success fees on the fourth quarter. Protection insurance with very good levels of commercial activity, up by 7% year-on-year. And then on banking fees, the well-known headwind from the lower account maintenance fees. But as you may see, also quarter-on-quarter a less negative evolution.
So we think that as quarters progress, we are going to do better on that front. On other revenues, I would only remark here that the dividend from Telefónica this year is not paid in the first quarter, and that on other operating income and expenses, we have an additional negative impact from the banking tax of EUR 120 million. On operating expenses and loan loss charges, not much to say. Everything is doing according to our expectations. We are reconfirming guidance, as you know. And finally, on other provisions, here we have higher provisioning levels for legal contingencies. With that, let's move to the details on NII. Let's focus on the quarterly evolution, this NII bridge on the center. As usual, on the first quarter, a negative contribution from the account.
Then, as you may see, a slightly negative client NII, but this is basically due to lower average loan balances during the quarter. On the other hand, we have had larger cash balances, and this is why you see this larger contribution from ALCO. Below, bottom left, you may see the evolution of the customer spread progressing, up by 6 basis points, 364 basis points. And then on the center, the evolution of yields, the backbook yield of the loan book progressing at 462 basis points. And then the cost of our client funds, 75 basis points, up 10 basis points in a quarter. Remember, this is the cost ex-structural hedges and foreign exchange. On the right, you may see the evolution of deposit beta.
But as you know, I think that for better clarity going forward, we will be more specific about the cost of our deposits and the percentage of deposits at a cost. But in any case, it's evolving in line or even better compared to our initial expectations. And this together with the good activity levels Gonzalo has already commented and a higher yield curve than the one used for our initial estimates. We are upgrading our fiscal year 2024 NII guidance to meet single-digit growth. Let's continue with revenues from services. Remember this new P&L presentation that we think is better to understand the different dynamics of our commercial activity. And here, clearly, you see much better performance from wealth and protection revenues, up by 12% year-on-year compared to banking fees, down by close to 11%.
In any case, on the bridge on the right, in euro terms, you may see that wealth management and protection insurance revenues are more than compensating that headwind from banking fees. And on that front, we are reiterating the guidance we provided three months ago for revenues from services to grow by low single digits. Here you have all the details. On the left, wealth management revenues, as I say, with growth close to 16% year-over-year. On AUMs, strong inflows. Also, the positive mark-to-market effects are clearly helping. On life savings insurance, very positive evolution with strong carryover effect from high commercial activity last year. And as I said, quarter-over-quarter, the impact of the success fees on the fourth quarter. But even not considering those, we have positive evolution quarter-over-quarter. On protection insurance, up by close to 7% year-over-year.
Life risk with sustained growth driven by high activity. On insurance distribution fees, although we have also very positive commercial activity dynamics, on P&L terms, there are some non-recorded impacts, including timing differences in revenue recognition that are affecting the P&L, but something that we expect to improve in coming quarters. Finally, banking fees. I have already very well commented the impact from the current account maintenance fees on recurring banking fees. But in any case, you see that quarter-over-quarter, we have less negative evolution. Also, finally, on that front, wholesale banking fees that this first quarter have performed really well. A brief comment on costs. On this slide, I will focus basically on cost to income that keeps trending down, 40.3% compared to 40.9% the previous quarter.
On the bridge, you may see that banking tax obviously is having an impact on that, negative impact. It's a quarter where we have closed a new collective agreement with unions for our staff compensation for three years. After that, we are reiterating our cost guidance for the year for costs to grow by less than 5%. A final comment on P&L items, loan loss charges. I would say that everything is really calm on that front with an annualized cost of risk for the first quarter, 28 basis points, 29 basis points on a 12-month trailing basis. We are guiding for circa 30 for the year, something that we are reiterating. A high coverage ratio, 71%, small reduction quarter-over-quarter, but it's basically due to a denominator effect. We keep our EUR 800 million unassigned collective provisions unchanged or pretty much stable for the quarter.
Moving to the balance sheet, a comment on NPLs, precisely that increase that I commented as a denominator effect, EUR 300 million more of NPLs. But of those, approximately EUR 200 million are due precisely as we continue with the ongoing alignment of the prudential definition of default, the new definition of default, a process that is expected to be finished by the second quarter. In any case, the NPL ratio is really low level at 2.81%, well below the average of the sector. You have all the breakdown across segments. Not much to comment, I would say. Everything doing according to plan. And finally, we are reiterating this NPL ratio guidance for the end of the year, circa 3%. Liquidity, very ample liquidity position, over EUR 200 billion, of which over 100 HQLAs.
We have a slight reduction of the Liquidity Coverage Ratio, but in any case, at very sound levels, 197%. This is due basically as we paid the dividend early April. And by the end of March, we had already the negative impact on Liquidity Coverage Ratio. On the right, you see the mix of our funding, our client funds, retail 79%, wholesale 21%, are really conservative funding with insured deposits 64%. A few words on MREL. We have received the 2024 MREL requirement this first quarter, and it's 24.65%. We comply with it very comfortably with an MDA buffer at 232 basis points. We end the quarter pro forma the Q1 call we have just announced today with MREL ratio at 26.97%. We comply with the MREL requirement mainly with subordinated instruments, and this has been a key driver for the rating upgrades we have had this quarter.
Moody's now rating our senior preferreds A3 and now our Tier 2s rated investment grade by all main rating agencies. It has been a quarter quite active in terms of issuances, equivalent of EUR 4.2 billion. I would remark that we have already made very good progress on our funding plan. Remarkably, these $2 billion senior non-preferred with great success. Finally, capital. We end the quarter with a CET1 ratio at 12.26%. Keep in mind, we fully deduct the third EUR 500 million share buyback from our solvency ratios. That is - 22 basis points. Then we have + 36 basis points of organic capital generation despite, as you know well, the banking tax is affecting our profitability, hence our organic capital generation this first quarter. Then dividends and AT1 coupons, - 29 basis points and + 4 basis points from markets and other impacts.
Finally, the book value per share, considering also the dividend paid this April, evolving fine, up by 9.2%. The tangible book value per share, as a reminder, EUR 3.94. Before moving into Q&A, please save the date. We are planning to hold an investor day to present a new 2025-2027 strategic plan, November 19th, sorry, in Madrid. We'll be very happy to see you there. Thank you very much and ready for questions.
Okay. Operator, please. We are ready for Q&A.
Thank you. For any questions, please press star and one on your telephone. The first question is from Francisco Riquel of Alantra.
Yes. Good morning. Thank you for taking my questions. First one is a high-level question on NII. I wonder if you can detail the main assumptions behind your revised NII guidance for 2024 and what is driving the upgrade, if it is the new assumption for Euribor, the cost of deposits, and the related hedges, or is it a non-customer NII? Also, you can update your NII sensitivity to lower interest rates. And in this context, how big a cliff in NII shall we expect in 2025, assuming the current forward yield curve? My second question is if you can update on your commitment in terms of capital distributions and the timing of such distributions. And given that you are announcing a new investor day later for later this year, just wanted to test your appetite to continue buying back your own shares despite the rising share price. Thank you.
Thank you, Paco. Let me answer the second question and let Javier obviously provide the full detail on our NII guidance. In terms of capital distributions and timing, we will be making them when we receive appropriate authorization from the ECB. In the past, as you know, we have announced that we have asked for authorization. Then when we receive the authorization, we have communicated those. You should expect, unless something changes, that we will not be making any communication until we actually have approvals on any decisions. Okay? The way we see this is for this three-year plan, which finishes at the end of 2024, our EUR 12 billion figure, we do not need to wait until November 19th to continue giving you information on how we gradually progress on that program.
The November 19th investor day will be more focused on 2025 and onwards, what is our expectations, what will be certainly capital remuneration expected that you should expect for that three-year period, but not for what is up to 2024. Obviously, as we have said, the EUR 12 billion are going to be generated by the end of 2024. We are not going to be able to actually make announcements of current or real distributions all in fiscal year 2024 because, by definition, some of that will happen later. Let's separate the tactical decision on the EUR 12 billion when and how. I would say that is tactical, and we are fairly committed to that happening and confirming that it is our expectation today. From the November 19th event, which is more strategic, looking forward, where do we go and obviously targets and implications also for capital.
In terms of appetite to buy back, depending on or despite our rising share price, we've always said that we will buy back capital. We didn't put a cap on what is the level at which we would stop buying back. It's very difficult for management teams generally to second-guess what is the right cheap value for their shares and what is not. We are actually taking the market as the market price. The fact that it is above or below book value is not going to change our decisions from that point of view. We obviously have always said that further distributions beyond the ordinary payout can take the form of share buybacks and special dividends. That's still the case. We have so far gone through the way of share buybacks. It's not necessarily going to change because of a higher share price.
But the board keeps obviously the decision for the right time in as to which way to go.
Okay. Thank you, Gonzalo. Well, hi, Paco. Well, what is driving the NII guidance upgrade is a little bit of everything. So it's the combination of better volumes. So clearly, we already saw later last year that there was a more positive momentum. But we are happy to confirm that this positive momentum on the new production of loans has had a carryover into 2024. So I think that this is positive also on mortgages. So something that is remarkable also with quite a significant reduction on the pace of early prepayments, which is helping on sustaining the size of the loan book. So better loan volumes, this is one thing. Deposits, so the pace of migration into deposits at a cost is abating. So we think that we are more close to the peak on that.
I'm not saying that the peak is in the first quarter, but we have much more visibility when this may happen. We see that the environment in Spain on the liquidity situation of also the other market participants is sound. So that this imbalance between loans and deposits that we have in Spain continues to be there. So we have much better visibility on which may be the cost of our deposits for the year. So basically, it's what is behind. And then finally, rates. And you are right. So basically, we are using end-of-March rates to make this guidance based on that yield curve that is basically round numbers, circa 50 basis points above the levels used for our previous projections. And then, as you know, during the month of April, the yield curve is even higher. So that's the situation. And well, this is what is behind.
I'm happy to update you with this new guidance. For 2020, you had a question before about sensitivity. On sensitivity, we are pretty much in the same place with this circa 5% sensitivity to moves of one percentage point on the yield curve. We have added some hedges. We have rolled over, and we have slide 40 on the deck with additional information about rate sensitivity and interest rate management. We have added two hedges. Basically, we have rolled over a EUR 5 billion hedge maturity we had in the first quarter. And on top of that, we have added an additional EUR 2.5 billion hedge. But the sensitivity remains pretty much the same. You need to keep in mind that this is not a static balance sheet. So forward projections on the different volumes of assets and liabilities are always incorporating our latest views on that front.
The sensitivity continues to be around that 5%. For 2025, and here, I would like to make a comment on that topic. So we have published our 2025 consensus. And this is on our website, on our corporate website. NII for 2025, according to the consensus, is expected to be at circa EUR 9.7 billion. So well, with the current conditions and if these conditions continue, we see upside to that figure. Basically, it's what I have been just commenting. So we are more upbeat in terms of the loan book, clearly, and into 2025 also. We think that we are getting closer to the trough in terms of the leveraging. So I think that probably when we start projecting our views for the loan book evolution into 2025, we'll be more positive.
On deposits also, we expect a continuation of the calm situation we are having with slightly lower yields. I think that probably in terms of competition, the landscape will continue to be a calm one. Also, the yield curve, obviously, is going to have an impact. I think that the market consensus is being more and more with a view that probably the extreme rate cuts that were priced late last year are no longer the case. I think that if those conditions continue to be maintained, we see upside to that EUR 9.7 billion. That is the market consensus. Obviously, we need to work on that, and we need to reconfirm those views as we get closer to that in order to be more specific. Thank you.
Thank you, Paco. Operator, next question, please.
The next question is from Max Mishyn of JB Capital.
Hi. Good morning. Thank you very much for the presentation and taking our questions. I have two follow-ups and one question, please. So the first follow-up is on loan book growth. You mentioned that new production have been better and amortizations have also been better in mortgage book. And I was wondering whether you keep the flattish loan book guidance for 2024. The second one is a follow-up on capital. Given the better outlook for loan book growth, can this change your mind on capital distributions and also the potential introduction of countercyclical buffer in Spain? And lastly, could you please share more light on what drove other provisions in the quarter and what kind of expectations you have for the rest of the year? Thanks.
Thank you. Thank you, Max. On loan book, really, the year has started better than expected. To be honest, March, April are showing good trends. We saw today the GDP number on this basis. Some of this is very recent, but I see upside to that flattish guidance. It's different if you look at the three segments. You have consumer. It's already up 2% in three months. So. That's far away from flattish. Then you have business where we are growing, but domestic demand is still limited. We had actually pretty good figures today on investment, fixed capital formation. It bodes well, I would say. On mortgages, we obviously are as where the deleveraging is more significant for us given how seasoned our book is. But you saw that chart where we had EUR 0.9 billion of reduction this quarter versus EUR 1.9 billion a year ago.
If you look at the quarter, it's actually March is being better than February, better than January. April is now looking better than March. So while we should still see some deleveraging during the year, we're not that far away now from sort of breaking even on the book. Generally, I'd say some limited upside to that flattish I do see. We have some on that front. Not necessarily that's going to change completely NII this year because obviously where rates are for the deposit facility rate. But clearly, in terms of traction into 2025 and onwards for the next three year, I see, as Javier was indicating, we see some sort of fresh positive tailwinds. In terms of capital, I think your question was again related to price.
Loan growth. Loan growth if loan growth may change our capital distributions.
Oh. I would say in the short term, no. So targets for 2024, given where we are, I think they are pretty safe in terms of material numbers. And we want to clearly sort of honor our commitments there. When you look beyond, to be honest, we are all looking forward a situation where we have more organic growth opportunities. And hence, we're going to generate a lot of capital in any case, given our profitability at 16% levels. But obviously, if we have some positive growth and we expect that to gradually build up over the next years, that's going to be a great use of our capital, particularly we're making returns of 16% as we're making now.
So hopefully, we're not going to have a figure where every euro we make, we distribute, but not because we spend it in a disorderly way, but because the business itself has a G on itself that is at least clearly higher than zero. No change in the short term. Hopefully, some positive change, meaning more growth in the business in the mid and long term.
Yeah. You had a question, Max, on other provisions. Well, on that front, you may be aware that well, this is something related to mortgage costs. Basically, this is the short answer. So the prescription period is now, after the recent European Court of Justice rulings, looks more open. So without a clear deadline, probably the Supreme Court will establish or will clarify better all this in coming months or weeks. Who knows? But in any case, we are observing an increase of the pace of claims for this matter.
And as a consequence of that, we are increasing the level of provisions for that. And for this P&L line, for the whole P&L line that last year we had other provisions by EUR 250 million, this is a mix of things. But we are expecting this year to be closer to or circa EUR 300 million for the whole year.
So that's the message. And the key driver is that one.
Operator, next question, please. And thank you, Max.
The next question is from Ignacio Ulargui with BNP Paribas Exane.
Thank you very much. Thanks for taking my questions. I have two, if I may. The first one is, how do you see deposits evolving going from here? And what would be the implications for asset management? There have been deposits going down in the quarter. You have been mentioning there has been a bit of a shift. So how should we expect the interaction of liquidity going forward and the implications for NII? And the second one as well linked to the NII, if you could update us a bit on how should we expect the ALCO Book yield to evolve over the coming quarters? The 1.5% should step up reasonably in 2025, or it's a bit more delayed given your maturity profile? Thank you.
Hi, Nacho. Well, on deposits, the first quarter is always a little bit seasonal. We have actually a very good seasonality on much better seasonality on the second quarter. So you will see that. I think that so far we are striking the right balance between AUMs and deposits. For us, it's important to both. On deposits, basically, our focus is to more or less maintain our market share. I think that we are happy with that. With wealth management or AUMs in general, annuities, etc., we have a clear bias to grow. Well, here is the fine-tuning of this balance that so far we are happy with the evolution we're having. We for sure will continue to be the case, as to the previous question, the environment we feel in the industry in Spain is calm.
So I think that we will be able to do so. And you could see that this very gradual evolution of this migration into deposits at a cost that is gradually fading. And well, as I said before, we think that we are closer to the peak on that front. On the ALCO, well, basically, we have changed it a little bit, the tools to manage our interest rate risk sensitivity. And we are keen to use more derivatives, as you know. And precisely on that slide 40, you have plenty of details. So the fixed income portfolio, I am not saying that we are not going to reinvest, but probably reinvestments are not going to happen in the short term. So we are keen to use more derivatives, basically, because also sovereign spreads are tight in our view.
So we think that probably there are other ways to manage this risk that do have a risk-reward that is now more positive. You may see on that slide precisely that we have EUR 7 billion maturity of fixed income next year. And I would say that the yield of those bonds is really low. It's very close to zero, in part because that was the mark-to-market impacted by the mark-to-market when the banking integration. So you remember that we had to mark-to-market the bond portfolio. Back then, yields were negative. So that resulted into an impact on part of our portfolio. So we have a positive impact from that maturity, even if you reinvest or not, because in any case, that cash will have a massively higher yield than the yield that those EUR 7 billion is having now. Thank you, Nacho.
Thank you, Nacho. Operator, next question, please.
The next question is from Alvaro Serrano of Morgan Stanley.
Hi. Good morning. Thanks for taking my questions. One on NII and one on capital. On NII, maybe it's for Javier, but I noted your assumptions. But if I think about presumably Q2, NII is not going to be hugely different from Q1. So if I take your 5% sort of guidance, it implies a pretty steep reduction the second half, 9% run rate on my numbers, which sounds very difficult to see unless I'm missing something. Are you being conservative, or is there something that I'm not sort of capturing or taking into account? And the second question is on the capital buffer. De Cos has been on the tape saying there'll be a decision taken soon. If it comes out at 100 basis points, would you absorb it within your current buffers?
Is 12% the capital that you're happy with, or would you move it to 12.5%? Or how do you think about a potential implementation if it was 100 basis points? Thank you.
Thank you, Alvaro. I will deal with the second one. I think move on to Javier. Obviously, there's been talk about a countercyclical buffer. We have to wait and see what happens. We continue to see limited reason, to be honest, in Spain with the deleveraging that we have and the lack of any indication of overheated market for this to be introduced. But in any case, we'll have to see. Clearly, there's noise around it. My understanding and my expectation is that if there is any movement, there will be a transition period. So we do not see any scenario in which our, let's say, EUR 12 billion target will be altered. And we will have to think when we look at sort of longer-term projections. And certainly, this could be something we discuss in our Investor Day in November.
What are the capital generation dynamics of that mid-long term? And whether in that context, if there is a different countercyclical buffer, we want, as you say, fully absorb it because we have a generous management buffer or not do so in full. I do not want to sort of take a position in advance, a determinant one, because we just don't have enough information on this. I don't think it would be particularly productive if at this stage banks generally say, "Well, we don't care. If this buffer is increased, we're not going to change anything." I wouldn't suggest that's the right way to deal with it. So we have to see what happens. Again, this is a question for, I don't know, 2025- 2027.
In any case, given our capital generation, the timing involved here, I think that's something that will not alter certainly our sort of fundamental case. Just one final point. You mentioned 1%, which is one potential figure. But this just don't assume it's 1% in our capital levels because this is only referring to the Spanish part. So approximately 1% would imply 75 basis points more in terms of the level for the MDA buffer. So we have plenty of optionality here. But we don't want to pre-commit to what we would do other than saying clearly we do not see our EUR 12 billion capital plan in any way at risk.
Hi, Alvaro. Well, on NII, no. I don't think you are missing anything. But probably to give you further details, as we have not been commenting about deposit betas in any of the questions.
But as I said, let's shift to deposit costs. You saw that the average cost of our client deposits at 75 basis points this quarter. Our internal assumption is that for the year, it's going to be circa 80, the average of the year. So probably this helps on your internal assumptions. But this is the assumption that we are using internally. And you said that the second quarter is going to be in line with the first quarter. Honestly, I think that this is going to be challenging. So I think that actually, the second quarter probably will already show some level of reduction on a quarter-on-quarter basis. But well, it's low sorry, mid-single digits means quite an ample guidance. So let's see. Let's see how the year evolves. And if everything that today we feel quite a bit is obviously reconfirmed as the year progresses.
Thank you, Alvaro. Operator.
Thank you very much.
Operator, next question, please.
The next question is from Sofie Peterzens with JPMorgan.
Yeah. Hi. Thanks for taking my question. Here is Sofie from JPMorgan. So I was wondering if you could just comment on how you view inorganic growth opportunities. Would you consider, I mean, considering where your share price is, would you kind of consider anything in Spain or Portugal? And when you do the internal assessment, how do you compare share buybacks versus inorganic growth opportunities? And then my second question would be, I mean, you already a little bit touched on it. But what should we expect from the Investor Day? Will it be 2025-2027 targets, or longer-dated targets? Will it be revolutionary or more of the same? How should we kind of think about the Investor Day? Thank you.
Thank you, Sofie. In terms of organic versus inorganic growth, and I would link it to your second question as well in terms of the Investor Day, we would like to see the future we would like to see more growth into the future, more organic growth into the future. And we think this is probably the right time, the right environment for us to pursue that organic growth. Again, the world keeps changing. Obviously, digital means things need to be done in different ways. And it creates threats but also opportunities. Spain has been in a sort of long path of delevering for 15 years or so. That's going to change at some point, I have no doubt. And the sense we have it may not be that far away.
So how do we have an institution that is lean, that is efficient, that has 25% market share, and all the vigor to actually capture the maximum opportunities in Spain and obviously in Portugal, even if with a slower market share, we are in pretty good shape? So organic growth is certainly going to be, is already, but it will be even more so focused for us going forward. Hence, I wouldn't expect any revolution in November, to be honest. We were happy with our business model. We just want to do more things with it. But we're not going to change dramatically our risk profile, our business profile, our attitude to profitability and capital and focus on organic growth. That's certainly the environment in which we are. And that means that acquisitions are not something we're looking for. And it's going to continue to be the case.
It's obviously different to say, "Would we never, ever do an acquisition?" And if something comes to us that is good and attractive and makes sense and it's sort of in line with the business, we will look at it. But my experience is that these things normally just do not happen. Or if they happen, they need to be very clear opportunity for shareholders. Looking at the last 10 years, 2014, we did Barclays. That was a very logical bolt-on acquisition, which made a lot of sense, big synergies, low risk. Then 2016, 2017, we did BPI. Very special history there. It's worked out extremely well. We had a specific angle, and BPI had a specific need. It was, again, something that doesn't happen, to be honest, many times in a lifetime. Then we had, obviously, Bankia.
The merger with Bankia was quite unique as well. These things happen, but very rarely. We are not looking forward for growth on the basis of acquisition for our next three-year plan. But again, we would assess opportunities if they come and move if they are extremely attractive to us. I guess that probably answers, sorry, or tries to answer your question.
Thank you, Sofie. Operator, next question, please.
The next question is from Britta Schmidt with Autonomous Research.
Yeah. Hi there. Thank you for taking my questions. I've got three questions. On the net interest income, BPI's NIIs started coming down despite volume growth. And you mentioned some strong deposit competition there. Can you maybe provide a bit of an outlook in Portugal and break down the NII growth guidance into Portugal and Spain? The second question would be, could you provide us with the front-book lending yield and the front-book deposit costs and how they've moved from Q4 to Q1? And then lastly, with there still being pressure on the year-on-year comparison on banking fees, when do you expect that to abate? And at what point would you expect fees to return to growth? Thank you.
Hi Britta. Well, in Portugal, it's true that we have a different dynamic. Probably I can give you some figures, and you will have a better view on what is going on there. We have approximately 40% of BPI deposits at a cost. This already makes a difference. In Portugal, basically, all those deposits at a cost are time deposits. It's not like in Spain, where we have basically large corporates and also the public sector also with current accounts that are usually indexed. Well, and the cost of the average cost for the first quarter has been 1.40%, if I'm not mistaken. Yes, 1.4% has been the cost in BPI. You see clearly a different dynamic. The good news is that the situation is massively much calmer than it was just after the summer.
We see that in terms of volumes, in terms of front-book pricing, we are being able in Portugal to pass on the negative yield curve to price 1-year deposits, for example. We are very active on being, in many cases, the first ones in the Portuguese market to cut our new deposit rate offering. In terms of balances, things are okay. I think that on the Portuguese more heated market, we are already in a much more calmer position. Also, this is allowing us to have a better view. This has been one of the drivers, obviously, of our better view for 2024 for the group and, as a consequence, our review of our guidance. Yes, BPI, if you look only to NII for BPI, it's going to be very probably negative year-on-year.
So it's going to have at group level a negative contribution. So you are right. In terms of front-book deposit and loan yields, well, the loan book yield of the front book is like 4.8%, a few basis points down compared to the previous quarter. I think that this also has to do that, well, Euribor is already negative. The yield curve is negative. So when you price one-year loans, for example, you already have that negative impact. But I would say that apart from the mortgage business, where in Spain, competition is really strong, on the other segments, I would say that there is absolutely a lot of competition but less. So I think that on SMEs, corporates, we are being able to pass on higher rates and with not a material margin compression. And it's the same with consumer lending.
It's obviously less linked to market rates on that case. But I think that on that front, front-book yields are not impacted by competition. As an example, for fixed-rate mortgage, we are pricing fixed-rate mortgage in Spain slightly below 3%. The same mortgage in Portugal is priced at circa 4%. So there is a huge difference. And on the other hand, then you have the difference on deposit pricing between Spain and Portugal but also on the asset side. And on maintenance fees on the front book, on deposits, it's circa 3%. So that 21% at a cost is having a cost of circa 3%. And the front book, although the new production, if you look on a monthly basis, is starting to come down the yield by a few basis points, is also circa 3%, also in Portugal. So the yield is the same.
The difference is that in Portugal, the percentage of deposits with cost is much higher. On maintenance fees, I think that we are getting closer to the bottom. So I think that probably, well, we have gone a long way on that process. And probably this will help to show on this new P&L segmentation, if you look only at banking fees, I think that this will allow us to be close to flattish, if not flattish, for fees as we are closer to the bottom on that process of waiving maintenance fees.
Thank you, Britta. Operator, next question, please.
The next question is from Andrea Filtri of Mediobanca.
Yes. Good morning. I wanted to ask if there is a requirement for the Spanish government to divest the stake in CaixaBank at some point. And on capital allocation, two questions. The first is, with share price above tangible book value per share, isn't the opportunity of buying back shares actually reducing in appeal? And as a byproduct of that, do you think that the ECB in the new regime sees with hostility an increase in dividend payout ratios? Thank you.
Thank you, Andrea. In terms of requirements for the Spanish government to divest, there's nothing new. There is a regulation, but it's a regulation that can be changed by the government itself that has been postponing for a number of times now the deadline for divestment. And it is now the end of 2025. But obviously, it is very simple. And it has happened a number of times before to push out further that date. And in fact, some of the public comments the government had made indicate that that is clearly a possibility. So there is, I think, one date. But it's not really a deadline in practice. And the government will decide on that front. With respect to the share price and tangible book, it is obviously a very relevant question, Andrea. And I made some comments on this.
It is generally our view that tangible book has been a reference, particularly in times of distress of the financial sector. And when you look at tangible book, but you are making 16% return on tangible book, and you think that 16% is sustainable, I don't think the fact that tangible book is or the price is below tangible book is a good indicator of whether you should buy shares or not. Because actually, in my view, and I hope we go that way, we're going to need to start changing our minds and go back to what it used to be before the financial crisis, where people were looking at sustainable earnings. And maybe because they're looking at price to book to sustainable return on equity or directly on sustainable earnings. So we are now. I haven't made the last number, but trading at seven times earnings.
We think those earnings are sustainable. Is 7x earnings not an attractive level on which to buy shares? I wouldn't think so. It doesn't mean, obviously, if rather than 7x, it's 6x, 5x, or 4x earnings, it becomes even more and more attractive. I completely agree with you. But I think we are going to need to move away a bit from tangible book. That's my wish, honestly, as we look at this business as a business that is recovering its basic sort of equilibrium between returns and risk. And certainly, that's how it feels now at CaixaBank. So we will see. I haven't seen any change of position from the ECB, the other part of your question, with respect to higher payouts.
We always kept our hands free of choosing between share buybacks, which is what we've done so far, or special dividends for that extra capital distribution. Obviously, the only difference from a regulatory point of view is one needs to go through a special authorization, the share buyback. The other does not, which is a bit surprising if you think of it. And I think that if we were to go or move that, it would always be whether it's a share buyback or it's a special dividend, it's more something that is related to the current trends of capital generation rather than the ongoing profitability of the business, which we would sort of put the payout of that 50%-60% as the main indicator. So no, in short, I haven't seen any negative indication on that from the ECB.
Thank you, Andrea. Operator, next question, please.
The next question is from Marta Sánchez Romero with Citi.
Good morning. Thank you very much. I've got a follow-up on capital. I'm sorry to insist. You haven't ruled out extraordinary capital distributions for this calendar year, 2024, beyond the ordinary interim dividend that you will be paying in November. I just wanted to clarify that. So we could still expect either buybacks or a special dividend before year-end. My second question is clarification as well on the guidance, the new guidance on other provisions. Would you be able to offset that EUR 50 million delta with a lower cost of risk? And what is the status of your litigation with Coral Homes and MAPFRE? Do you expect any resolution this year that could have an impact on your EUR 4.6 billion commitment on capital return? Thank you.
Thank you, Marta. It's great you asked the question because it's not that we have not ruled out any extraordinary capital distribution this year. We expect to announce some because otherwise, it's not going to work. Yes, absolutely, we will continue on that front. We expect not just the ordinary dividend but some extraordinary dividend or sorry, not dividend, extraordinary distribution announced during this year, 2024, and most likely complemented by something that is post the year-end, 2024, when the capital actually materializes. But certainly, because of the size amounts to EUR 4.6 billion, even if you put a 6% payout on whatever your estimate of net income for this year, you see there's a very significant gap in order to get to the EUR 12 billion, which you should expect during this year. Some of it will be during this year.
Some of it will be in 2025. Let's have no hesitation on that. I'll let Javier comment on other provisions and lower cost of risk. But there's no news on litigation. And even if there were news, we do not expect that would have a meaningful impact neither on what you mentioned about Coral or MAPFRE. MAPFRE is clearly, in my view, going to be further delayed in any case. But we're not expecting any material impact on our capital plans from any of these two.
Hi, Marta. Well, about this EUR 50 million delta, if it can be accommodated on a better cost of risk, well, we have guided for circa 30 basis points. There is the chance that this may be the case. Or as you know, we have been commenting that the situation on that front is doing very well. But unfortunately, I cannot precommit exactly. Note also that on other gains and losses also, we are having quite a decent evolution. So it's not only cost of risk. So below the line, there are several P&L lines that also may help to accommodate that additional impact. Thank you, Marta.
Thank you, Operator. Next question, please.
The next question is from Ignacio Cerezo with UBS.
Hi. Good morning. Thank you for taking my questions. I have a follow-up on the banking fee question from Britta before. If you can actually give us the breakdown of the EUR 428 million banking fees ex CIB this quarter between things like activity payments and maintenance fees. The second question is on the customer spread. You're now around 3.6%. Do you have any color, basically, to give us in terms of where you think that customer spread falls in a more normalized rate environment? Do we need to use similar betas or pass-throughs on lending and deposits to the ones we have seen on the way up? Or would you expect actually a behavioral difference on the way down? Thank you.
If I may.
Please.
Okay.
Your specialty.
Well, on maintenance fees, we had last year that specific part of our fee base, if I remember well, it was like EUR 360 million. And we are expecting this year like EUR 300 million. So this is the delta compared to this year. And here, you see the weights of all that. Absolutely, we are not expecting to lose those EUR 300 million. So there is a clear bottom on that. And this is well, we are open. So I give you the figures. And on the customer spread, hard to say, to be honest. So far, the only segment where on the asset side, let's say, beta is not one is on mortgages. It has been the case in the past. But as long as that segment also starts doing better, and it's our expectation, probably that beta on the asset side will gradually improve.
Also, let's say that the ability of us, the banks, to pass on wider margins or at least to pass on movements on the yield curve more clearly is going to be higher. I mentioned before the difference between Portugal and Spain. In Portugal, we have been growing our mortgage book for years. Now, the consequence is that the front-book yield on a new mortgage in Portugal, a fixed-rate mortgage, the same mortgage, is 4% and is slightly below 3% in Spain. So you see clearly the difference once the dynamics of the market change, which is our medium-term expectation. Back to our previous comments into 2025 and beyond, it looks for us more and more likely to give a more positive message in terms of loan growth going forward than in the recent past.
For sure, this will help this normalization on the process of the pass-through of rates and yields of the new production of loans in general. It's as specific as I can be now, Ignacio.
Thank you, Nacho. So it seems that that's all for today. Thank you, Gonzalo. Thank you, Javier. Thank you, all of you, for joining us. Enjoy the rest of the day and spring.
Thank you very much.
Thank you. Bye-bye.