Good afternoon. My name is Edward O'Loghlen. I am the head of IR for the CaixaBank Group. I would like to welcome you to this Investor Day, where we will be presenting our 2019-2021 strategic plan. It is a real pleasure to see some familiar faces that I have known now for some time. Let me quickly run through the proceedings for the day. We will start with a presentation from the Chairman of the group, Jordi Gual, who will talk to us about the strategic vision for the bank. This will be followed by the core of the presentation, outlining the details of the strategic plan presented by the CEO of the group, Gonzalo Gortázar. We will then pause for a 20-minute break and re-initiate proceedings with a presentation by the CEO of BPI, Pablo Forero, who will talk to us about developments at our Portuguese affiliate.
Finally, the group CFO will wrap everything up with the numbers and the financial implications of the plan. We will, of course, set aside ample time for Q&A after that, and we hope to end the event before 5:00 P.M. or around that time. With that, let me say I look forward to catching up with some of you after the meeting. Let me yield the floor to the Chairman of the group, Mr. Jordi Gual. Jordi, the floor is all yours.
Thank you. Good afternoon. [Foreign language] [Foreign language] It is a real pleasure to welcome you to the presentation of CaixaBank's new strategic plan for the next three years. Thank you very much for coming and sharing with us what is a very important day for our institution. Today we launch a strategic plan that will drive us forward to the future of banking from a very solid foundation. Let me tell you from the start, many things will change in the future. Banking technology, indeed, is becoming increasingly important, but some things will not change. We believe this will continue to be a people's business, a business with people at the core. We announce the new plan with the satisfaction and confidence of having successfully achieved the objectives of the 2015-2018 plan.
Over the past four years, we have reinforced our commercial leadership in Spain based on a model of retail banking and proximity, with the best omni-channel offering and specialized and innovative value propositions covering all business segments. We have finalized the integration of BPI, the best bank in Portugal in 2018, according to Euromoney. We have reached profitability levels that cover the cost of equity. We have improved the quality of our balance sheet and improved our focus by divesting non-strategic assets. We have completed the prudential deconsolidation from CriteriaCaixa. In the context of the deconsolidation process, in which CriteriaCaixa reduced its stake to 40% and ceased to be the controlling shareholder, the corporate governance of our group has strengthened significantly. The proportion of independent directors has increased. CriteriaCaixa no longer holds a majority in the board of directors.
Its representatives hold less than 40% of the seats. A lead independent director has been appointed, the board has also become more diverse. ISS, as you well know, one of the leading providers, the global benchmark in the evaluation of corporate governance, has placed us consistently among the banks with best practices. In the coming years, with the reduction in the number and the size of the board and the increase in the number of women in the board, we should strengthen this position further. Our commitment to responsible management starts with the best corporate governance practices, this is especially important in companies that have a leading shareholder, as we do. We are proud of what we have achieved during these years in a very complex environment.
With negative interest rates, in a context of deleveraging, with strong competition, with rapid technological change, increasingly demanding and uncertain regulation, a high degree of litigation. We have succeeded by doing what we do best, which is to focus on our customers without any distractions and reinforce their trust on us. We have done it with the most valuable asset that we have, which is more than 37,000 professionals, which are committed to our way of doing banking, which distinguishes itself by focusing on the customer, an extremely responsible approach of the way we manage our business, and a clear social commitment. CriteriaCaixa is no longer the controlling shareholder of CaixaBank, as I said before, but remains the leading shareholder with a long-term commitment and the same philosophy that has guided its actions throughout its 114-year history. A business philosophy shared by CaixaBank.
It is characterized by a long-term vision in the management of the business and the relationships with all stakeholders. The ability not only to adapt to change, but to anticipate it. A proven approach to risk management, a commitment to serve the client and society as a whole. This philosophy continues to guide our strategy and our day-to-day management. Our goal is to generate sustainable value for all stakeholders, our customers, shareholders, employees, and society as a whole. We are fully convinced that this multi-stakeholder approach helps us build a solid business with sustainable profitability over time that benefits everyone. This focus is clearly reflected in the mission of the bank, in the mission of the group, which we have updated in this strategic plan to make it more simple and direct. It defines our fundamental purpose, what drives us.
It says that our mission is to contribute to the financial well-being of our clients, of our customers, to the progress of society. Of course, the well-being of people depends on their emotional and physical well-being, but also on their financial well-being. Yes, this well-being depends in part on personal circumstances, such as the level of income, scientific research shows that the financial well-being of individuals depends a lot, and in fact more than on personal circumstances, on the decisions we take, the habits that we have, and our day-to-day behavior. CaixaBank offers its clients the best tools and expert advice to make decisions and develop attitudes that contribute to their financial well-being. With those tools and advice, customers can plan adequately to meet recurring expenses. They can cover against unexpected events. They can maintain purchasing power upon retirement.
They can make their dreams come true, thanks to our financing. We do it through specialized advice, through budgeting and simulation tools, through convenient and safe payment services, a full range of savings, retirement, and insurance products with responsible lending, and ensuring that we take care, this is very important, of the personal information of our clients. Our purpose, besides contributing to the financial well-being of our customers, it's also to promote the progress of society as a whole. We are a retail bank, deeply rooted wherever we are, wherever we operate, and as such, we feel that we are relevant participants in the progress of the communities where we develop our businesses. We contribute to the progress of society by channeling savings and financing in a prudent way and by managing efficient systems of payments. These are traditional banking activities. We go beyond this.
We also contribute to the social progress through financial inclusion and education, contributing to the sustainability of the environment, supporting diversity with housing assistance programs, and by promoting corporate volunteering. Of course, we also do it, and very importantly, through our partnership with La Caixa Banking Foundation, which, as you know, it's the parent foundation of CriteriaCaixa. This foundation has an annual budget of EUR 520 million, which is partly funded by the dividends that CriteriaCaixa obtains for its stake in CaixaBank. A significant part of this budget meets local needs identified by the branch network of CaixaBank, both in Spain and Portugal, through BPI, of course. What we do is important, also it's important how we do it. We would not be able to carry out our mission without solid values, which are widely shared in our organization and deeply rooted in our employees.
Quality, trust, and social commitment. Quality because we are obsessed with the client to whom we want to offer the excellent service and the products that best suit his or her needs. We understand trust as the sum of integrity, professionalism, and proximity. There are no shortcuts to achieve trust. It requires respecting our pledges, and we do, and fulfilling the expectations of our clients, and we try our best, both our clients, our analysts, and our investors. It requires building long-term and fair relationships based on mutual benefit for all parties. Lastly, social commitment. It is our foundational goal, our raison d'être, and a driver of a strong emotional attachment, not only by our clients and employees, but also with the rest of the stakeholders.
We have prepared the strategic plan 2019-2021, taking fully into account our mission and values. Conscious that our accomplishments to date set a solid foundation for the future, with the participation, I'm proud to say, of both the board and the whole management team. The future that is uncertain and challenging, also full of opportunities that we are convinced that, as we have done in the past, we will be able to seize. At the macroeconomic level, we expect GDP growth for Spain and Portugal to remain around 2% above the average of the Eurozone, this makes a lot of sense because we are at the mature phase of the economic cycle. We also expect interest rates to rise, as the European Central Bank has signaled. We are conservative, we are prudent, and we forecast, like the market, a very moderate increase.
We also expect moderate increases in terms of the rates of volumes of credit. We do see greater room for growth in the demand for long-term savings products due to the demographics of our markets and the unmet market potential. Digital transformation will continue to offer both opportunities to do things differently and to do different things, always with the focus on offering the best customer experience. Convenience, simplicity, availability, personalization, immediacy, transparency. This is the name of the game. We have a track record that shows that we are able to do it. Digitization is transforming our industry. Disruption may be a threat. We must not forget that we are in a business that combines technology and trust. As we like to say, bits and trust.
In other sectors, such as the music industry, only the bits matter. This has led to disruptive transformation, radical, fast. In contrast, in the financial sector, in which trust plays a fundamental role, we are seeing an evolution rather than a generalized disruption. Maybe with the exception of what is happening in some parts of the value chain, such as payments, where we see more disruption and a considerable pressure on margins. Another external factor that I think is worth highlighting is the growing demand on the part of our clients, and all stakeholders in fact, for responsible management of the business. The bar is set even higher in our industry after the reputational damage triggered by the financial crisis. This is a significant challenge. Also a tremendous opportunity for CaixaBank.
Since society values more and more companies with a strong social commitment and environmental commitment, this is our case. Our objective in this field is ambitious. We want to be the front runner amongst European banks in responsible banking. We are convinced that we can achieve it, since it is part of our culture, of our DNA, and has been so from our origins 114 years ago, as I said before. In short, to conclude, our vision is to be a leading and innovative financial group with the best customer service and a benchmark in responsible banking. Leaders, because we have the ambition to continue being the first commercial bank in Spain while expanding our business model in Portugal, where there is great room for growth, as you will hear later from our CEO in Portugal, in BPI, Pablo Forero.
For leadership to last, it must go hand in hand with attractive and sustainable profitability levels, beyond the cost of equity and with a recurrent dividend. This is our goal. Let me assure you, this is our commitment. Being leaders in such a changing environment entails being even more innovative. This, in turn, requires us to be more agile and flexible. You will hear about this from our CEO, Gonzalo Gortázar. To achieve it, we will accelerate the digital transformation of our institution, of our banks, with a focus on the client and organizational efficiency. In the context of strong competition, low interest rates, growing digital penetration, and changes in customer expectations, the main battle will be around client experience. Our goal is to offer the best customer experience through any channel with a differentiated and value-added service.
Gonzalo Gortázar will provide some details. You will have ample opportunity to ask questions on this. As I said before, we want to be the benchmark in responsible banking because we believe that society demands more and more from businesses in this field. More fundamentally, because we were born years ago, as I said, I'm not going to repeat the figure, 114, to meet social needs. This is a core part. Before concluding, I would like to thank the CEO, Gonzalo Gortázar, and his team, many members of the team are here today, for the excellent results achieved in the recent years. With great effort, enthusiasm, and a strong commitment to a shared project. For the board, it has been a satisfaction, and for me personally, to have such an excellent management team.
The track record of CaixaBank and the firm conviction that this effort, enthusiasm, and commitment will continue allows us to be ambitious and optimistic for the next three years. The board of directors that I have the honor to chair is fully convinced that the new strategic plan, together with the management team that so well leads Gonzalo Gortázar, constitute a guarantee that CaixaBank will continue creating value sustainably for all our stakeholders. We have always done. We commit with ambitious and realistic goals, confident that we will again deliver. Thank you very much for your attention.
Thank you. Good afternoon. Thank you, Jordi. It's my pleasure to work with you on the board. It's been a tough four-year period. We have ahead a very challenging three-year period as well. Thanks to everybody for being here. I'm going to try to be pretty brief on the first part of the presentation, which is the stuff that you know, what we have achieved over the last four years, and spend more time on what we want to do in the next three years, which is the core of what brought you here. Very quickly, three big areas, commercial performance, leading market share reinforced during these four years. Profitability, we managed to grow from the 3.4 to close to 10%, somehow proving that our model could work even in a negative interest rate environment.
A lot has been done structurally in terms of simplification of the group. You know all that well. You know the figures for client penetration, both general and digital. It's been a good ride in a period where our competitors have been tough, but most of them have lost some traction in terms of retail market penetration. Market shares 2014 to 2018. You have it there on the paper. It's a good scorecard. I would certainly look for more of the same going forward. It's not easy. We'll have to work hard to continue improving market share. I guess today we present, and you've seen the numbers, 5% growth in core revenues for the next three years. Is that possible or not in an environment that we see today is not an easy environment?
When you look back and you see the track record for these four years, I think for the last decades, you can see that there's something in this organization that is allowing it to consistently outgrow the market. We certainly are going to push to continue in that direction. Profitability has increased. As I said, big difference between core revenues and recurring costs. Initial period was tougher, particularly when we lost the floors and the fall in interest rates. Since sort of beginning of 2016, we managed to start showing the market that we actually had some engine in terms of growth, and that we could keep costs under control during the same period. That's thanks certainly to that split of the business, which means that over half of our revenues come not from the strict banking business, but from insurance and payments.
Restructuring of our portfolio. It's well known to all of you. Particularly satisfying was the acquisition of BPI, because obviously opens new opportunities for the group. Capital rationalization was a key objective for the plan, coming from 24% of our capital in non-core business and ending up in that 3% pro forma for the divestiture of Repsol. Significant reduction of non-performing assets and also non-performing loans, where we expect to end the year below the 5% level. We did change some of our ratios in the middle of the process, 2016, to take into account the fall of rates, particularly into negative rates. Once we did that, as you can see, obviously, the various metrics we had challenged ourselves to achieve, we did. From that point of view, it's these two minutes of good feeling about what we have achieved.
What we have achieved is important, particularly because it gives us trust and energy to keep that business, which I was saying just before this speech, is unfinished business. It will always be unfinished business. There's a lot of things we've done, and we have closed a few chapters of things that we needed to do, but there's plenty more to be achieved going forward. That's why brings you here. What do we do over the next three years? Five strategic priorities. You've read about them. Obviously, first things first, clients. As the world changes, as clients become more demanding, as the offering that our clients get is more and more diverse, people are offering new services in different ways.
The secret for success is going to be, for us, to stay very close to them, to understand the change, to understand the needs, to make sure that we are there very early offering what they really want. Then making sure that we can move the organization around that. That the organization needs to be moving faster because the world is moving faster, be more agile, be quicker at making sure that all that movement is very much staying totally focused on our clients. That's what this plan is about in summary. Clients. You all know this well, but anyhow, just a few notes. First, yes, we have this track record. It's based on the growth. Growth that goes, you can see here, for 20, 25 years in terms of client penetration. Something is happening here. Hopefully, we'll be able to keep that going forward. Customer loyalty.
Our clients tend to consider us their primary bank, 90%. This is obviously market figures. Customer satisfaction measured by NPS, very significant increase in the last four years. We obviously came from a very difficult crisis that had our clients less happy with their financial institution. We have a good basis in terms of what clients perceive from us. There is something obvious to all of you, digital is very important, within digital, mobile in particular is critical, sort of everywhere, every industry, every country. The only point here is that is true. Let's be realistic. Branches keep having a very critical role today. Certainly in Spain, we still have over 80% of customers that use branches as a way to interact with their bank. That is coming down, but slowly, as you can see.
We do expect that branches are going to keep having a critical role in our business for a long time. Particularly for the majority of our clients that have a financial profile that allows us to offer them many services. As you will see, they actually use more branches than others. Within our digital clients, over 6 million now, almost two-thirds, 62% use branches as well. The rest is exclusively digital. Even the evidence and information we have about those that are exclusively digital, they do appreciate the fact that we do have branches. In fact, some of them are exclusively digital this year, but may actually visit branches next year. What's happening in the branches, I obviously gather here some information that is relevant. On the top right, you see transactions at branches.
Overall transactions are flat for the last four years, but the typical payment of check deposits, cash deposits, transaction updates, the typical saving, et cetera, all this is falling sharply. What happens is that people have more time to plan to do other things, particularly financial planning, commercial agenda, more interaction on advisory, et cetera. What we are achieving here is trying to reduce the transaction workload in branches so that we free up time for value-enhancing business, which is normally advisory or new commercial actions. You can see what you know, that obviously other areas, particularly mobile, is growing very fast in terms of transactions. Transactions are moving away from branches. That is true. Still, I was saying branches are important, most important I would like to highlight here is our clients.
When our clients are digital and visit branches, they tend to have more products from us. They tend to interact with us more frequently. They tend to be more loyal. They gave us higher quality ratings. They tend to buy products from us also on digital channels more often because they are closer, more linked to us, and more loyal. Certainly, they are much more profitable. You see the difference between the digital only and the omni-channel clients. There's no question that we see our bank as a bank that is physical and digital at the same time, and that where we want to make sure that clients feel at ease, how they interact with us.
make sure that we actually encourage them to use the right channels because our experience is the more channels they use, the more loyal they are, the more products they buy from us, the more profitable they are. With that philosophy, branches and digital, they are all critical. We need to make sure that we work well with both factors. We have highlighted four levers, four growth levers, which I'd like to discuss. First is the transformation and specialization of our distribution network. This is pretty obvious, but there are three lines. One is concentration of branches, second is specialization of branches, third is remote channels. You look at the last 10 years, this is basically what we've been doing, concentrating branches. M&A has been quite helpful from that point of view.
If we add all the acquisitions and we pro forma those in 2008, we had 7,600 branches. Obviously, we closed all of these branches that we acquired and more. Over 10 years, it's been 42% reduction, and particularly in the last four years, as you can see, we've closed 900 branches. Most of them associated to, let's say, the organic evolution of the branch network, where we concentrated branches rather than consequences of M&A. Although at the beginning, we had some M&A associated to the acquisition of Barclays Spain at the beginning of this period. The other thing is specializing branches. People, obviously within all this, we need to specialize the brands, but also that means the brands need to have the right specialists.
We move from the typical, we have private banking, premier banking, business banking, into further specialization, where over these four years, we launched the Store branches, which we will discuss, the agro initiative, the HolaBank, which is catered for non-residents, DayOne for technology companies, CaixaNegocios, business bank for small business, et cetera. Big effort over the last 10 years. What we want to do in the next three years is, I have to say, more of the same. Significantly more, but more of the same. Three big areas. Store branches, move from the close to 300 we expect to have by year-end into more than 600 in three years. The AgroBank business consolidated and continue to build our remote inTouch relationship model. In the middle, you have a good feeling of what it means.
Looking at business volumes, adding both credit and also the liability side, both on and off balance sheet. Store branches are approximately a quarter of the business today. They should move to be over half of our business in 2021. 600 branches, more or less, but over 50% of the business, very significant bet on our side. The other urban branches would lose business to the Store branches because they will be consolidated among themselves and into Store branches. The rural network will maintain 11% approximately of our business volume. It's approximately that number in terms of our employees. It's a profitable business. We'll discuss it later.
I think it's relevant that when you compare us with other banks, other listed banks, I don't think any of them have the same presence in the rural Spain that we do, and this means more branches, means fewer people per branch, different dynamics. inTouch, and as you can see, the inTouch clients are still allocated to the various part of the network. That's why it adds more than 100% of which are moving from 3% to 9%. We today have approximately 600,000 clients under the inTouch model. We expect to have 2 million more by the end of 2021. You may see our projections, our targets, and say it's continuity, but actually a lot of things are happening in the middle. A lot of things are happening, and we are planting the seeds not just for these three years, but for the long term.
You can see that over 800 branches of reduction in three years. The Store branches, some of you know, I will not spend a lot of time. There's a short video later. Basically what they give us is specialization. We have bigger branches, so we can specialize our people. We can provide a better service for clients that demand a different degree of service. It also means longer opening hours. We've managed to agree to open these branches until 6:30 P.M. in the evening, and that makes a big difference for many clients. It also means that there's no cash service, at least there's no visible cash service. There is always a hidden way to do a cash service if it's really needed. It means the time at the store is spent productively interacting with clients, planning sometimes commercial agenda, but not in transactional services.
The way the branch is organized, where we have people either with clients or in an internal team room where they are working, planning, working together in an agile format, making sure they are much more proactive with very close monitoring of the commercial agenda by the branch manager and a different dynamic. I have to say, people love it. Our employees, once they move into a Store branch, they actually do not want to go back to a normal branch. It's much more fun. It's a different way of working. It's an agile way of working. It's a better learning experience. The same way that clients tell us after an initial transition period that they love the experience, our employees certainly are enjoying it. You have some of the statistics, bigger branches, 12 employees per branch.
You know that in Spain, branches are small in any case, 2.8 times others. Customers per branch as well. More productivity, 21% more in the Store branches than in comparable sort of large branches in the same areas. Not only the base level, but also the growth in new business is coming strongly from Store branches. Some of the cash point that I made, the absorption ratio, this is a good indication of how efficient our branches are becoming. We had these measured as the transactions that can be done at the branch or at the ATM during opening hours. What proportion is done at the ATM for the overall network is 84%, which is a number by itself, and it's been growing. For the Store branches, it's over 97%. We're trying to make cash irrelevant in branches. AgroBank, second big area of transformation.
This is already in place. Just to remind you, this is a CaixaBank branch with the CaixaBank logo, but with a specialization is somehow getting very close to the client. Obviously, different areas of Spain would have different agricultural products that are relevant to the area. What we are sending is them a message. This is a big bank. You can get anything you want from us in terms of the offering, but we are so close to you as the small sort of rural Caixa that may be closer but does not have the same full range of financial services. Our clients in rural Spain love this. They see us differential. We created a real brand, and business is coming along nicely. Customer penetration, market share, business volume, it's all going in the right direction. We like the model. The model is profitable.
I think this is quite relevant. These two are very relevant when we talk about the traditional branch network. The third lever of action we mentioned was promoting the InTouch attention model, which is part of what we obviously want to do. InTouch is a service designed for people that are digital, that tend to have very limited interaction with the bank. Certainly, no frequent branch access, limited time availability, where we call people and we say, "You have a relationship with us. We're offering you to have a remote account manager," and it'd be myself. "Here are the advantages of what you may need or not." Very often, we are offering this service to clients that are not interacting with us because they are less loyal, they are moving away the business, or they do not feel they receive the right level of service.
The response we're having, and we already have 600,000 clients, is fantastic. People do like the service, and the acceptance rate so far is been around the 90% level of the clients that we call of these characteristics. Big opportunity to grow the business going forward in a much more efficient way. You have here some data. I said our target is to have 2 million customers more, and the productivity is 2.5 times more. The number of customers per employee that you can handle when you are doing this remotely, over the phone, and with obviously the wall, et cetera, all the digital channels that we offer is 2.5 times more than the physical branch. We're moving into higher productivity levels, and certainly here we do have this capacity.
As these people are reskilled from the traditional branch network, we want to make sure that we use this capacity to generate more revenues. Digital channels obviously affect our main digital web and mobile offering, which we used to call Línea Abierta, which we now call Now. As you know, we have 58% of our clients that are digital, a very large proportion in Spain. Our ambition is to move that on to 70%. Obviously, this is changing. One statistic that I like is the fact that every day we have 1.5 million clients in our website. Obviously, it's a big shop, when you have 1.5 million clients navigating through your website every day. Big opportunity, naturally, for digital sales, which are increasing fast, 4.5 times in the last 4 years.
We're particularly being successful in some relevant targets, like consumer lending. Obviously, you will ask me about digital sales and physical sales, et cetera. I am giving some statistics, but there's a lot of our model that is digital and physical. Many of our sales start digitally and physically, and many others start physically and end digitally, because we are working on an omni-channel base, and that is what, to me, makes more sense. We'll continue to progress here. I think rankings on Google, Apple Store are also quite telling. Higher than, if not all, certainly most of the competitors operating in Spain. imaginBank, a specific initiative we'll continue to push. imaginBank, we have 1.2 million customers that have recurring income, 23 year old on age, on average, so young millennials.
Obviously, from that point of view, we're trying to offer something that is very friendly, very simple, cost efficient. On the other hand, we're still dealing with clients that have limited financial firepower, and therefore, we need to design a model that is appropriate for what we have. Good, again, rankings, Apple, Google, in line with some of the most reputed sort of neo banks that operate in many other markets. From my point of view, nothing or at least we compare quite well and we make money, which is also a slight difference. The challenge here is to say we have volume. We need to make sure we find the right business model for this type of activity. What are the products that we can sell to increase the profitability of these kind of clients?
On that, consumer lending, insurance, some sort of third-party offerings through APIs, et cetera, are certainly the way we want to go. In any case, this is obviously making sure that we continue to have a prosper business 5, 10, 15 years from now, because we do not want to lose the youth from CaixaBank. We have, as you saw before, 2.7 million of customers under 30, and certainly, even though these are not the main drivers of our profits today, we want to make sure that the bank is equally profitable 5, 10, 20 years from now. Third point, third lever, our ecosystem. Everyone talks about ecosystems and platforms. I just want to make two points. One is we have a financial ecosystem. This is a bank that is more than a bank. It's a financial services group.
You heard me before saying that daily banking, lending protection, insurance, asset management, payment. We are striving to make sure that any client that comes into CaixaBank for any financial services need that they have, we can actually satisfy those. Satisfy that in a very efficient form because we just have one platform, one branch network, one employee workforce that can deliver everything. This is a big advantage when I compare ourselves to other models in other countries, much more specialized and hence much more vulnerable to attack on certain products. As we are providing this ecosystem, I think we do have something that no one can offer as a new entrant in its entirety. Second, we are increasing that ecosystem, and we're moving now a bit beyond financial services. This is something people like to talk about it.
I'm not sure where we end up, but certainly, we're experiencing and have experienced already, particularly on the consumer lending side, where we have significant partnerships, we're actually selling mobile phones or cars or white goods, et cetera. Obviously, selling alarms and protection system for older people, with a number of alliances on the payment area. Some examples of our innovation associated also with this ecosystem. Payments, obviously, very open world now. We have alliances with many other firms, including Apple and Samsung Pay and Garmin, et cetera. Payment is changing quickly. Purchases through mobile, through our network is around 25% market share. So, quite representative. It's nine times year on year. Obviously, still it's only 2.8% of all payments in Spain, but the pace of change is quite telling.
Consumer lending, I mentioned how we are trying to identify the customer need and be there a bit earlier than when client needs money to buy something. We'll want to be there when the client wants to buy something. Then we can offer a deferred payment to our clients. Sometimes we want to be earlier, even before the client knows they want something and say, "Hey, here's this new car. Here's this new mobile." Over the last two years, we've made EUR 100 million in revenues selling mobile phones, cars, white goods, et cetera. We have financed over 3 million mobile phones with Telefónica since its inception of the alliance with Telefónica as a good example. We'll continue to do more on this front.
I mentioned some of our services for protection for senior customers and a big effort on financial planning, where we have a very big opportunity, as you know well, and where we have launched recently Robo-Advisor, which is growing very fast, obviously. EUR 31 million in seven months, still small part of our business. I wanted to mention a few things on payment side because it's something that we've been less explicit before. It's complex, it's changing. I wanted to remind you of our alliance with Global Payments, in the point of sale business. As the merchant acquiring business, we actually got into an alliance with Global Payments and launched Comercia Global Payments. We sold them 51% a few years ago. Global Payments is a worldwide leader in payments. It's actually been a very productive alliance, I think for both sides, but certainly for CaixaBank. We've grown nicely.
Our market share in this business is 26, 27% and keeps growing. The net income from Comercia Global Payments has actually almost doubled over the last four years. On top of that, we have additional fees, direct revenues from the service, and the fact that when we have merchants that have bought the point of sale from Comercia, they are on average 1.7 times more profitable. This is a big business. We've been very big historically. It's changing. The change is working so far towards our benefit. The alliance with a worldwide technological leader is being extremely helpful to ourselves. There's two big areas, e-commerce and in-store solutions. E-commerce is growing very fast. We just had the Black Friday week, again having the record day of sales in Spain. It used to be Christmas or the 5th of January a couple of years ago.
By big margin, it's Black Friday. It's growing fast. We're offering different services, in fact, when we take our add-on payments platform to these businesses, our competitor is usually not the typical bank competitor, is Adyen or some of the payment specialized providers. We are on that battle. We're working well, offering payments integration, optimizing conversion rates, cybersecurity, fraud, offering analytics, both e-commerce and physical analytics. This is particularly useful for small and mid-size merchants. Obviously, the very large ones do have their own solutions. The rest, to bring a specialized solution is very different. We're integrating, obviously, into the merchant, the ability to pay in a deferred format, which we can convert into a loan. Escrow payments, obviously important in the internet world. All those are solutions that we are providing.
Again, we feel this is changing very rapidly, and we feel we are actually very well positioned and capturing that change. In-store solutions. You all remember the typical point of sale. This is a dumb machine, just designed to transact. We're installing, as I said, already installing the new 2.0 version with remote update capabilities. It become more a sort of a smartphone where you can actually change what the instrument can do for a client. It's open architecture, so we are benefiting already from what other developers can offer for our merchants and the clients of the merchants. Big change. This is a business we've always led in Spain. We're not going to give up, and we continue to see plenty of opportunities.
What we are doing already, we want to offer not just the transactionality, but a full vertical by vertical, depending on the kind of shop or commerce, like a restaurant or others, a complete solution to manage accounting, finances, generally tools to make a small business a better one. Customer journey, won't spend too much time, but we, and you will see later, we are changing the organization in many areas to be structured rather than on specific products, I do mortgages or consumer lending or whatever, and areas, I do marketing, I do systems, et cetera. I'd say, well, you're part of this customer journey. This case is mortgage. All customer journeys for us need to be omnichannel.
We want to make sure that if you want a mortgage from us, you can start physically or digitally, and whichever way, and that the whole process is as seamless, as painless as possible. For that, we need to have a team with very different backgrounds, in the same room, making sure that they change the whole process, they eliminate pain points, they increase conversions rate, whatever. This is how the organization is changing. This is one example. Obviously, the mortgage, people want a house, they want a mortgage. You know all that. One thing is to know, the other thing is to make it happen.
We are now in that process, with a good number of customer journeys being reviewed and changing, with the sense that our traditional execution, which was very fast, now will be able to accelerate by a significant function going forward. Obviously, we should end up with products that people like more. Net Promoter Score in this case now is going up very, very quickly, which we measure obviously when people ask for a mortgage. It's now at 60%, and we'll hope to continue moving that way. This is the biggest part of what we're doing in the plan. Offer the best customer experience. Again, if we do this well, and the whole organization needs to be behind this, if we do this well, we will win this battle.
In order to do that well, obviously we need to make sure that the organization has the right tools and digital transformation is critical. One page reminding you, we've done a lot. We're not starting now. Our processes are digitalized. Our employees have mobile tablets, smart PCs now, widespread, everyone, which allows them obviously, to initiate transactions wherever they want. Digital signatures are being used. It's close to 100%, 70 million digital signatures in the last 12 months. That's what we have achieved in the last years. Then just another important part, which is analytics and data. We have a lot of data, everyone knows, banks have data. We have to take care of that data in a critical manner.
It's part of the trust that we have from clients. We continue to heavily invest in complying with data protection regulation and then also protecting those clients from any outside interference. We had a single data pool, which was effective four years ago, and we've been using this single data pool now for four years. Obviously, one thing is to have a tool, and the other one is to have the whole organization using that tool. Sometimes that requires education, and there's initial skepticism. There's always some areas that decide, well, we can use the single data pool and get a lot out of it. Others, that they see no benefit from that. We made good progress.
For the next three years, what we want is to just make sure that everyone moves along in the same direction. We make the use of data analytics completely widespread across the banks. We have some great areas of excellence. Business intelligence is one incredible area, where we now have the ability to target commercial campaigns in a much more effective way. The typical branch manager knows that he wants to sell pensions because it's the end of the year, and typically will have all the information on those clients and will select three or four criteria and say, "These are the 30 or 40 calls I'm going to make today or this week." With business intelligence, rather than having three or four criteria, we actually have an algorithm with normally 26.
What the commercial manager of the branch gets is a list where the proportion of effectiveness of his or her call is much, much higher. This is very simple, but this is quite important. Because we have almost 30,000 people at the branches, not all of them are convinced that technology can do them a favor. We have to work in making sure that everyone gets used. Obviously, as people start to see the results, then this becomes a best friend of people. This is an example of parts of the business which are ahead in the using of data. Underwriting and risks is another example. We have changed our scoring models over these years and at a much higher level of accuracy, because we have much more information to model. That is obviously something that is very special.
I said we have 27% market share of the payments in Spain. Not all the bank has 27% market share of the payments in Spain, obviously. We can build on many situations, information, and models that are extremely powerful. This is obviously examples. We don't have the time to get into the detail, but certainly big area for us, with many early wins during these years, and hopefully many more to come in the future. Some other things, more technical, moving to the cloud. We are setting an internal target to be approximately 50% in terms of cloud adoption by the end of the period. Migrating internal IT to an API-based architecture. Extend the use of agile methodology in IT and in many other places of the organization. Cybersecurity, obviously, an additional data center that is planned to build and continue to change the way we cooperate in the organization.
For that, we need also the right tools. All these, unfortunately, are expenses. Javier will come later with the bill. I'm sorry. We have to make sure that we future-proof the bank. This is not about saving just a few millions in 2019 or 2020. We want to save these millions, but we want to make sure that we save the immense positive gap in revenue generation that we have had in the past, we want to continue having in the future. Third, people. Yes, we have to be close to the branches. We need to have close to clients. We need to have the technological solution to do that. Eventually, obviously, all this business is still done by people. Technology empowers people. It's a great lever for people to do things.
We cannot think any second that people are not as relevant as they've always been in this industry. We need to ensure we have the best team, continue to invest in talent development, reskill our employees and discuss how the branch is being transformed. We do not need so many people at the cash points. We do not need so many deputy branch managers. We need many more people specialized in business banking, specialized in affluent banking, specialized in client management through inTouch, et cetera. 6,400 people have changed roles in this period. We continue to make sure that this organization is managed in a sort of modern, meritocratic way, that we continue to keep and attract the best people. A lot to do, a lot to do in terms of how do we work together. This organization has been very successful executing.
In the past, it was easy to execute. There was an order and it was executed. In the present and in the future, it's not that the way you execute. Things are much more complex. They require much more cooperation between different people, different areas. They require much more attention to what's happening. We need to have our 37,000 employees very interested in what clients want, making sure that they can say, "Actually, this is a problem we're not solving." That needs to come very quickly and systematically to headquarters so that we can develop solutions. When it's not what clients want, but it's the bank is not doing things properly because we're bureaucratic takes hours or the ultimate decision does not make sense. We need to make sure that people can raise their hand and very quickly scale things up and obviously that the organization is responsive enough.
These are all soft issues, it's difficult to put in the models. It's a big part of what we want to do in the next three years. Here on the right-hand side, you have some color on how we are organizing and say we want to be client-focused. We want solutions for client needs. Enjoy, which we call today, let's say consumer lending and other things a client needs funding to enjoy, whether it's a trip or a car or a house, whatever. Protect, daily banking, commerce, payments. These are solutions the client needs. We have segments, non-residents, we have seniors. Big opportunity with seniors, close to 3 million people of 3 million seniors, and obviously with significant firepower and from financial point of view, reorganizing how we work to make sure we're closer to clients, we are faster.
Much better than all what I said is this short video. Gives you a small break from my long speech. I will accelerate for the rest.
The modern world is constantly evolving. Consumer needs are changing at a frantic pace, and accordingly, their way of relating to brands. At CaixaBank, we know that the best way to meet these challenges is through fast and continuous transformation. Our goal. To constantly offer the best customer experience to all our target customers through each and every one of our channels. Tomorrow is now. We are a bank whose specialization covers all market segments. We have specifically designed services, trained and certified managers, and our own channels in each segment. A clear example of this is our new model for bank branches, the Store. These spaces enable our customers to discover a new way of relating to their bank, where technology is more accessible for them than ever before.
Here, they receive a friendly, transparent, and open service, thanks to new tools that allow them to share information and sign contracts online. An experience that also takes a step further from the traditional norm, incorporating an exhibition area with products that customers can purchase through financing and which they can insure through our wide range of insurance policies. These offices enhance a hybrid online and offline experience, as our customers can contact their advisor via video conference or make an appointment to be attended in person. All this is offered through the new CaixaBankNow app, which also has a virtual assistant that uses artificial intelligence and the new My Finances service. Through it, users receive predictive alerts on possible charges, information on their accounts with other banks, and a monthly report prepared using big data.
In addition, we offer completely digital experiences such as inTouch, a service through which customers and their advisor contact each other virtually, and imaginBank, our mobile-friendly banking proposal for millennials. If the way we relate to our customers is changing, the way we work internally must do so, too. That is why we've created new open spaces with cross-functional and autonomous teams that work on missions and with customer-specific laboratories. This new way of understanding the customer experience and our work has made us the leading bank for 26% of Spaniards. At CaixaBank, tomorrow is now.
Okay, I could have shown the video and saved a lot of words on my side. Two other things before we finish. Shareholder returns. Obviously, Javier will get into more detail. Big headlines, return on tangible equity over 12% into 2021. Core Equity Tier 1 at 12 plus one. We're building a transitional buffer, and we're not calling this 13 because we do not think that 13 is the number that we need to keep after 2021. We do think there's going to be an impact, mainly from Basel IV and some other regulatory developments. Hence, during this three-year period, taking into account that Basel IV starts 1st January 2022, we want to take account of that. Hence, what we are going to look for is by the end of the period, to have those 12 plus one.
That one will be used for whatever is finally the amount needed for these regulatory tweaks. We will end the period then with a Basel IV ratio of 12%. That's the ambition. Right? Cash payout, 50% plus. Used to be the old payout. There's a slight change. We're talking about above 50%. As Javier will say, for 2019, the idea is that above 50% will be capped at 60%. Javier will elaborate on that one. How do we get there? Growth of 5% in core revenues. I will not spend much time here. It's a track record here. We look at off balance sheet, 5%-6% in AUM insurance funds. We have, I think, the ability and the position to capture the growth. On the lending side, we're being conservative. Maybe we're being too conservative, but this is our view.
We're going to continue to see low growth on the lending side and on our side. We're going to continue to be careful in terms of, A, credit underwriting, and B, spreads. Significant opportunity on the life risk and on the non-life as well for these years. You can see some of the growth opportunities. I've discussed those in the past. It's pretty obvious. We have a great opportunity in long-term savings. Still structurally, a lot of growth. A great position from our side, market leader. We have the platform, we have the people, we have the training for these people. Structurally, a lot needs to be done on this space in Spain. Protection insurance as well. Our last four years have been spectacular. We think there's still significant room for growth. Some new initiatives, particularly on the long-term savings and advisory model.
We have applied for a new banking license in Luxembourg for wealth customers, which we are in the process of obtaining and will be certainly operational, expect during 2019. That will be a further support for our growth. As you know, clients, high-net-worth individuals do want to diversify jurisdictions as well as assets, et cetera. Consumer lending, we have a very significant track record for the last four years. Still, we have the data, we have the platform, we have the digital channels, we have alliances, and we see we can continue growing that book. You will see that it's a significant growth, but it's lower than what we have achieved in the past, and it's still moving consumer lending from 5% of our total loan book to 6%. It's not something to worry about. Payments, I've discussed, a significant opportunity as well.
Business and corporate banking, we have been very successful over the last years. We come from a relatively low market share in business lending, we continue to grow. That's no longer a low market share with over 15%, but we'll continue to invest in the business specialization. We had 124 business branches throughout Spain, over 1,500 employees, we continue to develop a new product and service offering. The reality is the traction we have is one we expect to continue. BPI, we have Pablo here, I will not spend a lot of time. Obviously, a significant opportunity is here. It's happening. More to come. As I said, big transformation. This is what we see. Big opportunities in revenues. It's insurance. It's both sort of advisory and protection. It's consumer and business lending. It's payments. It's BPI. These six are, I'd say, the biggest opportunities we have.
Then we move into cost and say, well, we actually are changing the nature of our business. Here you have the staff that is in new roles, which has been changing quite sharply. We expect to accelerate that for the next three years. I will not elaborate because I've mentioned it before. That is going accordingly with the business profile, it's changing. We do have an advisory model that is having a higher weight year after year. Carries a lot less capital as well, have some advantage, but obviously has some costs associated to it. The distribution profile as well is under a significant change. All that is resulting in us being more productive.
Whether you look at transactions per customer, per employee, or core revenues for employee, there's no question there's a productivity journey here that has been quite positive and that we expect to continue in the next 3 years. Numbers of employees. You see what has happened since 2011, and we put 2011 in order to perform on the various acquisitions we've made, including Banca Cívica. Obviously, we have had a lot of people leave because we had M&A overlaps and special agreements to have people leaving. That's over 5,300 people. We had all the incentivized departures through early retirements and other agreements during this period. We have new hires, still a new organization. We need new DNA, specialists, young people, et cetera, and we had attrition. Big moments. When we look at what we're saying about branches, we said, actually, the transformation of branches means concentration of urban branches.
That means approximately or slightly more than 800 branches that we will close during this period. Again, if we look at the previous four year, it was 900. It's continuing on that trend line, focusing on urban centers. What is going to result from that is obviously lower branches, and lower need for people. We will also want to negotiate how or what are the conditions around our rural network. As banks, we do have a number of labor agreements with our unions that are also sector-wide agreements, that limit our ability to restructure and change the business. We need to have a rural branch that even if today is profitable, that we continue to future-proof its profitability. Hence, for that point of view, what we need is more flexibility.
As an example, we are in certain locations, we have branches that are one people, we call S1. Those are limited in our agreements with unions. We're going to need more branches with just one people to make them more efficient. We have some branches where we had obligation to have a second responsible, a deputy branch manager. Sometimes we're not going to need a second branch manager. We may need a branch manager and a specialist or something like that, but not the same. We need to also discuss mobility between branches as we have people that maybe exit from one side or the other. Even if we're keeping the branches on the rural side, which is consistent with, A, keeping the business, and again, this is profitable.
B, also socially, sending a strong message to people that they are not going to be outside of the banking system. We do need somehow to make more flexible labor rules that affect these branches. This is what we need to discuss with the representative of our employees, and this will be a process that will take a few months, both how do we optimize the network, the urban network, and also how do we make more flexible the rural network. I'm not going to be able to be much more specific because obviously this is our objective, but then we'll be subject to a negotiation. We have had these kind of negotiations in the past. We have found agreements that were reasonable. We expect the same, but obviously we can. Cost income ratio. We talk about revenues and cost.
We're going to focus on what we call core cost income ratio. It's higher than the cost income ratio that people calculate, so apologies for that, but it makes more sense. We're basically taking away trading results from cost income. When we measure ourselves internally. Now for a couple of years, we look at cost income, excluding these things that go up and down because they don't represent really how efficient we are. We may have a good year in trading results, then we're very efficient. We have a bad year in trading results, we're poor efficient. That makes no sense. No? I would encourage you as obviously, analysts and investor community, I'm sure you look at it that way to use it more frequently. On that basis, our core cost income ratio has come from 62 to 56%, and is still above the official cost income ratio.
We want to bring that 56 to 55. Obviously, the actual cost income ratio will be lower, the same way that there's a 3 percentage points at this occasion. It's a tougher way to measure ourselves. Even for us internally, when we set up profitability targets, bonuses, et cetera. I think it's a fair way or a much fairer way to look at it. I finished, and sorry for the time it took me. Social responsibility. We're a different bank. Whether we like it or not, you as investors and analysts are used to say, "Hey, CaixaBank, big listed bank," et cetera. We were not listed seven years ago. We were a savings bank. Somehow in Spain, people have gone shy because savings banks went bankrupt. A lot of them went bankrupt. Savings, Caja- is kind of a bad thing.
Well, we are a Caja, now a bank. We were the largest Caja. We're the largest inheritor of a Caja. We've been extremely successful. We haven't cost money to anyone. I want to make sure that society, and you know that this is a problem in Spain because you are all in the world, look at what kind of reaction people are having against the banking system. Well, we're a different bank. Some of the people say it's a pity we need state banks because we lost the Cajas. The Cajas were different. The Cajas were caring really truly for the customers. I would say, well, if I make CaixaBank, it's the best of both worlds. We're a bank. We're a listed bank. We have the market discipline. I think that's pretty obvious to you all. That's important. We have a capital markets access.
That's very important. We have this different way, and our employees feel this differently. We want to make sure that society perceives us differently. In volunteering, I don't have the statistics of other banks. I suspect a few will be able to say that a third of the workforce does that. It's not just a name, a label. It's something people feel. When we ask in our people employee survey, what makes you proud? They sometimes say, well, we're great. We've been named number one in this and that. 96%, 97% of people say it's the fact that we are working, we're doing a great job, but that also results in a benefit for society.
When I see millennials, they actually ask about these things, and they say, "Actually, this is a good reason to come to CaixaBank and work for CaixaBank." I hope one day it will also be a good reason for you to invest in CaixaBank. Anyhow, on top of that, we will present good financial reasons to make it happen. Plenty of work to do on ESG. Nothing that is surprising to you. We are working on all these dimensions, but we need to do more because we need to make sure that society perceives us as certainly good for society, and that will make our business much more sustainable. Just to end up precisely on that point of alignment between shareholders and the bank, we want to make 12% and above return on tangible equity, generous cash payout. 40% of that goes to the banking foundation.
Not making any profit forecast, but for the sake of thinking, let's assume we make EUR 2 billion. Well, EUR 800 million of this goes to the foundation and reverts to society. When I talk to clients and to people, I say, well, is there anyone, I mean, EUR 800 million of our profit. CaixaBank does well, society does well. Beyond the fact that we also, as a bank, do our normal business, and that's good for society, we banks are needed. We have this extra angle. Anyhow, I thought it was worth reminding you of all that. Obviously, as long as the banking foundation does well, all the investors do well, which you will appreciate here. I am an investor as well, certainly not just banking foundation is someone that deserves making good returns, but the rest of investors, institutional investors, our retail shareholders, et cetera.
I think as an institution, as a system, particularly as an institution, we want to make sure that we remind people time and time enough that good things for CaixaBank are good things for society, and we'll certainly keep pushing on that front. Thank you. Coffee break?
Coffee break.
Good afternoon. Good afternoon. We will move on to the second part of the presentations. Without further ado, let me hand it over to the CEO of BPI, Pablo Forero. Pablo, your turn.
Hi. Good afternoon. Thank you very much for coming to this Investor Day from CaixaBank. For those who doesn't know me from before, just to clarify that I used to work for CaixaBank. I was part of Mr. Gortázar's management committee. In a nutshell, our strategic plan, what it wants to achieve are mainly two goals. Many things, of course, but mainly two goals. The first one is to improve the profitability of BPI. BPI is profitable, but not enough profitable. We are a little bit more ambitious, and we want it to be definitely more profitable. What it means is that we want to have a return on equity, Core Equity, after taxes above the cost of capital, which is not the case today. We want to be closer, somewhere between 10%-11%.
On the other hand, even slightly more difficult still to get, which is we want to get to our efficiency ratio of 50%, which is not the case today. The plan, the strategic plan we have is an ambitious one. No doubt, no mistakes about it is going to be very demanding on us. However, we are pretty confident that we are going to be able to achieve and deliver the strategic plan for two main reasons. One, because since CaixaBank took control of BPI early last year, we are talking about 18 months, we have demonstrated to ourselves and to our shareholders that we are able to deliver many transformational projects, many improvements, many enhancements to our structure, our commercial behavior, our commercial practices, our financial practices, et cetera.
We have delivered so many projects, several hundreds of projects in this short period of time, we have delivered well and on time, that we have the confidence that we will be able to deliver the strategic plan as well. The second reason we feel comfortable about it is because we believe that the Portuguese economy has addressed some of the perennial imbalances that the economy had. Therefore, we believe that for the next three years, the economy is going to be supportive to our financial plans that we have. We are going to have an environment which is going to be slightly positive or benign, supportive at least. With this, I want to mention just on the economy, I know that many of you and maybe even myself a few years back, we were skeptical about the abilities of the Portuguese economy.
The country has done its homework and has done it well. If we think about the main imbalances that the economy had, the fiscal balance or the fiscal deficit, the current account deficit, and the level of leverage in the economy, the economy has made very good progress and in a recurring and sustainable basis. The deficit has been below 1% for the last three years. You will see that for 2017, it shows like a three, but in reality, the fiscal deficit was 0.9. The difference was the recapitalization of Caixa Geral de Depósitos, the largest Portuguese bank, which is private. You take that one off, in reality, the deficit was 0.9. This year is going to be 0.7. Next year, the government thinks it's going to be 0.2.
The reality is that the country is running a basic surplus, after the financial expenses that they are in negative. We believe it's going to be sustainable. It has happened and is sustainable. One comment, and this is a one-side comment for you. The Troika was the first thing that has happened to Portugal in many years. This is very politically incorrect, so please don't quote me outside this room. Current account, same. The country has had a perennial deficit, current account deficit. For five years in a row now, the country has been running a surplus. This is the first time this has happened in more than 40 years that Portugal had a current account surplus on a sustained basis. The reasons for this is for real.
They have done an internal depreciation, an internal adjustment that give us some comfort that the country is going to have a balanced current account for a while. Leverage has always been also one of those concerns among the investment community. Well, the good news is that now corporate Portugal has the same level of leverage that the Eurozone, the corporate Eurozone. We may discuss if you like that level or not, but at least it's not an outlier any longer. In the families, that process of deleveraging is also happening. We expect that the economy that is currently growing will continue to grow somewhere, not very spectacular, but somewhere between 0.8, 0.9 for the next three years. Unemployment, something that is quite relevant for the stability of the country, is not an issue any longer.
We are talking a country which is almost at full employment. Certainly, there are full employment in some areas in the country. When you compare it, you compare the 6.6, this is the reading for September. Probably in December, we're going to have an even better reading in terms of unemployment. When you compare the 6.6 with the 15% that we have in Spain, you can imagine this, I think this is not an issue, should collaborate to the social tranquility that you have in Portugal. Finally, I couldn't resist to mention this to you because I think there is no better number that illustrates the internal adjustment that the Portuguese economy has done. Since 2010 to 2018 included, private sector wages have grown 0.1% per annum. Okay?
At the same time, private sector wages were growing in the Eurozone by 1.8% and in Spain by 1%. This is what it means, a real internal devaluation, which is what the Euro forces you to do. When you have imbalances, you have to do an internal devaluation because you cannot do a currency devaluation. This is a real internal devaluation. We believe that the homework has been done. It is sustainable, and certainly, in my opinion, in my humble opinion, it is sustainable for the next three years. We should have an economy that will be constructive for our financial case. The other aspect why we feel comfortable about is what we have done in these 18 months. We feel comfortable we can deliver the strategic plan because we have confidence in ourselves.
Here is a brief summary of everything we have done during these 18 months. I don't want to go through all of them because probably it will be too boring for you. We are running now the bank with 1,000 people less than had at the end of 2016. We have done significant investments, improvements in infrastructure, in technology. It is ironic because I was going to say that we were very successful in this migration without a glitch. Unfortunately, I cannot say without a glitch because precisely today we have got a glitch. Some of the systems are not working properly in Lisbon as we speak. This is what it was, the law. This is Murphy's law at its best. I had my line perfectly trained to say without a glitch, but I can't say that. We have managed our financial cost.
We have done a tremendous simplification of the bank. We are focused exclusively in doing business in Portugal with our Portuguese clients. Everything else, we are sitting down, eliminating, simplifying. It drains resources, it drains investments, it drains time, it drains people, et cetera. We are saying we want to be the best bank in Portugal, for that we need full focus. We have done that as well. We have done hundreds of plans. I only mention here the cost-saving plans because they are always the most difficult to manage and create more conflict. Simultaneously, we have done many plans as well to increase the revenues. You cannot never build a success story in finance if you only focus on expenses. We have reviewed fees and commissions. We have created consumer lending as a separate business unit. Before that, it was just a department.
We have done a coordination among the corporate business between Spain and Portugal. This was an accident waiting to happen. We had two teams competing with each other for clients in Portugal and in Spain. We have the Portuguese team trying to do business in Spain, and the Spanish team trying to do business in Portugal. We managed full coordination. This has been very successful because some people were very skeptical and thought that we will be losing revenues. In fact, in 2018, so far, we have had the best year in corporate business ever. We have launched retail products, which is always extremely difficult, as you know, for all the compliance issues that exist. We are again in the advertising market. We are regaining market awareness, new clients, et cetera. We have been executing an efficiency plan that I will mention later as well.
Simultaneously as well, we have executed our synergy plan. We have executed up to 90%. If you remember, CaixaBank announced when it made the offering to buy 100% of the sales of Banco BPI back in 2015, that CaixaBank thought that we will be able to strike EUR 130 million of synergies after three years. Well, in fact, we are at EUR 125 million. We have shut down that project. Everything else that we do in terms of efficiency are not adding up to this, because otherwise we will never finish. EUR 113 million of these synergies are already finalized, designed, implemented and finalized. Either the cost impact or the revenue costs are already having impact in our accounts every month. EUR 12 million or 29 projects are still in progress. EUR 125 million, of which EUR 78 million are synergies and EUR 47 million are revenue synergies. This is permanent.
This is recurring and will continue. There are about 600 micro projects behind this synergy plan. You can imagine the amount of execution, delivery, et cetera, that we have gone through. The ability to see the results that we have been able to do it is what is giving us the confidence on our ability to deliver the strategic plan for the next three years. Simultaneously, we have done the simplification of eliminating all the foreign businesses that BPI was doing on the side. They were not particularly profitable. They had risk, operational risk, regulatory risk, that we didn't like. Among everything, they were distracting us from our main subject, which is to do the best in the Portuguese market. We took the decision of shutting them down, and we are executing.
The bad news is that you cannot imagine how difficult it is to shut down something. It takes about three or four times the effort that it takes to open either a branch, a bank, a representative office, wherever. To shut down these things truly takes a lot of time, but we have done it, and now we can enjoy the fact that we are running a business without all the complexity around the foreign entities. Simultaneously, we have reinforced and enhanced the governance of BPI, which is extremely complex and also time-consuming. There is no way you can run the bank on a successful way on a daily basis in a bank taking many simultaneous decisions, et cetera, if you not create a proper governance. We have created a proper governance that under the board and the board commissions, is replicating the governance structure of CaixaBank.
The people know to whom they need to talk. The guy in CaixaBank can talk to the equivalent who is in the X committee or Y committee in BPI, and the guy in BPI knows to whom they need to talk, et cetera. That facilitates enormously the daily running of the bank. We did this at the very beginning. Practically, we did design all this in the first six months of last year. The implementation takes always a little bit longer. Finally, simultaneously as well, we did our capital reinforcement. We didn't want anybody among our clients or among our shareholders or among our supervisors to have any doubts about the BPI's capital, the quality of the capital, the sufficiency of the capital. We didn't want to spend endless hours of discussions with the authorities.
We just wanted to have very strong capital and so be able to focus ourselves in what we want to do, which is winning clients and servicing the best we can. We did this series of transactions during the year. The first one was as soon as March 2017, so we were just there one month and a half. Everything else. The impact of all these transactions have been to reinforce our capital ratios by 400 basis points, and now we have a Core Equity Tier 1 of 13% and a total capital ratio of 14.8%. All these numbers are very well calculated. One issue less. What is BPI today? In case you don't know it, I'm not going to spend too much time on this because you have the information yourself. But we are the fifth largest bank in Portugal.
We have 2 million customers, and we have 4,900 people. We have 10% of market share. We are owned by CaixaBank in 95%. 95% of our stock is owned by CaixaBank, and the remaining 5% is publicly traded in Lisbon stock market. CaixaBank has made an offer to buy the entirety of that 5% to the market. This is a process, which is a regulatory process that takes some time. We are in the execution mode. In reality, it is CaixaBank who is in the execution mode, and we hope that in the next few months will be addressed, solved. There's nothing wrong in there, it just takes time.
In a few months, we will be owned 100% by CaixaBank, and we will not have to be quoted in the stock market, which again, will add enormously to the simplification of the bank, because it's always very expensive. We are investment grade. There you have some numbers on the right of what we published in September in our quarterly results. It's something just to bring to your attention to the non-performing exposure ratio calculated according to EBA. It is a ratio of 3.8. BPI is and has always been the bank with the best asset quality in Portugal, without any doubt. That's part of the culture, and this is obviously something that we value enormously, and we will continue in that tradition. Something you should be aware. The bank is absolutely high-quality assets, without any doubt.
Far this year, we have got a recurrent profit of after taxes of EUR 164 million, which is 20% better than previous year. One consideration that now is the time. All our strategic plan doesn't take into account none of the profits that could come from our investments in Africa, neither Angola or Mozambique. All our strategic plan is about what we do with our clients in Portugal. Anything coming from those investments, BFA or BCI, are outside of the strategic plan. It will be a surplus, but it will be a plus, but are not in our numbers at all. We have a recurrent return on tangible equity, core recurring tangible equity, so that neither includes anything coming from Angola of 8.6%. Therefore, we are still not covering our cost of capital. Our cost to income is 61.5% as of September.
We come from 87%, and we are on our way to 50%. We are quite comfortable that we will get to 50% because we have the tools to get there. Solid capital position. You know those numbers. So far this year, the activity is going well. We are growing in mortgage, we are growing in consumer, we are growing in our lending to companies, and we are growing in customer deposits. Our growth in lending, just in order, because I guess I may have these questions before. Remember that we are in a far better position than our competitors. We don't need to do big write-offs. We don't need to do big sales of assets because our non-performing ratio is so low. In reality, we are not deducting every month from our loan portfolio because we are not selling, we are not doing write-offs.
Every loan, new loan, brand new loan that we do add to our statistics, while our other banks in Portugal, of course, that on one hand, they are lending new business, but on the other hand, they are doing write-offs or selling loans on the other hand. Their net position is different. We are growing market share in mortgages. We are growing market share in loan to companies. As I said before, we have an excellent risk profile that we will maintain. This is just a note. One of the great things of BPI is that they began investing in digital channels very early. Now BPI has a very good position in terms of the new economy, the digital channels, and digitalization. In fact, when you look at the statistics, our individual clients are the ones who uses our internet channel the most. They are the second ones when they use our mobile channels, so they're quite used to this. In terms of companies, our corporate clients are the ones who use our internet channel as well.
We are well-positioned. We haven't done a revolution yet, but at least we have a good starting point to improve in terms of digital channels to our clients. Our strategic plan itself, as I said, our goals are what I explained you, improve our profitability, and secondly, to finalize the implementation of CaixaBank bank insurance business in Portugal. We have five strategic priorities or venues: profitability, customer experience, human resources, efficiency, and quality, and reputation. Not very different from the strategic plan of CaixaBank. Only that for us, the first one is profitability. What are we planning to do in terms to achieve the profitability we want to do?
Is we are planning to continue to grow our loans book. I'm going to try to explain to you how much by talking about market share quotes. We are planning to grow our loan portfolio mortgages as much as the market plus 1%. Our plan is to grow 1% market share in three years' time. We have grown 1% in the last four years. Our plan is to grow another extra 1% in the next three. We believe we can do it. We are launching new products because of that, et cetera. In corporates, we are planning to grow our market share another 1%. In reality, it's 0.9. If you look at the statistics of our previous year, we grew 3% in the last three years. We are planning to grow 1% in the next three. The reason for that is quite simple.
It's strategic and happy to share with you. Is because we thought that if we put on ourselves to grow as much as the market plus 3%, 1% per annum, we will be at risk of putting on us a pressure, a tremendous pressure to compromise in asset quality any moment during the strategic plan. We didn't want to do that. That's why we settle for as much as the market plus 1% market share. In consumer, we want to grow 2%. If you look at our numbers for 2018 and 2017, we are winning market share by the order of 1% every year. We could in theory put 2.
We have put with 3, we could have put 3 and plus the compounding, we put 2 because we thought it's more sensible, and we don't want to make mistakes in the way we growth in consumer finance. We believe there are plenty of opportunities to grow in an orderly fashion and properly and profitable. Customer segment diversification. This is all about importing and applying well in Portugal, the technology, philosophy, and the business model of CaixaBank. We have done several of these things. There is a lot of things to improve and to keep improving. This is part of this. Focus on customer payroll deposits as well, a lesson learned from CaixaBank for so many years. What gives you a loyal client is not just a cash account, is a payroll account. Everything evolves around that in our retail business. Reinforce insurance products, same.
Is about replicating in Portugal the success story in insurance that CaixaBank has. Profitability analytics, no doubt, will help us to make better decisions. IRB adoption, this is simpler. It's very simple. We are in a standard model. If we move to complex model, IRB models, we will save some capital, That will help us in our return on tangible equity. We will be simplifying, continuous reviewing the products we offer, the pricings, the services we offer in order to simplify what we do on a daily basis. Finally, this is important, maintaining an stable cost base. We are at EUR 450 million of expenses on annual basis, We want to keep it that way. We believe we can, because there is a combination.
Obviously, there are some forces to increase our expenses on annual basis, On the other hand, all this transformation that we are doing is front-loaded. All these expenses and investments that we are doing in order either to reduce our international presence or to make investments in corporate or to create a platform that we are creating for credit cards, all that is front-loaded. At the same time, we have these trends and these barriers to grow the expenses. On the other hand, there are expenses that will come down over time because we are front-loaded in terms of investments. Customer experience along the lines of CaixaBank. I'm not going to spend too much time on this.
It's basically to review every process that we have with clients from the point of view of the client and see how you can do it in a more user-friendly way. Human resources, I honestly believe that BPI has one of the best banking teams in Portugal. It's an excellent team, has proven able to work very hard and to deliver many projects simultaneously. In a record period of time, therefore, we want to invest in them, either training, development, mentoring, et cetera. This is very important and something I will spend a lot of time. We need to do something extra that CaixaBank doesn't need to do. Actually, they also need to do a little bit of that, but for us, it's going to be more acute. Which is, we need to manage that after three years, everybody in BPI feels part of CaixaBank group.
BPI has been always an independent bank, very proud of their inheritance and very proud of their history. We need to make them feel very proud as well of being part of CaixaBank team. That requires time. That creates opportunities to mingle, et cetera. This is part of what we need to do in these next three years. For those of you who work in a multinational, that you will understand perfectly well what it means to feel like you are part of a group. Efficiency, of course, we need to do it. I will mention something that we have done this year that we will continue to do.
For example, what we have done is we have gone to the branches, every kind of branches, from private banking branches to premier branches, retail branches, companies, enterprises branches, et cetera, and review all the tasks that the people were doing in the branch. Trying to identify which task we can remove from being performed at the branches to a middle office in central services. It is a task in itself, then, to prepare a plan of which are those tasks that we can remove, then set up everything at the middle office, and then physically, finally, remove the task from the people. What is the purpose? It's to liberate, it's to free up the time that the people at the branches, the people who are closer to the clients, have to deal with clients, deal with promoting products, giving advice, visiting brand-new clients, et cetera.
It's an investment that we are doing for the future. Well, the exercise that we have done in 2018 is going to liberate, or is in the process, because we still have one month to go. We will be liberating 440,000 man- hour per year, that we will see the impact in 2019. We are liberating all those hours so the people on the branches can spend more time with the clients. Now, there is another team which is starting to try to identify which efficiencies we can do in 2019. Now, taking for granted what we've done and looking for new opportunities to become more efficient. All that kind of things we will continue to do. Finally, quality and reputation.
BPI as well, this is one of the big assets of BPI, has a tradition in the Portuguese market as being a financial provider of high quality. We want to maintain that, no doubt. It means that everything has to be done in an orderly fashion and without compromising that reality of quality, which is sometimes difficult when you need to raise the cost of the fees and commissions, because the clients doesn't react very well to that. BPI has a fantastic reputation in Portugal, and obviously, we want to keep that reputation up and without any threats to that. Within our strategic plan, we have some specific activities to improve those. What kind of bank we will be by 2021? We will be a bank with 12.5% of mortgages market share, 15% market share in consumer finance.
We will grow, hopefully, our payroll deposits by 6%. We will get up to 50% of our clients to be regular users of our digital channels. We should be in the top 3 of customer satisfaction, et cetera. Also, we will have reduced our cost-to-income ratio to 50%. Behind all that, this is a growth, this is financial. Our revenue should be growing at a cumulative 7% per annum, and our expenses at zero in the cost to income. In terms of NPL, these are the numbers that we will be below 3%. This is our strategic plan. We know it's demanding. As I said, we have the confidence in ourselves, proven to ourselves and to our shareholder during these 18 months that we have been running BPI, that the team can do it, and we can do all the transformations that are behind these numbers.
Thank you very much.
Thank you, Pablo. Thank you for the presentation. Now to wrap it all up, the man with the numbers, the group CFO, Javier Pano.
Hello. Thank you very much for attending our Investor Day. Thank you. Yes, I come with the numbers. Well, I will make a brief introduction first. We think that we are positioned in a solid starting point. I will not go over the details because the CEO has already commented them. It's only a few months left to end our four-year strategic plan, but I would only like to highlight two things. First, that our profitability is already in line with our cost of capital, and this is something important for what we are planning to do. Second, that during at least the latest three years, we have been delivering a cash payout ratio above 50%. This despite clearly a challenging backdrop with negative rates, subdued loan volumes much lower than expected.
I would say that this probably has been the largest miss on our projections four years ago. Also, we had a strong hit on our profitability after the mortgage flow removal. Lately, with clear competitive pressures in some segments and as always with regulation and more to come and more demanding. Let me introduce, because I think that it's important to have also the macro backdrop, the chairman has already commented that we are expecting that the European economies will grow around 2% during the next three years. The macro situation has been tempering a little bit, I think that according to expectations, as we are in a more mature position in the economic cycle. In any case, we think that we may increase at fast speed with most businesses doing well, firing on most cylinders.
Importantly, starting to invest and also to transform the bank as our cost of capital has already been met in order to future-proof the bank for long-term sustainable profitability. Just a few key macro metrics from my side. The labor market is expected to continue improving in Spain. Somewhere we are lagging clearly compared to the rest of Europe. As Pablo was commenting in Portugal, also in Spain, a sustained external position, I would say a balanced external position, also a continued fiscal consolidation that will lead to sustainable growth ahead. I think that probably the most balanced economic situation of both economies in recent history. This has resulted, not only in Spain, but also remarkably in the case of Portugal, into a clear reduction of the risk premia, contrasting sharply with the situation in recent times to other non-core economies.
You know that rating agencies have upgraded both economies in recent times, this is allowing lower financing costs that no doubt is facilitating the economic rebalancing. Within this macro backdrop, what we're expecting at industry level is moderate loan growth between 1% and 2% in Spain, slightly lower in Portugal. On the customer front, it is expected that the industry probably will perform better, around 3%, 3.5%. In the interest rate cycle, we think that the trough is already behind us. For this strategic plan, what we have been using is implicit market rates. According to those 12-month average, it's the tenor that affects us a lot, is expected to be on average around 70 basis points by 2021, and long-term rates are expected to go up very moderately. All in all, we have built the plan on conservative assumptions, both on volumes and on rates.
After this brief introduction, let me tell you which we think are the key levers for sustainable profitability. First, we set an ROT target by 2021 above 12%. This is our ambition. Please note that from now on, we will be including valuation adjustments on the denominator of the ROT ratio, according to market practices so far. The key drivers are four. First, continued core revenue growth is what we have been doing so far. I will tell you on which businesses we are planning to focus during the next three years. Always trying to deliver positive yields while we run our business.
At the same time, once we have already met a profitability in line with our cost of capital, we think it's time to invest in our business, in business opportunities, and also starting to spend on transforming the bank, as Gonzalo has already explained. It has been four years to now where we have de-risked the balance sheet remarkably, and we are planning to continue to do so. This will result into some cost savings, some tailwinds. At the same time, we want to be, as always, ahead of regulation. You know that this probably is one of the news of this strategic plan. We want to build a transitional capital buffer ahead of new capital requirements. Now let me go into the detail.
Again, on this strategic plan, we have built what we call the ROT ladder, and trying to better display which are the engines and also which are the headwinds for our profitability going forward. The starting point, note that it's the trailing 12 months ROT as of September 18, with some adjustments mainly related to Repsol and real estate disposals and also extraordinary write-back we had during the third quarter. We have done so to make it comparable with future numbers. As you may see, the engines for growth are clear here. Business lending, consumer lending, as has been the case in recent times, clear engines for growth. Also long-term savings protection. We know that we have a unique business model, a fully integrated bancassurance business that clearly does very well on those two businesses.
Also we have clearly identified an opportunity going forward in payments, despite the newcomers to this business. We think that thanks to our large market share, we can do well also on that front. On mortgages, we think that mortgages can be accretive on our profitability if rates do go up as expected. This is the plan A. Also Banco BPI adds to our profitability clearly, and Pablo has detailed which are the plans there. From there, we have some headwinds. First, we are planning what in our plans is that we will redeem TLTRO in 2020. We will lose subsidized funding from 2020. Also, you know that we have already started, but we will keep building our MREL layer, more expensive funding. This will take away together around 60 basis points off our future profitability.
There are other core businesses that unfortunately will not be engines of growth that also have a negative 90 basis points impact. That will result into a profitability around 14.4%. For here, we face other impacts. First, as I commented, we want to invest and to start transforming the bank. This results into operating expenses. That takes away 1.8 percentage points. This is partly compensated by the fact that thanks to the recent de-risking process of the bank, we have had a clear NPA reduction where we have cost savings, I would say less real estate-related expenses, mainly after the disposal to Lone Star of the large OREO portfolio. Wanting to be, as always, ahead of regulation, we want to build this transitional capital buffer. This results into a larger capital base by the end of this three-year horizon plan.
This also takes away 100 basis points to our profitability. All in all, this results into an ROT that would be higher than 12% by 2021. Even in case that rates were not to go up as expected, our profitability would still be above our cost of capital above 10%. Please note also, that Pablo has commented that we have not included BFA results in our projections. The big picture is that we are forecasting that our performing loan book will grow by 1% CAGR, and our customer funds clearly doing better, around 4% CAGR during the next three years. You see that so far, this has been the trend in recent times. Let me now go into the detail of each one of the business opportunities. First, business and consumer lending, together expected to add 2.1 percentage points to our profitability.
You know that investment in equipment in Spain is doing well. It's a strong contributor to GDP growth in Spain mainly, but also in Portugal. Thus, we expect that our business loan book will grow between 2% and 3% CAGR during the next three years, in line what we have already been doing during the last few years. In consumer lending also, we continue to be positive. The consumption of durable goods is still below pre-crisis levels. Also, personal consumption is a strong contributor to GDP growth. On our consumer loan book, we are envisaging growth between 6% and 7% CAGR during the next three years, slower than in recent times, as we are also in a more mature phase of the economic cycle. This will result into a more diversified loan book.
You will see that our consumer lending book, the weight of this consumer lending book, will grow from 5%-6%. Our business lending book will grow from 31 to 33 BPI. Also, we grow markedly as on consumer lending BPI is expected to do well. Also you see that our mortgage loan book, on the contrary, the weight will come down from 36 to 33. On this segment, we take a conservative outlook for new production, as the focus going forward is more in value rather than in volume. We expect that this portfolio will continue to deliver at a pace around 2% per year, probably during the next three years. Another key lever for profitability is our long-term savings business.
You see that the penetration ratio of private savings, insurance, and pension plans amongst households is still, both in Spain and Portugal, is clearly below the EUR average. Also, a key metric that we are monitoring closely is the pension replacement rate. That is what represents the public pension over the final salary. It's 82%, 95% in Portugal, 82% in Spain. This is expected to trend lower. We think that we have a clear business opportunity in this long-term savings business in Spain and also in Portugal. We are envisaging our balances on this business to grow between 5%-6% for the next three years. This will result in clear market share gains. We are already market leaders well ahead of the next in ranking.
The mix of our customer funds also will evolve positively with a larger weight of profitable customer funds. At the same time, retaining a large proportion of zero-cost retail deposits that gives us a lot of leverage ahead of a higher internal rate cycle. Another engine for growth is what we call our protect business, which is life risk and non-life insurance. Also, again, you may see that the amount of total gross premia over GDP both in Spain and Portugal is well below the average in Europe. We think that clearly there is a business opportunity here. VidaCaixa, as you know, is the life risk market leader in Spain. We are envisaging life risk insurance premia to grow between 9%-10% CAGR during the next three years. Also, in non-life, we are doing well.
We are growing ahead of our competitors. We are seizing market potential even among our individual customers. Only 10% of our customers do own a home insurance product, or only 7% a health insurance product. Plenty to improve on this front, even, as I say, amongst our own customers. Also, I mentioned that we seize a business opportunity in payments. Although there is a lot of attention from newcomers, fintechs, et cetera, on this front, you see that still mainly in Spain, surprisingly, still the non-cash penetration ratio is very low. This only has one way, as you can realize. We are expecting that credit card turnover will grow exponentially during the next three years by 12% CAGR during the next three years, as I say, resulting into revenues coming from our payments business also in line with this growth, around 12%.
This will result in a situation where the weight of our revenues from payments over total recurring banking fees will grow markedly from 32%-44%. Well, Gonzalo has already elaborated on this, you know that this business is clearly underpinned by agreements with leading partners. The fact that we already have the largest market share in credit card turnover and in point-of-sale terminal turnover puts us in a situation. This is like a virtual circle. If you are the leader, the more easy for you is to keep gaining market share, at least in this business. In Portugal, I will not repeat what Pablo has just explained. Portugal is expected to do better than the average of the group in new lending. In line or slightly below as we deploy our business model in the evolution of customer funds.
At the end of the day, resulting into core revenues improving by 7% CAGR for the next three years. At segment level, an ROT expected to be around 11% for BPI by 2021, and a core cost-to-income, as Pablo said, below 50%. Let now see how we convert all those business opportunities into the NPL. We set a target for core revenues to grow around 5% during the next three years. The split is 5% for NII, 4% for fees, and 8% for other insurance revenues. Looking into the detail of NII. This 5%, as I say, in case that rates were not to go up and if rates were to remain at today's levels, that is at minus 40 basis points, for the short end, our NII would grow around 1%. You see here the NII bridge. Clearly, consumer lending is one of the largest contributors.
That is extremely profitable portfolio. Mortgages would be accretive if rates go up. If not, the mortgage on book would not be accretive. Clearly here, mREL and TLTRO having installed on NII evolution. A message on our customer spread that is expected to expand to 265 basis points. This is no doubt mainly due because we expect that EURIBOR will go up, but we are not considering in our projections asset margin expansion on a like-for-like basis. That is, we are not counting on the fact that, let's say, SME spreads or mortgage spreads or consumer lending spreads would be wider. We expect that on the contrary, it would be in line to what we already have today, or probably in some areas we may have some further tightening. I would like also to update you on the sensitivity of the balance sheet. This is something important.
Remember that we guided that in recent times for our sensitivity, what we say to 100 basis points impact between 15%-20% on NII. After TLTRO redemption, as we no longer will have a fixed rate liability, our sensitivity is reduced and will be more in line of around 50%, no? I would like also to take the opportunity. According to the balance sheet projections that we may have by 2021, and according to what we think that we can do at ALCO level, is the sensitivity we may have. On fees, our ambition is for fees to grow around 4% CAGR during the next three years. If you look at the fee breakdown here, you see clearly the evolution.
If you look at the recurring banking fees or traditional banking fees, we come from 73% of our total fee revenue base to 50% now and going towards less than this to 47%. Much higher quality fee revenues. You see it in the fee bridge, where you see that fees from AUM and payments will be the main contributors. Now we shift to efficiency. As I said before, we want to invest into the business, and also we have cost inertia. We have already set a target for core revenues at 5% CAGR. We set a target for recurring expenses at 3% CAGR. I go now into the details. This would result into our core operating income growing around 7% CAGR for the next three years and resulting into a core cost-to-income ratio below 55%.
The CEO has already done. I encourage you also to use more and more of this metric, stripping those, let's say, noises from trading profits and others. We are on this metric, core cost to income. I think that we are well-placed. We compare well with European and Spanish peers, but we want to do even better going forward, and we are envisaging a core cost to income below 55%. On costs. We have a target for our recurring cost base to grow around 3%. We have three pillars here. First, we have cost inertia. It is mostly derived from collective bargaining agreements for salaries. After many years with GDP growth over 3%, we face wage inflation. On top of this, we have identified clear business opportunities. I have just explained them. We want to invest into those business opportunities.
As the CEO has explained it, we want also to spend on the transformation of the bank in order to deliver a much better customer experience to our customers. The good thing is that this results into cost efficiencies, as this new relationship model that we are starting to develop will allow us to some restructuring, some headcount optimization, branch closures, and reskilling. This obviously helps us to obtain this 3% CAGR on our operating cost base. Importantly, I would remark that no material growth in intangible assets is expected despite investment in transformation. I think that this is also important. You have here also some productivity metrics that have already been commented by the CEO. To partially offset this, we continue on de-risking the balance sheet. We have done a lot, but we want to do more. We target an NPL ratio below 3% by 2021.
You will see that we expect that our NPL stock will be reduced by 40% to around EUR 7 billion. You know that on our real exposure, we have also made a landmark transaction with the disposal to Lone Star. We have a small real exposure now, just EUR 600 million. It may grow very slightly in coming years as we may still face some repossessions, but anyhow, very moderate NPA exposure expected by 2021. Cost of risk is expected to remain below 30 basis points despite we continue expanding our SME loan book and our consumer loan book, but moderately. At the end of the day, the backbone mix is not changing materially. As I said, the de-risking process is having some tailwinds in the form of lower net expenses related to our real estate activity, 66% less of expenses related to this legacy portfolio by 2021.
Now, let's talk about capital. We set a CET1 target, Basel III, at 12%. On top of this, we want to build a transitional capital buffer of 100 basis points ahead of still some pending regulatory requirements. Which ones? First, Basel IV. Second, still the review of internal models on some segments that is still pending. We have already given you a few, one month ago, the impact on our mortgage portfolio. Still the review of the large corporate portfolio is ongoing. Also we face the new EBA guidelines. All in all, still a few unknowns here and there. Our assessment is that altogether with 100 basis points, we face these question marks comfortably. This will put the solvency of the bank well above the SREP requirements that you know that are at eight and three quarters.
Well, you have seen in the recent stress test that the resilience of the bank in an adverse scenario is strong. You see that the capital depletion results into a CET1 ratio that would be above the SREP requirement. You see that this compares very well, at least with our domestic peers. I think that also very well compared it with the rest of the industry in Europe. Let me also give you a message on MREL. I think that it's time to update you on this. You know that we have had continuous access to capital markets, supported by more recent credit rating upgrades, more than EUR 17 billion issued in four years in all asset classes. Now we face MREL. What we expect? We expect that we will have the binding requirement during the first quarter of next year.
Our estimate, considering what is the SRB standard MREL calibration, is that this requirement should not be higher than 22.65%. We already hold a subordinated MREL ratio at 17.2%. During the next years, we don't face AT1 or Tier 2 issuance needs. We don't face early calls. The first call we have in our Tier 2 is in 2022. Thus, what we plan to do is, you see that we have wholesale maturities, mainly in corporate bonds, accumulated EUR 7.5 billion. Our plan is to mainly roll those maturities into senior non-preferred in order to mainly fill our incoming MREL requirement with a subordinated instrument. This is the plan. You may see that this may result into an issuance around EUR 7 billion, EUR 8 billion, I think that according to our track record, is something manageable. Now, on liquidity, we have a strong liquidity position.
This is a part of our DNA, a liquidity coverage ratio close to 200%. Today is the first time we disclose our net stable funding ratio at group level, 114%. Both ratios are expected to remain comfortably above the minimum requirement of 100% after the TLTRO redemption. We hold a large liquidity buffer with more than EUR 75 billion of liquid assets. You know that we have planned everything, our funding plan, everything to redeem TLTRO in time by 2020. Finally, on capital distribution, we are upgrading our cash payout ratio from greater or equal to 50% to greater than 50%. We have already paid 56% during the last three years. What we will do from now on is that at the beginning of each year, when reporting year-end results, the board of directors may set a cap on the cash payout.
This is done for dividend accrual purposes in our regulatory capital. Because if we don't do so, what would happen is that the supervisor would require us to deduct 100%, as we don't have a cap, to our regulatory capital ratio. For 2019, it is already intention of the board to set this cap at 60%, this will be updated every year according to circumstances. Our capital distribution capacity, I would say that is reinforced by the fact that we expect that our profitability will be above our cost of capital, clearly, we built this strong solvency position well above MDA buffers. You see that well above 300 basis points on our MDA buffers. To wrap up, a summary of our key financial targets. We recommend in three years to see where we are.
On profitability, we set a target for core revenues to grow by 5% CAGR. We set a target for our cost to income ratio to be below 55% by 2021, and our ROT above 12% by 2021. On the balance sheet, on volumes, we expect our performing loan book to grow by 1% CAGR and our long-term savings business to grow between 5 and 6. We set a target for our NPL ratio below 3% and our cost of risk to be below 30 basis points during this three-year plan. We set a target for capital at 12% plus a transitional buffer of one percentage point. We set a cash payout above 50%. On liquidity, we set also a target to be always above 130%. Thank you very much. Thank you very much also to all the teams involved in the preparation of this strategic plan.
I think that we may be ready to take a few questions.
Thank you very much. Please call out your name and the name of the company you work for. What I'll do is start from the right, my right, move over to the left, and then move back. I guess, Paco Riquel. I've said your name already.
Yes. Francisco Riquel from Alantra. Thank you for taking my question. Two for me, just one extra P&L headline that you have not mentioned in the strategic plan, which is below the cost of risk. What other provisions shall we consider? If we should include any restructuring charge because you are downsizing the network? Also, the legal provisions. If you plan to keep the current run rate in terms of legal provisions, overall, what is your assessment of the mortgage litigation risk in Spain? Then linked to this, you are clearly not betting for the retail mortgages in Spain. Unlike your peers, you are planning for further de-leverage in this business. You mentioned that you are more focused on value than on volumes. You also with the risk of overall in this mortgage loans, do you think that the provision mortgages
No problem.
Just a second question on Telefónica and Erste Bank, if you can update strategically where you are on these stakes, and if you plan to hold onto the stakes during the time horizon of the plan. Thank you.
Thank you, Paco. Maybe I'll make some comments, and Javier will complete. I'll try to be short because unfortunately we're a bit late and there may be a lot of questions, but try to be to the point. As our legal provisions, obviously, we have uncertainty. We have had a run rate of legal provisions in the past, and I think it is safe to assume that this will continue for the foreseeable future. I do not have a crystal ball, but we were all surprised by the latest events around the [Sam Bankman-Fried] or the [JCDecaux], so we'll have to watch out for that one. There's nothing other than what is well-known in the market that worries me at this stage. With respect to restructuring the network, there will be restructuring charges.
That is something that is very difficult for us to predict at this stage, because we do want to close branches. We do think that we should operate with a lower headcount and with a more flexible headcount as we discuss on a rural basis. That requires a negotiation with trade unions, given how these things work in Spain. We will obviously go through that, and we'll have to come up with a view when we are more advanced. At this stage, we do not think it's appropriate to speculate with potential outcomes, even though we would love to for the sake of transparency, BS transparency, we think. I think we need to do this in the right order. There is no question that as a consequence, we will end up with a lower headcount and with a restructuring charge.
In terms of the mortgage, we are going to continue our policy and our strategy. This is a very important product where we have a very large market share, and we're going to continue being very active. We need to watch for underwriting criteria and appropriate pricing. I am not able to comment on whether competitors are pricing properly or not. It's very difficult. I have to assume that they are, and sometimes they will be more aggressive than us. Sometimes we'll capture the client. We do have a very large client base, and I think we do have a good product based on that fixed-rate mortgage, where we have actually changed it again to eliminate any expense associated to it, eliminate the upfront fee, and just based on a fixed installment for the whole-of-life of the portfolio as a base product.
That has been very well received by our people, and in fact, it means we continue to be quite active in the market. We'll see. With respect to Telefónica and Erste, we are planning to keep those stakes during the life of the strategic plan. We continue to see good financial contribution for those, and at the same time, active partnership with both. I won't elaborate now, but obviously we are, and I mentioned before, we had funded since inception more than 3 million mobile phones with Telefónica. We have a joint venture consumer finance. We're targeting their clients. We plan to do more on that front, and this is an example of the various initiatives we have with them. As you know, we have some others ongoing with Erste Bank. I'm sure Javier has some further detail maybe on
Well, probably on the mortgage issue. Well, many times I have faced this question. When will the mortgage loan book stop deleveraging? I remember myself saying, "Well, probably in 18 months, we'll see probably," et cetera. Now we face the reality. If you do the maths to stabilize our mortgage portfolio, the new production would have to increase around 20% annually. Because you have such a large amount of redemptions, which are ordinary redemptions, that it's really difficult to balance the situation. We don't see the conditions for the next three years to do this. It's really very difficult for us to grow at a 20% pace on the new production. What? We face reality. This is what has already been happening. This portfolio has been deleveraging.
It's a very good portfolio, gives us a lot of gearing towards higher rates. This is the situation. I think that the best way we can do is to face the situation as it is. It's not that we are no longer betting for this product, on the contrary, and I think that Gonzalo has already been clear on this. The dynamics in this segment is this one.
We have one at the back, to the right. Stefan.
Yeah. Hi, guys. It's Stefan from Citi.
Sorry?
Hi, guys. It's Stefan from Citi. A couple of quick questions on my side. BFA, well, several times you have now said we don't include the BFA contribution. What does that mean exactly? What's the status quo in terms of talking to the ongoing government? On the 100 basis points buffer, could you please tell us, is that coming from operational risk, credit risk, market risk, stakes, et cetera? Lastly, on the cost of risk, you are saying less than 30 basis points. Is that a through the cycle, or is that just over the next couple of years? If it's only for the next couple of years, what's a through the cycle cost of risk on the business that you're currently riding? Thank you.
Thank you. With respect to BFA, what we're saying is, for the sake of clarity, the dividends and equity from the results of BFA is not included in these projections. BFA will have the result, whatever that is, and that will need to be added to our own targets. With respect to the strategy of BFA, it has not changed. We are holders of the stake. We have 48%. We do not have an influence in the management of the bank. We think 48% is too large a stake. In due course, it is our interest to reduce it. At the same time, the bank continues to do well. We have received payment for the dividends that was pending. The bank continues to be profitable, going through a difficult period in Angola.
The reality is Angola is doing a good job in terms of economic policy, devaluation, the agreements with the IMF, the various reforms, all of them suggest to indicate that this is likely to result in better environment for Angola, better environment for BFA. We do not know and cannot predict what will be our stake during the next three years. We thought that the most simple way was to say, well, these are the results, any income or if there was to be a loss in Angola, is not accounted for. Our expectation today is a positive one, but one where we need clearly time, and in the meantime, we will continue to cooperate and try and make that a better future come. In terms of buffer and cost of risk, maybe Javier, you want to elaborate it.
Yes. On those 100 basis points, there are mainly three things that unfortunately, as of today, we cannot exactly quantify each one. Which is first, the incoming impact of Basel IV. Basel IV will result into risk-weighted asset inflation. Probably the largest unknown on this front is what you mentioned, probably the operational risk related risk-weighted asset inflation. We still have question marks on this, so we cannot give you today which is exactly the impact from Basel IV. Second, we are still on an ongoing process on the review of internal models, TRIM. We have already had the final letter for the mortgage portfolio. We disclosed the impact of this on our latest results presentation. We are now on the process of the large corporates book, and this is ongoing.
In any case, we expect a moderate impact, if any, but it's still an open question. Third, there is another issue, which is the new EBA guidelines. The EBA guidelines will result into new parameters of grade models. I mean, new parameters for PDs, LGDs, et cetera, a review of all this. As of today, I cannot give you the specific impact that may come from this. Our assessment is that altogether, for the three things with 100 basis points, we may be well covered. This is our assessment. Unfortunately, as of today, we cannot give you exactly the quantum for each one. For sure, in coming quarters and years, we'll keep you updating.
I can imagine that at some point, I don't know when, probably, I don't know if in 2020 or when, the market will start talking about Basel IV fully loaded. By that moment, we'll exactly tell you which are the impacts. That's it. It's a voluntary buffer. I would like to clarify this. No supervisor, no regulator has asked us to build this and to disclose it this way. We have thought about a lot, Matthias, about how to deal with this, and we think that this was the most transparent way to face this incoming, let's say, if I may say, uncertainty around capital during the next three years. On cost of risk, minus 30 basis points, this is the guidance for these next three years.
This is not the through the cycle cost of risk that we think that maybe slightly higher than this, probably closer to 50 basis points, but this is always a discussion with our risk people. It may be probably closer to 50 basis points. We think that it's an attainable target, to be below 30 basis points. Well, look, you saw that we are envisaging NPLs to come down markedly. This is because new net NPL formation will be quite modest. The pace of cures, we expect that will continue to do well during the next three years. Obviously, there will be inflows. Net new NPL formation will be moderate, probably higher, but for sure higher in some segments like consumer lending and SMEs, maybe slightly higher than on, for example, on mortgages, where we expect very low new NPL formation.
As we reduce NPLs, I think that I elaborated on our latest results presentation on our expectations on cost of risk for our consumer loan book, et cetera. I remember saying you that we expected, let's say, a normalized cost of risk for our consumer loan book, slightly over two percentage points, et cetera. We expect that it will be lower than this during this three-year plan. Well, if you do the math, you will see that with a consumer loan book around 6%, with a cost of risk below 2%, you will see that a large contributor to our cost of risk precisely will come from this book, as cannot be another way. Extremely profitable book, but obviously with a higher cost of risk.
May we move up to the front here? Mario Ropero, please.
Hi. Mario from Fidentiis. Couple of questions from me. The first one is, given the rather conservative, or at least apparently conservative assumption on loan growth, could you give us your expectations on risk-weighted assets growth? On how much capital you are expecting to generate, average. Then also, if you appear to be above 13%, whenever that happens, would you be happy to make the promised distribution of excess capital above that? Thank you.
Let me start with the second question, Javier answers the first. We are changing the way we will manage our excess capital. We do have a shareholder that owns 40% and is capped at 40%, as you know. That creates complexity, if you can think of buybacks, because you really need to have a complex discussion with the shareholder, and the best way, hence for us, is to manage that process through dividends. We have made clear with a plus 50%, and at the same time saying we want to achieve 12 plus one, that we're going to be building capital.
Because the plus 50% is a floor, it means as we go towards that level of capital, when we start to feel that we will exceed that level, we have the ability to separate and deviate positively from that 50% to a higher extent, depending on how things go. Our expectation is that we will end up at those capital levels. If we create more capital, the payout ratio will be higher. If we create less capital, the payout ratio will be lower. I would say that part of the message, if anything, should give you more confidence that excess capital will be returned. The difference is that we are adding this 1% buffer, which is obviously news today, but you understand that in a three-year period, just up to Basel IV, it is prudent management for us to include it.
We're going to see more automatism in terms of adjusting the payout ratio, depending on how quickly we make progress towards that level. Obviously, given where we are and what 13% is, it's going to take some time before we have that discussion. Javier.
Yes, on the evolution of risk-weighted assets, I would say that you should expect very moderate risk-weighted asset inflation. On one hand, our loan book will grow moderately, as you see. Risk-weighted assets from the loan book will grow moderately. On the other hand, we expect that we will have other things counterbalancing this. For example, risk-weighted assets coming from DTAs, we expect that will be lower as we consume DTAs. By the way, I comment you that we are expecting to consume DTAs, all classes of DTAs. This also resulting into lower CET1 deductions also. This also will help the improvement of our regulatory capital ratio. I would rather prefer not to elaborate on the expected pace of organic capital generation, because I would be giving you guidance on many things, amongst them our payout ratio expectations.
You know that we have a clear track record on this, generating capital organically and having set those targets that Gonzalo has just explained. It's clear that we will be generating capital organically.
Okay. We have another question here at the front for [Andrea].
[Andrea Filtri] from Credit Suisse. Just quickly, I want to go back to your mortgage expectations. If we go to slide 99, I can calculate that you expect your mortgage book to decline by 8% over the period. That effectively implies no improvement on a year-by-year basis versus the levels where the sector is today. You mentioned that you need your new production to grow by 20%. If we look at sector data, it's growing at 15%, 16%. Are you saying that you don't expect any improvement going forward, or you expect a deterioration of the sector trends? Thank you.
It's a segment where we will focus on value. Recently, it has been clearly the segment where everyone is focusing on. There's a strong competition. I would like to clarify that our view on this segment has nothing to do with recent developments around mortgages, to put it broadly. It was a view that we already had before this. We think that there are other segments more profitable or where we can deploy our capital and our investment, and it's what we have been doing so far. This has resulted into a core revenue growth, I would say, more resilient than probably the rest of the industry or the other peers in recent times in this negative yield environment. Unfortunately, we want to be boring.
We want to do more of the same, reinforcing the good things that we're doing well, and trying to avoid those that we think that we are not doing so well. Our feeling is that there are other business opportunities more than mortgages. It's a good business, and we continue to grow. We're expecting the new lending to be growing around 5% per year. For us to overcome this natural deleveraging tendency would be such an effort that would put us into a position where we would put a strong competitive pressure into the market. I think it's not the right thing that we should do.
Okay. May I break the established order because Pablo Forero, the CEO of BPI, has to go in 15 minutes. Perhaps we'll take some questions for BPI first. If you have any specific BPI-related questions, we'll front-load those. Here at the front, please. This gentleman over here. Yes.
Sorry. Yeah. Thank you. Inigo from Aberdeen Standard Investments. Wanted to ask you, Pablo, the situation in Portugal has been quite cozy, frankly. We have a government there that is a coalition with anti-system people, a communist party, and a socialist party. As you mentioned, the salary increases for a good decade has been below zero or flat. You have a public deficit, which is at 0.7%. Is there a risk that we get into a more populistic environment down there?
Okay. Of course, the risk is always there. I tend to see the bottle or the glass half full. Next year, by the summer, are the elections in Portugal. You can imagine how testing is the budget for 2019. The government has been able to resist all the temptations and produce a fully orthodox budget with a fiscal deficit of 0.2%. That's the fact we have. Obviously, the leftist parties, who are not in the government but are supporting the government in the parliament, are making noises and are complaining, and they are having now a big discussion about the salaries for the teachers and the doctors, et cetera, which is the classic scenario. I think that the government has proven to everybody that they are in a very orthodox way of managing the economy, managing the fiscal deficit. The risk exists there.
The risk will be larger if the Socialist Party were to lose seats in the next elections. On the other hand, if the Socialist Party wins seats, which is the most likely scenario, it will be safer. That's from the point of view of the macroeconomy. For us, the negotiations we are having with the trade unions are around 0.75 salary increases. We are creating room for ourselves for higher increases than those in our three years plan. Not very much, but at least some.
That's the way we have built the strategic plan. Obviously, some things may go slightly better than planned, other things may go worse than planned. We are in that environment where I will tend to be optimistic in terms of a country that after such a painful period, will try to do their things properly. Thank you.
We have another question here at the front, please.
Ignacio Ulargui from Deutsche Bank. What is the cost of risk that you are planning in Portugal for the plan? Thanks.
Yes. Thank you. It's interesting because as you may know, if you look at our numbers, our cost of risk in 2018 is negative. It's always harder to predict the positive. Just 1 clarification, the cost of risk of a bank is the result of 2 forces, is how much provisions do you do for the year, plus the cost of selling or write-offs of selling. Write-offs is different because it goes to the cost of risk directly to provisions. The cost of selling loans, selling bad loans. What is happening to BPI is that we are making provisions on a normal basis. However, every loan we sell, we make a profit. The net of the 2 numbers is a negative cost. This is because the bank was properly provisioned, obviously all those loans were at 0.
We are recovering some of those loans. For going forward, just to answer your question very specifically, in terms of provisions, we are budgeting between 20 and 30 basis points. When you add the recoveries, we are at 0.18 positive for 2019, 0.23, 0.26. That's the result of the provision, less the recovery that we believe we will continue to do, less and less obviously because we are selling, taking advantage to sell, but less and less.
Another question for Javier Echanove, please.
Hi, I'm Javier Echanove from Santander. I have 2 questions, 1 on BPI and another 1, a general 1. On BPI, you've mentioned that you're now moving to IRB. I'd like to know what's the calendar for that, what is your expectation of the calendar for that, also the likely impact if you're successful in moving to IRB. A general question, which is, if we look more towards the near term, what are you expecting to see in terms of net interest income growth, commission growth in the next 3, 4 quarters, if any, and whether the modest improvement that we are seeing in the Euribor is enough to keep the net interest income growing. Thank you.
Thank you. Regarding the IRB deadline, what we have in our plan is we are starting to produce to get to IRB. We expect to have the impact to be fully approved by the European Central Bank in 2021. It's something that is happening the last year. Okay? It is a very, very lengthy process, as you may know, where the ECB may take as long as they wish in order to make the approval. Even if you are ready, it might take a little bit longer. The data is 2021. In terms of the commissions, let me see, because I don't know them by heart. I don't know, Javier, if you know them by heart. Commissions, let me see. Do you remember, Ignacio? We are growing commissions, not very significantly.
I'm trying to look at the numbers of the rate that is growing.
The question was on fees. Sorry, can you repeat the question?
Yeah. Sorry, my question was on BPI. CaixaBank as a whole.
Sorry.
Why don't we deal with it at least later then.
Okay.
In the coming quarter.
We'll come back to that as soon as the BPI. Maybe I don't know.
Do we have any other Banco BPI specific questions? There's one over there. Oh, sorry, Sophie.
Yeah. Hi, it's Sophie from JPMorgan. On Portugal, I was wondering, some of the Nordic countries are taking out the pension benefits. Do you expect fewer Nordic people to move to Portugal? How do you think that will have, what impact do you expect on the Portuguese economy? Do you expect house price slowdowns, lower GDP growth, given that some of the GDP growth actually comes from the service sector?
You're talking about the people who come to Portugal to benefit from the tax treatment of pensions, isn't it?
Exactly.
Right.
Because it's disappearing for some of the Nordic countries.
Yes, absolutely. The new minister of economy has already told us, it was in a private meeting, that they will more likely begin to tax, to some extent, these pensions. It won't be zero any longer. It will be something. They are in the process of deciding politically what that be. Obviously, the demand for housing in Portugal, particularly in the areas of Porto and Lisboa, is huge. Mainly from people benefiting from this particular status with the pension. Also for the people looking for the visas, for the European visas, the golden visa that they call for people who invest something like half a million EUR, they have access to the-
To the Portuguese passport. I think that's going to continue. Maybe it won't be at the same speed, maybe it won't have as much impact because there is a lot of construction going on. A lot on relative terms. Obviously, this is a small country. There's a lot of construction going on in order to meet this demand. I think it's going to continue to have a positive impact on Portugal. It won't be as aggressive in terms of salary, price increases as we have seen. I think you should factor that some of this is going to continue to happen. You know that when the country gets better known, there is also a momentum created there, and probably it's going to continue to benefit from that. I would be optimistic on it.
Any other Banco BPI-related questions? Okay. We'll go back to the previous order. We finished with Andrea. Marta.
Thank you. Marta from Merrill Lynch. I've got a follow-up on capital. What do you expect to be IFRS 16? Is it going to be a significant impact in January 2019? Second, the Danish Compromise. Some other banks in Europe implicitly are assuming that it may go at some point. Do you expect to stay for the next three years? If the status quo remains, do you think there's a risk that the current solvency ratio in your life insurance business goes up? Because it seems low compared to standalone insurance businesses, 140%. Another question is on consolidation, of course. On the one hand, we've got, with few exceptions, banks in Spain not making their cost of capital. Competition, as you've pointed out, is fierce. On the other hand, you have the strongest currency in the market.
You're trading at a nice premium to your tangible equity, not 20%. Are you going to seize the opportunity and use this strong currency? What needs to happen to see more consolidation in Spain, do you think? You've pointed out MREL, TLTRO as a big challenge. Other banks are shying away of that issue. You're being very honest, perhaps to put pressure on the market, and cause a de-rating of your peers. Do you think consolidation will happen in 2019? Thank you. Just a brief one on your NII. How much is coming from interest accrual on your NPLs today? Thank you.
Okay, Marta. To be honest, I didn't hear the first question.
IFRS 16.
That's my pleasure to give it to you, Javier, as well. Let me answer first briefly on Danish compromise. We have a view that it will be maintained. We see no reason for that to change. We do not see a risk for a solvency ratio at the VidaCaixa company level to change. We have, I think, a comfortable situation there. It's a very profitable company, as you know, and plenty of earnings generation and a big buffer just because of earnings generation. With respect to consolidation, we would like to have a stronger currency, not for consolidation purposes or not. Obviously it's your judgment, as a collective group, what's the value of the bank. We have plenty of things to do. I probably bored you with my presentation.
It's full of things that we actually need to do, consolidation will distract us from doing what we think we need to do. We continue to have a position where we are not financially attracted to see if at some point there's an arbitrage. We are very happy with our business model, conscious that we have a lot to do, particularly over the next three years. Hence, with a position of reactiveness, if at some point there is something that comes to us as obvious and attractive, we will look at it positively. Recent history suggests that that is unlikely to be the case.
With MREL and TLTRO, we are being very open what it means for us, it's quite obvious for everyone that for banks that have a higher degree of access to the capital markets, this is more manageable than for banks that have less. Some of the rules are not yet clear. We do not know exactly for us what will be the MREL, even if we have a pretty good sense for us and for the others, and the timing in which it is required for us and other banks. I think everyone is speculating as to whether TLTRO may be prolonged in one way or another. I don't know, but we're spending relatively little time in thinking about others and a lot of time thinking about the many things we need to do.
IFRS 16. Well, the impact on the P&L is immaterial, I would say. The results into a risk-weighted asset inflation also, with some capital impact. I would put this amongst those impacts of those 100 basis points. I think it would be probably around up to 10 basis points, no more than this. You will see also a reclassification, a reclass between amortizations and expenses. Due to this, you know it very well. On Solvency II, we are comfortable with the position of VidaCaixa. I think that when you compare it to other peers, also you have to take into account that VidaCaixa is 100% capital with no transitionals on Solvency II. VidaCaixa is not, let's say, listed or issuing in the market other subordinated instruments, thus probably does not need to compare so theoretically good to others that are in the capital markets.
Also, in this, let's say, 140s area, we are comfortable. We have not ever had any kind of pressure from the supervisor or regulator to increase this solvency ratio. VidaCaixa has a large matching adjustment portfolio with very low risk profile, as long as this Spanish sovereign does not default, something that it's our plan A. We think that it's not in our plans, and so far, it's not in our plans, to summarize, to increase the solvency of the insurance company. You asked about the impact on NPLs. Well, NPLs, you see the target that we have for NPLs, just 3%. The contribution on NII of NPLs will be low. If I remember well, it's a yield on average around 2%, but as you see, the proportion is quite low.
Can we go through this row here at the back, Marta Bastoni?
Hi. This is Marta Bastoni from Bloomberg Intelligence. My first question is a bit general. You have 90 basis points of improvement in your scenario, coming from EURIBOR, which obviously is impacting a lot your ROT outlook. What is your plan B, if there is any, and how fast this can be implemented? Is it, I don't know, faster deleveraging, asset sales, cost cutting? The second question is about the return on tangible equity and the valuation adjustment that you are putting in your calculation of your target. What kind of change in this valuation adjustment you have compared to today? Thank you.
I start with the second one. On our projections, we have considered that the valuation adjustment is the same as today. Just to consider a figure for our projections. If you compare our profitability on a trailing 12 months basis, comparing the same methodology to the other, the difference is just 10 basis points. I would say that it's not remarkable as of today.
The first question, Marta, you mentioned a figure, I believe, of 90 basis points. I understood the question, some part of the beginning, I'm not sure what exactly.
How much rates go by.
Yeah, you mentioned how much rates go by. It's actually 80 basis points and not the full effect is felt in 2021 because.
Yes. The change from today's EURIBOR, minus 20 to 70.
All right. Okay. It's just that number. What we have presented today is a central scenario base case with a certain level of targets for 2021. We have also, for the purpose of comparison, say, by the way, how much of that is directly related to interest rates? Hence we go from the plus 12 to the plus 10, and the impact on revenues that Javier mentioned. What we have not elaborated is on a fuller scenario in which now the base case is no movement in rates. Do we take any other management action? How do we change that? It's not incorporated. The figures are just sensitivity. Would we look at what else can we do in that scenario? Of course, we will.
Do we think that the more strategic transformation that we need to do is imperative whether we are at 11 or at 10 or at 12 return on tangible equity? The answer is yes. We are going to look through the period for many important decisions that we need to take because they are critical to our long-term position. We do not give up to find other tweaks in managing the whole business, to offset a situation if it is prolonged of negative rates. We certainly in the past have found ideas. Whether their rates are flat or they increase, this is a projection at a given point in time. We are going to continue to see if we can do things better, even if the rates are growing at +12%. From +12% above, there is always incentive to try to do better things.
It is clear that this is just a sensitivity analysis, and we will continue to fight for better profitability in any scenario.
Could we continue over on the right here to Mr. Andrea Henry.
Thank you. Just a very quick question from me regards the 12% plus one, if this is already net of the RWA optimization or not. Thank you.
By RWA optimization, you mean any kind of action we may take or?
Yes.
Yes. It is including everything.
Yeah.
Yeah.
Can we move to the next row, please, Nacho?
Hi. It's Ignacio Cerezo from UBS. Couple of quick ones from me. If you can tell us what kind of capital leverage do you have against any litigation number that comes up bigger than expected, and specifically, you beyond the IRPH case. Thank you.
Well, specifically in particular, the IRPH, I think we have been discussing our exposure, Javier, at around EUR 7 billion. It's a complex case. We'll see how it evolves. We expect the Supreme Court position to be confirmed eventually. In any case, because it's quite complex scenarios, the number of scenarios are very different. It's difficult for us to quantify potential exposure from that. I know, obviously, the market has been trying to come up with different impacts of different legal issues, and I respect a lot the very difficult job you need to do because it's very complex. It's very complex for any of us.
Our best defense is obviously, apart from the legal case, in terms of what we're doing, is having a strongly capitalized bank, having a bank that is every year more profitable and hence that can absorb unexpected impacts, whether it's associated to this one or to some others. We have many attractive businesses, but our plan is to keep our very attractive businesses. During the crisis, I think we've been quite happy to see that we didn't take decisions that, in order to offset certain contingencies, created a loss of competitiveness or the ability for us to grow in certain areas. I think vis-à-vis any contingency, we'll keep having the same things in mind.
We are consciously running with a fairly high level of capital compared to our SREP requirement, one of the reasons is, in this uncertain world, whether it's for legal or for other potential contingencies, that we can actually absorb it, obviously, see what that impact is on our capital ratios, and then continue to create capital organically to repair capital very, or as quickly as we can.
Okay. We have another question in this row at the back.
Hi, this is Alejandra from Credit Suisse. You've announced a higher CET1 target than your peers, and also the fulfillment of your MREL requirements through reprofiling of senior subordinated debt. Does that mean that you've got a rating target in mind?
Well, we have done a lot and we have improved in recent years. Personally, my aim, I think that Gonzalo will share with me, is that we would like to be at some point single A. That's clear. This all in permitting.
Okay. I think it's time to move to this row. We'll take Nacho and then Alvaro.
Hi. Yes. I have two questions. One on what you were commenting before, that if rates don't come through, there will be other lines that we're looking at, particularly on costs. It will be more on reducing the structure. There is something that you can do more on the bargaining with trade unions. The other one on the NII, how much you have a very limited exposure in terms of bonds. Is there any change on that within the plan or not? Thanks.
On the first one, obviously, we need to sit down with the unions and find a reasonable agreement, and we will do so. I think this is likely to take a few months. It's probably unlikely to be unaffected by the level of rates in this period. We will try and do something that makes sense, that is positive for shareholder and at the same time is acceptable for unions. Obviously, these discussions are complex, are lengthy. We need to discuss many things because it's not just a question of number of people, it's how do we manage and have flexibility going forward. Certainly, we will do our best, and I'm sure we'll come up with a plan that is sensible from the point of view of shareholders and creates value. Javier?
Well, on the ALCO portfolio, you know that we have today a portfolio of around EUR 30 billion. Of this portfolio, even more than half of this portfolio is, let's say, for pre-funding of the TLTRO that you know that we are, according to plans, we are envisaging to redeem in 2020. I think that the size, I have commented this in different occasions, unfortunately, the market is not there. We think that we may have a structural portfolio other than this, I would say that will mature by itself in 2020, 2021, of a size between EUR 30 billion and EUR 40 billion. I think that is according to the liquidity buffers that we want to hold to run the bank, always in a comfortable liquidity position.
At the end of the day, we will hold more or less this amount of liquid assets, no doubt that at some point we can deploy those into long-term bonds. Being those Spanish bonds or from other core issues. This is something that probably during the horizon of this strategic plan is something that we may do.
Hi. Álvaro Serrano from Morgan Stanley. Two questions. First of on NII trajectory, you've given the 5% CAGR. Obviously, you've also explained the rates and the loan growth, but at the same time, you've been very conservative on the MREL cost. When we think about how that's going to look, obviously there's an element of being back-ended loaded, but you're currently growing NII at 4%, give or take this year. Should we assume there's going to be a significant slowdown before it accelerates? I'm just trying to contextualize the X rate is plus one CAGR, which is, Gonzalo has explained, it's purely a model input. When we think about it, if you can give us some color of what you're thinking. Second question is on capital, on the 12%, if we put the buffer to one side. Before it was 11 to 12.
In that 12% going for the higher range, when you think of the next three years, do you think there's any risk? Do you factoring any possibility of a countercyclical buffer being introduced in Spain? Clearly the loan growth, we all wish probably that that was an issue. In other countries where consumer lending has picked up very fast, the regulator, even though mathematically it wasn't supposed to come in, regulators have actually put it in. Do you think there's any risk of that happening? This financial stability report seem to be making a big deal about consumer lending. Thanks.
On NII trajectory, so far this year, we have had some tailwinds. We have had some expensive redemptions. We had expensive subordinated bond that thanks to our issuance we have been able to call. Also, we have had other expensive wholesale maturities, legacy wholesale funding issued back in 2012, et cetera, very high spreads. Unfortunately, we don't have this tailwind for the future. At least the tailwind is weaker. At the same time, we face higher funding cost. We will no longer have funding cost because of MREL. The latest issue we did in October, we paid 145 basis points over six-month EURIBOR. On top of this, by 2020, the numbers are done with TLTRO redemption and a -40 basis points. This will be substitute by something that is clearly more expensive than this.
Once you strip those tailwinds and you face these headwinds, you have a few more than the growth of the loan book, which by the way, is expected to grow by more or less 1%. This is, according to our best estimates, is in the case that rates were to be as at today. With 12-month EURIBOR at -15, et cetera, is where we would be with an NII growing at 1%. This is our best estimate. If you look at the sensitivity that I already disclosed to you, 15% rates from where we are today to, let's say those 70 basis points withdraw by 2021. You look at the sensitivity, this is more or less the impact. Is where we are.
The impact of higher rates, mainly on the mortgage portfolio, if you look at the ladder of the bridge of the NII bridge, in case rates do not go up, well, the mortgage portfolio will not have a positive step. This is clear. That's it. On the second question, on the countercyclical buffer, it's not our expectation that it will be changed. It's not our expectation because the economic, well, the macro environment or, let's say, the balance of the I mentioned it at the very beginning. The growth balance is, let's say, very calibrated in Spain now. The external sector is balanced. You mentioned the consumer lending, et cetera, but I gave you also a piece of data. It's clearly below where it was three, four years ago, sorry, during the crisis.
It's not our view that it's not, let's say, if I may say, the body language or the language from the supervisor is not this one. This is our view.
Yes. Obviously, as a reminder, I think we presented some data last quarter precisely on the relative weight of consumer lending vis-à-vis the peak and vis-à-vis other countries. At this stage, I think the evidence doesn't indicate that there is a sort of a sector problem or a reason to consider some macroprudential actions on that particular topic. I find it normal that supervisor reminds people that consumer lending is risky because it is true, and obviously, we all need to make sure that we maintain great underwriting standards properly in a moment where there's very limited yield in many areas, and there is some in consumer lending. I find it useful, but I do not think it represents the fact that today there's a problem. It's a message of let's be cautious looking forward, which we certainly are doing and intend to continue doing.
Okay, moving on to the next row. If we could take a question from this gentleman here, Daragh.
Hi. Daragh Quinn from KBW. Two questions. First, just on Telefónica and Erste Bank. Listening to the few hours of presentations, nowhere is it obvious that you should be investing in Austria and Eastern Europe. Is that really the best use of your capital? I am surprised you are not talking about it in the same way you talk about the investment in Angola. Surely it should be non-core. Similarly for Telefónica, given the impact it has had on capital, really, what is the justification for holding that stake? The second question, you described the impact on return on equity from a lower interest rate environment. If that scenario does play out, how do you expect to manage cost growth and the investment in costs? Will you moderate cost growth to make sure that there are always positive jaws during the period of the plan? Thank you.
Thank you. We take good notes of your views. I do take good thought of those views. I think we generally care about the views of shareholders and investors. I think if you look at what we have been doing in the past, we have been acting generally in line. At this stage, our view is that we have productive and attractive value-producing investments, but obviously volatile. We understand what you say. In this case, obviously, we do mark to market. In the case of Telefónica, it is an unrealized loss, but it is from a point of view of shareholders' capital, it is real. We have unrealized gains in the case of Erste Bank. In both cases, we have businesses around and growing businesses around these stakes. It is a philosophical debate. We opted not to get into that during this investor day because it obviously consumes time.
We have made very clear that we used to have too many of these investments. We have made tremendous progress on that front. We are saying for the next three years, we think these are investments that are going to be producing value for shareholders. We completely respect your view, which based on what you said is obviously different. With respect to the actions and cost management, we have just announced a significant transformation of our branch network. We have pre-announced it because we had this investor presentation. We are going to start a discussion with unions to see how we affect that. We are certainly moving in that direction. Today that is taking place at the same time in which we feel we need to invest in the business.
I am not sure how rates are going to behave in the next three years. I wish they behave more than the market expects. There is a good reason to think that we may have good news rather than bad news. Obviously, if it is good news, we will celebrate and discuss what we do with this extra profit. We are all concerned about what it is bad news, they do not come. The question for us as a management team is, if we believe we need to do certain things that are generally necessary for the business
Do we stop doing it because rather than 12, we are going to end up at 10.5 or 11? The answer is likely no, we will not stop doing them. We will end up with a lower return on tangible equity if that happens. Is the principle. Does that mean that we are going to do nothing and relax? Obviously not. We are genuinely thinking that in order to keep growing revenues properly, obviously then revenues are affected by level of rates, but the trend line is one where we need to continue investing in the business. Hence, it is a three-year period in which probably many of the benefits of our business model are not yet with us. From that point of view, it is not a particularly easy part of the cycle.
It wasn't the last four years, and at the same time, we managed to increase profitability. It was good from a credit quality point of view, not from a revenue generation point of view. We managed to improve a lot. You have our commitment that we will do it. There is going to be potentially some If rates do not increase, there will be some impact. We will try to manage it to limit, but there will be some impact. If we see something that is more fundamental, obviously it will force us to rethink again about the business model. It is not easy to change the cost trajectory, as you well know. Could we have a microphone here for-
Yes
Britta? Thank you.
Yes. Thank you. Yes. Yeah. Hi, it is Britta Schmidt from Autonomous. I have got two quick questions, please. One on the life insurance market. You expect life risk premiums to grow by a CAG of 9%-10%. What gives you the confidence that you can extend market share? How do you expect the market to develop, given that last year has been somewhat disappointing from a very high level, and this year also doesn't look like the market is going to grow very much? My second question will be on the cost of risk. Pablo has already commented on the BPI expectations around the 20 to 30 basis points level. Are there still benefits on a CaixaBank level from purchase price adjustments made on the previous acquisition? Do you expect the 20 to 30 basis points also to be booked on a CaixaBank level for BPI? Thank you.
Gilson, perhaps on the second question, you are right. The PPA will still allow us to offset mostly all the impact that Pablo commented. BPI will not be a net contributor to cost of risk during the next three years. This no doubt will help to keep our cost of risk at group level below the 30 basis points. That is our target. I think the first question was with respect to the life risk insurance, Britta, wasn't it? To what extent we can increase market share, et cetera. Well, there is one data point, which is obviously a track record and the speed at which we have. We do not see a reason for a slowdown. We have many initiatives launched in separating what's life risk from the credit-linked risk insurance, which has obviously been an important source of profits.
Our advisory model has been changed to take a client through their financial needs, current financial needs, and expected financial needs. One of the key elements is how much money do you need to have in safe securities, cash and equivalent, as a buffer for contingencies. Okay. One of the key outcomes from this advisory process, which we are running through our 1.5 million affluent clients, is actually if you have a proper life insurance, then you can allocate more of your financial portfolio to long-term savings. Our network is going through this advisory discussion with our clients, and hence forcing the discussion, the typical asset allocation discussion, to include as well the life risk. This is something that is already implemented, but it is gaining traction, and I expect that it will continue.
Second, we are expanding all our life risk proposal and some of the non-life products as well to the SME segment very actively, where we see significant potential. Third, I would say there's a number of detailed initiatives on this front. It is one of very clear action plans that we have, coming from pretty good track record to make sure that we continue doing things to continue along that way. From a macro point of view, we feel we still have enough room to further penetrate our client base compared to other countries and compared to what we think we can achieve. This is the best in which we think for the next three years we can deliver on this area. There's a lot of thinking and specific actions behind them. As with the rest of our expectations, it will require hard work.
Based on what we have achieved in the past, I think we will deliver on that front.
Yeah. Could we take a call on this row at the back from Benji, please?
Hi, it's Benji at Jefferies. I'm just picking up on the insurance question. We like to ask about the interest rate sensitivity on NII. I'm just wondering, in terms of growth and profitability of the insurance business, in terms of your targets, have you embedded any impact from a higher rate environment? The second question is just around the outlook for costs. You've hinted that headcount will go down. If we look at slide 60, I'm trying to back out from the information there. I'm getting to perhaps a 1% headcount reduction. Is that a number that you would agree with, disagree with? Thank you.
Well, if I may, with respect to the insurance business, we benefit particularly in environment where there's a steep rate curve, and where investing in the long term really pays versus the short term. We are basing our expectations on the current situation and the market, the forward rates, to the extent that we see something that clearly helps, or long rates in particular. Life insurance will become more attractive to clients, and it will be easier to do or to outperform our current projections. In any case, as with life risk, I think we're being generally ambitious on this front. It is precisely where we have our core competencies, where we see the opportunity in the market, and where we have a strong attraction. There should be, obviously, a room to do more if we have better circumstances in terms of long-term rates in particular.
Over here.
Down to 1%. I'm sorry, I
You were asking whether 1%, Benji, was a correct number or not.
Yeah, just in terms of the headcount reduction that you've hinted at in slide 60. You give some metrics. We're just trying to back it out from that information.
No, 1% is not a good estimate of reduction. It would obviously be larger than that. I don't want to, and I know, but we can have many questions, and I'm sure you all have many ways to try and estimate a number. We're not trying to be unhelpful by not saying a number. It is unhelpful for us in the context of a forthcoming discussion with labor unions to be very specific on this front. Certainly 1% is not a number. It's too low.
Now we've moved to the other end completely. Sophie, all yours.
Thank you. I wanted to ask around the stamp duty costs. Are you both seeing higher stamp duty costs now the customers, or how should we think about it going forward, regarding the stamp duty cost? Also regarding your trading income, how should we think about trading income going forward in your 12% ROE target? What kind of trading gains are you modeling? My third question would be on the NSFR impact from TLTRO redemptions. You mentioned that it will fall, but by how much, please? Thank you.
Take the latest one. Well, TLTRO, the maths are quite simple. The exposure is EUR 28 billion. We are having this funding at minus 40 basis points. If we redeem this on time as we expect, the maths are pretty clear, no? On trading income, I think that we have done fairly well in a situation where we had lots of levers to play, if I may say. We had a large legacy portfolio at a profit. We had different, let's say, hedges, interest rate hedges on some also legacy issues we could play. I think that we should expect a lower trading contribution going forward. We have been guiding somewhere between EUR 250 million-EUR 300 million. I think that we may be probably lower than EUR 200 million going forward, no? Because it's a more difficult environment for the ALCO to find opportunities.
Although we are improving our capabilities and our franchise in CIB, and we are gaining more revenues from our CIB activities related to derivatives with clients, et cetera, I think that somewhere between EUR 175 million-EUR 200 million probably is the right number going forward, no? There was a question on this. Sorry.
On the impact of the stamp duty.
Well, if I may, obviously, there's a new regulation, that is putting additional costs on the product. We changed our mortgage product, before the new regulation was passed, to focus again on a simple mortgage with a fixed rate component, no upfront commission, and us absorbing all the expenses. On this basis, we think we're having an adequate return on the product, and the product obviously has to take into account all costs to make sure that it is appropriately priced, no. We will continue to evolve our offer, depending on market circumstances. Again, there's obviously many of them that can change. We do not see at this stage, or we do not expect any change for the time being.
Okay. Well, thank you very much for attending. Apologies for running over the time. We, I think, ran over by about half an hour or so. Jesús, Maria, Laura, and myself are here. Please follow up with us over the next couple of days. I'm sure you'll have questions. Thank you very much once more.