Good morning and welcome to CaixaBank Results Presentation for the Third Quarter of 2024. As usual, we are joined today by our CEO, Gonzalo Gortázar, and our CFO, Javier Pano. In terms of logistics, we plan to spend about 30 minutes with the presentation and about 50 minutes to one hour with the Q&A. The Q&A is live, and you should have received instructions by email on how to participate. My team and I will be at your full disposal after the call. And without further ado, Gonzalo, the floor is yours.
Thank you, Marta. Good morning, everybody, and welcome to this presentation. You've seen our results this morning. I'd say, as the slide says, it's very strong operating momentum. Activity levels, particularly in customer funds, is what I would highlight the most. New lending, up 20%, although in terms of balances, as you will see later, obviously we're still in a very low growth environment, but some positive signals here. And when you look into net inflows, protection premium, and then customer funds, both off-balance sheet wealth management balances are up 9%, and on-balance sheet deposits are 5.5%. Quite remarkable, not only in nine months. There's very strong activity growth here, which also explains, as Javier will get into, how is our customer spread, etc., evolving in the quarter. Based on great news, which is the fact that we are attracting more funds and growing nicely.
Revenue growth is obviously relevant, both in terms of NII. If you look at it on a nine-month basis, if you look at it quarter on quarter, we managed to stabilize NII. We have been expecting growth, sorry, negative growth in sort of quarterly NII, but we managed to avoid that one other quarter. Cost income, cost of risk, all pointing into the right direction. And then that leads us to a fairly solid result in terms of net profit. And obviously, again, significant capital generation. This quarter, we are announcing the interim dividend at the top end of the range that we gave some quarters ago, so 40% of the first half-year result, EUR 1.5 billion, sorry, EUR 1.1 billion.
And then even if we have not yet finalized the fourth share buyback, we have already received approval for the fifth one, which obviously we will execute after we present our plan in the Capital Markets Day and obviously after we finalize the fourth one. So activity, profitability, asset quality, efficiency, and capital generation, all moving in the right direction, in line with expectations, but it's nice to see them mostly at the top of the range in almost all dimensions. Quick reminder, we want to continue to emphasize, and we do this obviously for you, but also for a wider audience that we're a different bank, we have a different place in society.
Some of the initiatives that you see on this page in terms of financial inclusion are, I would say, outstanding compared to other players in the Spanish market, microfinance as well, our social DNA, our volunteering effort, which we have had in Valencia now, terrible rains and flood, and we're having already our volunteers helping out besides a number of initiatives that we're taking in terms of extending facilities and facilitating insurance payments, all that here in this heavily affected region of Valencia where we are currently based and talking from Valencia. ESG, well ahead of our mobilization finance commitments, sustainable finance mobilization, sorry, and obviously looking forward to present in the next Capital Markets Day what our targets are for the following year. Spanish economy doing very well. You see how conservative we've been in our projections.
I think generally most economists have been in Spain, but always surprised on the upside. Last projection is for 2.8% growth this year based on yesterday's figure for the third quarter. There's clearly upside towards the 3%, I would say, but obviously our economic research team will come up with their own conclusions, but clearly, economy growing 3% while Europe is growing below 1% is quite remarkable. Portugal doing well this year, not as well as Spain, but as you can see, we're expecting them to converge into 2025. Employment, PMIs, tourism, generally we see the right trends and obviously very significant divergence with the Eurozone, and nicely this time is for the better. Okay. Business volume up 4.5% in these nine months. Obviously, it's mostly related to customer funds, but you see how we have now regained our ability to gain clients, 200,000 in the last 12 months.
Also with increasing the proportion of relational, more loyal clients and generally with an increase in market shares in Spain and as you will see later also in Portugal. Loan generation, new loan production up 20%. You see particularly higher in mortgages. Obviously, there's a significant process of amortization as well, payments and prepayments, scheduled payments and prepayments. But as you will see, the balance of mortgages is also growing. Consumer lending is up and new business lending also with some positive momentum. When we look at the balance sheet, I think one very remarkable thing is consumer lending. Again, another 1.5%, 1.4% growth this quarter for a total of 5.9% in nine months, which is obviously way ahead of our expectations for this year. And the dynamics are pretty good also in terms of asset quality or what we see from the behavior of our clients.
The other highlight is mortgages were basically flat in the year, but you see on the bottom right-hand side how we have had now two consecutive quarters of stock growth and our stock of mortgages growing, which is obviously pretty good. Businesses are up as well here. We have a bit of seasonality in the third quarter. I'll have to see how the fourth quarter evolves. Hopefully, again, we'll confirm that inflection point that we were talking about last summer when we presented our second half results. But clearly, given the seasonality and the traditional weakness of the third quarter, to me, these are pretty good numbers the same way that the customer funds were quite remarkable. And here you have some details. The 9% year-to-date wealth management in the quarter and deposits, again, pretty good.
Deposits are stable this quarter, but remember we have big seasonality, positive seasonality in June. We were expecting a drop in deposits this quarter. Actually, they did not come down, and I'm sure Javier will elaborate into that, so I won't spend more time. But again, very good dynamics. You see some of the market share figures quite good, giving us comfort that we can actually build on our ability to grow volumes faster than our competitors here in Spain, as we have traditionally been doing. Wealth management, volume growth, net inflows, all pretty good. You have the numbers. Market shares, as you can see, particularly remarkable again in insurance, savings insurance. And then the fact that we have both an underpenetrated customer base coming from original bank clients that is gradually moving and converging, but we still have plenty of potential there.
And the fact that overall the market is still underpenetrated vis-à-vis the Eurozone makes us fundamentally bullish on this business. Something similar in protection insurance in terms of our ability to further penetrate former bank clients and the convergence with Europe. You can see those statistics on the right-hand side. And again, the quarter has been pretty good, 11% growth year-to-date in premier and then good diversification between all the non-life components, health, home, auto. And I can see obviously opportunities across the board as well here. BPI, mentioned it briefly. Good performance, return on tangible equity 20%, cost income below 40% at 39%. Pretty impressive numbers for a bank that seven years ago when we took control was obviously with very different statistics, cost income above 70% and very low profitability. It's doing a fantastic job, BPI, asset quality, coverage, and market share, all doing well.
Obviously, still plenty for them and for us to do in Portugal. Revenue is up based on all the factors that I mentioned. Efficiency, cost of risk leading to our return on tangible equity at 16.9%, just very close to the 17% and above that we are expecting for this year. And one final word on capital. I mentioned the highlights that we've actually generated a lot of capital, 171 basis points year-to-date based on high profitability and still pretty good or pretty low rather than pretty good RWA growth. We have announced the fifth share buyback, as I mentioned before, and also the interim dividend payment. And with that, we basically have either executed or announced the ongoing EUR 9.5 billion of capital distribution during this three-year period.
There is another EUR 2.5 billion pending, which we obviously expect to get to between now and the end of the plan, including obviously distribution of the final dividend and any additional capital distribution that we need to do to get to that EUR 12 billion, which is obviously clear now, very close to us for it to be reached. And with that, I will leave you with Javier.
Okay, thank you, Gonzalo. And well, good morning. From my side, I will try to be brief with my comments on details on the P&L and the balance sheet, starting with this consolidated income statement, focusing on the evolution for the third quarter. Net income, EUR 1.57 billion. That is an increase of slightly over 3%. You know that the third quarter is usually a quarter with some seasonality impacting some of the key P&L lines.
So hence, you may see gross income up by 1.9% year on year, but down 2.7% quarter on quarter. It's not the case for net interest income. That, as Gonzalo said, is progressing also quarter on quarter. We'll elaborate on the following slide on that topic. Wealth management doing really well, up by close to 12% year on year, close to 6% quarter on quarter. Protection insurance with strong commercial dynamism, although we have some non-recurrent factors impacting the evolution year on year and quarter on quarter. So we'll elaborate on that in a few minutes. Then banking fees, that as you may see on a year-on-year basis, close to flattish, as this, let's say, underlying pressure from maintenance fees on current accounts is gradually fading. And quarter on quarter with that seasonality impacting a few of the key businesses among those CIB, the third quarter always softer.
Then on other revenues, not much to remark. I would only say that we have somewhat lower trading income this quarter. And then below, on total operating expenses and on those charges, I say that this is everything doing according to plan. So we are set to meet the guidance for the year on both. And then finally, other provisions with some improvement, as you may see. Let's move now to the details, starting with NII. I will have a more detailed explanation about some of the different moving parts here. So year-to-date, we have NII up by 13.6%. Quarter on quarter, as we have said, a little bit positive. That commercial NII that is having a negative contribution as we have loan index resets that are impacting negatively, but this is at least partially compensated by better performance on the commercial gap and higher average liquidity.
On top of that, we have a positive contribution from ALCO mainly as precisely lower rates are already filtering into our wholesale funding that, as you know, is mainly swapped into floating. So below, you have the evolution of the customer spread, and it's down by 15 basis points to 343 basis points. Then what is behind that is precisely that we have the back book yield of the loan book down by 12 to 447 basis points. And then client fund costs that are up by three basis points. On the right-hand side, we have added further additional information. Gonzalo has already commented that we have had a really strong quarter in terms of inflows into deposits. I would say that close to offsetting the really strong seasonality, we usually have positive seasonality in the second quarter.
Remember that it was like deposits growing by EUR 20 billion, so we have been able almost to compensate that in the third quarter. As a consequence, average deposit balances are already 4% up year-to-date, 3% up quarter on quarter. We have had strong inflows, some of those coming from large depositors, public sector. As a consequence, the weight of interest-bearing deposits has gone up by 2.2 percentage points to 25.8%, but at the same time, the cost of those same interest-bearing deposits is already trending down 2.86% for this quarter on average and set to clearly come down as a major part of those are fully indexed, but what we have added here is precisely the evolution of non-interest-bearing balances. This is, as we call it internally, the jewel of the crown, and we have been able to maintain this stable quarter on quarter.
And as you may see, pretty much stable in the first quarter of this year. So as a consequence, we are now expecting fiscal year 2024 NII to be over EUR 11 billion . Let's move now to revenues from services. On that front, year-to-date, we are up by 3.8%. Wealth management, as you see, up by more than 12%. Protection by 6%. And precisely on that front, we have some non-recurrent factors that are impacting the quarter on quarter or year on year. Quarter on quarter, remember that on non-life insurance, we had last quarter an extraordinary positive in Portugal, and this is impacting the quarter- on- quarter evolution. And year on year, on the third quarter last year, we had an exceptionally low pace of claims on life risk insurance. And as a consequence, the year-on-year comparison is less favorable.
As I said, this business, as you know well, we are strong believers and is set to continue to do really well in the long term. Fees, as I commented, that seasonality impacting CIB and maintenance fees that are gradually having less impact, as you can see on the year-on-year evolution. A few words on costs. Up by 4.5% year-to-date. We are planning to meet our guidance. Remember, costs slightly below 5%, although we are going to be at the upper bound of that guidance. You may see on the central chart below that our cost-to-income is hovering circa 39% and on the bridge on the right with strong contribution from revenues. I think that finally on comments on the P&L, some words on loan loss charges. It has been an eventful quarter, I would say, with cost of risk at 28 basis points on a 12-month trailing basis.
We continue to hold comfortable NPL coverage at 71% and still maintaining unassigned overlays circa EUR 500 million. Moving to the balance sheet, some comments on NPLs down by EUR 100 million. EUR 10.4 billion is the stock. As a consequence, the NPL ratio remains pretty much unchanged, 2.69%, well below the average of the industry in Spain, as you may see. You have the breakdown across the different segments, as you may see, very close to the average. So there is not any particular segment deteriorating or showing signs of deterioration, something that actually we are no longer expecting in any case. A very ample liquidity position, which is part of our DNA, as you know very well. Liquidity coverage ratio at 213%, a stable funding ratio 148%, more than EUR 200 billion of liquidity sources, EUR 224 billion. A very stable deposit funding, 77% retail, 23% large depositors.
This has increased a little bit, partially due to those inflows I mentioned before. A few words on MREL and the funding plan that is actually completed for the year successfully. We closed the quarter with an MREL ratio at 28.33%. The requirement is 366 basis points below, so with a very comfortable buffer, as you may see. We are complying with requirements, mainly with subordinated instruments. For the year, we have issued EUR 7.3 billion, of which 39% ESG issues successfully. The third quarter, EUR 3 billion, EUR 1 billion, Tier 2. For the year, we have issued more than 30% in foreign currency, mainly U.S. dollars, continuing with currency diversification we already started a few years ago. Finally, capital. We are already deducting this fifth EUR 500 million share buyback, just announced today, - 22 basis points on CET1.
And from there, we have + 71 basis points of organic capital generation, - 43 basis points from dividend accrual and RWAs, and then minus 5 from other impacts, resulting into a CET1 ratio at 12.24%. That is a very comfortable MDA buffer at 362 basis points. Continuing increasing shareholder value with the book value per share up by more than 11%, once considering the dividends paid. And well, you know that we keep with our evolution policy. That fourth share buyback, that is approximately three quarters already executed, the interim dividend with a DPS of EUR 0.1488. And this fifth share buyback approved by ECB and by the board and set to start at some point from November the 19th. As November the 19th is our Investor Day, the day we are presenting a new three-year plan. Remember, in Madrid at 9:00 A.M.
Local time, we are happy to see that plenty of you have already confirmed attendance. So we'll be glad to host you there. So thank you very much, and I think we are ready for questions.
Yes, please. Operator, first question, please.
The first question is from Antonio Reale of Bank of America. Please go ahead.
Good morning, everyone. It's Antonio from Bank of America. A couple of questions for me, please. The first one is on liquidity, which continues to be one of your key strengths. And if I'm not mistaken, this quarter, I think you've increased average liquidity by almost EUR 10 billion, which is a big number for a bank that doesn't need it. Now, you're paying for this, of course. And if I heard correctly, I think, Javier, you said 2.8% or so, but then you got a positive carry against the ECB rate.
I guess you can continue to make money as long as your cost of liquidity is lower than the ECB rate. So my question for you is, at what level of ECB rates do you think that this math no longer works for you? And I'm not necessarily looking for an answer, but I think your general logic around it, I think, will be very helpful. That's my first question. The second one is on your activity levels in wealth management. We've seen nearly EUR 9 billion of net inflows in the first nine months. Can you give the sense of what the product mix has been for us to understand the fee margin coming from this, and how can this affect your fee growth outlook going forward? Thank you.
I think that's for you.
Okay. Okay, Antonio. Good morning. Well, in terms of deposit growth, yes, you are right.
We have had a really strong third quarter, as I said, close to offsetting the very strong seasonality, positive seasonality we had during the second quarter. We are growing on liquidity on deposits, but for the good reason. First thing, deposits do have a margin. Usually, those large depositors, let's say that the rate that we agree with them is an index. It's basically on the overnight index. And there is, I would say, almost always a margin, and it's always a positive margin. To the point about the ECB mismatch, when rates go down, the same will do what we pay for those deposits because it's automatic. It's indexed. That positive margin always will be within the bank.
This is probably we have had some extraordinaries on that front from large depositors, but I would rather focus on the underlying, which is precisely what I mentioned while presenting the slide, the jewel of the crown, as we call it internally, which is precisely those non-interest-bearing deposits that are remarkably being stable during the quarter. So we are not cannibalizing, let's say, that deposit base with transforming those into expensive deposits. So I think that this is the way we are focusing our commercial focus. So I would say that that's the case. And precisely, I think that I forgot mentioning when I presented the slide, but probably you realize that we have increased the amount of hedges during the quarter, so by EUR 7.5 billion. So we are now holding an outstanding amount of EUR 37 billion.
So basically, we are trying to hedge precisely that pool of deposits that are non-interest-bearing and to retain that spread for us as long as possible. So this is a little bit what is behind that hedging. At the same time, probably for those of you that follow that slide where we detail plenty of information about the ALCO activities, you also probably will realize that we have increased EUR 3 billion on fixed-rate mortgages in our quarter. So all that is gradually hedging the positioning of the bank, the sensitivity of the bank. You know that we are aiming this kind of 5% sensitivity to parallel shifts of the yield curve of 100 basis points. And this is why we are trying to hedge as volumes are doing better. But there is no mismatch in that sense. On wealth management, well, we are having strong inflows in the year.
Last year, inflows were probably more skewed towards annuities. It was probably 2/3 last year. This is a little bit over one quarter. So it's a little bit less. There was like a pent-up demand for the product that was when rates went up, the long end went up. So we were able to originate those products at a better yield. And I think that probably last year there was a pent-up demand into those. This year, still we have strong demand for money market funds. So I think that over time, this will flow into other products. So far, despite having a stronger weight of money market funds, we are being able to maintain quite a stable management fee that is on average circa 80 basis points for our AUMs.
Well, once you are into the mutual fund ecosystem, then you know that for tax reasons in Spain, you can move around different asset classes very tax efficiently. So we think that that process will accelerate eventually as markets keep doing well, etc. So it's a process that takes its time, and for sure it will come. I don't know if I am missing something else here, Marta.
No, we're done, I think. Thank you, Antonio. Next question, please.
The next question is from Maksym Mishyn of JB Capital. Please go ahead.
Hello, good morning. Thank you very much for the presentation and taking our questions. I have three. The first one is on loan book growth. You mentioned in the presentation that you were protecting margins in the third quarter. Could you please share some more color on what happened there? Do you see more competition?
And if so, in which segments has it been changing or most competitive? The second question is on the share of remunerated deposits. How much would have been your cost of deposits if there were no inflows of public sector deposits? And how do you see the share of remunerated deposits evolve as rates move down to 2% in the coming years? And then the last one is on taxes. Have you included any provision related to the recent revision of the special tax paid in 2023 and 2024? And what kind of impact do you expect from the changes currently proposed by the government? Thank you.
Thank you, Max. Let me start on two of the topics. On the loan book, you would say, or I would say there is very strong competition across the board.
Mortgages are certainly very competitive, and on the business front, it's also quite competitive. Banks continue to be liquid. They have capital, and they generate more capital. And growth is limited. I'd say you've seen our mortgage loan book growing slightly. The new production is pretty good, but the loan books are stabilizing now, moving from slightly negative to slightly positive there. And on the business front, generally, the market has still no growth. We're doing pretty well. We're also obviously helped by our growth in our international branches. So there's very strong competition. That is the reality. There's also a very visible offer in Spain that is not resulting in anyone being distracted, quite the opposite. I think competition is pretty strong across the board, and it's particularly intense in the asset side.
I say we obviously always look at protecting margins, but we cannot be isolated from the market environment. Overall, I am not expecting that to change. I think this is likely to continue to be fairly competitive on the asset side. That's the reality, and then across the board, I think on the consumer lending, obviously, price and margins have different dynamics because it's smaller. It's more just making sure that you have the appropriate sort of point of sale convenience being at the right point at the right time. And that will continue, I would guess, to be that way for most consumers. Others are also fairly price sensitive, but I wouldn't expect a change in the environment from that point of view. In terms of taxes, we have appropriate provisions for the current sort of tax reviews that are taking place.
It is not entirely closed, but certainly, as we see, we are a very conservative institution with provisions for these contingencies that cover appropriately our risks. The future of the tax is under debate. As you know, it expires this year. But actually, yesterday, there was a proposal to create a tax that is, I would say, in line with the existing one, but with some differences. We are analyzing those. The proposal is to create this tax for just three years, not as a permanent, but obviously two years up to now and then another three years. So it's not an initiative that we obviously like and support, and we will be vocal, and we are being vocal about the negative consequences of converting this tax into a kind of a more permanent one. But in terms of the impact on the future, I think it's too early.
I don't think it's going to be necessarily very different from where we are now. I would say, if I were in your shoes, I would sort of keep something in line with what the banking tax has been so far because what I have seen on the one hand is higher, but on the other hand, there are deductions which seem to me may offset each other. It's still early days, and we need to look how this evolves. Obviously, we're not going to stop actively explaining why we think it's not a good idea going forward to maintain this. Okay?
Well, Max, there are a few forward-looking questions that I am sure that in a few weeks, well, just less than three weeks, actually, we can give you further detail, the percentage of remunerated deposits, etc.
But let's say that you had a question about the deposit inflows. Let me elaborate a little bit here more. So basically, what happens here is that the public sector had direct access to ECB directly up to March 23. Actually, it continues to have access, but at a lower rate. So what is happening is that over time, during the last few quarters, plenty of balances that were deposited by the public sector directly into ECB are being recycled into the system. And well, this is having an impact. So if we were stripping out those balances, but just those balances, well, our average cost for the quarter probably would have been a few basis points lower. But I would not, I would say, reach too many conclusions from that because, as I said, I think that the first question, those are deposits that are mainly indexed.
We already hold 50% of our interest-bearing deposits that are indexed. The major part of those indexed to the overnight interest rate. So hence, we are basically set to reprice this downwards really soon. And as indexed to the overnight index, it's different. If you are indexed to the overnight index, that's indexed to 12-month Euribor because 12-month Euribor is more forward-looking, and actually, rates are starting to come down faster. But if you are indexed to the overnight, there is a small lag until the rate actually comes down. So I think that all that is probably having an impact. But well, in any case, all those different dynamics impacting NII are actually taken into account while managing our sensitivities, etc. So that's from my side.
Okay. Thank you, Maksym. And next question, please.
The next question is from Alvaro Serrano of Morgan Stanley. Please go ahead.
Good morning. I have kind of one follow-up, and sorry, Javier, because I know you're going to point me maybe to the Investor Day. But just on your 5% rate sensitivity, can you remind us because some banks have different assumptions here? I'm sure you're aware. What kind of mix shift would you expect in your either term deposits or interest-bearing mix? Because one of your competitors was expecting that with rates at two, the term deposits could actually the mix could fall by half. Just wondering what you have there in your assumption. And then a completely different question, maybe for Gonzalo . What's the logic behind the buyback announcing it now? We were kind of prepared for interim buybacks from the experience last year. Should we start to think about quarterly buybacks? Talk us through the logic and what to expect in the future. Thank you.
Thank you, Alvaro.
I am happy to take the second question and then let Javier. Our share buyback logic is obviously that we generate capital, that we generate capital that is above the 12% target level, and that we do this very recurrently. Hence, when we see that we have some decent size, we're not going to do buybacks probably smaller than 500. Never know, but we are thinking that 500 is a round number. When we get to having enough capital above 12% that equates to at least 500, we get into the approval process with the ECB. As you know, the ECB does not want to see buybacks announced until they are approved, which I understand why. Obviously, when we receive those approvals, and we received this approval a few days ago, then we have a board meeting to make it effective.
In this case, it actually was at the time of our quarterly results. So it was a natural thing to announce. While we see this capital generation at this pace, logically, what you should assume is that we have a level of above EUR 500 million beyond the 12% that we are likely to start that process. There could be at some point some circumstances. I will not commit to that sort of 100% of cases if we're expecting at some point that maybe there is a headwind here or there or our sort of views of the future change. We could be a bit more conservative. But otherwise, we want to be very disciplined, recurrent.
So you should be fairly confident that we'll continue to behave in this way as long as we create capital because risk-weighted assets continue to grow at a very low level, and we generate capital well above our dividend. This will continue. That's the plan. Yeah.
Hi, Alvaro. Well, as you say, plenty of that will be the focus of our next meeting. But we tend to think that in a positive rate environment, it's going to be difficult that for those clients that are already holding a time deposit, eventually, we'll stop having a time deposit, and those balances will shift into a non-interest-bearing account. So what is behind is more probably the thinking that we are going to be able to pass on lower rates into those time deposits than not the fact that those time deposits will disappear and balances will shift into 0% accounts.
And this is the case in our case in particular, as we have circa 50% of our interest-bearing deposits that are.
I think it's because we are in Valencia and we received these alerts. My apologies.
Yeah. It's an alert because of the floods. I don't know. Sorry. I was saying that we have circa 50% of our interest-bearing deposits that are indexed. So we tend to think that those will remain remunerated, although at a lower level because it's indexed. So my point is that probably it's balances that will not change that much, but at a lower yield, clearly.
Okay. Thank you, Alvaro.
Thank you very much.
Thank you, Alvaro. Next question, please.
The next question is from Ignacio Javier Ulargui of BNP Paribas Exane. Please go ahead.
Thanks. Good morning, everyone. And thanks for the presentation and for taking my questions.
I just have two questions, if I may. I mean, the first one is on fees. I mean, given the performance that we have seen so far in the year, how should we expect about the performance of fees into the year? You have a guidance for low single-digit growth on fees and on the wealth management fees and insurance businesses. How should we think about that? Should we expect this to gain more relevance in the future? The other question is on Portugal. If I just look to Portugal, you have been gaining market share over the last three, four years steadily. Bank h as done very well on both lending and deposits. Just wanted to understand a bit, how do you see Portugal, whether you think there is still organic growth opportunities and where you would potentially consider organic growth?
Thank you, Ignacio.
I'll start with Portugal. I'll say we continue to be very bullish in Portugal. I mean, the economy is doing well. I think there's a good basis for that structural growth to continue performing. Bank has done extremely well, continues to gain market share. Competition is probably more robust now than five years ago, but still, it's gaining market share, quality of service, perception of the bank, reputation, asset quality. It's really an outlier in a positive sense. We continue to see a great opportunity, not only for the country, but also for BPI to continue doing better than others. We have a great team. Honestly, we don't want to break that virtuous circle. The threshold for anything that is not organic growth is very, very high for us.
We expect to continue giving you good news about Portugal in the next years, indeed.
As for fees, Ignacio, I understand that you are talking about the whole complex of what we call revenues from services that includes AUMs, protection, and banking fees. Usually, the fourth quarter is a better one. Let's see if this is the case. So far, wealth management is doing extremely well. Markets performing well, adding into that. Probably this has added a more positive tone than our initial expectation. On protection, we had this kind of, let's say, non-recurrence that probably distorts a little bit, but the underlying is very positive, 6%. Then this kind of trade-off that we always have had with maintenance fees on current accounts, so far more or less mitigated, although there is an underlying structural pressure on that front.
So all in all, honestly, this low single-digit guidance is our best estimate now, potentially with some upward risk if the fourth quarter is quite a sound one. But let's see.
Thank you, Ignacio. Operator, next question, please.
The next question is from Sofie Peterzens of JP Morgan. Please go ahead.
Yeah. Hi. Thanks for taking my question. This is Sofie from JP Morgan. In terms of consensus net interest income, previously, you said that the previous consensus net interest income of EUR 10.2 billion in 2025 looked a bit low. The latest consensus is now EUR 10.4 billion in 2025. Do you think this looks more reasonable? And the EUR 7.5 billion structural deposit hedge that you did in the quarter, will this have any kind of positive impact on net interest income in the outer years? And then my second question would be just around the rationale for changing your chairman?
Your new chairman seems to be slightly older than the one who's stepping down. If you could just give your thoughts around the chairman change and what that means for CaixaBank. Thank you.
Thank you, Sofie. I guess, again, I start with the second question. I'd say the change in chairmanship, obviously, for a large organization happens from time to time. In this case, it is due to personal decisions, which we have to respect for the outgoing chairman, who will be leaving on the 1st of January. He's completed his mandate of four years after the merger. Obviously, now we start a new cycle with a new plan, etc. He thinks the bank is in a position of strength, which it is, in my view, and that this is the right time for him to move on. Obviously, we're very respectful of his decision.
I appreciate a lot. He's been a great banker, both in the last four years and obviously previously, back to his time at BBVA. But we need to obviously respect his decision. Then, at that point in time, the board convenes to decide after the appointments committee previously has looked at various options, and very quickly comes to a conclusion that there is one board member, Tomás Muniesa, who is currently Vice Chairman, and this is perfectly suited to take the job and just keep the bank running without any interruption because, obviously, Tomás has been involved with CaixaBank for 45 years. He's been the Vice Chairman and supports completely what we're doing, the plan, etc. We know him well because he's been in the management committee and then on the board for a long time. So, I'm convinced that that is going to work very well.
I wouldn't read into this anything that has to do with change other than personal decisions, and fortunately, the fact that there's someone on the board that is very prepared to take that important board chairman responsibility facilitates things a lot. I think on the executive side, basically, there's no real impact. We keep being very focused on what we need to do. We have the right strategy. We have the right starting position, and we have the right team in place. So I wouldn't expect anything of significance out of this change in the chair role.
Okay, Sofie, good morning. Yes, about market and analyst consensus for next year at 10.4%, I would say that, well, you know that rates are quite volatile, and we saw the last few days, again, rates going up.
I would say that 10.4% is within the range of scenarios we are working on. I'm sure that in a few weeks, we will further elaborate, but it's within that range. I think that is correct. If the hedges do have a positive impact, I would say that not materially because the yield curve we are hedging basically still short to medium-term maturities up to four or five years. And the yield curve in that part of those maturities is quite flat. I would say that there is not much steepness. In order to be accretive to NII, we should go longer. Something that we don't rule out, so eventually we can do, probably not via derivatives, but also using bonds as we did some time ago. Well, let's wait for that.
You could see the yield curve in the U.S. is steepening a lot in recent weeks, not so much in Europe. We have some geopolitical events ahead of us. So let's see. So we eventually may have some opportunities to do so, but not for the time being.
That's very clear. Thank you.
Thank you, Sofie. And next question, please.
The next question is from Marta Sánchez Romero of Citi. Please go ahead.
Thank you very much. So my first question is on capital. I was holding on to every word Gonzalo was saying on the rationale for the timing of the buyback. And it sounds quite positive. So does that mean that we should not expect relevant changes to your current 12% capital target? The second question is also related to capital. The RWA growth is lagging loan growth.
Can you explain or can you give us some sense of the front book density of your mortgage and corporate book? How does that compare to the back book? Because I guess now that you're accelerating loan growth, it's important to understand that we have that RWA growth well captured, and here, also related to capital and RWA growth, do you think that as that loan growth accelerates, the incentive to optimize your capital base to go deeper into how optimized your RWA base is increases, so we should expect RWA growth to be below loan growth in the coming years. Thank you.
Thank you, Marta. Just briefly before I hand it over to Javier, what I said is obviously what we're doing now, with respect to the 12%. We will communicate soon in the Capital Markets Day what we're going to do for the next three years.
So whether that 12% benchmark is maintained or not, I'll have to wait. There's actually no decision that has been taken by the board on this point. We have discussed in the past, obviously, the impact of this countercyclical buffer and the possibility of passing on part of this onto our target, which is something that is to be decided and announced by the Capital Markets Day. But what I said is valid wherever the benchmark is, whether it's 12% or another one, this is the way we want to look at our capital base. Currently, and we've said very clear that there would be no impact of the countercyclical buffer, certainly for this strategic plan. And that is a decision for the next one because this is obviously phased during 2025 and 2026. So I see no reason why we would change anything for 2024.
But whether the 12% is still the magic number for this decision on capital going forward is something that we need to wait just a few weeks to be decided.
Well, Marta, unfortunately, for the other question, I think it's a key topic also to elaborate on our Capital Markets Day. I can add very few comments now. First thing is that we are something that I think that I have actually commented in some other occasions. Probably incorporating more active capital management going forward in terms of SRTs, etc., is something that will come. We were already doing some of those transactions, but we are keen to incorporate this more as business as usual and more recurrently. This is one message I can already give you.
Internally, we have a clear golden rule, which is loans should have at least a profitability over 15%. So this is a golden rule. And actually, when we are envisaging loan growth, it's because it's profitable loan growth. And that golden rule applies. So I think that just to provide you some comfort about, okay, we're talking about growth, but it's always profitable growth. So I think that this is the key. Otherwise, that would not be the right thing to do. But I am sure that we will be able to elaborate on all that in a few weeks. We are planning to give you plenty of information about what we are thinking going forward on loan growth, on risk-weighted assets, capital consumption, profitability, etc. So I think that I would rather prefer to wait a few days.
Okay. Thank you, Marta. Operator, next question, please.
The next question is from Andrea Filtri of Mediobanca. Please go ahead.
Thank you for taking my questions. First question is on capital allocation. As an established financial conglomerate with a large insurance company, you have the option of growing in asset management, leaving the goodwill deduction at the VidaCaixa level, as we have been seeing from a European peer, something many other banks are unable to do just as interest rates are coming down. Could this or a deal in Portugal banking be a good alternative to buybacks, also considering the valuation versus tangible book value per share when you look at capital allocation? And then just two quick questions. Funding costs, where are you seeing the evolution of liquidity in the coming quarters? And what about the Portuguese funding cost evolution? And there is a decline of 4.5% quarter on quarter of life risk insurance.
Could you elaborate a bit more on that if there is any one-offs in this number? Thank you.
Thank you, Andrea. On capital allocation, obviously, we're aware of the various capital treatments and that compromise and all that. And we, yes, we're a financial conglomerate. The view we have is that we want to make sure we do not do things we're not comfortable with from a business point of view because there is some particular arbitrage. Obviously, I'm not criticizing others, and maybe others are in a different situation or they are more comfortable with. The asset management and insurance business that we have are extensions of our branch business. We are not going to enter into being an asset manager distributing through other channels, getting into the institutional market on asset management. We just want to serve our clients.
And obviously, as we keep growing our business in Spain and Portugal, the Asset Management business is going to keep growing. But we do not want to extend that operation into being in asset management for other purposes, even if, as you say, obviously, you may think it's a pity that we are not taking advantage of one particularly positive regulatory environment. By the way, I think the more that banks get into arbitrage through these, the more likely it is that they will have some regulatory pressure at some point on the whole system because I don't think supervisors are going to be looking favorably around significant arbitrage through insurance subsidiaries. We're not going to do it. We think there's a very sound justification for the current capital treatment for Danish Compromise. And our insurance business is a real jewel.
We are happy to keep growing it, but for our own purposes. Just one comment on Portugal. I already mentioned that we're focused on organic growth. But the other thing you mentioned is share buybacks. And obviously, share buybacks for us, share buybacks are a good use of capital if there's no better use for that capital. The best use of that capital is to grow the business, grow it organically. And in the past years, we have had very significant share buybacks because there was very limited loan growth in Spain and very limited RWA growth. It'd be desirable for that to change gradually. And hopefully, we will actually leave more capital in the business because the business is growing nicely. It returns on tangible equity of now currently 17%. We're not seeing tangible book value per share as a good indicator of our value.
I think I understand that many people in the market, and I have full respect for people that look at that as a significant indicator. But I think we need to look at sustainable profitability. You look at our price-to-earnings basis and our expectations. I feel that there's very good reasons to keep buying back shares at these valuation levels. And tangible book value is, in fact, we're trading at one. I don't know, depending on which date you take 1.2x, 1.3x tangible. And I don't see why that should be stopping us. Another thing is if we were trading at, I don't know, 15x earnings, I would fully agree with you. But trading at 7x, 8x earnings, I think it's an easy decision for us as long as we don't have better uses.
Again, I go back to what you say always, and I fully agree that better to grow the business profitably, that's the first good use of capital for us.
Hi, Andrea. You had a few questions about funding costs. I understand you are asking for client deposit costs. Well, first thing, volumes. And you asked about liquidity evolution, etc. Well, long term, we are of the view that both loans and deposits should grow closer, or at least closer than now, to nominal GDP. So this is like a long-term view. Let's see how this actually lands into, let's say, short-term plans or medium-term plans. But that's the view. So we think that focusing on the deposit side of the business is something that is accretive long term. So this is my first statement here.
Second, in terms of the future evolution, some data I have already disclosed during this presentation. We have close to 50% of our interest-bearing deposits that are indexed mainly to the overnight interest rate. There are a few that are indexed to 12-month Euribor. So that reprices, let's say, later. But generally speaking, reprice fast as soon as the central bank cut rates. So I think that this and this is coming. So this is coming because it's by the term sheet. So that's one point. In Portugal, it's not exactly the same. So in Portugal, there is basically also you deal with large corporates with time deposits. So there is not so common to have indexed current accounts. So in Portugal, you need to keep rolling over those time deposits. So it's like a different way of doing the business.
Well, our expectation is the funding costs will gradually come down and obviously will be one of the key offsets for lower rates going forward. But I am sure that we will have the opportunity to discuss all that also in a few weeks. Then you had a question on life risk, and I think you are asking for the year-on-year evolution. Basically, the third quarter last year, we had exceptionally low claims on life risk. Hence, the comparison on a year-on-year basis is a little bit less favorable. But I would say that is something that actually is not happening this year. So you should not derive any further conclusions from that. So you saw that the evolution for the overall protection business is up by 6% year to date. So it's evolving actually in line with our expectations.
And remember, at the beginning of the year, when being asked about the evolution of this business, that last year delivered double-digit growth. I remember by saying that, well, probably this year double-digit growth is not going to be the case. And actually, it's what is happening. Thank you, Andrea.
Thank you. Just to complement what Javier was saying on deposit cost in Portugal, this quarter, they were already falling Q- on- Q at BPI. Just to complement it. Thank you, Andrea. Next question, please, operator. Sorry.
The next question is from Britta Schmidt of Autonomous Research. Please go ahead.
Yeah, Andrea, thanks for taking my questions. Actually, I just wanted to pick up on the deposit cost in Portugal, which were down quite significantly this quarter. We've seen some of your peers actually reprice upwards, but still being at a lower level than what you booked previously.
I mean, how's this being managed? And if it's not something that's down to indexing, how can you ensure that the fast repricing of the asset side could be offset by lower deposit costs in Portugal as well in the coming quarters? And the other question I had was, do you have any sort of sense or idea what a potential impact of the devastating floods that we've seen in the southeast of Spain could have on your operations, potential costs, but also potentially on the cost of risk and NPLs? Thank you.
Thank you. Thank you, Britta. Obviously, Javier will comment on Portugal. BPI is actually doing a great job in this respect.
But anyhow, obviously, with respect to the floods as a very significant impact in terms of human lives, losses, infrastructure, particularly housing and vehicles, you know that there is a consortium, the Consorcio de Compensación de Seguros. Some of these costs are going to be borne by basically this public sector system. But there will be obviously some impact on our insurance and our company. Nothing material for the purposes, certainly, of CaixaBank. And there's going to be a significant reconstruction effort and help, obviously, from the central government and why not from Europe. We will be actively involved in that reconstruction effort as a leading bank in the region. It's about 5% of GDP of Spain. The capital city in Valencia is not damaged. So I think that impact on tourism is going to be fairly limited. But there will be impact.
We're going to be standing by our clients here, helping them out. They will be receiving, I'm convinced, state support, and public funds will be made available. So hopefully, even if there's some impact, obviously, some businesses would be partly hit. And you could say that there will be some asset quality pressure. I think overall, we will sort of get through this without an impact on us. To be honest, at this stage, and again, having been here for the whole week, and you just heard the alarm, which is sort of just reminding people, I guess, that they cannot just get onto a car and drive safely currently. It means that all of us are obviously moved by the human cost that obviously is associated with a disaster like this one. I do not, again, think that the financial consequences are going to be an issue for us.
But we will, on the contrary, be supporting our clients, those that are really impacted as a bank and as an insurance company, w e can do a lot. As I said, we have started advancing payments by both the Consorcio and the other insurance companies. So we are making sure that people get the funds immediately when they need it. We have launched funding efforts from AgroBank for obviously agricultural businesses, from MicroBank for small businesses, business interruption in particular, which is an issue. People that have lost their vehicle or they have a big problem in their shop, etc., just make sure that they can keep obviously on business. And then generally from CaixaBank, I am confident that the whole society is moved and we will get through these tough times.
Hi, Britta. Well, on Portugal and deposits, well, actually, I forgot to mention before that Marta said.
It's actually progressing very well. There is quite a difference in the mix because at group level, interest-bearing deposits is like circa 25%, but in Portugal, it's 40%. The yield of those deposits at a cost is pretty much the same. It's like 2.85 or circa that figure. The weight is like 40%. It's quite different. It's a market that had a lot of pressure at some point with some actions taken by the Portuguese Treasury distributing a retail, let's say, treasury bill. Well, since then, that situation is much calmer. I would say that probably who had the chance to purchase or to invest into that product has already done so. From there, probably what we are having is, to some extent, recovering part of those flows that went out. The situation is pretty much calmer than several quarters ago.
So BPI is doing a great job. The starting point is strong because the liquidity position of BPI is as strong as at group level. So with a liquidity coverage over 200% also, etc. So no funding needs. So we think that we can manage the situation with some flexibility. And what we see in the market is the market is being competitive as always, but rational. So we tend to think as corporates and SMEs, etc., are used to this way of functioning with time deposits instead of indexed current accounts, that the natural way of things is that at the rollover date, those time deposits will gradually come down. And actually, it's being the case.
So we are happy to see that as rates have started to come down and Euribor coming down, we have been able to pass on those lower rates into the new front book yields. So we are estimating that this is not going to be a problem.
Okay. Thank you, Britta. Next question, please, operator.
The next question is from Ignacio Cerezo of UBS. Please go ahead.
Yeah. Hi, good morning. Thank you for taking my question. The first one is on loan pass-through and loan yields. I mean, qualitatively, you think it's logical to expect similar pass-throughs on the way down than the kind of 65% you have seen on the way up? Or any strong reasons actually for big variations there, maybe mix or the capacity actually to keep fixing in the future? And the second question basically is on the [audio distortion] line.
I mean, it's come down a little bit actually from the last couple of quarters. So just checking basically if everything is going according to plan on the legal side actually for you, if there's any discrepancies versus the view you had two or three quarters ago. Thank you.
Well, I can confirm this. Things are according to plan on the second question, but Javier, you may want to comment also.
Yes. Well, I would say that the environment is pretty much the same than in the last few quarters. The landscape is, as usual, very competitive on mortgages. We are making this third quarter actually close to 80% of the new production at fixed to maturity, which is remarkable.
Well, it's probably with long rates that are not moving as much as the short end of the yield curve. We have a little bit more stability in terms of front book yields on the new mortgage production. That is like circa two or three quarters, a little bit below that. So I think that is pretty much stable, although I would say competitive. We don't expect that long-term rates will come down much more from the current levels. So as new mortgage production is more linked to that long end of the yield, probably we are going to be able to maintain approximately current front book yields. And basically, when you talk about SME and business lending, I would say that approximately 80% of the new production is at floating, usually indexed to, well, to three, six, or even 12-month Euribor.
I have commented this often, that usually on this kind of commercial relationship, the negotiation is about the spread more than the absolute yield. Spreads, well, the negotiation is tough as always, but I would say that rational. Yes, we think that for the new production, we are going to be able to maintain, I would say, the margins. In our view, yes, because, well, hopefully also as we have this, let's say, long-term view that lending should improve. Theoretically, as lending improves in terms of volumes, also should theoretically have a lesser impact on the yields of the new production. Let's see. Yes, we think that we can replicate the evolution. Then on top of that, consumer lending that actually we are growing nicely up by close to 6% year to date.
This is fairly correlated, a little correlated with the market rates. So our rates that are higher clearly. So the correlation is lower. Thank you.
Another provision you have?
I will, I already commented .
I'm sorry.
Nothing unexpected.
Okay, so I think that's all for today. So it has been a pleasure hosting you one more quarter. Have a wonderful weekend, a long one for some of you. And hopefully we see you all in a few weeks.
Thank you very much.
Thank you.