Hello, good morning, and welcome to CaixaBank's financial results presentation for the Q1 of 2022. My name is Edward O'Loghlen, head of IR, and with us today is the CEO, Gonzalo Gortázar, and the CFO, Javier Pano. In terms of logistics, just a brief reminder that we aim to spend around 30 minutes of the presentation, with 45-60 minutes after that available for live Q&A session, for which you should have received instructions via email. Let me just end by saying that my team and I are available after the call. Without further ado, hand it over to the CEO, Mr. Gortázar.
Thank you. Thank you, Eddie. Good morning, everybody. You've seen the highlights for this quarter, which we're titling Solid Operating Performance in a Volatile Environment. The volatile environment you know well, and why do we think it's been solid, our performance? I would say in terms of activity, we see the loan production doing fairly well in terms of new production. Also in the SME side, but you have the highlights here on consumer mortgage with an increase over 10% quarter-on-quarter. Actually also a significant increase compared to the Q1 of last year. That's on the asset side. Again, on the business side, we had, I think, good trends during the quarter.
On the liability side, long-term savings had EUR 1.2 billion of net inflows, which I think is again something fairly positive given the volatile environment. We had a market impact of approximately EUR 6 billion, which Javier will discuss later on. I think pretty good activity, and I think I would add to this is not only a volatile environment, it's also been a quarter of heavy integration work for us and also a quarter in which we had a significant impact at the beginning from Omicron in terms of activity. I would say quite positive data. In terms of P&L core operating leverage, as we had the reduction in costs from the integration work that we have already done to a very large extent.
Core operating income is up 1.9% despite the fact that we had very strong headwinds on NII, as you know well. The non-NII core income or core revenues increased by 3.6%, which was not enough to offset fully the 5.4% fall of NII, but in any case, a good factor, a supporting factor. Asset quality and capital, pretty good. I think again, our expectations were surpassed. We managed to bring down the NPL ratio, maintained the cost of risk in line with last year as per our target for this year, and we had a very significant increase in CET1 capital, 36 basis points year to date.
The total, net income on a comparable basis, with last year increased by 21.9%. Point on integration, I would say we're 90% done. You see here on the page, 90% of departures are already effective. Branch integrations, the reality is at the end of April, they are also close to 90%. That figure of 80% is the end of March or the first of April. April has been a quite productive month in terms of integrations. We're at 90%, and I would say hence, most of the disruption that you could expect into a large integration is behind us. Notably, our NPS levels in the end of March have now matched again, the NPS levels that we had before the integration process.
Quite a nice picture. We still have work to be done. Obviously, there's the 10% that has not yet been done and sort of make sure that we properly cement all the work that has been done. Again, this is more and more something that we're leaving behind rather than an issue going forward. In terms of activity, the loan book, I mentioned the increase in mortgage and consumer lending. It's 16% over last year and 11% compared to the Q4 . You can see on the mortgage production, which obviously was a weak point during 2021, the Q1 brings a record. Within the Q1 , you see how March has been around EUR 1 billion.
I have to say the figures for April give me confidence that we're gonna be in a similar level to the month of March. Hence, the strong effort that we put into the My Home campaign beginning of the year is now leading to results, clearly, no? So quite happy, not about where we are, but certainly about the trend that we have in terms of mortgage production. You can see also on the SME side, 22% increase compared to the Q1 and 27% increase compared to the Q4 of last year. I think the franchise is doing very well, and it's in a good position to benefit from further growth, particularly related to the NGEU initiatives.
On the protection side, we had a bumper quarter with MyBox. You see particularly in non-life, up 71%. The life risk was also pretty good, particularly the month of March, and again, giving us good feelings about the trend of business for the year. You see that the business is quite diversified now beyond life risk and on the non-life side. MyBox continues to be a key engine for growth of this part of the business. On the customer fund side, you obviously know about the volatility on the right-hand side of this page. We have grown our market share. Again, like we did last year, in this Q1 , our market share increased by 13 basis points.
In fact, it has increased by 5 basis points in mutual funds, 5 basis points in pension funds, and over 30 basis points, sorry, estimated in life savings. Very positive trends. I cannot think of a period of higher degree of challenge for our people with the integration and the market volatility. You see, the delivery is pretty satisfactory, certainly in my opinion. With respect to the macro environment, we obviously have this big uncertainty about the consequences of the Ukraine invasion. We have changed our GDP projections. We had 5.5% GDP growth for 2022. It's been brought down to 4.2%.
These figures may seem high, but I always like to remind that during 2021, we had a recovery from the pandemic, as you can obviously see in the chart. Just maintaining the level of the Q4 of 2021 implies 3% growth for 2022. In a way, you could say, not exactly, but you could say that 3% is close to zero. When we're talking about 4.2% is a good number, but it's in no way an unrealistic number. You saw the government change their projections today for GDP for 2022. They brought it down to 4.3%, so very close to our 4.2%.
IMF, Bank of Spain, everybody is converging around these areas, including obviously estimates from various banks and other private commentators. With that, we had an impact on provisions. Javier will get into that detail, but something that is so far manageable. We have no question, uncertainty. No one knows how this situation is going to evolve and what the ultimate impact exactly is going to be. Some reasons for being optimistic, you see the dynamics of consumer spending. They are quite positive. You know, on this chart, again, this is what our clients spend through credit, debit cards, and including what they withdraw from ATMs. Because there's been obviously a change and a transfer from ATM withdrawal and cash payment onto direct card payment.
We group everything together to avoid any interference from this change in behavior associated to COVID. You see what's happening. In the Q1, We had an increase of 10%. April is even higher, which is quite remarkable. This chart talks about domestic spending. When you look at also non-resident spending from non-residents, you see a significant pickup, particularly in April, which I associate to a very positive tourism recovery that I'm expecting for Spain, which is hopefully going to have a significant cushioning impact from the Ukraine crisis in the next months. You know how dependent is Spain on tourism, and I think expectations are, for good reason, high in that regard.
Obviously, we have a different interest rate environment. Nothing new from what you know, but a huge impact on our expected profitability going forward. So we have positive news from the curve. We have uncertainty from the geopolitical situation and the economic impact. Facing the situation, we feel good, first of all, and it's not on this page, but it's because the integration is 90% done. We've done the homework. We can focus on what is really relevant, clients and opportunities that the environment may create. When you look at financials, net income and profitability is at higher levels. NPLs are down.
You see how we managed to reduce both NPL ratio and NPL in absolute levels during this quarter. The cost of risk is at low levels, but the levels that we were expecting and that we achieved last year. Coverage is very high. Solvency position is higher, I would say, than for a very long time, and we continue to create capital. We have plenty of buffer vis-à-vis our MDA, over 500 basis points, liquidity and MREL, et cetera, position of strength. You know that well, so that's not new. Whatever comes from the future, which we think is going to be manageable, but should it be more challenging, we are in good shape.
I would say in better shape than I remember for a long time. Just one final note. We continue to act differently in response to our environment in terms of our ESG responsibilities. Obviously, the war is once again testing the entire world as to what they can do to combat and ameliorate the situation. We've been very active in facilitating life for people that are affected by the Ukrainian crisis, whether it is in terms of commissions and transfer of funds, offering free current accounts, collecting donations. We have also been, through our volunteering program, actually bringing people from the border of Ukraine to Spain.
Over 400 refugees, which we have already accommodated in different families, and we continue to do so, which is something that we pride ourselves on. One note on MicroBank as well, MicroBank in Spanish, MicroBank if you read it in English, is the largest private microfinance institution in Europe. It's 100% owned by us. It's actually profitable on a sustainable basis, appropriately profitable, with a double-digit return on equity. We have very significant long-term agreements with the European Investment Bank, European Investment Fund, and other multilaterals who look at MicroBank as a reference for what can be done here. Again, doing quite a lot of good work to small entrepreneurs.
Loans here are, I don't know, EUR 5,000 to EUR 10,000-11,000, but they allow both families and also people to create businesses and create jobs. With over 13. Well, now it's almost 15 years since it was created. It's a success story on how to do good and do well at the same time. With that, I'll leave it to Javier. Thank you.
Okay, thank you, and a very good morning, well, from my side, as usual. Further comments on the P&L and the balance sheet. Let's start with an overview of the loan book. You see this quarter, despite usually adverse seasonality in the Q1 of the year, we have had a flattish loan book. So you see that we have an improvement across all segments, also on mortgages, with a slower pace of the leveraging, as we have been commenting, with a clear improvement in the new production during this Q1 of the year. Well, we have been guiding for a flattish loan book for this year.
There are plenty of micro-uncertainties, but we feel positive and with momentum, and this is despite the fact that the tailwind from the next generation European funds has yet to come. All in all, positive vibrations. Let's move to the ALCO portfolio. Clearly a very different backdrop in terms of yields. You know it well, so we have taken the opportunity to increase the size. As a consequence, the yield improved to 0.5%. The average life and duration remains below 5 years. You may see that still this year we face close to EUR 8 billion of maturities. You may see also that the breakdown in terms of sovereign exposure remains broadly unchanged.
On the right-hand side, you may see a reduction of the wholesale funding cost referenced over six-month Euribor, and this has to do with the fact that we still have a small part of this wholesale funding at fixed rate. Moving to the customer funds, well, the most remarkable is what has already been said, that despite the uncertainty in markets and very high volatility, we have been having net inflows, EUR 1.2 billion for the quarter, but not any single month of the quarter with outflows, which is remarkable. Also, I would say also that the month of April is doing well.
In terms of market effects, those EUR 6.1 billion negative, but despite this, the end of period AUM balance is still 2% above the average of last year. Thus, this, markets permitting, still provides support into next quarters. With this, let's move to the P&L. EUR 707 million net income, up by 22% on a pro forma basis year-on-year. You know also that the Q1 is always affected on a quarter-on-quarter basis by seasonality in the Q4 , mainly on fees.
Thus, if we focus on the year-on-year evolution for core revenues, those are down by 1.7%, obviously impacted by negative evolution on NII that you know well, but already being offset by growth in fees and mainly on insurance premium. Having said that, NII starts to stabilize with a quarter-on-quarter evolution that is down by 0.6%. Fees up by 2.9%, and insurance premium from life risk growing strongly, both organically and also in this case impacted by the consolidation of Bankia Vida. On non-core revenues, we have strong trading this quarter. We have a lower contribution from equity-accounted, a different perimeter that you know very well also, and higher charges on other operating income and expenses.
Costs in line with our expectation and guidance, down by 4.3% year-on-year, already reflecting personnel-related cost savings. Below the line, lower, or I would say on loan loss charges remaining at low levels, very moderated, despite incorporating an additional related macro risk provision. With all this, as I say, net income slightly over EUR 700 million and close to 22% over one year ago. On our Portuguese business, I would say that the very positive trends that we have had in recent quarters continue. Good performance in terms of core revenues, up by 4.2% year-on-year, obviously quarter-on-quarter also with very strong seasonality on fees, very well contained cost base, up by 1.5%.
We keep gaining operating leverage, and as a consequence, the core operating income in Portugal up by 8.7% year-on-year. You see growth on the loan book across all segments in Portugal, and with this, the net attributable profit there has been this Q1 EUR 69 million. Balance sheet-wise, an NPL ratio at very low levels at just 2.3% stable for the quarter. Moving into the details, you may see the evolution of NII. You may see that quarter-on-quarter down by 0.6%, but starting to show signs of stabilization. We have quarter-on-quarter a negative contribution from the day count, a lower day count the Q1 , -EUR 15 million.
Still client NII having a small negative impact, but this time ALCO adding EUR 8 million. In terms of back book yields and margins, you see also those signs of stabilization with a back book yield on the loan book at 161 basis points stable. The front book up by 27 basis points to 191 basis points, as we have this Q1 a lower weight on the new production from lower yielding CIB loans. On margins also, this stabilization. As well as has been commented, a more favorable interest rate outlook ahead that if materialized, which is our expectation, offers a very material upside potential to NII going forward. Now fees.
The seasonality that is well known, mainly affecting asset management and insurance distribution, with a strong seasonal contribution last Q4 . On a year-on-year basis, up by 2.9%. You may see the different components. We have a negative contribution from recurring banking fees, in this case affected by the rollout of loyalty programs. On wholesale funding, also insurance distribution and obviously, basically on asset management, very positive results that more than compensate and, in this case, obviously in the Q1 of this year on asset management, still having the tailwind from higher average balances compared to last year.
Other insurance-related revenues, you know, it's premiums from life risk, up by 23%, in this case, with the contribution of 100% consolidation of Bankia Vida and a lower contribution from SegurCaixa Adeslas equity accounted after the changes we have done. With this, you see the central chart, we have record high quarterly life risk insurance revenues over EUR 200 million. Moving to costs, in line with expectations, you see, down by 4.3% year-over-year, with those personnel-related cost savings that are well known. 90% of employee departures already completed by the first of April. We reiterate our expectation that we are gonna have 80% of cumulative cost synergies this year.
Well, with this, the recurring cost to income stands at 55.8%. Finally, on some details on the P&L on loan loss charges, as you may see, remain at moderated levels. This despite the fact that we include this quarter the impact from the new macro scenario that has already been commented, this GDP growth reduction in our expectations to 4.2% for this year has already been incorporated. Well, you see that we are on track to meet our guidance for the year, with we reiterate this guidance with a cost of risk circa 25 basis points.
I would like to remark that we have reassessed the COVID reserve, and as we have further visibility into this situation, this is now standing at EUR 1.2 billion. Moving to some other details on the balance sheet, on NPLs, positive trends on, in absolute terms of reduction over EUR 200 million this quarter. As a result, the NPL ratio down ten basis points to 3.5%. You see that the improvement is across the board, across all segments, I would say. The NPL coverage improves two percentage points to 65%. At the same time, we are reducing our REO exposure, also our rental portfolio with a very good pace of these portfolios during the last couple of quarters.
Some comments on ICOs. 7% of those ICO loans are already amortized. Of the remainder, 40% are already paying principal, and 91% will do so by the end of the Q2 . The Q2 a key milestone on that front, but what we have been preparing well ahead, well in advance, for this situation. 97% of those are performing. Finally, you know well that we have a complete non-material exposure to Russia. On liquidity, a very ample situation. You know well our metrics, and you may see those here that remain broadly unchanged compared to recent quarters, very ample situation.
On MREL, we closed the quarter with an MREL ratio at 26.51%, with more than 4 percentage points above requirements, so very comfortably. Despite market volatility, we have been able to issue 3 times this Q1 , also some of the issuances during the month of April. Also in foreign currency, as you know, the focus going forward is in the rollover of upcoming maturities and also the diversification of the investor base. That you can expect us issuing also in foreign currency. Finally, solvency, strong quarter, 37 basis points of organic capital generation. We are accruing the upper bound of the 50-60 payout guidance for this year. On top, we have had 22 basis points positive from market and others.
The most remarkable here is a positive impact of 20 basis points from the transfer of Bankia Vida to VidaCaixa. With this, we close the quarter with the next IFRS9 transitional CET1 ratio at 13.18% on top of 24 basis points from IFRS9 to 13.42%, an MDA buffer over 500 basis points. We have improved also the tangible value per share by EUR 0.06 to EUR 3.80. Just as a reminder, this dividend policy, this 50%-60% payout for this year in cash and on top of our intention to proceed with a share buyback program for this fiscal year. Thank you very much, and we are ready for questions.
We are indeed. Thank you, Javier. Thank you, Gonzalo. Operator, can we please proceed with the first question, including the name and the company of the caller, please?
Yes, of course. The first question come from line Ignacio Ulargui from BNP Paribas Exane. Please ask your question.
Hi, good morning, and thanks very much for the presentation and for taking my questions. I just have two questions both on revenues. The first one on NII and the more favorable rate environment that, Javier, you were mentioning. What should we expect for 2022 NII given the performance of the 12-month Euribor? What kind of rate sensitivity should we expect, particularly more in terms of timing? How do you see that playing out over the coming months? The second question on fees, whether you could elaborate a bit on the different impacts in fees in the quarter. I'm particularly interested on the impact that the change of conditions to Bankia customers has had.
Based on your past experience, how quickly you think that you could recover that gap of fees with higher value-added products? Thank you.
Hi, Ignacio. Good morning. Well, on NII, well, it's we are in the situation we were expecting, you know, with NII stabilizing this Q1 , ex-TLTRO. We need to be clear here on this. You know that from the Q3 , we lose the minus 1% benefit on, in terms of funding. That was actually a carry of 50 basis points. Taking this aside, putting this aside, I would say that we are stabilizing. How long it's gonna take to have a positive evolution, it's a close call, you know, because it's you have different effects here. In terms of volumes, I would say that I mentioned it, you know, we feel positive.
It's true that there is plenty of macro uncertainties, but we have a positive momentum. So far we are not seeing signs of this loan demand abating and we are doing well, but time will tell. We feel positive on that front. In terms of ALCO, you saw that we have already taken advantage of the new yield backdrop to increase the size of the portfolio. We can do plenty more, but we are gonna be cautious. We need to see, at least from my side, I would like to see which is the terminal rate of this cycle, you know, before deciding to engage much more on that front. Obviously we have plenty to do, potentially.
I think that this also will offer support, no? In terms of the repricing mainly from mortgages, here you know that you have this lag effect, no, be it's approximately two months. We are gonna start having, I would say a significant, or at least material, positive repricing from the Q3 , not on the Q2 On top of, in the very short term, what we have is repricing, faster repricing on what is wholesale funding. You saw that we have the wholesale funding swapped into floating, no? This, there is no delay, so automatically when there is a fixing, because it's swapped to floating, automatically it reprices faster.
We will start to have a material positive impact if the curve remains at current levels from the Q4 . I would say that this is probably the best guidance I can give you, and very materially on 2023. That you mentioned about sensitivity. Well, we are in the same place, so this 20-25 guidance we gave is valid. One thing here is that the higher the rates, the lower the sensitivity. If in the first part of the journey, sensitivity is higher. If the end rates are approaching 2%, which is what now the yield curve is discounting, then the sensitivity may be at the lower bound of the range I gave you, no?
Because that will mean that more sight deposits will be sensitive to higher rates. All in all, this is the view, no? Clearly it will take still some months, 1 quarter or 2, in order to have a clearly positive contribution, but very material going forward, no? In terms of fees, on that front, you saw this negative contribution in the quarter from recurring banking fees. Here we have basically two effects, one which is more short-term and another that is more structural, no? The more short-term is what you already mentioned, no? We have some clients coming from Bankia and CaixaBank that were common.
Actually, it's a low amount. It's approximately 5%, no? Some of those were loyal clients in one of those banks, no? Both or on Caixa or on Bankia. Obviously, now those join the loyal client program, and we need to adjust those fees. This is one impact, and we are going through that process. It's not gonna take long, but it's still not finished if I may be fair. Then there is more a secular trend, which is the fact that we are having success on making clients more and more relational, no, with doing more business with us. We showed some figures in the presentation.
Obviously those clients that become more relational with us are not charged explicit fees, but on the contrary, are doing more business with us, and we have margins in other parts of the P&L. From NII, because they do a mortgage or a consumer loan with us, or they engage with protection products, and as a consequence, we have revenues on insurance, or we have AUMs. This is the way we are progressing and doing banking, and we think it's the right thing to do so. There is an underlying structural small pressure from that effect, no? Obviously it is the way we face the business and the way we think is the right way to grow. I don't know.
I think that I have covered the topics.
Okay. Thank you very much, Nacho. Operator, could we please have the next question?
Thank you. The next question comes from the line of Sofie Peterzens from JPMorgan. Please ask your question.
Hi, here is Sofie Peterzens from JPMorgan. My first question would be just on your cost line. With the Q4 conference call, you kind of guided towards EUR 5.9 billion-EUR 6 billion of costs. If I kind of annualize it, the Q1 , which tend to be a little bit seasonally lower costs, are slightly close to EUR 6.1 billion. I recognize that you still will get some synergies from the Bankia transaction. Could you just talk us through how we should think about the cost trajectory throughout 2022, and if the EUR 5.9 billion-EUR 6 billion of costs still holds? My second question would be on excess capital and kind of capital headwinds.
In the past, you have said that you don't really expect any significant regulatory capital headwinds. Could you just confirm that that's still the case? Would you still be comfortable to run with around 12% CET1? Is it fair to assume that that's kind of your go-to target ratio? Thank you.
Thank you, Sophie. I would start with the cost question. Obviously, synergies are going to kick in progressively during the year, even though we have already a big impact this quarter. We have the overall inflation situation and which is obviously evolving in the wrong direction from that point of view. We have a number of decisions we've been taking as we progressively see opportunities in this environment, which includes obviously areas that were not profitable with negative rates, but that are likely to be profitable again with positive rates, and where we can and we have to exploit them as much as we can. The pressures are on the upside, I would say.
I think that makes us more likely to end up closer to the upper end of that range of EUR 5.9 billion-EUR 6 billion than to the lower end. We will see. Obviously, this is something that we will discuss in some more detail in our Investor Day. You know that our wage agreement protects us on salaries for 2022 and 2023, but yet there will be some increase in there as agreed with the unions and also because we have that inherent rate of growth in the cost base associated with various other benefits. Clearly the pressure here is obvious.
My sense is that we're going to be more defensive than certainly than other sectors and potentially other institutions in other markets because of the nature of the business in Spain and our existing wage agreement. A lot of hard work on this front. For this year, what was the focus of your question, within the range, but I think more likely to end up closer to the upper end. Maybe Javier can take the second one on capital.
Yes, Sofie Peterzens. Well, to your question about the pending impacts, I would say that we are broadly where we were. No major changes. You saw this quarter, this positive one-off from the transfer of Bankia Vida to VidaCaixa. That's 20 basis points positive. We don't expect that any further M&A impacts will be higher than this. So remember that that was the message that we were expecting, on a net basis, a neutral impact. We don't expect that what may be pending will be higher than this. Medium term, in terms of regulatory impacts, we are where we were. I still don't have visibility on what may be impacting because we have positives and negatives.
What may be impacting in 2022 or 2023, but the net of everything is gonna be pretty much neutral. Potentially, I don't know, probably up to 10 or 15 basis points, negative or even slightly positive because we have not yet finished the final figures. No, but for me, the question is more the calendar. We are still pending the final authorization, for example, for IRB models in Portugal. It's not clear to me if this positive is gonna be in 2022 or 2023. Other adjustments in some internal models that are still pending a final decision from the supervisor, whether it's gonna be the impact this year or early into next year.
No, but the broad message is that you know that we keep generating strong capital organically. We have a strong margin in terms of capital evolution, as you know well. The message we gave last quarter about this, let's say right number, around 12%, is still valid.
Okay. Thank you, Sofie. Operator, could we please move on to the next one?
Thank you. The next question comes from the line of Andrea Filtri from Mediobanca. Please ask your question.
Thank you. I'll start with macro. I've seen that you have changed the macro scenario. If you could just detail for us what the additional macro overlay has been, and what would you need to see in terms of stagflationary signs to revise your macro scenario and your guidance downwards in a meaningful way? Second thing on your COVID overlays. They are down EUR 200 million versus your prior EUR 1.4 billion level. Have you released EUR 200 million in the quarter, or have you allocated them? And if so, to what and why? And finally, on your capital evolution, if you could explain to us the technicalities of the 20 basis points one-off impact in the transfer of Bankia Vida to VidaCaixa. Thank you.
Thank you, Andrea, on the economic environment and the stagflation risks. Obviously, we all know how difficult it is to predict what is ahead of us and yesterday even the ECB mentioned the difficulty in forecasting appropriately inflation, which we all have seen both at the ECB and honestly many market participants. So that's the first word. The second is, in terms of the current situation, we see more volatility on inflation. Here we have, first of all, the situation with the war, potential impact of sanctions, the oil and gas that Europe imports from Russia. All that may generate surprises.
Obviously, if there is a significant movement here, you will see significant impact in energy prices, at least that is, our view. There's difficulty around that part. We don't really know exactly how much or how large is it going to be the, second-round impact. We saw figures of high, core inflation in Spain yesterday with 4.4%, mostly due to sort of, manufactured, food components, et cetera, but obviously still a very high number. I think, inflation is, something to, watch very closely and where we may have, certainly news that are different than what we expect. On the economy in Spain, the realities were, as you all know, far away from, the center of action, no?
The main impact is energy prices and raw materials, and that's what we have included in our projection. We have to also sort of remember that we had strong tailwinds as we came into this year. The accumulated savings from the pandemic, and we see that now when we see actual levels of consumer spending I discussed in my part of the presentation, fairly high, which wouldn't be consistent otherwise with what we're seeing. We have the next generation EU funds, which are advancing slower than we all would like. Anyhow, they are coming, that's a certainty. The major difference is certainly tourism, where I think we have reasons to be reasonably bullish for this year.
Now, even the current situation places Spain as a sort of close to home, safe place to go with all the other advantages of coming down to Spain. We're seeing it already, you know, mentioning the activity from non-resident sector that we see through our points of sale, et cetera. I think we have a low probability of a recession and technically, therefore, of stagflation. Obviously, this is our current view, and we have to continue monitoring the situation. Then we're a bit more nervous about whether the sort of the levels of inflation are already hitting their maximum and then should come down.
It was the case in Spain in April, and given the cap on gas prices negotiated with the EU, our expectation is of further decreases in the headline inflation in May. Core inflation is at high levels, so we need to watch out for that one. All in all, given that we have revised our forecast to levels to which other people are now converging, like the government today, my expectation is that this is unlikely. This framework is unlikely to change in the short term, unless well, something very relevant happens or then we have an accumulation of data leading to one place or the other, which is I think also by definition gonna take some time, you know.
Anyhow, Javier, there was a second question.
Yes, there were two more questions. Hi, Andrea. On the COVID reserve, what we have done this quarter is two separate processes. One about estimating the impact on provisions for this reduction in our precisely those GDP growth expectations. This results in a charge of EUR 214 million. This has to do with lower GDP growth, slightly lower real estate price increases, et cetera. You have the details of this scenario in the presentation. Then a separate process that needs to be done quarterly, which is a reassessment of the need of the COVID related reserve.
As we have more visibility of what this reserve was covering and the evolution is positive, we have re-estimated it downwards by approximately EUR 185 million.
That have been released, and thus with an impact on the P&L. Actually, the impacts are pretty much similar, although the approaches are completely different and are part of the reassessment of provisions that we need to do on a quarterly basis. Finally, you had a question on capital. Well, the fact that we have a positive impact on CET1 is because initially, by the end of the year, Bankia Vida was a subsidiary of CaixaBank on individual basis, and now it has been transferred to VidaCaixa, and VidaCaixa is an insurance company. By the end of the year, we had a reduction of the goodwill of Bankia Vida, that was approximately EUR 400 million, and this was deducted from the CET1 ratio.
Once it's transferred to VidaCaixa, this deduction does no longer applies. This is the main reason. There are some further additional details, but this is the main impact because to VidaCaixa, the Danish Compromise applies.
Okay, thanks for your question, Andrea. Operator, could we please move on to the next one?
Thank you. The next question comes from the line of Maksym Mishyn from JB Capital. Please ask your question.
Good morning. Thank you for the presentation and allowing us to ask questions. I have one question and two follow-ups. The first one is on mortgages. Your new strategy seems to be working, and the volumes are picking up. I was wondering if you could tell us what different are you doing in mortgages from what you have been doing before. Is it pricing? Is it risk appetite? Then a follow-up on the macro provisions. I was wondering if you could share with us which macro variables within the model have the most sensitivity to cost of risk. One follow-up on capital. There was 20 basis points impact of the Bankia transfer and then another three basis points positive. Given the moving rates, I was wondering if you could tell us what offset the potentially negative impact from the fixed income portfolio. Thank you.
Thank you, Max. If I may start with your question on mortgages. Yes, we feel that we're as expected, increasing our production, and this is a consequence of the My Home campaign. We have put our efforts and internal incentives and attention onto the mortgage product once again, after 2021, which was disappointing for us. Obviously, the results are coming. We have not changed our risk appetite. We're being very conservative there. New production in terms of loan to value, debt to income levels, sort of, eventually just the scoring we have for clients.
All the statistics that we follow, basically, eventually, it's all about expected loss of the new production are very much in line. We have been conservative. We continue to think that we should be conservative on that, on that front. We haven't brought down pricing other than in certain parts of the portfolio, but it is true that rates on the fixed income part are going up. Maintaining pricing that is now aligned with market pricing means we're being more competitive from that point of view.
The main impact, again, is My Home campaign, which is a permanent campaign for our branch network throughout the year, and where anything that is related to this home ecosystem has strong attention, focus and incentives. This obviously includes the mortgage. Not only mortgages, it's obviously insurance, protection insurance, household insurance, it is alarms, it's consumer lending associated to house refurbishment, improvement, et cetera. It's in a kind of an ecosystem of household, which is included in My Home. Clearly there, the message that we are keen to invest and grow is having an impact in terms of our ability to sell mortgages.
This takes some time because obviously the sort of lag between a discussion on a mortgage and the time at which the mortgage is effectively granted is somewhere between 1 and 2 months. It's not surprising that we are actually seeing a pickup now in the month of March and continued in the month of April. Again, certainly no change in risk appetite. No? In terms of macro variables that are more significant, I would say real estate is the more significant one. Real estate prices is probably what drives a higher impact. You've seen, or you can see now in our accounts, a 10% drop in real estate prices implies a EUR 320 million expected loss.
Obviously, a 10% drop is a very large drop, which is not something we are at all expecting. In fact, when you look at the mortgage market in Spain, it's at a very sort of logical point in the cycle, I would say mid-cycle. When we compare it to the previous situation in 2007, we are a whole world apart from that, no? I would say this is fairly relevant. Beyond that, unemployment is always and has historically been quite relevant. The unemployment figures were published yesterday, and they were pretty good. There's a seasonal impact after the month after Christmas.
We saw growth that was above 1% in terms of once you take into account the seasonal impact in the number of employees. Recent reforms to the labor law were very obviously controversial in Spain. Eventually, I think what has resulted is something that is fairly sensible, and so far it's working nicely. Also, reducing the temporary component of new jobs or new contracts that are temporary rather than indefinite. Those are, I would say, the key elements. I think there we do not expect necessarily to have bad news.
Quite the contrary, we're seeing both real estate and unemployment working much better than what GDP actually would suggest, no? On capital, again, Javier, if you can take that one.
Yes. Well, Maxim, it's, we have, you know, a limited amount of our ALCO portfolio accounted as fair value with impact on OCI, no? As a consequence, we have had moderated negative impact this quarter from that front of minus 6 basis points on CET1. On the other hand, we have had positives on the evolution of Telefónica, that you know that is accounted also at fair value. This has been a positive impact of 5 basis points. We also have on the quarterly reassessment of the valuation of BFA, our stake in Angola, this has had a positive impact of 2 basis points.
Because, you know, with a higher oil price and the currency that is appreciating, et cetera, there was a slight review on models. The net-net is you see that here you have one positive and there are some other impacts here and there.
Okay, thank you for your question, Max. Operator, please move on to the next one.
Thank you. The next question comes from the line of Borja Ramirez from Citi. Please ask your question.
Hello. Good morning. Thank you very much for taking my questions. I have two quick questions. Firstly, on assets under management, your AUM growth was resilient in the quarter and you seem to be gaining market share. Could you provide more color on the commercial activity and also any indications for the rest of the year? My second question, regarding digital banking, your market share in digital banking is at 43% currently. I would like to ask if you could please provide details on the opportunities going forward and also any color on your imagin, the platform and the opportunity for customer acquisition. Thank you.
Thank you, Borja. Let me start with the second question, and Javier takes the first one. On digital, let me clarify, 43% is not our market share, it's our penetration rate. As you know, that will be over 100% because there are some clients that would work with more than one institution. It means that of online banking clients in Spain, 43% of those are clients of CaixaBank. The following peers are around 25%, and then you go down all the way to 10%. It's a big lead, but 43% is not market share, it's market penetration. We have over 11 million customers and growing.
Clearly, our customer base is digital, and what we have to incorporate that in anything we do. We have incorporated it for a good while. Where do we see opportunities? First of all, this is not just about opportunities, it's absolute need. We would not be running a healthy business if we were not leading on this front. The more obvious one is in imagin. We will discuss about imagin obviously in our Investor Day in a few days. We have close to 4 million clients in imagin.
We have a substantial penetration rate there of sort of the young people, even though in imagin we have also clients that are my age and higher, no? The substantial penetration of young people, millennials, generations, et cetera, we have been gaining members, because as you know, imagin offering is not just about banking products, but about creating a community and offering various sort of ways of engagement, including gaming, including music, including the environment, which is probably the one that is having more impact on people volunteering and all along et cetera. There's plenty more to offer to these clients.
imagin is growing and will continue to grow, but also we expect to be able to offer new services, new products, financial and non-financial, to this large customer base. This is beginning, and we have a project that I'm expecting to, at some point, move into sort of economics associated to internet companies. In terms of once you have made the investment, you actually have exponential growth on the revenue side, but limited growth on the cost side. We'll see, and I'll love to get into some more detail again in Investor Day on imagin, but it's probably the one that is biggest.
What we are doing generally for our clients in terms of the ecosystems and the vertical offerings that we are developing, I discussed about the home ecosystem, where there's a very significant financial component. I didn't mention, for instance, the solar panels that we are also now effectively commercializing as one other example of an alliance with a utility. Another example of what can be done. Our offering of our Wivai is growing very nicely, and it's now moving from physical origin to digital, mostly. Obviously that is where we can have exponential growth by linking our customers, the information we have on them, our algorithms, our AI models, and the ability to offer a number of products,
As you know, in Wivai, we've been offering sort of mostly electronic products, but also mobility and many other home appliances, et cetera, et cetera. Increasingly, our models allow us to predict better and better what products may suit to which clients, and more and more, to be able to cross that bridge directly and with limited human intervention, which means that obviously we can do more at lower cost, no? Digital sales on SME and corporates, there's plenty to do to make sure that our full offering is digital. This is obviously absolutely core to our strategy, and in a more structured way, we will address it in the next Investor Day on May the 17th, no? Javier, maybe.
Okay, Borja. Well, on AUMs, no, well, you know that this is one of our key strengths. You know that historically we have been doing well. I think that the key of our success is twofold, no? Well, first thing, to have the wider range possible of products, and, you know that on this front, we do very well. We have our own factories, but also we are being able to distribute third-party products whenever is necessary. But the most important thing is not only this, because I think that this almost, pretty much every large bank can do, is the fact that we are close to clients, and we are transparent with clients, no? I think that this is a big difference in some cases.
We are very close in the sense that we become the financial advisor for households. Every household, every client has its dedicated person with a name to contact with. Also we assess them very transparently, you know? On that front, I would like to remind one key thing, which is that of our EUR 220 billion of assets under management, and here I include life savings, no? Which is actually on balance sheet, but it's a part of our let's say, long-term savings business. The key is that EUR 50 billion out of those 220 have what we call an advisory contract, where we charge explicit fee for this advice.
The customer is happy to pay this fee in order to receive this advice. We give them pretty good advice, no? In terms of the portfolio of products that fits better to their needs in terms of risk appetite, in terms of the age of the people. It's not the same when you are in your forties than when you are in your seventies. We are being able to adapt very well to the needs of every single person because we have dedicated people for this. We have the wider range of products available, and we are very transparent with all the process. I think that this is the key of the success.
We are quite a bit on the future evolution of this business. We will further detail in a few weeks, because there is plenty to do. You still, you know that Spain is still.
Behind on this business compared to other countries in Europe. You don't need to go to the U.S. or the U.K., where obviously are much more developed, but also comparing with France or Germany or the Netherlands, so Spain is still behind, and we are part of the participants of being or trying to change and make a progress on this situation for Spanish savers. It's as simple and as complex as this, no? We are successful since a long time ago, and we know very well how to do it, no? I'm sure that we can further discuss in a few weeks.
Okay. Thank you, Borja. Let's move on to the next question, please.
Thank you. The next question comes from the line of Carlos Cobo from Société Générale. Please ask your question.
Hi. Good morning. Thank you very much for all the detailed explanations. Two follow-ups in a couple of things that have been discussed. On capital, you generated like 36 basis point higher. Ahead of the capital market day, and when we think about the share buyback that you need to quantify, should we understand that it's an extra capital surplus that you can distribute or not? If it's not, why not? Always keeping in reference that 12% that you said it was a good guidance for the level where to assess the surplus. The other one is on the costs. Could you share with us what's the percentage of the headcount under the collective agreement with the unions?
On that side, do you see any risk of having to reopen that negotiation? Because it's hard, maybe it's being a bit negative, but it was negotiated under specific circumstances, under the COVID and all that. So probably that carved the cost inflation on wages. But things are changing, and if you don't negotiate now, it could accumulate a bigger underlying cost inflation. It's not something specific of CaixaBank. It's the whole sector. But I wonder whether there is a risk of having to sit down with the unions again, earlier than you think. Thank you.
Thank you, Carlos. Let me answer. In terms of the capital, as you know, we are under this supervisory approval process, and we have presented our numbers based on fiscal year-end capital levels. We would need to restart to incorporate the capital we have now, and that is, I don't think that would be a good idea. You need to, or you should think about this capital as obviously good capital. Of course, it's capital that can be distributed, and in fact, it is to be distributed, if not used for our organic growth. When looking at it and the share buyback that we have on the table now is referring to numbers at the year-end. Okay?
That is the request that we have put into the ECB and which is under process. There's not much I can elaborate on that front. It is good capital, but if the question is that capital potentially to be distributed now in the share buyback where we have requested ECB approval? The answer is no, because we requested it before it was actually created. On the second point, basically, or practically all of our personal expenses are under a collective bargaining agreement. It's a small number of employees that are top part of the scale that are not within that collective bargaining agreement.
In practice, this part of employees that maybe 5 percenters, to give you a sense, tend to follow similar paths to employees that are in the collective bargaining scheme. I would, for all purposes, say that is all our personnel costs, which is around two-thirds of our total, are subject to these five-year agreements. In terms of, is there a risk, I don't think it makes sense to having had an agreement that was extremely complex to reach for quite a few financial institutions and unions on the other side.
Once you have an agreement in which obviously there were things that were agreed in favor of one side or the other, and you end up having a full pack of say, "Okay, on this, I have an agreement," because of the change of circumstances, I think it doesn't make sense to reopen that agreement. There are many things that have gone south during these five years. Rates have been more negative than we expected them to be when this was negotiated, and then we had the pandemic. I think on that front, the banks were exemplary in terms of how they reacted, both for the shareholders but also for society as a whole.
My expectation is that therefore, these agreements will continue because they are binding on all parties until the end of 2023. It is true that if there's a significant inflationary component these years, and the agreements do not reflect that because they are based on conditions agreed upon five years ago, this will make it a complex negotiation in 2024. That's obvious, but I think we may actually have a more informed view of the environment in 2024 than we would have earlier, no? Because the environment is so volatile and uncertain currently that I don't think even if there was the willingness to negotiate, that the factors are there to reach an agreement easily.
My strong view is, no, we will have to negotiate in 2024. And obviously time will tell what outcome we achieve, no?
Okay. Thanks, Carlos. Let's move on to the next question, please.
Thank you. The next question comes from the line of Alvaro Serrano from Morgan Stanley. Please ask your question.
Hi, everyone. Thanks for taking my questions. One's on NII. I mean, the NII was in line, but if I look at your loan growth, it was probably better than most of us expected for you and for the sector. Your ALCO book grew significantly, but the NII was in line. The question is, have we not seen the full impact of the loan book performance, and in particular the ALCO book? Should we expect more in Q2 and following quarters? I know you said there's upside to NII, but I think you were referring to the rates angle. I'm more interested on those dynamics in the ALCO and the loan book.
It's kind of another sort of follow-up on capital, maybe asked a different way. When I think about, I mean, you've got a very sort of strong capital base, 30.2%. When we think about going forward, you've already got a 24% market share on loans, give or take. I mean, it sounds like it's difficult to grow it. When we think about the outlook, can you grow into that capital, obviously adjusting for the buyback, but or should we expect that most of the capital is gonna go to distribution versus investing? Thank you.
Thank you, Alvaro. On the second point, I think you're right. We will be generating quite a lot of capital that will be distributable. How much we are able to grow, it's gonna depend a lot on the market evolution. Today, I would say we need to be cautious and think that credit growth is going to be limited. However, what I would not assume is that we are going to lose market share on the asset side.
I think we are in a good position to keep and increase our market share, certainly on consumer and on businesses, and certainly play a big catch-up on mortgages to offset the losses that we have had in the past, or at least try to balance, get a bit closer the share of new production, with the existing book. You are right, with the information, with the macro scenario we have today, there's going to be limited asset side growth. We have no plans for M&A acquisitions, whatever, hence, our profits are going to be all distributable, and our intention is, in fact, to distribute them back to shareholders. We do not want to accumulate excess capital, no. NII, Javier.
Hi, Álvaro. Well, on NII, in terms of volumes, you need to take into account average balances, you know. I would say that growth and you saw it in a chart where you saw growth, for example, on a monthly basis on mortgages. You saw that we had higher volumes of new production during the month of March, you know. Thus, actually average balances for the quarter were not moving that much. You have the details on our quarterly information, no? It has to do probably a little bit with this. We see positive momentum, but on the other hand, we have those macro uncertainties. My feeling is that we can do well, but time will tell, no?
Hopefully average balances over the year on a quarter-over-quarter basis will be more stable, and thus, we will start having the impact from volumes also, on that part, no? On the ALCO, it's a little bit the same, no? Looking forward, you saw that we also have maturities ahead of us, EUR 7 billion plus. Well, I mentioned in the past some long-term targets for the ALCO portfolio, which I maintain, but we are not gonna be there in one go. We want to see exactly which is the path for rates for the long term. We are not managing the bank for the very short term in order to hedge the next quarter NII.
We feel that we have quite a long-term opportunity ahead of us in terms of building an ALCO portfolio that makes sense for the very long term, no? I would be cautious on that front, but it's something that, in my view, will come, so you should not probably be waiting for us to see the same pace of growth in every single quarter, no? That's it, no? Just to remind what I mentioned, I think it was on the first question, no? That there is a lag on the repricing from mainly from 12-month Euribor on mortgages, you have this two-month lag, so this actually does not have an impact until the Q3 in practice.
In the very short term, already wholesale funding and foreign exchange funding already repricing, spot, no? You have this impact in the very short term. I think that to see NII moving from current levels, we probably need to wait until the Q3 , and then from there, very materially into the Q4 and into 2023.
Okay, thank you for your question, Alvaro. Please move on to the next one, operator.
Thank you. The next question comes from line of Ignacio Cerezo from UBS. Please ask your question.
Hi, good morning. Thank you for the presentation. Two quick ones from me. On NII, if you can give us the frontbook, backbook of the mortgage book. On provisions, if you can share with us how much of the EUR 1.2 billion overlay do you plan to utilize within your 25 basis points guidance? Thank you.
Ignacio, thank you. On the second one, the answer is to be decided. It will be used gradually as needed. I think we need to look at it also when we have a sort of bit of a longer-term approach looking at what is ultimately Ukrainian impact, no? In all likelihood, there will be some use of that provision during this year for those 25 basis points. Then we need to understand what is the environment in 2023 and 2024. I think there is some likelihood that unused provision will allow us to make sure that we contain our cost of risk going forward.
Obviously will have to do with the macro environment and ultimately what the Ukrainian situation leads to. Javier, on
On the mortgage portfolio. Well, the backbook is now at the lows actually, because you have still not repriced positively. It's slightly below 1%. The frontbook, you need here to take into account there is a mix of fixed and floating. It's between 1.2-1.3%.
Okay, Ignacio, hope that answers your questions. Let's move on to the next one, please.
Thank you. The next question comes from the line of Britta Schmidt from Autonomous Research. Please ask your question.
Yeah, hi there. I've got two questions, please. The first one would be on the MyBox offer. If I'm not mistaken, some of the MyBox offers, when they were launched, should start renewing. Could you just talk us through how that will work in terms of pricing and whether we'd see an impact there? And then secondly, just to pick up on the fixed rate versus floating debate, are you seeing any changes in mortgage pricing and a little bit more rational behavior, especially in fixed rate? And maybe you can also tell us how much of your new business was fixed versus floating. Thanks.
I'm sorry, but there was some resonance here. On the MyBox question,
On MyBox question on renewals and pricing of the renewals, and then fixed versus floating mortgage production and pricing in those two segments.
Sure. On MyBox, on the renewals, we are having a good experience, this year where we have the first significant part of sort of three-year contracts that expired. You see a lapse rate that is higher in the motor part of the business because that's what happens in the market. In any case, it's much lower thinking if you think of the annual product than the cumulative lapse rates after the third renewal versus the first renewal post three years. Certainly motor is a more affected one. Household, we're being able to maintain production after the three year at basically the same levels.
I would say it's the same case with health, where we have also increases in price and associated to sort of inflation on medical and hospital expenses, et cetera. The experience we're having is quite positive, I would say. In terms of mortgages, Javier, maybe you can elaborate. Yes. Hi, Britta. Well, in terms of pricing, on floating, I would say that the market is approximately in the same place. In our case, approximately 140-150 basis points over six-month Euribor. On the fixed rate, obviously the market is adapting to the new situation.
You need to take into account here that since mortgage starts to be negotiated with a client, you have a delay until you have the closing of the mortgage between one and two months. Obviously the market has moved so fast that I think that the retail market needs to adapt to the financial markets, no? This will happen gradually, you know.
We need to see by when this happens, how all the situation settles. But I am sure that the margins will be in the right place as it cannot be another way, you know. But I would not read too much in today's prices because we are just in the midst of this repricing of the retail market for fixed rates.
Thank you, Britta. Move on to the next question, please, operator.
Thank you. The next question comes from the line of Pamela Zuluaga from Credit Suisse. Please ask your question.
Hello, good morning. Thank you very much. Most of my questions have already been answered, but I have one follow-up question and then maybe one more. The follow-up is on your target to increase the ALCO portfolio. You said in the past, you intend to move it to EUR 90 billion. Is that the level you're still aiming for? Do you anticipate that such an increase, while of course, like you said, would help NII could increase the capital sensitivity to widening sovereign spreads? Or are you gonna account for most of these purchases as held to maturity again? The question would be, you mentioned that you expect the NextGenEU funds to start supporting loan growth. Can you elaborate a little bit on how you see this happening, particularly which segment would benefit more and when? Thank you.
Right. On the second one, obviously, what we're expecting is to be able to provide funding, co-funding to this initiative is EUR 70 billion. How it works is a bit more complex. First fact is there is a slower implementation process than expected. Again, I think this is just the nature of the business, and it's more important than we have the right projects selected and the right sectors rather than doing this in a rush. Obviously the ideal world is to have everything well done and soon. I think we have already EUR 30 billion approved by the central government, but that then often goes to regional governments and takes time until actually it flows into the real economy.
Things that we're doing, for instance, is, if you look at households and SMEs, there are significant projects and subsidies for them. For instance, what is the digital kit, up to, I believe, EUR 2,000-12,000 of various subsidies. What we're doing is, just making sure that we incorporate into an offer with some technological partners. Though that subsidy probably with something else, because this is focused on software and there are some other things that are of interest in hardware. We incorporate the subsidy plus other things, and we put in the funding associated to that. We have a sort of a finished products which benefits the client and that we have incorporated as our commercial offer, part of our commercial offer.
The digital kit, which is already operating for SMEs up to 50 employees, is a good example where we are being very active. We're being very active with solar panels for refurbishing of housing. There again, what we're trying is to incorporate the subsidy into an offer which includes funding and the whole installation of these solar panels. This is already active and I think gaining traction very nicely. This is more sort of a retail SME level. We have the very large electric vehicle case. We have been selected as the financial partner one of these big PERTEs, the electric vehicle that is led by SEAT and where PERTE has been approved.
There's significant investment to be made in the manufacturing plants in Spain and also in cell manufacturing. Where we expect all the participants to talk to us and for us to try and help fund their investment in this big project, no. There's quite a lot of various and I'm just putting some examples, various initiatives. There's plenty of initiatives and possibilities also on the agricultural side, where the digitalization of the agro business is a tremendous opportunity. Again, where we have the largest presence by far with agro clients in Spain.
Overall, the top-down figures we have is that probably EUR 35 billion of the co-financing opportunity is going to be provided by banks. We obviously aim for a share that is at least our market share of the business in Spain, no. Javier, this was another question, no?
Yes. Hi, Pamela. About the ALCO portfolio. The long-term target of EUR 90 billion is still there, but as I say, it's a long-term target. We'll see when we get there. The way we look at it is as something structural, as I mentioned in one of the questions before, not just for the hedge of the next quarter NII, no. As we think that this may be quite a long-term opportunity, you know, going forward, and it's gonna be quite a structural investment. As of today, my view is that will be accounted as amortized cost, and as a consequence with no impact on capital. Although by when we are there, we will decide, no?
My first take is that probably the major part will be accounted this way. Thank you.
Okay. Thank you, Pamela and operator. Could we have what I believe is the last question, please?
Yes. Thank you. The last question comes from line of Fernando Gil from Barclays. Please ask your question.
Hi, everybody. Thank you for taking my questions. Two quick questions if I may please. First one is on BPI in Portugal. Provision seems to be EUR 34 million positive in the quarter. I was wondering what happened this quarter to have this provision line positive. Second is cost line on BPI. If you could provide us at least a split on how this is moving into the year. A final short question on extraordinary expenses in the group. We see this EUR 8 million this quarter. Are we done in terms of this? I don't know if you might have answered this, but just to clarify this, please. Thank you very much.
Javier, I actually have a problem here. No, my headphone is not working either. I understand that's an overview about BPI, also in terms of costs. Well, BPI is doing better and better. You see it every quarter. I would say that this actually a process of rolling out, let's say, the CaixaBank way of doing business in Portugal to the extent you can roll out, because there are obviously some differences, mainly in terms of long-term savings with different tax treatments, etc. In this sense, I would say that we are quite positive about the organic evolution, no?
We have been quite vocal by saying that the plan is remaining this way, organic growth, and that's it, no? Obviously in terms of costs, the fact of BPI belonging to a very large group offers plenty of, let's say, cost synergy opportunities in terms of making plenty of things at corporate level and thus helping to keep the cost base at low levels, no? This continues to be the plan. We are extremely happy on the way things are doing there. That's the plan. In terms of provisions, you saw that the non-performing loan ratio remains at very low levels, so you should be expecting there also a very moderate cost of risk.
You know that we have already consumed the PPA in Portugal, but even having done so, we don't expect that the cost of risk evolution in Portugal will deviate on a material way from what happens at group level. In terms of the extra expenses, we had a few, and we may have a few more, but I would say non-material in terms of expenses on the P&L related to the M&A, eh? Because I assume this was your question. I don't know if that answers.
I think so. In any case, I'll follow up with Fernando.
Oh, okay.
Given that we've run over time, let's finish it here. Thank you very much. It's been a pleasure to host you one more quarter and, hopefully see you in a couple of weeks. All the best. Bye-bye.
Thank you.