Good morning, everyone, and welcome to CaixaBank Invest Today, and welcome to the presentation of the Strategic Plan for 2025-2027. Truly a pleasure to see so many familiar faces joining us here in Madrid today. I would like to extend this welcome to the members of the Management Committee of CaixaBank, who are here with us today too, and to all those people who are watching us live streaming. Just let me run quickly through today's agenda. We have prepared two presentations, one from our CEO, Gonzalo Gortázar, and one from our CFO, Javier Pano. They will be followed by a Q&A session in which we will take questions from the room, but also remotely via streaming. Just two quick notices before we start. The first one is the slide set that we will use is available at our corporate website.
The second one, we need to finish this event at 11:30 A.M. sharp. Without further ado, I hand it over to our CEO, Gonzalo. The floor is yours.
Thank you, Marta, and I share your welcomes to everybody. Buenos días a todos, muchas gracias por venir. Thank you. As Marta says, great to see you in 3D after so many interactions remotely. And looking forward to the session today, and I'm sure you'll have plenty of questions, some of them you've already pointed out in the coffee this morning. So I'm going to start with brief comments on where we are now and high-level ambition, some comments also on the backdrop, which I think are quite necessary to understand what we are aiming to do over the next three years, which is the main section of the presentation, the strategic pillars, as we say here.
Where we are is completing a three-year plan in which, obviously, the integration with Bankia has been the highlight, a big success in our point of view with full alignment, full integration of the two organizations, and basically a sense that we have done the homework and that the house is in order, and hence we can be 100% focused on the opportunity that we have ahead of ourselves, and obviously, this integration has left us with a very strong competitive position in this market and market shares, clients, and obviously an ESG strategy that we will discuss later on. Briefly, in terms of targets, a great scorecard for the last three years.
I would highlight efficiency, return on tangible equity well above what we had thought, obviously with the aid of higher rates that's pretty well known to all of us, but with a good delivery on what we had to do as well, and a significant increase in the capital distribution capacity from the EUR 9 billion that we had originally estimated to EUR 12 billion. What we see this new plan is that we can deliver above 15% return on tangible equity on average for these three years, as you will see with a higher level at the end of the period, at the end of the period in 2027, and three pillars which we'll discuss later on: growth, transformation, and sustainability. The backdrop. The backdrop is quite relevant. First of all is the economy. Now we have seen the economy doing very well for quite some time relative to the Eurozone.
What we expect is for this to continue maybe to a lower level, but still growth that is going to be between 2% and 2.5% for 2025 to 2027, and the Eurozone gradually converging to those levels, but still below. We should have lower rates, and as a consequence of lower inflation, the labor market is doing very well in Spain, has been doing, we expect that to continue, and we also feel that for a number of reasons, including where the starting point is that investment is going to be growing, and hence that business lending in particular will also benefit during the period. There's a number of reasons for that. We are obviously at fairly low levels, and you will see on the next page a very low debt at this stage for both families and businesses.
We are seeing good trends in the market, which we have been commenting on for the last quarters and expect that to gradually change. Obviously, rates are going to normalize. This is the expectation or the curve we were expecting for the 12-month Euribor, which is based on the end of September levels. Javier will discuss more in detail that. I was saying potential to grow the loan book, and here is the long-term growth on the left-hand side of various European countries after the great financial crisis. You see Spain is at the bottom, minus 38%, when some other European countries, including the Eurozone on average, are up 21%. This kind of at some point needs to start to reverse, and we feel that is likely to happen during the life of this period.
You see the strong deleveraging through that long period, and basically we have the expectation that loan growth is going to gradually convert to nominal GDP growth, which on average during this three-year period would be 4.6%. You'll see our volumes are slightly south of that, but getting closer to that level. So it is an inflection point, but still actually as a percentage of GDP we still see indebtedness coming down, but at much lower pace. Savings rate, and I think this is very important to our numbers and to the environment. In fact, it is much more important the right-hand side here, what happens with saving rates and hence with customer funds in these years than what happens on the asset side.
When you look at our sensitivity, you'll see that the sensitivity to higher or lower loan growth is much less important than the one on the right-hand side. We have an increase in disposable income in Spain that is well established, and you also can see that the savings rate is at levels, sorry for that, of between 13% and 14%, well above historical levels, obviously still below the peak in the pandemic, but well above. We're expecting that to continue, and this means obviously more customer funds, more money in the pocket of our customer that is going to result in increased growth in deposits and increased growth in wealth management products, and one final note on the environment, demography. We have population growth in Spain. We've been having over 1% growth for the last few years, and we're expecting that to continue.
The National Statistics Institute is very clear about that. So again, that means we're going to have a larger market, more customers, and hence good news for our business. That's the first one. Life expectancy is also something well established, but we need to be reminded of how important it is. If you look at the over 65, we're expected to grow by 20%, basically from 10 million to 12 million. This is in 2030. Some of the analysis we've done in this plan looks all the way to 2030, even though all the numbers and targets that we're setting today are based on 2027, because obviously 2030 is too long to fix a target, but at the same time sometimes helps to see sort of longer-term trends.
And this is a big one, and this is a big one that favors us given our very differential position, strong position in bancassurance, and particularly with the senior population. And then finally, energy transition, something well established. This is obviously going to be increasing the demand for new lending. So all these things are there in the backdrop. Some of them were, but not to this extent three, five years ago. And I would have to think that the environment is. We're discussing just in the coffee that this is the fourth plan that Javier and myself are presenting, and I'd say clearly it's the one where the environment is most positive.
Many risks, we all know that, but certainly it's a plan which we are presenting in times where the potential is pretty exciting, both for the environment and also because I said we have the house in order, we have done our homework, and we can be 100% ready and focused on our business. Three pillars: growth, transformation, sustainability. I'll start with growth. Obviously, having talked about the environment, starting with growth is kind of pretty natural. And as an introduction to that, summarizing economic growth above the Eurozone, rates coming down, low leverage, low starting position in terms of indebtedness, savings rate very high, demography, energy transition, all this conduces to growth. And at the same time, our competitive position, our bancassurance model, our leadership, our financial condition as well allows us to take maximum advantage of this growth trend.
Again, I want to emphasize it's more important what we see in terms of growing our customer funds and through the elevated saving rate than just growing the loan side, which we're going to do as well. Six categories in which we have, for the purposes of this plan, aggregated our businesses. We'll get into all of them, but just to get a sense, what we're saying, business volumes, addition of customer funds and lending is going to be up by more than 4%, and this is obviously very different from what we saw in the first two years of the existing plan, just 1%, 2022 to 2023, but actually it is in line, in fact a bit lower than what we are achieving already in 2024.
So that's the other point I wanted to come across very clear: is that actually the growth we're expecting for the next three years, this growth that we're experiencing now, so it's not coming out of the blue, something that is going to happen, we're seeing these trends today. So it makes in our minds this plan something that we're definitely capable of achieving. So daily banking, deposit gathering, payments, transactions, great starting position. It's very clear with market shares north of 35% in the case of payroll deposits. And again, what I said, very good trends, demographics, employment, disposable income, and obviously on top of that, the trend towards electronic payments where obviously we're going to see significant growth, and with 31% market share, we're very well positioned.
This area, which is obviously something that is very profitable for us. It was not when rates were negative, but this is the core of our business. Our deposit gathering and associated services is now obviously a profitable business. We're expecting 3% growth, above 3% in terms of customer deposits. So they're talking about the on-balance sheet business, which is basically just slightly below what we're seeing in 2024, but significant growth from previous years. We are aiming to increase our client base. Over the last 12 months, we have increased our client base by more than 200,000 clients, and we're expecting over 1% growth in the number of clients every single year going forward, which, given where we are now in terms of client acquisition and also population trends, we think is something that we're definitely going to be able to achieve.
Second point, home mortgages, traditional business. We have 25% market share both in the stock and now also in the new production. You have the figures for the last three months. You know we look at home and mortgages and a broader base as the My Home ecosystem with not just financing, but also insurance, appliance, protection alarms, solar panels. All this is going to set to grow. Demand for new housing is strong in Spain. It's going to continue to be strong both in terms of volumes and prices, and also a significant investment in renovation and efficiency of the housing stock with NGEU funds and generally a desire from the population and from administrations to help that process. So mortgage lending, you can see on the right our ambition is to grow the book at above 2% per annum.
Obviously, that is a change from what we have seen before with the mortgage book shrinking. We have now actually had two consecutive quarters of mortgage book growth. So again, this change is not a surprise, is something that is a well-established trend at this moment in time. And obviously, building on the demand for new housing and the mortgage product, there's a whole range of products and services that we're currently offering and that we're planning to further develop, including sustainability-related products and services. Consumer lending, I said home, mortgage, and consumer. Consumer were doing very well. You see that actually we had 4%-6% growth. This plan on the right-hand side, we're just aiming at maintaining that level of above 6% growth.
This is actually going to leave consumer lending to GDP in Spain at levels that are fairly consistent with historical average, certainly far away from peak. So we think that the market will continue in this environment to help us. And we are starting from a position of strength as with all our businesses, given our competitive position here in Spain, both on direct lending, but also on what we're doing through our platforms, particularly Facilitea, which we used to call Wivai , renamed as Facilitea. We're going to be developing a number of additional services under this brand. Facilitea Movilidad is the one we're launching as we speak this month for used cars where we are actually cooperating with over 200 car dealers that will sell through our platforms. And we have already like 6,000, 7,000 cars in stock.
We've been already selling this through this platform in a, let's say, less developed format that's going to be significantly growing going forward. I'm just putting it as an example that is coming out very soon. The actual change from traditional auto manufacturers to the electric car provides obviously disruption. It also provides a great opportunity for people like us that can have a higher share of these car-related lending. Just to give some examples, obviously there are many initiatives you have on the page, happy to discuss them, but I cannot elaborate too long in the interest of time. Wealth management, this is a strength. We have been growing much faster than the market.
Figures even without acquisitions are approximately double the market growth for the last. In this case, we put an eight-year period, but basically whatever period you take, we have a very significant market share, close to 30%. Not only we're large, but also we've been, in my view, leading the market, particularly towards an advisory model and the payment services that are explicit for a very large part of our AUM, and that trends tend to be followed by many other players. Here, as you see, we're expecting 6% growth, north of 6%, which again is, I think, natural given what we said about the high saving rates that we were seeing in Spain, are well established, and it's obviously not as significant as what we're achieving this year, but obviously this year we also have a mark-to-market component.
If you exclude that, basically we're talking about sustaining the pace we have now. My expectation, there's great potential, rates will come down, people are going to be looking for other higher yielding products, and we're going to be helping them, advising them on that. So there is, as always, great potential and great momentum on the business. There's plenty we can do. We just launched a new series with BlackRock's technology, Aladdin, which is going to be, I'm sure, a success here in Spain, but there's plenty of initiatives. We're going to continue to be on the offensive. This is one of our best businesses and one where we are actually looking forward to expand and to expand faster than our peers. Protection insurance is a similar story in terms of our track record for the last years, big market share.
There's a big opportunity in protection, plenty of gap between where our clients are. Look at banking clients, CaixaBank clients, look at Spain versus the Eurozone. We expect to continue to grow our premiums at 10% per annum. That's not that different from what we have achieved in the past. And here again, what we see is the same as in wealth management. Longevity is a big opportunity for us, a big opportunity that we are already capturing and have been capturing for a while, but it continues. Some of the initiatives associated to health, to welfare, switch towards more modular solutions so that the protection insurance that someone needs can be adapted through their life cycle because they can add and change protection depending on whether they're getting married, having a child, retiring, or you name it.
Obviously very strong push in digital. I'll refer to that later on. Senior ecosystem point I made on this being the fastest growing market segment, the seniors in Spain. That's the reality because of the longevity trend that we discussed. Before we had four million clients. Basically that's 40% penetration for senior citizens. We have, I think, a product range and a service that others do not offer. And obviously we have the distribution, which is very important for seniors. This is not just a digital business. It has a component of digital because many seniors are very digital, but it also has to have the right physical distribution platform, which we have. We have great successes, annuities in Unit-Linked, in My Box Jubilación, My Box Retirement. We have had tremendous success in the past by continuing to innovate and combining savings with protection.
We see a great opportunity. The position that we have is unique. We're going to continue to leverage our scale, our position, our capabilities to do both financial, and we will be adding some non-financial services in cooperation with other partners most likely. On the business side, you see we have had some faster growth in the past. This has been aided by our growth internationally, where we have a very small presence, but a successful and growing one. We're expecting long growth, about 5% in this case, compared to the 3% that we have currently. This 5% is going to be majority Spanish-driven as opposed to what we have seen most recently. One point of note, we have a lower market share in SMEs, 19.6% than our natural. We're going to be obviously targeting higher market shares in that area. We think we can.
We have the distribution, we have the people, most important over 4,600 specialized managers as we have the offering. We're going to keep investing in digitalization. Technology is changing part of this business in a significant way. We need to be agile. We need to reduce the time it takes for us to say yes to a client, particularly with respect to loan applications. And basically this program has been gaining ground, and we will continue to develop strongly. The opportunity is significant. It's also related to decarbonization and renewables, which you know well. Internationally, we have a small presence, but a very successful one. We've actually doubled our presence in terms of lending over the last three years. We have no NPLs. We have mostly only investment grade. The reason for this is large companies, which we bank with in Spain, that ask us to bank at headquarters level.
Because of our size, we can do it, and we can be very competitive compared to other providers and obviously then Spanish companies operating outside and then once we establish presence in Frankfurt or in Paris or in Milan or London, then more business comes naturally to us also from significant sort of large local corporates. We'll continue to be small, modest, but there's a lot of business for someone that is long-term-driven, relationship-driven, and where we have good people. We have hired approximately 150 people in CIB internationally and in Spain over the last three years, and we're planning to do so again over the next three years. No investment banking, no big risks, just taking advantage of the things that we know to serve corporate clients and obviously broaden our capacities outside, transactional banking.
The strong industry and product teams that we have in hotel tourism, asset finance, FX with FXNow, we're having a significant digital FX tool for clients. We're having significant success now in a few jurisdictions, real estate, et cetera, et cetera. BPI, I haven't made a separate comment on what the areas of growth are for BPI because they are exactly the same. We are in very close markets. BPI is in a great position. It's been growing market share lately, certainly since we have taken control of BPI and obviously now operates at a very attractive efficiency and profitability levels. The trends we're seeing across all businesses are very much applicable to BPI, where we have this 4% volume growth as well and a very differential non-performing loan relative to others, particularly in Portugal, very differential non-performing loan ratio.
Again, very much aligned, Spain and Portugal, CaixaBank and BPI after almost eight years, things are working very well. And also we are obviously operating as one group in two different markets. Moving on to transformation, second pillar of this plan and obviously a very important one. When we talk about transformation, we talk about three things. We talk about the distribution network, digital and physical, technology, and then people. We've provided some numbers of IT investment during this period. It's going to be about EUR 5 billion for us. That's approximately EUR 1 billion more associated to strategic IT initiatives, let's say change the bank's deep transformation initiatives that you can see. Out of the total EUR 1.4 billion of additional initiatives, EUR 1 billion, 70% referred to IT. The other 30% referred to other parts of the business, customer service, payrolls, client acquisition, et cetera, et cetera.
Starting with transformation of our network, starting point, 18.4 million clients, and we have obviously a system to serve them where we have specialist relationship managers for 40% of those in branches. We have the operation we call in Touch, remote branches, 15%. These are more generalists than Imagin mobile bank, mainly aimed at young clients and others, be they digital or physical, but they do not have a separate relationship manager or especially assigned relationship manager. Basically what we're seeing looking at the market is obviously clients are more and more digital in the way they interact and the frequency in which they interact. But at the same time, they continue to tell us, they continue to have a multi-channel approach, and they continue to tell us that they value very much the human interaction, even more so after COVID, and that includes also the youngsters.
So we look at our bank and say, well, we need to provide the best digital service. The fact that we can provide physical service at the same time and if we can combine it in a seamless way is a huge competitive advantage, which certainly our sort of neobanks and others, and I refer to that, are going to have no possibility to emulate because the capacity that we have built is obviously not easily replicable. So how can we use and transform and use technology to boost the capabilities of our teams that are in the branch network and obviously in the customer service? Three big areas. First of all, we need to make the physical network more flexible. So obviously people sitting in the branches can interact physically with clients, but can also do it remotely.
We now currently only have remote interaction from people that are outside of the branches. We need to make sure that we have a hybrid approach here. We're going to continue to take away from branches some of the administrative tasks that are still in there, despite having been talking about this for decades. We're still, every time we look at the branch network, we see actually there's things we can do outside of the branch network to make sure that our people are free to provide service to clients and to sell, and we're continuously doing that, and we have good plans on that front, so we are basically going to have a more productive network. Second is a specialization. We think still we have the ability to have more of our relationship managers specialized and increase of approximately 20%.
Through the reorganization of the portfolio, which we're taking the portfolio of clients, we're going to end up having twice as many clients served by specialized managers, which obviously will result because we have that track record well established, will result in higher productivity and better service for clients. Commercial performance will also be boosted by AI. I'll have a few words on AI later on, but clearly AI is going to allow us to improve customer experience and efficiency. One other point that is also relevant is the leads that we get from customers that navigate through our channels with AI. We are going to be able to convert those leads and send much more high-quality leads to our managers that obviously will be able to then close sales. Moving from the physical to the digital, we have our mobile app.
Obviously, again, largest in the market, over 11 million. We still see great potential both to use the current trends in order to have more digital sales, but also to change, simplify, make faster, more convenient, more effective our app. And this is based on reducing the number of screens, the time you get to get something in terms of number of clicks. Simplification of the product portfolios is critical. The dialogue, obviously great potential also for AI in our app. Think of it as one of the largest digital shops in Spain with these 11 million and over 5 million of daily clients in our app. That provides a great opportunity. This is happening. Some of you are clients. Others, I hope you become after today. But you will see that the app is already changing, and this is going to be continuing during this quarter and next quarter.
So again, this is not sort of plans we'll do in 2027. This is happening now, and we're seeing the result of that change already. We aim to be number one in customer satisfaction, looking at the large banks in Spain, and as you can see, grow digital sales and lead generation. Particularly with the app, we do have a saying: we want to be, through the app, the natural orchestrator of how clients interact with us, and again, with the changes we're doing in terms of simplifying, making it a better app, and introducing AI, which will obviously take a longer time frame than just the next couple of quarters, we have the ability to do so. Certainly, we have the traffic to spend a lot of time in making it not just great, but greatest.
Imagin: a few words, 3.5 million clients, big growth over the last years, I think. The idea I'd like to highlight here, you have a lot of information, is this is a real full-fledged bank from the point of view that we are offering a complete range of products and services. Many of the neobanks here are having sort of one anchor product. When you look at their client base, they are basically monolines. We are actually providing a full bank, and most of our clients here have Caixa Imagin, hence CaixaBank, as their primary relationship bank. You see some statistics, 50% of our active clients have their payroll with us. That gives you a good indication of where we are. Actually, the proportion is even higher than the one we have at CaixaBank.
Obviously, there we have also older people with pensions and other kinds of clients. But it's very impressive. We have developed the full range of products, deposits, lending. This is a very profitable operation. You see three and a half times growth in gross income, and we expect significant growth on a relative basis, not as much because the base is obviously now higher, but significant growth again over the next three years. We do not feel particularly threatened by neobanks. They are making our life more interesting. They're making us busier. We look at them. They do some things that are great. But at the same time, our position is one where we're actually competing very well with them, and we're going to continue to do so. Certainly, that is the plan.
One of the initiatives you can see on the right bottom of the page, for many of these clients that are actually high value, we're going to be introducing personalized relationship managers. In fact, we have already done it just for the top of the pyramid this year with great reception. Our clients here appreciate a lot having a person to contact when they have a need or something else pops up. IT investment, I said quite a lot of money, over EUR 5 billion for three years and EUR 1 billion purely marginal transformation. Where is that EUR 1 billion going? Three areas. I'd say first to boost the effectiveness, the agility, the traditional business that we're doing. And here's channel renovation. Lots of comments already made about the app. Streamlining applications, be it the app or for the bank, will become a very complex bank.
We have 18 million clients, and we have integrated so many banks. Even if we have one sole core banking system, the reality is we have many, many products. And in order to move faster, we probably need to be a bit simpler from that point of view. This is a process that we started long ago, and now we can, during these three years, spend the time and the necessary money to make sure that that happens. Second, what we call here cutting-edge capability sounds very nice. It's again AI, and it's obviously continued migration to the cloud. We expect to have 50% cloud adoption by 2027. That compares to one third today to give you a percentage. Obviously, this is a long-time phenomenon, but good progress these three years. In order to do this, we're going to be hiring 1,000 IT professionals.
You will hear later about the cost implications, but basically what we're doing is internalizing, not exactly the same people, but services that we are currently outsourcing. We are going to be internalizing. We'll have a higher degree of control of our destiny, which is very much associated to technology without an increased cost associated to this part. Obviously, the whole program does mean we're going to be having a higher cost growth rate than otherwise in the next three years, and Javier will discuss that and then resilience and cyber. We know you don't want to see us having a problem. Neither do we. We feel that we need to keep investing to make sure that we are at the very top, and we are today. We will continue to be in 2027, but it costs us money.
Obviously, I didn't mention talking about the AI capabilities, but we want to have 30% of our processes supported by AI in 2027. Talking about which, I wanted to give you a few examples of things that are currently in place. They may be in earlier stages or more advanced, but those are all things that are happening today. Giving you an example of what we're doing. Our chats with clients, AI is allowing us to reduce the response time by 25%. This is a very significant number of conversations, over four million a year. Obviously, this is going to keep growing. So the ability to make more efficient the interaction. Basically, all of this in the end is about a human interacting with a machine.
Rather than having to have an extreme degree of complexity in doing that and knowledge, it's just natural language allowing us to get very quickly all the knowledge of the machine to the human in the form that the human demands with natural language. So it's magic, but it's basically making efficient that interaction. So everywhere and banks are all about information, and clients want information from us, and employees want information from the machine. All that can be obviously developed to a great extent through AI, be it more efficient and obviously better results. So chats, the employee assistant, again, these are again chats that go and get responded by the machine. We currently have obviously AI already in place, but basically what we'll see is the number of inquiries that will go to a human expert because the machine cannot respond to will be reduced by 40%.
So again, much more efficient contact center, 20% higher absorption rate by AI agents. Commercial, the platform I mentioned, how you interact with our app is going to be a different experience, a much better experience with AI. And some of these initiatives were basically launched this year-end. And obviously, if you interact easily with the app, you're more likely to buy, and you're less likely to call someone because you have a problem. So it's going to be more productive commercially, more efficient as well for us. Customer service claims earned something that is also very common to many industries, code generation, software development, much faster. We have a program. We started a year and a half to move from the thinking to the reality. We put over 100 people in one building working full-time across sort of different functions.
We have actually scaled that up after a year, and we'll continue to scale it up during the next years. This is obviously going to be critical for us, but it's also going to take some time. Again, for me, it's a matter of providing the right customer experience more than the matter of efficiency. We're going to have both. We obviously can be more efficient, but what we cannot risk is not having the best customer experience that technology can provide through generative AI. Then finally, team. Here we'll talk about developing the talent that we have in-house, upskilling, reskilling, program of development by skills, making sure that we take this very seriously because it's critical to us. So we're mapping everybody in terms of what the skills they have today.
We're mapping the organization, what skills we need them to have in three years' time because obviously the business is evolving and is demanding different profiles of different people. And making sure that people understand what they need to do in order to be able to move from one place to the other. And that means a lot of training, investment in education, which we are happy to do. This looks like nice words, but it's actually a tremendous amount of work and supported by tremendous technology as well because we're 46,000 people. And if you think that each one has 10 skills, then it becomes 500,000 skills to play with. And that even in a human mind, as good as we have some, is not possible. So a lot of work there and movement towards specialization, attracting, retaining top talent.
I mentioned the hiring program on the IT front. In total, IT and others, we're expecting another 3,000 young people to come on to CaixaBank over the next three years. So this is a planning which we're investing. Obviously, this does have a cost, but we think it's absolutely necessary, and actually, the good news is we have done all the streamlining through the integration. Now we have growth opportunities, things to do, and it's great to add new DNA, and then it's not just having the talent and attracting it, but also making sure the talent interacts in the right way. So here's what we're talking about: simplicity, agility, basically making sure that our customer-centric culture pervades everywhere and that the organization, as a consequence, moves as fast as it can.
Here we have a lot to learn from some of the new entrants where obviously they have a timing advantage. We're never going to be able to be as fast, but certainly they provide us a reference, and we cannot be as fast. We'll be looking for the silver medal or the bronze medal. Plenty of good things for us to do, and this is basically, in the end, hopefully going to result in higher Net Promoter Score, higher service and quality for clients, and with that, I would be finishing, moving on to our positioning on sustainability. There's nothing much new, particularly because actually over the last three, four years, we have developed in a systematic way our approach to the E part of the ESG, the environmental initiatives. We have over-delivered on our target of sustainable finance mobilization, as we call it.
We are now achieving or aiming to achieve EUR 100 billion in the next three years. The good news is this is something we're doing already. Four years ago, we wanted to do things. We had ideas. Today, we are actually acting on them. We want to develop more products and more services that are going to help our clients in the transition. This is more because we have quite a few already similar with respect to decarbonization activities. A Net Zero Alliance, which we are one of the most advanced in terms of targets already disclosed, our people. We need to continue training our people, but this has started long ago and making sure that they are knowledgeable enough to engage with clients and have a proper discussion about what does the energy transition mean for them. You talk about this to a very large corporate.
They understand it, but they also appreciate our views as we are advising many of them on sustainability topics. But when you go further down the ladder, there's obviously many people that have heard about it, but don't necessarily understand or have a clear view as to what they need to do. And obviously, we can help them in having the dialogue and looking at obviously also the lending and finance implications, whether that is new investment or maybe some changes to their existing business mix, etc., etc. Second, on the social side, we are a reference here. I think you all know we have so many initiatives that are completely differential. We group them in three big areas: social and inclusion. And here, I'd say we're going to continue with our commitment to maintain our presence where we are the sole financial services provider.
We're not going to be leaving municipalities. Today, we're in over 3,200. In fact, we're increasing the number of municipalities we service, not by opening branches, but by getting these mobile branches that we have close to 20. By the way, they have been extremely useful now in the terrible tragedy in Valencia where we have six branches closed. We have been operating in many cases as the only bank that has been operating from the beginning because we were able to send our buses from all the neighboring areas to make sure that people in the locations that unfortunately were most hit have continued to have access to our banking services. Microcredit financial, we have the basic accounts, so over 360,000, a pretty significant number.
Obviously collaboration with la Caixa Foundation, which you know well and makes us very different, not just because we send one third of our profits in that direction, which is a real pleasure, but also because we actually are able to cooperate with them through our volunteers, over close to 20,000 volunteers that we have that can, yes, not only put their minds and pockets as they were, but also their hands to cooperate with what la Caixa Foundation does, which you know well is the largest foundation in continental Europe, one of the largest in the world, spending 600 million in social welfare in Spain and Portugal mostly, and doing tremendous good. For us, it's a source of pride to be able to be helping the foundation in doing that through our shareholder Criteria.
Employability, you have some of the figures here just for the efforts of Dualiza and MicroBank, 150,000 jobs to be created in the next three years. Obviously, you look at the whole bank, there will be many more, but those are more difficult to estimate in terms of measuring the impact. We're being able to measure the job creation at these two initiatives. I'll continue to push forward. MicroBank, you may have seen in the press, actually has one third of the share among all microbanks in Europe, not just in Spain, but all microbanks in Europe. It's a huge success. So it's Dualiza in Spain with what we're doing in this area and the Formación Profesional, which is a big source of potential in Spain and of need.
And then longevity, we discussed again the increased importance and what we look at it from a social perspective is not just the financial opportunity by helping these clients save or sometimes use their savings, but also looking at how we can help them in their personal and financial well-being. And then to conclude our targets, and obviously this is a great moment to hand it over to Javier, but just a summary. Return on Tangible Equity, profitability over 15%-16% by the last year of the period. Cost income in the low 40s%. On all these, Javier will elaborate, so I'm going to just enumerate them. Expect NII in 2027 in line with what we are expecting for this year, 2024. Obviously, this is the impact of lower rates that are already coming. Costs at around 4% and service revenues in the mid-single digits%.
I discussed already growth in business volumes, and I'm going to repeat myself. Asset quality, obviously, is going to remain pretty strong. Expect to be below 30 basis points in the cost of risk throughout the period, and obviously, at the same time, with a low non-performing loan that will continue to come down. Capital, very much continuing with what we have done in the past. Payout 50%-60%. The board will decide annually which points in this range. There will be an interim dividend as we had already paid, in fact, this month, few days ago, and we have a commitment and an intention to distribute excess capital above 12.5%. Obviously, this is a difference. It used to be 12%, now it's 12.5%, and this is related to the fact that there's now a countercyclical buffer.
Finally, the board has decided to pass on just 50 basis points of that countercyclical buffer, at least while that countercyclical buffer is in place. That leaves us with this 11.5-12.5 management target for Core Equity Tier 1, and with the ability and intention to distribute excess capital above that level. How much that will be, I'm sure we'll discuss that. It's going to depend on growth. I leave it here to Javier, but I started talking about growth, about the opportunity, and obviously, we feel that that growth is a great source of value creation. We're going to have a bank that is having a 16% return on tangible equity. We want to keep growing that business. If that means retaining capital, that's a great use of capital because it's going to be yielding a 16%.
But I'm sure we'll get into that later on. So, Javier. Okay.
So thank you very much. Yes, you said that, Marta. Happy to see so many familiar faces. And yes, thank you for making it to be here in person. And I would like also to say thank you to all the teams that have been behind the preparation of this plan. A lot of hard work in recent months. So thank you very much. Before I go into the details, let me make some introductory comments. You already said, Gonzalo, that this is our fourth strategic plan as management team. And well, actually, we feel we are on a sweet spot with this expectation of positive growth in terms of commercial volumes, while at the same time, we face still positive rates, obviously lower than in recent years.
But if you look at other plans on the chart on your left, clearly, other times we had good volumes, but we had zero rates or negative rates. We faced COVID during the last three years. We had higher rates, but actually, volumes were not as good as what we are expecting now, so clearly, we feel that we are in a good position from now. On the right-hand side, you have this summary of what Gonzalo has been already commenting. This business volume is expected to go up by over 4% with a performing loan book, sorry, circa 4%, with growth skewed towards higher yielding segments, business lending up by 5%, consumer lending more than 6%, residential mortgages more than 2%, finally growing that segment after several years of deleveraging, and then on customer funds, deposits up by 3%.
I think that probably we are being a little bit conservative on that one. And then wealth management over 6%. All in all, we feel that the plan is based on conservative assumptions on volumes and rates. For rates, we're using as a base case the yield curve as of the end of September that, as you know, was already factoring more than 200 basis points of ECB rate cuts. So with that combination, we are, as Gonzalo was already saying, we are expecting to deliver a RoTE over 15% on average, accelerating towards over 16% by the end of this plan. And we are talking all the time about volumes, growth, etc., but it's going to be profitable growth with that return on risk-weighted assets expected to be on average 2% and accelerating over 2%. On the right-hand side, you have our traditional RoTE bridge.
But before going into the details, let me first give you a preview of what is our guidance for the main P&L items. NII stable, 2027 vis-à-vis 2024, revenues from services growing mid-single digit. And when you combine both, you get a positive impact on our profitability of between two and three percentage points. Then we go to costs. And on costs, we have two different trajectories. What would be the business-as-usual trajectory that would result in costs growing by less than 3%. Once we add the P&L impact of the initiatives that Gonzalo was commenting, we get to costs expected to grow by circa 4%. And this is having a negative impact on our RoTE of circa 2.5 percentage points. Then cost of risk that is expected to remain broadly stable compared to the recent past, less than 30 basis points. So no impact on our profitability.
And then other impacts of up to 50 basis points negative, mainly reflecting higher capital levels, that new management target for CET1 together with more capital in order to fund growth. With that, let me move to the details. Starting with NII, I will spend some time on NII. I think it's a key part. As you know very well, we have been reducing significantly our sensitivity to rates. Upper left, you have this chart where you see the breakdown of our rate-sensitive balance sheet. You may see that currently we hold 65% of our rate-sensitive assets floating. And this has been coming down in recent times as we have been increasing production basically of fixed-rate lending, basically mortgages. Then on the liability front, we have 50% of liabilities at floating. And this basically has been increasing because in that case, we have been adding hedges, etc.
So we have a gap between floating-rate assets and floating-rate liabilities of circa 15%. And from that is where together with other things, because that would be like a static view of the sensitivity, which is not the right thing to do. But in any case, this is the main reason behind the positive sensitivity to have to raise that it has been significantly reduced. Now we are working with that circa 5% target to a parallel shift on the yield curve. Remember that when we were here three years ago, we were talking about sensitivities between 30% and 20%. So this has been significantly reduced. On the right-hand side, you have the evolution of NII. Clearly, we are expecting to be at a higher plateau, a massively higher level.
That stable target, 2027 vis-à-vis 2024, is true that in 2025 and 2026, we will have a small dip, but very shallow. Actually, we are guiding clearly here for NII to be all years above 2023 levels. It's something that we have been commenting on the quarterly call, so it's very well known. Customer spread, bottom right, we're expecting it to be on average 3 percentage points, clearly coming down in 2025 and then hovering around 3% later, and we are focusing on profitable growth. Clearly, here we present the customer spread minus the cost of risk, and as you may see, the two lines are really parallel. So growth is not expected to result at all into an increase of delinquencies. Further information about NII, so I think that this bridge is quite useful.
So here you may see how we go from over EUR 11 billion in 2024 to over EUR 11 billion in 2027 with lower rates. Clearly, lower rates do have a negative impact on our commercial balances. So basically, we have a negative impact from repricing on loans at floating rate, partially offset by lower costs on our deposits, but only partially. And the net is a negative impact of EUR 3 billion. And that includes also cash balances, etc., the excess liquidity we hold, obviously having a negative impact due to lower rates. But we are envisioning better volumes, and the volumes come at a margin. So we are expecting, obviously, a positive margin on lending, but also a positive margin on deposits with positive rates. That combined is adding EUR 1.1 billion to NII. And then we have quite a significant positive impact from ALCO, EUR 1.9 billion.
I would like to highlight here that this is not because we are planning to expand ALCO activities, more trading, larger book, etc. This is basically the impact of the passage of time on all the positioning we already have, and obviously the impact of lower rates that result into a counterbalancing impact compared to the impacts on the commercial front. Basically, here you have plenty of details. The main impact on ALCO is lower funding costs because we have all our wholesale funding swapped into floating. And obviously, with lower rates, we have quite a significant positive impact. Then those EUR 37 billion of deposit hedges, of which EUR 15 billion are legacy hedges, which the fixed leg is circa 0%, and this is maturing early 2027. And you have all the details below.
You may see here, and we are highlighting precisely on the case of the hedges, those maturities in 2027. You have the rates of the fixed leg quarterly. And also we hold EUR 24 billion of ALCO maturities during this period at a low yield. It's a legacy portfolio at 0.7% yield. This will be reinvested, obviously, at higher yields and, well, obviously having a positive impact also. We are, as I said, assuming that ALCO purchases are going to be solely to rollover maturities. Any new hedging needed in order to manage our NII sensitivity is estimated to be NII neutral, as the yield curve actually is so flat that actually extending duration is not having any impact on NII.
We are providing also additional scenarios because, well, the base case is that light blue line, the yield curve as of the end of September, currently as of yesterday afternoon, it's a little bit higher, but you know that this is having quite significant volatility. We are adding two additional scenarios, a higher rate scenario with a terminal ECB rate at 2.5% and another lower rate scenario with a terminal rate at 1.5%. In the base case, what you already know, NII stable, RoTE over 16%. On the lower rate scenario, NII will come down 1% CAGR, but still our profitability will be over 15%. And on the alternative scenario with higher rates that now looks unlikely, but who knows, NII would go up by over 1.5% CAGR, and our profitability will go over 17%. We provide additional scenarios or sensitivities.
We are working with the assumption as base case that the percentage of interest-bearing deposits is going to remain broadly stable. We say here circa 30%. That includes not only client deposits, but also other deposits we have. This is information we are disclosing on our quarterly presentations. And assuming this is going to be stable, but obviously at a lower cost as rates go down, changes of, as an example, 2 percentage points of more interest-bearing deposits would have a negative impact on our profitability of circa 15 basis points. Additionally, we add potential impacts of lower volumes. In the case of flat loan volumes, that would result into an NII in 2027 over EUR 10.5 billion. And that would still result into a RoTE circa 16%, taking into account that in this case, there is less capital needed to fund growth. So there is also that effect.
Then with flat volumes at all, also on deposits, EUR 10 billion NII with a RoTE circa 15%. With that, let's keep moving now to non-NII revenues. First, an overview of our expectations on total revenues. Our estimate for 2024 total revenues is those to be over EUR 15.5 billion, and we're expecting over EUR 16 billion by 2027. As already said, NII broadly stable, other revenues also stable. That is the mix of revenues and expenses, other revenues and expenses, income from associates, trading. The best guidance we can give you now is that this will remain broadly stable. We have, well, those key engines for us that are revenues from services with those key engines, wealth and protection that are expected to keep fighting on all cylinders and also counting on some banking fee recovery.
On the right-hand side, you may see how this compares with the past, that mid-single-digit growth for revenues from services only back in 2015, 2018. We did better. It was a different backdrop, 0% rates, a lot of inflows into AUMs, etc., and also, despite lower rates, as you see bottom right, also with an improvement on our pre-provision profit to circa EUR 9 billion. Here you have all the details, the breakdown of that mid-single-digit growth in services, wealth management on the back of high volumes, mid- to high-single-digit growth. We expect average fee to remain broadly stable. This is our base case. And actually, it has been the case for quite some time. Protection insurance expected to grow mid-single-digit, continued growth both in life risk and insurance distribution with strong commercial activity. We expect growth to accelerate as the plan progresses.
You know that there are some non-recurrent factors that may affect 2025 vis-à-vis 2024, and also, we are starting to introduce some changes in the product mix, hence having some impact. Then, banking fees, in that case, low single digit growth expected, recurrent banking fees with growth in payments, lending-related fees. This is going to be offset by lower maintenance fees. Still expect some pressure on that front. We'll do our best, but our assumption is that there is still some structural pressure. I would like to highlight that the P&L line will register the higher paid fees associated to capital optimization. So we are planning to be more active in terms of capital management, SRTs, etc. So what you pay for that is usually registered as a fee, and then CIB fees with growth supported by international banking and basically the penetration acceleration in Spain.
With that, let's move to costs. An overview initially on our cost to income expected to remain the low 40s%. That compares very well with the cost to income of the peer average. The peer average are the top 10 banks by market cap of the Eurozone, so 51%. So we expect to do well on that front, and then on costs, as I said at the beginning, like two different trajectories, what could be the business as usual, so with that, costs could have grown less than 3%. That's the impact of the collective agreement, social security costs that are growing, and general cost inertia in personal costs and general expenses, but then we are adding those, well, changing a little bit gear here in terms of strategic investments targeting some growth initiatives, but also basically digital and IT.
As a result of that, we have an increasing cost. You have this very clearly on the bridge on the right-hand side, the strategic initiatives focusing growth, basically aiming at customer acquisition, enhancing quality of service, resulting in a delta of circa EUR 100 million. Then everything related to IT that Gonzalo has been commenting, it's a delta of EUR 200 million, but already having circa EUR 100 million of efficiencies within the horizon of the plan. Okay? So I think that with that, we reach that cost base circa EUR 6.9 billion by 2027, hence that 4% CAGR. Cost of risk, but first, let me comment on NPLs. The starting position is quite a good one with that 2.7% NPL ratio. I would like to highlight that 36% of our NPLs are subjective NPLs. That means that are actually performing but classified as NPLs for prudential reasons.
So I think that is also important to keep that in mind. We are targeting an MPL ratio of circa 2% by 2027. We have quite a good track record in terms of MPL management historically. You may see that during the last decade, we have been able to recover almost all inflows. And on top of that, we have added several portfolio disposals, something that I would say that is almost now business as usual, and something that we are planning to keep doing. As a result of reducing MPLs, reducing, well, DTAs, reducing real estate, something that will continue to progress in that direction. We are releasing non-yielding assets, and this is freeing capital to invest in profitable growth to the tune of circa EUR 3 billion per year. And then that compares with over EUR 2 billion during the last three years.
Cost of risk itself, that guidance of less than 30 basis points annual average on the back of this benign environment in Spain and Portugal, also with some tailwind from lower rates, obviously a positive in terms of delinquencies. Cost of risk less than 30 basis points while we maintain a high coverage level, circa 70%. Now the final chapter, capital. Let me first comment on the three pillars that obviously is on what our capital devolution is based. First, high organic generation, capital generation with that profitability over 15%. That compares with 14% last three years. I would like to highlight that when comparing the capital devolution of this new plan compared to the previous one, the previous one actually the bold figure of EUR 12 billion that obviously we are planning to honor for this plan.
Actually, EUR 1.8 billion of those EUR 12 billion, sorry, are generated, were generated before 2022. So just to keep that in mind. The second pillar, an efficient use of capital. So as you may see here, we are expecting our risk-weighted assets to grow by circa 3%. That is the same than the last three years, but now we are targeting loan growth, circa 4%. It was slightly positive, 0.5%. As I said, we are trying to be much more active in terms of capital management, including SRTs. We have been active in the past, but now more. We are no longer expecting capital headwinds in terms of IRB models or other regulatory impacts. We are not expecting an impact from Basel IV either. Well, that's the situation. So profitable growth, that return on risk-weighted assets, circa 2%.
Then finally, the target that has been raised from 11.5%-12% to 11.5%-12.5%, as Gonzalo said, accommodating this new prudential requirement, that countercyclical buffer that, as you know, is having an impact of 75 basis points on CaixaBank, but actually we are passing on 50 basis points of those to our capital plan. I would like to remark that this is still an ample buffer over the SREP requirement between 200 and 300 basis points. 12.5% now being the upper bound of the target, being the threshold for external distributions. We are setting an interim target by 2025 between 11.5% and 12.25%. So I would like to stress that for that year, that threshold for additional distributions is 12.25%. And well, and that's the situation. And with that, we come to this CET1 ladder.
Let's assume that we are starting and we are closing 2024 with a CET1 ratio at 12%. It's not going to be exactly that. Probably it's going to be over that figure. So any capital over that figure is obviously available for the next three years. So from there, we are planning to build over 700 basis points of CET1. That would result into a CET1 ratio over 19% by 2027 before deployment. From there, we are estimating circa 200 basis points of negative impact from business growth. This is basically risk-weighted asset growth together with other impacts like operational risk, etc. And that results into over 450 basis points of capital for dividends, AT1s, and the excess over 12.5%.
To sum up, our capital devolution policy from now on is that cash payout between 50%-60%, including an interim dividend every year, plus additional distribution of any excess above 12.5%, 12 and a quarter for 2025 through dividends or additional share buybacks. A final word on MREL and liquidity. On MREL, we are actually closing the third quarter at a very good level, 28.3% ratio. That's well above the requirement, 24.7%. Actually, as you may see, we are complying with the requirement with subordinated instruments. We have a strategy that is yielding results. Actually, we had last week, as you know, an upgrade from Standard & Poor's to Single A for our seniors on the back of that strategy. Something obviously that we are planning to follow with that strategy, as I say, is yielding very good results.
On the right-hand side, you have what we are planning to issue. We are planning to issue only for MREL purposes. No need to issue for funding purposes. We are planning to issue circa EUR 21 billion across the different MREL asset classes, as you see. We face EUR 20 billion of maturities the next three years, including potential calls. That is an issuance of circa EUR 7 billion per year, which is actually what we have been doing and what we have done year to date. Below, you have our very comfortable liquidity metrics. My message here is that you should expect that very comfortable position to keep going during the next three years with our liquidity metrics hovering around those levels as we are not planning to face any liquidity stress.
Now finally, just to repeat what Gonzalo was saying, that summary of key financial targets, RoTE over 16% by 2027, over 15% on average, cost to income low 40s%, NII stable, revenues from services growing mid-single digit%, costs up by circa 4%, and businesses over 4% growth, NPLs 2%, cost of risk less than 30 basis points. And that cash payout 50%, 60%, and distribution of any excess above 12.5%. So thank you very much. And probably we face a few questions. I don't know.
Okay, so now thank you, Gonzalo. Thank you, Javier. We are ready for taking some questions, and we'll combine some in the room with those that come remotely. And I will start from my left and gradually move my way to the right. So Antonio, please.
Morning, Antonio from Bank of America. Thanks for the presentation. I have a couple of questions, if I may.
One on costs and more importantly, on cost income evolution, actually. I think you've talked about EUR 5 billion of investments, most of which, if I understood right, to be front-loaded in the first part of the plan with some efficiency gains that you expect to come through already by the end of the plan horizon. So can you help us understand what the implications are for your cost income ratio short term, so in 2025 and 2026, particularly conscious also that you've mentioned, I think, that the bulk of the positive hedge contribution to NII is mostly in Q1 2027. So I wonder if you could see negative jaws in 2025, 2026, and if you could give us a little bit more color there, that would be helpful. I then had a question on your opportunity in protection.
I guess a large part of the growth can come from non-motor insurance. I'm thinking about health, SMEs, and home insurance. To what extent you would consider internalizing the 50% stake you don't currently own in your P&C unit, conscious of the EPS growth potential as well as the Danish Compromise benefits. And then if I may, just a very quick clarification on the frequency of your capital distribution. I mean, you switched to interim dividends, and that's clear. I think I heard Gonzalo say that you'd assess extraordinary capital distribution at year-end, which would suggest somewhat a change in the frequency of the special distribution. You've been quite consistently in executing those buybacks. So I would just wonder how you're thinking about the frequency of the extraordinary part of the distribution. Thank you. Thank you, Antonio.
I'll let Javier comment on the first question and the two others in terms of internalizing the stake is not something that is on the table. We have a great partner, and it's a stable alliance, so that is not considered. And with respect to dividends, if I said something that suggested that or share buybacks that would only be assessed at year-end, that's wrong. It would be assessed as we've been doing. It could be as soon as we go above our established targets, we will consider share buybacks as we've been doing recently.
Hello? Okay. Well, on costs, well, those over EUR 5 billion of investments, actually, of those, like close to EUR 4 billion, were already business as usual. So we are stepping up a little bit here. So it's not like we are planning to do over EUR 5 billion and we're doing nothing.
On our, let's say, cost-based business as usual, there is already embedded quite a large chunk of that size. Then, yes, we have those plans. There is some front-loading. In any case, we are not expecting our cost base next year to be over circa 5%. So this is just to make this clear. So there is not like a huge overhang into next year. We are planning to obtain efficiencies, as you rightly say. This is, in any case, more later into the plan. That's true. But in any case, that 5% for next year should be considered, in any case, a cap. Well, in terms of jobs, it depends on how you look at it, because if you think about including NII, well, I think that is very well known and already priced by the market that our NII next year is coming down.
We have been guiding for that. I remember facing that question on the last quarterly call. You asked me about the market consensus that is now around EUR 10.4 billion. I said, well, this is within the range of scenarios we are managing. I reaffirm my comment. Then when you look at all other revenues, it's where probably you have to think about whether there is the way to measure those is, let's say, stripping out NII or not. I think that probably it's another way to look at it. Then in terms of protection, well, basically on that front, we are planning to be active as ever in terms of commercial activity. The point is that we are, as I said, we are starting to introduce some new products, basically offering a better benefit to clients, as an example.
So imagine with a life risk product that usually covers only the risk of death. So let's assume that we are adding here some extra benefits like coverage for serious illnesses, second medical opinion, all those kind of things. So basically, those products do have a slight lower margin initially, but over time, we are expecting to accelerate sales and production and ultimately being positive. So it's, I would say, the major change, if I can say it's major or main change that we are planning to make on our, let's say, product catalog going forward. For the rest, I would say that is more or less business as usual, continuing with My Box as the main commercial tool so successfully, clearly with a lower churn. So that's basically the plan.
Okay, thank you. So to Alvaro, please, the gentleman in front.
Hi, Alvaro Serrano from Morgan Stanley.
First of all, on rate sensitivity, you said in the plan that you're expecting roughly stable deposit mix. At what level of rates would you expect the mix to improve so people are not bothering to roll over interest-bearing deposits? Where I'm trying to get to is at what level of rates it sounds like, given your assumptions, you still have plenty of buffer to reduce remuneration if rates were to go even lower. I'm trying to get to what level of rates you stop running out of room to cut deposit remuneration and the rate sensitivity incrementally increases, maybe some handholding around that. And can you just confirm, related to that, that at the one and a half in your alternative scenario of one and a half, the NII would still be above 2023? And a very quick second question. That was one question, believe it or not.
The second question on loan growth, in particular in corporate, what gives you confidence that you can grow? I think it was 4%, given we've been through quite a lot of years of waiting for corporate loan growth to recover. In particular, a lot of us expect disintermediation to continue. So a bit of a word on that. Thank you.
Javier, maybe, well, let's combine the answer on the first question. Javier, you'll have your own view, but we're in a market, so we'll have to see how things develop. But clearly, there's a level at which if rates go low enough, basically, you will reach zero.
And what we will see is we will reach zero in terms of deposit remuneration, obviously, before that rates get to zero because there's no longer any real return on that, and people are going to be looking at other ways of saving. And we've seen this in the past when we had negative rates, and there were actually years where we had very significant inflows into wealth management products. And if things go that way, that will repeat itself to a lower extent because I don't think rates will go negative, certainly. So there is an area in which that will happen. And I think, from my point of view, I'm not sure I can or we should give an exact number, but say we'll be in the market and we'll see how things develop. But gradually, this is going to be natural.
Even if you have something that yields very low, you'll have people's attention in looking for products off balance sheet, and we will obviously be active in promoting alternatives that we think, again, would be better suited for clients. On the last point, I'd say corporate demand; this is generally associated with the feeling that the macro is going to favor greater growth. Obviously, there's consumer and there's mortgage, which is not your question, but when you look at business demand, obviously today it's still fairly low. In fact, you look at growth in Spain fixed gross capital formation; it's actually fairly low relative to other components of the GDP number. With lower rates, there is obviously a required environment where economies are sort of landing somewhere, and the risk that what's happening with interest rates, the energy prices, war, and the economy is somehow abating.
If this doesn't happen, obviously, it's going to be restraining growth in this part of the business. But the environment we see is conducive to that. And at the same time, we have many investments to be made. Balance sheets can afford it because there's very low leverage relative to others. So it's kind of waiting until a catalyst happens. And for us, the catalyst is that these uncertainties gradually disappear. And obviously, the energy transition is another factor for which we think that this credit is going to eventually grow. But out of our various volume growth assumptions, I would say this is the one where a lower percentage of it is happening today. So when we look at many of the things we're seeing, this is actually keeping what we're doing in 2024. Even sometimes it's slowing down. I'd say this is different.
There's a bit more of a sense that we are at the bottom of this great cycle, and this is going to come back. Good news, you don't believe it. Javier said, we're going to have much more capital, so I'm not sure that this, even if it's very much a point of debate and we put our own view, when in some others, I'd say we'll give 80%, 90% confidence here, probably the confidence number is a bit lower, but it's also less relevant to our ultimate valuation because obviously, this is the part of the business where returns are closer to cost of capital, and if the capital is not invested there, but it's returned to shareholders, it's kind of not a big difference.
Okay, Alvaro, to your points, basically, first thing I would say, of our interest-bearing deposits, we hold circa 50% that are fully indexed.
In any case, it's not only you don't need that amount or that weight of interest-bearing deposits, let's say, to be reduced in order to have a lower yield into those balances. This is my first comment. I think that with rates, let's say, approaching 1% or below, I think that yes, then probably we would be able to, but this is my estimate. We will be able to reduce the percentage of interest-bearing deposits because then actually rolling over a time deposit or whatsoever for retail is less accretive. Probably we could be able to accelerate inflows into off-balance sheet and as a consequence, reduce a little bit that percentage. It's true what you say that as rates go closer to 0%, the NII sensitivity accelerates. That's true, basically, because here you have two headwinds.
One is on the asset side, you have more prepayments on fixed-rate mortgages. You may have more prepayments. So actually, models is what are telling us, and I think it's common sense to think that this may be the case. And then obviously, with rates closer to zero, you are actually being able to pass on a lower amount of, let's say, lower costs in terms of cost of those deposits. So it's clear that this is the case. To your point about NII on the 1.5% ECB target in any single year, we are not providing this guidance formally, but I would say that it would be more challenging. But as we are being quite conservative on our, let's say, deposit betas assumptions on the way down, theoretically, we are modeling for deposit betas to be the same on the way up than on the way down.
But we are being a little bit conservative on that front. So I think that probably we would be able to make it, but with a certain degree of challenge, honestly.
Okay, so the gentleman in the front, Ben, please.
Yes, morning, thank you. Ben Cavan Roberts from Goldman Sachs. So just on capital, I mean, clearly a very constructive outlook on growing the business as lending comes back. Is there any inorganic growth that's a relevant consideration from here? And then sort of secondly, on capital, you're looking at capital return in excess of that 12.5%. Do you continue to prefer buybacks as opposed to excess dividends? And what would be the sort of shifting point to change your consideration there? Is it solely a function of share price? And then one final question just on the cost of risk.
Could you give any more color on what's going on beneath the hood, effectively, if you're expecting a largely similar picture across both mortgages, corporates, etc., or if there's a bit of variability there?
Thank you very much. I'll take the first two. Inorganic growth, nothing in these numbers, not that we are considering any in this plan. Share buyback versus excess dividends, we have so far always decided for share buybacks. There is no firm decision at this moment from the board saying this will always be implemented through share buybacks. But actually, we are now launching the fifth share buyback, and there's been five previous decisions in the same direction. I would expect that most likely decisions will continue to be in that direction and that share buyback will de facto be the most favorable tool. But the board will decide from time to time.
There's no particular criteria for me to say now this is what may change that decision, but this is a long time and we want to keep some flexibility, even if clearly we have acted in one direction. Cost of risk, Javier, you may want to comment.
Yes, well, the underlyings are as positive as we have been commenting recently. So basically, no early warning indicators at all anywhere. Basically, we are expecting this benign environment to continue, as you could see on our projections. And then, well, with lower rates, there is always a tailwind. Actually, the only very tiny deterioration we have had has been on everything related to floating lending. So obviously, with the impact of higher rates, this is no longer going to be the case. On the contrary, it's going to be a positive. And well, and that's it.
So it's true that from now on, we are going to not have the, let's say, the buffer of those overlays we have had in the past. But it's true that also in the past, we have had whatever to adjust IFRS 9 models, to higher rates, etc., still some tailwinds from COVID, etc. So I would say that all that is clearly behind, no other regulatory impacts ahead. So we think that with that high coverage ratio we have, we can clearly manage to be below 30 basis points.
Okay, Sofie, please, a lady in the middle.
Thank you so much for taking my question. It's Sofie from JP Morgan. So your plan, it seems that it's done at the end of September, but clearly we had the U.S. elections last week or two weeks ago.
How do you think about potential U.S. tariffs on China and also Europe, both direct and indirect impacts on Spain and CaixaBank? Then my second question would be around the tragic events in Valencia. The press was saying that the Spanish banks have on average around 2% of lending to Valencia, but CaixaBank is clearly a little bit more focused to this region. How do you think about both risks and opportunities in the Valencia region as we're going to rebuild after the floodings? And then just a quick follow-up. How do you think about loan growth if it accelerates and comes in higher than 4%, which is what you target? Would you prefer to use capital for growth, or would you prefer to kind of pay out excess capital? So what's your preference here? Thank you.
Thank you, Sofie. We start with the U.S. election.
It's obviously well analyzed now in the market, creates uncertainty in terms of what the implications may be. There's one generally on interest rates and what the market has guessed that it will imply for rates in the U.S., to what extent that is translated into the Eurozone or not. I think time will tell, but if you have an inflationary economy as large as the U.S., is it thinkable that you have a very low inflation economy in Europe? Some other people are better placed than me to answer that question probably in your own house, but I would say that's one implication. It's also the potential of obviously dollar appreciation and further pressure on inflation in Europe. So there might be some implications for rates, implications for growth, and what sort of major trade war and increasing tariffs will be bad for everyone. We know that from history.
My hope is that that will not take place. It doesn't mean that there will not be episodes of that, but eventually that some rationality will prevail. We in Spain have 5% of exports to the U.S., so it's a relatively low number compared to other economies in Europe. And if you think of exports being 40% of GDP, this means basically it's a kind of 1.25% of our GDP that is exposed to the U.S. in a direct way. And obviously, that's not going to disappear. It may be better or worse, but I think we need to look at it as something that generally in terms of its impact in Spain is going to be limited. But obviously, we're part of the world and we'll have to see.
And there are sort of a number of reasons to have at least the sense that things are going to change also in geopolitics vis-à-vis previous administration and that increase the range of possible outcomes. Not necessarily all of them would be negative outcomes. It's just different outcomes. With respect to Valencia, it's obviously, I have to say first, it's the tragedy, the loss of human lives that has moved us. And we decided to very quickly make sure that we would, first of all, locate all our employees. And fortunately, all of them are in good shape and we haven't had any victim, but we have many people that are fundamentally affected among our employees and our branches there. As I said, close to over 100 were affected. Only six today remain not operational. And then we're working with more branches. So a major effort.
I want to congratulate again our people on this to get that done, and obviously, clients are affected. I would say it's not Valencia. I was actually in Valencia. You remember the webcast? We were doing that from Valencia in the city. It was absolutely no problem. You couldn't believe that five kilometers away from the city center, you had this problem, so it's not Valencia, but certain areas of Valencia that have been badly hit, and obviously, there we are helping. Fortunately, it's not just only us. The administrations are providing substantial help. A number of sort of aid programs have already been announced. We're going to be actively cooperating with all that, so my sense is that the financial outcome of all that is going to be obviously negative, but contained with respect to a scenario in which there would not have been public help.
We will see an increase in non-performing loans in the region in cost of risk. We're actually seeing an increase in our operational expenses because we're actually doing many things to help that do not necessarily have any income returns, certainly in the short term, but we think it's the right thing for us to do. And my hope is that given what we're doing, when the dust settles, people look back and would say, well, in Valencia, particularly the bank that was the largest player, like CaixaBank, had a differential attitude and made our lives easier for those that were affected. This is what we are targeting. We have over 150 specific measures that we have already put in place, operational, fee exemption, obviously, lending, you name it. And we're going to continue to do that.
The good thing is, because this is associated to a part of Valencia in terms of the overall numbers for us, this is not something that I would look at as a material impact in our financial statements. I do not know and cannot provide you exactly sort of now an estimate, but the estimates we have done top down certainly makes this for the whole bank non-material. For the people affected, it's obviously very material. We're going to be helping there as we should. And in terms of the loan growth and capital share buybacks and payout, I would say clearly we want to maintain a payout, 50%-60%. And then we have a distribution policy. It will get capital above those levels, if and when. So what is more flexible here is the capital that we use for share buybacks, not the payout.
Marta, the lady in the back, and then Nacho.
Thank you very much. This is Marta Sanchez Romero from Citi. My first question is on cost. Your inertia seems to be worse than other players when I look at the underlying evolution. So some other players in Europe are making a bigger effort on keeping cost either flat or way below inflation, and you've just given us just about less than 3%. So I'm wondering whether there is room for doing more. Are you thinking that in terms of a plan B in case interest rates are less positive than we are currently forecasting? And given that you haven't done early retirement schemes in a big way for a while, I was wondering whether that is something that you could contemplate within the life of the plan and what is the payback today?
My second question is on capital and RWA inflation. Javier, we would welcome if you could provide some color on what are those measures that are going to keep those RWAs below the loan growth. That would be very useful. And thirdly, sorry, on the protection result, I still struggle to see why we're going to see such a big leg down in terms of growth from the 10% at which you've been growing for the past three years to now just about mid-single digit. It seems counterintuitive given that loan activity is picking up and that is a big, particularly mortgages, and there is a big feed into that line. So what is actually driving that leg down? Thank you.
Thank you very much. I'll start with Javier and continue with a second question or any additional comments on the cost front.
We obviously have gone through a major exercise of streamlining with the merger. I think that makes us different from other cases. We did what we thought was appropriate at the time. It was, I think, a very large exercise. Over 50% of the cost base of Bankia was cut down. And since then, what we're seeing is good dynamics. So when you look at other places in Europe, and I'll go back to some of the trends at the beginning, I think we're going to have better growth dynamics in Spain and for us, just because the economy is doing well and because we have gone through this phase of very low growth.
Anyhow, if you have more business to do, you're going to want to retain your people, particularly when you have actually done a lot, in my view, or in our view, what we should do at the time of the merger. When we look at growth rate for the next years and you exclude the one-offs, which you shouldn't, in practice, they are in there, but some of these initiatives is more in the 3% region. It's kind of in line with a wage agreement that we had with unions for 2025-2027. I find that's logical. I'd love to see this that logically will be coming down. Clearly, in the face of the current circumstances, I find that costs are evolving as logically they should be. There's a lot of discipline behind those numbers.
You don't do anything and you want to grow and costs explode, and we're going to keep having that discipline of looking at where we can save costs and what things we should not be doing, what things we should be doing with technology with much lower resources, etc., but these are the numbers we come to. Plan B, of course, if circumstances change, we will change. It'd be something logical. If we look back at some of the previous plans, we were joking about this being the fourth, Javier and I presented together, we had this question, and actually, we saw that things went sour, not in the previous plan, in the previous one, and we actually took action and we found that costs rather than grow 3% were flat during the period, so of course, you should count on us.
If circumstances change for the better, we will be probably doing new things. If circumstances change for the worse, we will be looking at additional actions.
Okay. Hi, Marta. On risk-weighted assets , well, there is the impact from lending. I would say that when you do the numbers, there is also an impact from an increase in guarantees. So it's not only as we are providing you the CAGR for loan growth. So there is some additional risk-weighted assets from guarantees. You should assume that density should be in the low 50s on average. That is, let's say, circa 20s for mortgages, 60s for consumer and businesses. So this is a little bit the summary. Then we have a step-up in activity in terms of SRTs and other risk transfer measures.
We have three transactions in place now that will result in a runoff of circa EUR 2 billion risk-weighted assets during the next three years. And we are planning to step up our activity. Probably we are planning to generate to the tune of EUR 5-6 billion of additional risk-weighted asset savings. So that would be a net considering the runoff of what is already in place of EUR 3-4 billion. So that is what we have in our minds. Obviously, this is always contingent on the right price and the right markets. And obviously, if at the end of the day, lending follows another route, we'll have to adjust our forecast. So that's a little bit the summary.
And in terms of protection, well, it's basically that we are making a lot of volume, but at the same time, we are improving, let's say, the benefits for clients, trying to deliver, obviously, as it has been always good value for money. So we think that it's about continuing to do so. I commented to a previous question about some changes on our life risk products, etc. So it's about that. So I would say that that's the summary. In the past, we have been able to expand our protection revenues significantly as we have been introducing new ideas, new commercial strategies. Remember the My Box that has been quite a huge success during last years, and we are planning to continue to do so.
Nacho, gentlemen in the front, please.
Thanks very much for taking my questions. I have two questions.
The first one is on loan growth and the interaction of that with cost of risk. You are growing in business lending, corporate lending, and consumer lending, which probably have higher cost of risk embedded. So if you could elaborate a bit on what do you think it makes different for the cost of risk not to go up slightly in the plan. The second one is on the deposit flow into assets under management. If I just look to the wealth management fee target, it's mainly driven by volumes. Just wanted to get a bit of a sense of have you got any specific plan to move people from on-balance products into off-balance, or do you think that the market grows in itself to allow that 6% growth in wealth management assets?
Thank you, Nacho. Again, we can very I'll give an introduction. Javier, you can be more specific.
We look ahead and we see better trends in the next three years than in the last three. So when we look at the cost of risk, it's under the assumption that we have pretty low levered clients and the economy is doing reasonably well. If we look back in the next three, this is what's happening now, but we had some ups and downs and some trouble and a few exceptional things get aligned to the new definition of default, huge surge in prices, in energy, inflation, etc. It's all ending up well, but we are being more optimistic about the environment going forward, and that gives us a fairly comfortable. Also, we have a very high coverage level now. And then on deposits, we see we're growing above 6% off-balance sheet and 3% on-balance sheet.
We are logically assuming that in a context of lower rates, we're going to have a market impact that it's favoring AUM and also just the right trends. I think those trends, back to Álvaro's question before, depending on where rates are, may accelerate and we may end up having actually more moving of balance sheet. That's my general sense.
Well, no, my comments to the two points would be that there is a change in the mix of the loan book. I was consulting one figure. So the weight of our mortgages now is 39% of the loan book that goes to 36% in three years' time. So there is a mixed effect. So probably with a stable loan book in terms of mix, we would have a slightly lower cost of risk than what we are guiding.
But in any case, honestly, we feel really comfortable about that one. And on the deposits and AUMs, the only additional color I can give you is that remember that we have quite a differential business in terms of what we can call annuities. So let's say savings insurance. And we expect that this will continue to do very well. We have quite a differential proposal here to our clients. It's not about specific campaigns. It's about this long process, but really with a lot of delivery in terms of that process of advice, becoming, let's say, the financial advisor for clients, etc. And for certain segments, more senior segments, annuities is quite a good product, a good proposal with tax efficiencies, etc. So I think that on that front, we make the difference because others probably do not have all that assets as integrated as us.
And that product line is going to be quite a significant part of growth.
Okay, I think Paco is next, and then I will take one from the remote audience. Thank you.
Thank you, Francisco Riquel from Alantra. My first question is on the customer spread, the 3% that you are targeting that looks high to me. So if you can give more color, you are mentioning on the liabilities that interest-bearing deposits are stable at 30%. So I guess the pass-through of the deposit beta will be much lower than what you are obtaining today. And also on the loan spreads, I assume that the 70% beta, which is your weight of floating rates, will also be lower and you are targeting market share gain. So you can reconcile also and give more color on loan spreads and deposit spreads to reassure on the 3% target.
Thank you. Okay.
I have a second question. Sure. Shall I? Yes. Sorry. My next question is more short-term oriented. Sorry, you are presenting a long-term strategic plan, but I also wanted to assess the shape of the plan during the time horizon. It's 15% RoTE with 16% in year three. The average means that year one should be 14%. For that average, if you can comment more on these short-term prospects, you have commented on the peak NII, which is more or less the 24% level. What's the draft? The cost inertia should be still high in the short-term in 2025, the 5% you were previously mentioning. A bit more color on the short-term of the plan. Thank you.
Sure. Javier, in the interest of time, I'll let you deal with it. 100% exclusive.
I jump into the customer spread question.
I would say that, generally speaking, we should assume that the customer spread is 50-50 loan side, deposit side, so circa 150 basis points each side, so as a result, those are, let's say, broad numbers. Okay. Basically, with that guidance, you should assume that our deposits would yield circa 50 basis points by 2027, so I think that this is the number, so basically, on interest-bearing deposits with approximately 30%, that would be a yield of, let's say, 1.5% on those with a margin of 50 basis points, and then the other 70% at non-interest bearing, so that's a little bit the magical and round numbers. The customer spread will come down already in 2025, and then we'll hover circa those levels for the next two years.
And then on the RoTE, well, we are not providing a specific guidance for every year, but I would say that if we are not at 15, we are going to be very close to that figure. So that's our expectation.
Okay. Thank you. I will take now one from our remote viewers. Operator, can you put it through, please? If there is any.
There is a question from Andrea Filtri, Mediobanca.
Yes, thank you for taking my question. I have three. One from digital, one on risk with asset optimization, and one on the Danish Compromise. On digital, why, despite the push on digitization, cost income does not fall further than the low 40%? Where do you think cost income could go with more digital push as an ambition longer term?
And page 32, when do you expect the rollout of the digital euro, and what do you plan to do with it in terms of risk and opportunities? For risk with asset optimization, Javier, you've already answered Marta on your ambitions on SRT. My question is, do you see potential change in the treatment by the European Commission on SRTs spurring further activity? And what is your sensitivity to securitize more on changes of P factor and risk-weighted floor on senior tranche for SRT? And finally, on the Danish Compromise, we just saw another FICOD bank undergo a Danish Compromise squared acquisition, which makes it two in only a few months. What is the size of the target that you would expect to be able to apply this option to?
What is the size where you believe the supervisor would instead step in and try to neutralize your capital benefit? Would this option not be more accretive to group RoTE than share by banks? Thank you.
Thank you, Andrea. I'll try to be direct to the point in terms of impact of digital. We are saying the low 40s. As Javier said, it's a big investment. It's a bit front-loaded, and we already get some benefits by the end of 2027. Our assumption is that everybody's going digital. It's not just on our own. If we were the only ones, we would be reducing costs and keeping margins. That is not going to happen.
So I think we're going to have to assume that we are going to keep trying to be at the top of the pack, but the others are going to be reacting, and margins in the market will be there. So we do not think that digital is necessarily going to allow us to move from 40%-30% cost income because even if we are going to be able to do the same things much more efficiently, there's going to be margin pressure, and others are going to be taking their part. But we'll try. I promise. In terms of digital euro, you know we've been quite active. The next step, if I'm not remembering correctly, is this third quarter of 2025 when the ECB will present the sort of draft for the technical design of the euro.
Our feeling is that this is going to take some time, and in the current plan, we're not going to see any impact. I think this is a matter of the next plan where we would probably see the digital euro being born. But probably, actually, it's not going to be that material even before 2030. Longer term, medium term, of course, it has the potential to be very material. And that's why we are actively following it. We were the sole European bank participating with the ECB in the exercise they did last year on our case, specializing on P2P payments. We're going to look to continue cooperating. We think the digital euro is going to take place. This is something that is going to happen. Banks may like it more or less, but it is going to happen. So we'd better be part of the design.
We're working with the BIS and the ECB also on wholesale digital applications and other working groups that are there. We've been selected to be part of Project Agora, precisely looking at wholesale and cross-border applications for central bank digital currencies. We're all over it. This is more in the innovation in the very early phases. In terms of real impact for the next three to five years, I think it's not going to have it. Time goes very quickly. The fact that we are following it so closely is because we want to be also at the forefront when there is time to basically see how we can benefit and our clients benefit from them. I would say there are a number of other initiatives that are not public at this time in which we are participating.
And if we see the opportunity, we will jump on them. We don't want to be a laggard here. But again, it's going to take some time. And then I'll comment on SRT for Javier, obviously. But on Danish Compromise, there is no acquisition we want to do. Because there's a Danish Compromise of financial arbitrage, we're not going to do the wrong acquisition because it costs us less capital. I understand that from a trading point of view, that's very attractive. And some of you may think it's wrong. But we're looking at the business from a structural fundamental point of view. And we like what we have in insurance and in asset management. There's a great insurance operations, great asset management operations that are completely linked to our distribution network.
Hence, as we have the distribution that we have, it doesn't make sense for us to think of buying other things because it would be off our strategy. It would be removing us from where we think our strong competitive points are. So there's no discussion we don't have. And my expectation is that the more that this is used for speculative or non-strategy purposes by other institutions, the more it will generate at least concerns from a supervisory point of view for those that do it, not for us.
Hi, Andrea. Well, on SRTs, we have this open consultation in the European Commission regulation to assess possible adjustments, as you know. Probably the most important would be reducing the capital consumption of the retained tranches.
And also the fact that the treatment in terms of the Liquidity Coverage Ratio of the retained tranches, also not only the retained tranches in this case, but also in case other banks purchase those more senior tranches to have a more favorable treatment in terms of the Liquidity Coverage Ratios. This is ongoing. So this is obviously only upside. The figures I commented before to our question from Marta are not including or not considering an improvement on the framework. But obviously, if it is the case, it opens the possibility to step up even more the activity on that front. We are reinforcing ourselves in order to be able to deal with more transactions every year. So that's the plan.
Okay. Back to the room now. I'll take Britta's, please. Britta's question.
Y eah. Perfect. Yeah. Hi, there. Thank you for taking my questions.
My first one would be regarding the rate outlook. Maybe can you talk a little bit about the curve that you have assumed and what you're assuming for three to five-year yields and whether there's any change in the duration of your hedging in the plan. And the second one would just be some clarifications on slide 53. I'm trying to basically see how the numbers fit together. In the capital accretion of more than 700 basis points, is there anything in there in addition to just net earnings such as usage of deferred tax loss carry forwards, etc.? And also in the business-driven RWA growth and others, the 200 basis points, is there anything in there that's on top of the 3% RWA CAGR? Thank you.
O kay.
In terms of hedging, you know that in recent times we have been more keen to use swaps over sovereign bonds, let's say fixed income sovereign risk. Basically, because as I have been commenting this several times, spreads over the swap curve were quite tight, and we thought that the risk-reward of having sovereign risk at tighter spreads was not that compelling, so this is why we have been hedging via swaps. Since a few weeks ago, we are observing a change in the trend of that, so spreads over swaps are widening, generally speaking. We will be opportunistic in that front, market dependent. We are a little bit agnostic in that sense, so if we feel that there is more value on sovereign, we will use again the sovereign in order to hedge our NII sensitivity. That's basically the message.
To your question about going longer, so far we have been hedging up to three, four, five years. To go longer, we would like to see likely possibly a steeper yield curve. Something we don't rule out may happen. Gonzalo previously was commenting to the question about the U.S., higher rates in the U.S. The yield curve in the U.S. has steepened it a lot, as you know. This has not passed to the Eurozone yield curve for now. I don't know if it eventually happens. Obviously, we can take advantage of that because we have room to add in that sense. This is not contemplated on our guidance. So as I said when I presented that, we are assuming a flat yield curve, hence NII hedging not having a material impact in that sense.
On our bridge on CET1, the over 700 basis points basically what includes additionally to net income is a positive impact from DTAs. We are planning to have a positive impact of up to 20 basis points per year from DTA consumption. So that's included in there. And then on the 200 basis points, apart from the impact on risk-weighted assets from loan growth, as I answered to a previous question, it's not only loan growth, also guarantees. So keep that in mind. We have some impact from operational risk. So you know that there is, it's not the operational risk related to Basel IV. So this is, let's say, that is a non-impact because it's offset with lower capital consumption from the insurance company. But there is operational risk going forward. You know that this is how it works. It's the average of the last three years in revenue.
So that average is a moving average. So having an impact. Then there is some impact from intangibles. So those investments we have been commenting to have the step-up of IT investments to have a negative impact on CET1 of circa minus seven basis points. Altogether with the, let's say, the backbook in terms of IT investments, it may be circa 15 basis points. And then the insurance business is growing and VidaCaixa is going to consume more capital. So I would say that those are the key topics embedded into that bridge. Thank you, Britta.
Sorry, Javier. Max, here in the front row, please.
Good morning. Thank you very much for the presentation and taking our questions. Max from JB Capital. I have two. The first one is on mortgages. You probably have the largest in-house off er of products supplementary to mortgages.
I was wondering why you don't want to be more aggressive with your growth targets. Then the second question is on capital. The range you're guiding for 11.5%-12.5% looks wide. Is it because you want to have a buffer to chase optionality? Thank you.
Sure. I would say in terms of mortgage target, it is what we think we can achieve. Obviously, all the business we do is with a view of creating value. Mortgage market is a very competitive one. In fact, mortgage prices tend to be below the government bond for 10 years. It's because there are other pieces of business associated with mortgages that you can justify the overall profitability of that. But there is a limit. We have 25% market share. We think that maintaining that market share is the right strategy in terms of volume and price margins considerations.
That's what we can see in the market. And hence what we are basically is looking at keeping our growth in line with what the market is having. We have a bit of disadvantage there because our mortgage portfolio continues to be a bit more seasoned than others. So we had a higher degree of amortizations or not prepayment, but scheduled payments. So we have to do a bit better to just stay on top. But generally, this is the main reason. If we see opportunities to do more, obviously we will do more. But not at the cost of having a proper net present value of the whole sort of customer approach. Because the product approach tends to be negative in this market given the competitive dynamics. Then capital in 11.5%-12.5%.
To be honest, there's fundamentally one point, which is the risk has not been increased in Spain. We have a countercyclical buffer because it has been decided. We're not a particularly hot market, to be honest. And when we look at our risk appetite, actually we're stronger than ever. We don't see a reason why we should operate with a higher minimum level. We have, on the other hand, increased the threshold for share buybacks to 12.5 and moved that capital to 12.5 because we also understand that if regulators and supervisors are moving clearly in that front, there is a sense that we should react somewhat. And there's been obviously a delicate and deep discussion at the board level, which I fully support, of course. But somewhat, I would say with 11.5, we are very well capitalized. And the balance of risk has not worsened, quite the opposite.
Okay. Any other question? Okay. So, Hugo, here.
Excuse me. The microphone. Hi, Hugo Cruz from KBW. So, I understood your credit spread of around 1.5% on the asset side. So, if there's a lot of competition, spreads go down, or if you see some spread widening on the bond portfolio side, how do you think about the trade-off between growing ALCO versus growing loan book, chasing growth if spreads are not attractive? How do you think about that? Thank you.
Well, honestly, we'll have to think once we are there. So, I don't have an answer currently. We'll see. There is a golden rule here in-house, which is that lending has to be profitable. And we are consistently delivering return on our lending over 15%. So, I would say that this is the golden rule. We will have to decide once we are there.
When deciding about market matters, I have been for decades already into this business. I have the natural tendency to say we'll decide once we are there because if the market has changed, it is because of a reason. What you now foresee, probably you have to rethink about it. In the past, we have been in a situation where our loan book was not growing at all. We were gathering deposits. Eventually we had to enlarge our ALCO portfolio. Now we have a little bit more uncertainty because we have the ambition to grow. We have the expectation that we will have this pace of growth. Time will tell, honestly.
Okay. Lento there, please.
Hi. Lento Tang from Bloomberg Intelligence. Thank you for taking my questions. I have two. The first one is on cost of risk.
So if it's possible, could you share roughly what's the split between the loan loss provisions charged to individual provisions versus macro outputs from the IFRS model only? The reason I'm asking is to understand a little bit more about why are you not more bullish about cost of risk guidance? Because if I look at the macro part, the key drivers, GDP growth, unemployment, house price, interest rates, they're all moving in the right direction. And then Gonzalo also commented earlier that the underlying asset quality are also moving in the positive trend. So if both of these are moving in the right direction, then is it the product mix that provokes you to give a more bullish cost of risk guidance? And that's my first question. And the second question is on AI investment.
What products and services do you see could benefit most from your investment in AI? Is it insurance penetration or mobilizing deposits into managed assets? Anything would be helpful. Thank you.
Thank you. On cost of risk, you can look at us as being some of the questions where you're too aggressive and you have downside. Now what you're saying is we have upside, which may mean that the assumption is correct. Obviously, there's uncertainty on cost of risk. And we're saying it's below 30 basis points. Within below 30 basis points, there's a range. But anyhow, I'm sure Javier can supplement on that. On AI, I would say, again, it's software development clearly where we are seeing significant productivity improvements already, and we're going to keep scaling it up.
It will allow us to be producing, obviously, faster and be a more agile organization from that point of view. That is a clear area, including also dealing with some of our legacy in terms of legacy languages, etc., that we can now upgrade with the aid of AI in a major way. Talk about customer service, interacting, providing really much faster response. This may be sometimes kind of automatic to a client. When we talk about, for instance, managing claims, what AI is allowing us already to say, this is the claim, this is the proposed response, then there's a human in the loop that says, okay, this actually is fine, go ahead. Maybe one out of five or one out of ten would say, no, this is not correct. I'm going to rethink it. The process gets much faster.
This is all in different degrees of implementation today. And then many processes with more time-intensive and more complex that you want to do. And very often clients love to do it through their own app. Our app is not providing the right response that is flexible enough to deal with clients that may ask the same question in very different manners. This is going to be much smoother. And hence people are going to be, in my view, very happy to do a lot through their app because they will not get to so-called dead ends, but be able to. These are the kind of things that we think are going to make a big difference.
Well, on Cost of Risk, basically provisioning is driven by models. So we are not thinking about, I would say, a significant change in terms of specific provisions, etc.
Models usually tend to work with a lock. So time will tell. But the drivers are those you mentioned. So it's basically employment. It's basically real estate prices. It's rates. And eventually time will tell. So we think that we are in the right place. In the past, we have had also that buffer of unassigned provisions that helped to cash in to some extent. Now it's not the case any longer. So I would say also that you should take this into account.
Okay. Any other question? We have Miruna there in the back.
Hello. Thank you for taking my questions. This is Miruna Jefferies. I had two, please.
First, on the mortgage growth assumption that you are using in the plan, the 2% CAGR, could you explain to us if that is driven solely by a normalization in amortization rate or actually a pickup in new lending as well? And if it is a pickup in new lending, what is driving that? And then if the live deal with two of your peers in Spain goes ahead and there are some remedies imposed to that, do you think that there is a chance for you to commercially benefit from that? And if so, is there any upside on your business volumes?
I didn't catch the second question. I'm sorry. All right. There is some upside to your business volumes from the guidance. On the BBVA Sabadell thing.
On mortgages, obviously, in this case, and thinking of our mortgage as mostly fixed-rate mortgage, the fact that rates are coming down is clearly a big incentive because it's a major tool in order to make housing affordable to people. So the pickup in new lending should come from higher volumes and also higher house appreciation. I think this year we're around 7% in house appreciation. And then volumes, even if there would be demand for much more, still we're expecting an increase in housing demand. Obviously, I think in terms of prepayments, we've already seen a major decrease in the rate of repayments because rates have come down. But still, there's probably a bit of improvement on that front. But certainly, pickup in new lending. And in terms of the current situation of consolidation in Spain, yes or no, we've taken a position considering many factors. Okay?
This may or may not happen. It may have certain consequences or others. It's very difficult to know. We certainly think that our plan, our targets are good and valid for any scenario. That's how we have committed. So we have not incorporated a special benefit if that is the question that allows us to get these numbers. We think we can deliver them in all reasonable scenarios, and certainly not because of a transaction happening or not.
Nacho?
Hi. It's Ignacio from UBS. A couple of questions for me. Have you incorporated any mix improvement on the AUM wealth management side? And if you haven't, why not? In terms of mix, basically towards higher margin products. And then the second, probably the answer is going to be no, but do you have any view on the new tax, the levy, basically, if you have any color on it?
Thank you. Okay. On the new tax, it's complex because it's evolving as we speak. So in terms of the view that we have, we obviously don't like it. We've been clear on that. But it doesn't depend on us. We have made the assumptions that a tax will continue. And this is included in these projections. And a tax that will have an impact that is not fairly different from the existing one. Obviously, if the tax disappears, the tax is changing in a material way. That will have some impact, which will be very easy for you to measure. And in terms of the mix in AUM, Javier, you want to comment on that?
No. Back to one of my previous answers. I said that annuities is going to be a key product, probably up to 50% of the new production.
In terms of margins, our main assumption is that it's going to remain stable. Remember, we are currently circa 80 basis points for the overall AUMs. Yes, we may see over time some shift from money markets to riskier products, having some advantage from that. But honestly, we are so the way we approach the selling process, if I can call it selling, because it's more advisory process, it's not like a push-push for campaigns, etc., for, let's say, wider fees, products. So time will tell. So at the end of the day, the client who will choose, which is the mean of savings, they will decide. So our base case assumption has been that one. You can assume a different one. But I think that is a prudent one. I think we're done. Do you want to? Well, there's another - sorry, Martin. Thank you.
It's just a follow-up on a comment Javier made on the impact from insurance on your capital at the bank. Can you remind us the solvency ratio at which you want to be running with VidaCaixa and whether you can sustain dividend payouts of 100% going forward to optimize that hit? Thank you.
Yes. Well, it's in the 150s, and we are comfortable at those levels. So I think that if we were to issue in the market directly from VidaCaixa, probably we would have to run a higher solvency ratio as it is fully incorporated. We think it's the right place to be, and we are not planning to change that much. Okay.
Okay. So now we are done, I think. There's no other question from the remote audience either.
If you allow me, Martin, I'd like to make one comment just because it hasn't come up directly, but we had a little chat just before the presentation. I'm sure in the next few hours, you, Cory and Nelson, are going to be making all kinds of numbers with the information. Apologies because it's a lot of information. So we're going to make you some, force you to do some additional work. And one of the points I wanted to emphasize is capital. We have obviously changed our approach. In the previous plan, we announced a given figure that we estimated on capital surplus over 12%. In this case, we're giving the same indication now related to 12.5%, but we're not putting out a number. And this is because in the previous plan, we were expecting very limited growth, which actually was the case.
And we were trading well below our cost of capital and below price to book. So it was very important for us to say, actually, we're going to generate all this capital. And this, apparently, in our training, is worth a euro is worth less than one euro because we were trading at a clear discount to book. And it was important to capture. And actually, for us, it was a key driver of our management effort to make sure that as long as the capital wasn't worth a euro inside the bank, that we will give it to shareholders with the reasonable limits of our capital levels. The situation now is completely different. If you look at the expectations we're giving for RWA growth, it's around 3%, Javier. And you'll do your numbers.
You'll come up to approximately, I don't know, let's say, for the sake of putting a figure, EUR 3.5 billion of additional capital that we're going to retain compared to the case where we would have 0% risk RWA growth. So there's EUR 3.5 billion that will stay in the bank. And again, don't quote me on the 3.5. It's just an example. So you'll do your numbers, but you're going to come, obviously, to figures that are around 3, 3.5, whatever. It's 3% compounded annual growth rate to RWA versus zero. That gap is going to be whatever, 3, 3.5 billion. This you may miss. And some investors would say, okay, it's a pity because they were going to give us EUR 3.5 billion, and now they're not because there's growth. The way we see it, there's EUR 3.5 billion that are going to yield 16%. And that's a great investment.
So we are in a much better place now than we were in the last plan because we're going to be able to reinvest at returns well above our cost of capital, a significant amount of capital, rather than being in the unnatural position and say, we don't find places to invest that capital all for our shareholders. And I think this is an important change in mind. We have had this discussion with some of you, certainly with many investors, particularly with those that are sort of longer-term driven and say, well, there's nothing better than finding good investment opportunities of your capital in your own business. And this is what it is about. And obviously, if growth ends up being lower because finally, I don't know, great demand from corporates is lower, obviously, there will be more capital for shareholders.
If we find more opportunities to invest organically or growth, we obviously will support that as long as it is clearly generating value. As in this projection, we see us as generating 16% return on tangible equity. In my old days before the great financial crisis, we were valuing G and the ability of banks to retain capital but invest them above the cost of capital as a big thing. And I'm not saying that the world has not changed and we're exactly back like it was in the 2000s. But some of this is now happening. And we're very pleased to see an economy where we can have not much because between 15% return on average and 3% RWA, obviously, there's still 12% that goes to shareholders, but there is at least some growth. And as long as it's profitable growth, we think it's great news for shareholders.
Should circumstances change, we will certainly adapt our strategy as always. But anyhow, I know we've commented on this, but I thought that the question would come more explicitly. So I wanted to reemphasize our position.
Okay. So perfect timing. Thank you all for your attendance. Thank you, Javier. Thank you, Gonzalo. And I also want to thank the internal team who has helped build this investor day. And so thank you all and enjoy the rest of your day. Thank you.