Good morning, and welcome to CaixaBank's Financial Results Presentation for the Q2 of 2021. I hope you and your families are well. For today's presentation, we are joined by our CEO, Gonzalo Gortazar and the CFO, Javier Pano. Please note for reporting purposes that this is the Q1 in which Bankia is integrated and thus is included in the P and L. And we have provided for comparison purposes historic P and L figures, which include Bankia restated Teixe Bank presentation standards.
Moving on, just a reminder that we plan to spend roughly around 30 minutes presenting with 45 to 60 minutes after that for Q and A session, for which you should have received instructions via e mail. And without further ado, let me hand it over to the CEO, Mr. Cortazar.
Thank you, Eddie, and good morning, everybody. Thanks for attending. And if I may anticipate, you'll be taking some time off over the next few days, and hope you Enjoy that time off. Let me go directly into key points of The quarter highlights, you know them well at this stage. The redundancy plan has been agreed.
The cost and savings associated with have allowed us to increase the target for synergies from $770,000,000 to $940,000,000 That equates to 54% of Bank is cost base. So I think a fairly ambitious objective, but one which we think is clearly achievable. And that's why we're revising our figures to that number, which we expect to achieve in full in 2023. Core revenues have gone well. You have the figures there both year on year and quarter on quarter.
We are obviously Going through the Q1 of integration of both entities and Toshiqo revenues and the level of activity as you will see later Understand the good levels is particularly satisfactory. Credit quality, again, NPLs are flat. Clearly, cost of risk Well below our estimates, we are updating and improving our guidance to be Below 4% by year end on NPLs and below 40 basis points on cost of risk by year end. Capital 12.5 percent on a fully loaded and excluding IFRS transitional adjustment, so well above our initial Estimates and our targets, 12.5%. Obviously, that gives us plenty of confidence, among other things, to restore very quickly normal sort of payout policy, which we're bringing back down to 50%.
In terms of how integration is going, we are fairly pleased. As you know, integration of 2 large institutions in Same market is a lot of work and a lot of complexity. On the corporate side, we have made progress in terms of merging the asset managers, which was completed early July, Agreeing with Global Payments, how to value our merchant acquiring business that we'll go into our joint venture with them. We are also moving ahead on other specialized businesses where we have specialized companies like Payments and Consumer Or Vida Caixa and Bankia, the pension business of Bankia. On the commercial side, All the retail network has been rebranded now.
All the retail network has joined terminals so that we can do Caixabank Transactions in Bankia's branches, obviously, everything has been unified in terms of management since day 1. We have fully integrated already some business units, CIB, Business Banking, Private Banking, because of the nature of the business has been integrated from This well, basically from day 1. And we already have the former Bankia network even though they are running different platforms. We have already been able to put some of our products from CaixaBank on that platform. And hence, The Buy Box, for instance, senior protection has already been sold through bank and really it's their fair share.
So It's fairly pleasing to see that this is happening soon. On an operational basis, in the headquarters, we have unified everything and Appropriate joint or joint unified governance, processes, integrated teams And the IT work is on plan. We have made very good progress. We obviously still have to do Some work until the end of the year when we will integrate IT, but everything is on track. Some more details on the redundancy plan.
You know them well. I'm not going to repeat them by reading what's on the page. But I think it's worth highlighting in terms of the total cost by measure of through its impact on Core Equity Tier 1 has gone from 2.2% to 2.4%, so slightly below 10% increase, but the cost savings have been increased by 22%. So it's clearly, I would say a very good trade off for a 10% additional cost, a 22% increase in the run rate of Synodys. Again, you have the details there of what's personnel and what's the general expenses.
And when you look at The payback, which is obviously a very crude simple measure, but something that's also very tangible. The payback from the cost of our savings Comes down from 2.9 to 2.5. I would like to remind you at this stage that we keep committed also to the revenue synergies that we announced at the Transaction presentation, even though all this is mostly related to the insurance business, so It is pending in terms of its contribution to the P and L. It's pending until we get an agreement and conclude The discussions we have with our insurance partners, Bankia's insurance partners, namely MAPFRE. Some details on production levels.
You see a long term savings business is really booming With that €5,800,000,000 of net inflows in the 1st 6 months of the year, 4 times what it was last year, which obviously was affected by the pandemic. But Even though and compared to the second half, also very satisfactory level. On the protection business, both life risk and non life, MyBox is gaining predominance very quickly. It's really a boomer and doing very well. And hence, we're quite happy with that part of the business.
On the mortgage side, we have an increase in new lending, 16% of the market We continue to be pretty strict in terms of pricing and the discipline we have on that business. Consumer, I think achieving this 3% growth is a good thing. Obviously, we have seen that Consumer lending is taking its time before it takes off, but activity levels are improving clearly. And hence, our expectation, my conviction is that we're going to have pretty good activity in the second half of the year. And we are extremely well positioned with what we've been doing so far.
On business lending, it's been in line with the second half of twenty twenty, obviously, well below what it was the first half of the year of last year because of the pandemic where we had a big jump in eco loans and non eco loans as well, I have to say on precautionary funding. So less activity on that front, but some stability in in new lending. Some macro data. You know we follow very closely the domestic card Spending in Spain with our 25% market share, it's actually very good and Instant information of what's happening in the month of July up until this week, Actual spending is up 11% on the same period of 2019, obviously, before the pandemic. And you can see how that has evolved in the last couple of years, a big is a big jump.
I have to say this is only domestic. I Checking the numbers also on the international side, even though it's still below well below the levels of 2019, it's almost double from it was just a couple of months ago. So that's also important for our activity. The international spending is Recurring even though still has a long way to go given sort of the trends in international tourism being different. PMIs record highs.
Employment, we're basically at the same level of employment in Spain as pre pandemic, which is quite relevant. We have an increase in active population looking for work. So what was expected and I think going on we have clearly Our recovery path for the economy in Spain, as you know. In terms of our balance sheet, customer funds, Very significant growth. Obviously, we have a lot of numbers here because of the complexity of the comparison with The period pre merger, I'm going to just comment more on the last column, the organic, which is, I guess, More indicative of trends with that 6% of growth year to date.
And most notably, your assets under management, look at that 10.3% increase, obviously, very high levels. And if you add all these and insurance, we're clearly gaining market share on this part of the business during the year, which is, I think, particularly, I think, something to be highlighted During this first stage of the merger, the labor union negotiations, etcetera, we've been able to actually grow on the high value added part of these customer funds faster than the market. Now the total, You see €13,700,000,000 in the middle of the page in the chart between market impact and net inflows. And then obviously, on the on balance sheet fund side, there's also growth in June. It tends to be particularly higher because of Seasonality, well highlighting again the assets under management at the end of the period are higher than those average for the quarter and certainly for the year.
So that is going to help fees in the coming quarters. And as you know from the market, actually July is also behaving very well. So Again, very strong support and tailwind here for our fee business. Long term savings, I just wanted to highlight a couple of things. On this part of the business where we have basically €210,000,000,000 now between insurance, Pensions and motor funds, so very large part of our customer funds.
We have made great progress in terms of our And during the quarter, we've launched together with the help and assistance of BlackRock and Impact initiative on which we have already €3,500,000,000 in AUMs, which are considered as Article 9 of the disclosure or the new disclosure regime. Again, I think we're pioneering here something that is quite promising for the future. And why not highlighting we joined the Net 0 banking alliance. And we're actually, as you know, making extremely good progress on this front. I believe it is very well suited to our DNA, the trend towards sustainability, and we're definitely committed to make the best out of the position in which we are and out of all the initiatives that are underway and some more that will be coming in due course.
On the lending side, obviously, demand is soft on the corporate side. You know that well, if you look at the middle of the page, You see mortgages coming down in line with historical trends and again, in line with, I think, strict pricing discipline that we have So on this front, consumer is broadly stable when you take out some of the noise from the integration. And here, I believe there is good upside given the economy and initiatives we've been taking. And then you see there is a significant impact on the Loan book on the business, loan book in this quarter, which is ours. I have to say the month of June has been positive, quite positive.
So I think we are in at least We have a trend that is not necessarily going to continue of that book deleveraging, but it's also going to depend on how demand evolves in the next 6 months. I would be quite bullish with respect to 20 2023 in terms of the impact of the EU funds on that front, but we'll have to see how soon this impact is perceived. Comparing the net income adjusted for this year with the net income of last year, You see, obviously, the big bar, green bar is the reduction in loan loss provisions. Remember, we did quite a bit in Anticipatory loan provisions associated to COVID in the first half of last year and actually in the first half of this year, we're having every other month good news on credit quality, which is very good, obviously. Our core revenues are up, but you have that Sort of tail of 2 cities between NII coming down, but fees and insurance more than or almost doubly On the positive sense, double.
So obviously, more than offsetting that negative NII. And then some other impacts. The final comments on where we are, I think very good that closed the merger late March and then in June. I think we have A real integrated franchise, a good and reinforced balance sheet, both in terms of Capital in terms of liquidity with numbers that speak by themselves and then the asset quality, Both current ratios and the outlook improving. All that gives us obviously confidence to reinstate our More traditional payout policy, which we're fixing at 50% for this year and obviously we're deducting corresponding The profits from our 12.5% capital ratio that already incorporates that 50%.
And anyhow, we have, I think, a formidable platform with the market share we have, the clients we have and the efficiency we're going to build in when we achieve these synergies, which we have recently increased. And anyhow, we're looking to We hopefully soon on business as usual, but we still obviously have to go through the rest of the year, integrate IT systems and then They overlap in branch. So that's what I would say at this stage. And I'll hand over to Javier.
Okay. Thank you, Gonzalo, and good morning. Well, some more details from my side. As Always starting with comments on the consolidated income statement for the Q2, a quarter with clearly lower loan loss charges, Stable core revenues that have led to strong growth in the adjusted net income well, on core revenues. Clearly, NII impacted by the lower deal environment, I would say.
Fees that continue to grow nicely, supported by our Long term savings business. On insurance, we keep recovering and track to our targets, although This quarter affected by some nonrecurring items, but the year end outlook is unchanged and we are quite positive on the evolution of this business as in the past. On non core revenues, I could remark Here, mainly the dividends from BFA, the Angolan stake Of PPI, you know, we will have had an ordinary, but also an extraordinary dividend of slightly over €90,000,000 this quarter. And then finally, I will remark the Resolution Fund charge this Q2. On costs, no major news.
We are on track to reach our guidance for this year. And as you know well, we have this extraordinary cost That mainly is the personnel restructuring. It's approximately €1,900,000,000 this quarter. And then below the line, clearly, lower loan loss charges with, well, situation after the Present buildup of COVID-nineteen reserves that allows us to clearly reduce the impact on that front. Other provisions also with some noise from M and A charges.
And this well, taking into account the M and A impacts that post tax are €1,400,000,000 results into a net income. Adjusted Ex M and A impact for the quarter of €764,000,000 well above the levels of last year. A few comments on Portugal. While the business is doing really well, you may see core revenues Really doing positively on a quarterly basis and also year on year good performance of NII there. You may see the positive evolution of the loan book with growth across, I would say, all segments, also the new production doing well.
And together with good cost control, this results into higher operating leverage with the core operating income up by 21%, I would say year on year. So really positive evolution. Also lower provisions, ending the second quarter with Net attributable profit of €36,000,000 You know that we have also a loan moratorium in Portugal that is ending a little bit Later than in Spain, as you know well. But well, the performance is sound. And well, you have here the NPL ratio in Portugal only at 2.1%.
Before entering into details of the Pianel, let me also give you a picture of our ALCO portfolio that is trending down this second quarter At €60,300,000,000 on the lack of reinvestment opportunities. I'm sure we can discuss this Later on the Q and A session. The yield stable and the rest of the metrics. You may see the maturity profile. Obviously, we are facing Some important maturities also this year, approximately evenly split between the 3rd and the 4th quarter.
The breakdown by different exposures that remains, I would say, rolling changes. And on the right hand side, wholesale funding costs That are fairly stable at much lower levels than before the closing of the transaction, remember, after the fair value adjustments. And now on NII, stable, I would say, quarter on quarter, obviously down year to date. Well, the yield environment is pressuring and we are expecting to keep having pressure during the second half of the year. In this quarter, you may see the impacts.
So it's client NII mainly impacted by lower loan yields and And the arrival repricings and the ALCO broadly offsetting this, mainly thanks to the top up on the TLTRO3. And on the right hand side chart, you may see the evolution of margins. The buyback yield impacted down by 4 basis points to 167,000,000 arrival repricing mainly. But on the contrary, a positive message here is that the front book It's gaining traction with a higher weight of consumer lending and also wider spreads on, let's say, CIB. And we are up to 211 basis points, up by 16 basis points this second quarter.
On fees, clearly, a much more positive environment. We are doing really well Quarter on quarter, year on year, whichever the metric, we are up by 5.5% on a like for like basis year to date. You will see the breakdown across the different segments. And it's not only Asset Management that is performing really well, up by 14 But also recurring fees, you have details, monthly evolution On the right hand side chart, this includes, obviously, payment fees, but all the, I would say, maintenance fees, etcetera, all the transactional fees, You may see that we are having a clear recovery. So this bodes well for future evolution.
On Insurance Distribution, you may See a negative quarter on quarter evolution, but this is not important. It's a one off. There are some accounting effects, but also the gradual rollout of the CasaBank commercial offering in the Bankia network. And As you know, we are quite upbeat on the future evolution of this part of the business. On Wholesale Banking, always more volatility, and we have A good quarter.
But well, as you know, it's a slightly softer year as this 2021 compared to last year With extraordinaires during the pandemic. And on other insurance revenues, I would rather focus on the central chart, which Probably gives us the broader picture. We have positive evolution year on year on Life risk Revenues, we are up year on year for the first half of the year. This quarter with also some nonrecurring items related To commercial incentives and others, but the business remains stable. And as you know, we are quite positive, as I said before.
And well, on the right hand side chart, you see the evolution of core revenues, as Gonzalo commented, fees and insurance Compensating so far NII. Well, the slow yield environment is putting pressure on NII, as you know. And now we have some chance of a slight undershooting on our Core revenue guidance for this year, that should not be more than by 1%. On costs, I will not remark much things. I would say that we are on track to meet our targets.
We are On costs with negative growth year to date, but well, you know that last year we had extraordinary cost savings within the last part of the year. So we are on track for our cost guidance for 1% for this year. On the right hand side chart, you have the phasing Of the core synergies, that will reach €940,000,000 by 2023. And finally, on the P and L, loan loss charges. This second quarter, really low, EUR 155,000,000 Now cost of risk is standing at 41 basis points on a pro form a basis.
You see the evolution of Our different stages of the loan book, I would say that pretty stable, although on stage There are always inflows and outflows. We can comment later. But at the end of the day, we are at the same in the same place. We have had this Q2, the partial assignment of COVID-nineteen reserves to specific provisions in the, Let's say, the periodic model update. And this has been €400,000,000 And now the unused COVID reserves stand at €1,400,000,000 You know that this is in general terms Doing better than initially expected.
Also, Moratoria performing clearly well, better than Our initial expectations thus we are upgrading our cost of risk guidance for the year to less than 40 basis points from less than 50 basis points. Let's move to the balance sheet. Some comments on NPLs. You know that As I commented in the previous slide, good performance. So we are not having new NPL formation Materially, so actually the balances have come down by €100,000,000 as you may see.
And the ratio remains Stable at 3.6%. The breakdown by segments is pretty stable, nothing material. And the coverage ratio at a sound level of 64%. And with this, now we have the expectation that the NPL ratio is not going to be Over 4% is clearly we expect that is going to be below by before the end of this year and probably Growing a little bit more into 2022. The bulk of the moratorium has already expired.
You have the details on the right hand side. And it's now €6,800,000,000 outstanding, the major part in Portugal with a more extended And this is expected to end as of September. And as I said before, performance is Would nonperforming moratoria considering active and expired is 0.5% of the loan book Or EUR 0.2 billion when excluding those with payment difficulties already before COVID. The OREO exposure unchanged at €2,300,000,000 And on liquidity and MREL, well, the numbers speak By themselves, liquidity over €160,000,000,000 Liquidity metrics extremely comfortable. The PLTRO3 outstanding Probably unchanged at €81,000,000,000 And you have all the MREL stack.
I would remark here our subordinated MREL position Above 22% and total NREL at 25%, well above requirements. We have been Having successful market access this first half of the year, diversifying the investor base with issuances in British pounds and Swiss francs also. And also with a very active presence in the ESG world with 3 green and one social bond and any further issuance this year, We'll be targeting 2022 refinancing needs. And finally, capital. Strong capital position, 12.5%.
With this, we are back, I would say, to normal in terms of dividends with Cash payout target at 50%. This quarter, we have negative impact of 86 basis points from restructuring As have been already been flagged before, also regulatory impacts of 69%. This includes 3 impacts That we have been also commenting in the past, this leads to 155 negative impacts from, let's say, regulatory and M and A related. But with this, our view is that now net capital drawdowns are already finalized. We have organic capital generation, 33 bps.
Take into account that this second quarter, We have the catch up of the payout dividend also the dividend accrual that was accruing at 30 Percent and now it's 50%. Some other impacts that result into this sound CET1 ratio 12.5. On top of this, we have IFRS 9 transitional that results into ample MDA buffer at 4 68 basis points. You have also on the right hand side the evolution of the tangible value per share with positive evolution despite M and A impacts that have been And fairly neutralized each other. And with this, I end by with a summary, which is What we have been commenting, a really strong balance sheet post merger, a strong solvency position.
I would say that also an evolution in terms of credit quality, much better than our initial expectations, thus We are improving our guidance in terms of cost of risk. Also after the redundancy plan agreed, We upgrade our synergy targets for the next 2 years clearly. And now the integration is proceeding at full speed. Thus, we are shifting the focus to sustainable profitability and capital returns. Thank you very much.
And with this, we may be ready for questions.
Okay. Thanks, Gonzalo. Thanks, Javier. Let's move on to questions next. Operator, can you please proceed with the first one, including the name and company of the caller?
Operator, are you there? Hello. Hello. Can you hear me?
Is my line open?
We can hear you. I'm not sure if you're the operator.
No, it's Halvaro. Hi, I think they've opened my line. Is it me you're listening to? Okay, great.
Could you please transfer us to the operator?
Yes, I think my line is open. Yes, I can hear my voice. Two questions for me. It's Alvaro from Morgan Stanley. Good morning.
One on your core revenues. You mentioned I think, Javert mentioned that it could be minus 1% versus the original flat expectations. Presumably, it's E and I that's Pointed, so I'll concentrate my questions there. When would you expect the NII to bottom over the next few quarters? And if I think about can you maybe walk us through what are the headwinds remaining?
Obviously, the arrival or how much the arrival Impact is left and maybe sort of any other margin pressures that you want to point out? And the second question Related to that is on corporate lending, if you can maybe Sure. Your thoughts about the outlook there. Obviously, it's down and I heard you, Gonzalo, talk about do you But a significant improvement, but I don't know if you've done any analysis on sort of liquidity of where liquidity positions of your clients And how much of potential increased CapEx or increased working capital requirements they're going to Dip into existing liquidity before actually loan growth picks up. So any thoughts there?
And If you can help us with your crystal ball quantify potentially the opportunity with the NextGen funds that would be great. Thank you very much.
Yes, I commented that We have now a slight chance of approximately a 1% undershooting on our core revenue guidance. And as you say, it's for pressure on NII. And I would say that here We have different angles as always. 1 is, and you pointed out the part of loan growth. On that front, we are observing that corporates in general and SMEs Actually accumulated quite a decent amount of liquidity.
And remember that we were quite active on eco lending, which We think it was the right thing to do. And now those clients are, let's say, having a little bit less appetite for new lending. So we are having this situation. At the same time, there is this kind of Delay or at least a little bit about next generation funds that Everyone is waiting for, but at the end of the day, we are money is still not there. And the plan and also companies, Samiz and even corporates Always looking for more details before deciding.
And this is affecting. We think that we We will have a great opportunity on that front. And obviously, we are working internally to take advantage of this opportunity. But unfortunately, it's not there yet. It's going to be there probably more in the Q4 or even into next year.
We face now Q3 without Probably that helped in terms of loan growth that probably initially in the year we thought would be there. On the contrary, in other areas like consumer lending, I remember commenting last quarter that we had launched A really large campaign in terms of consumer lending is doing well. So we have been gaining tractions As the quarter progressed and well, in July figures are good ones. So I think that on that front, We can do well, but it's unfortunately a little bit uncertain to what extent as we are in this, let's say, post pandemic or in the midst of the pandemic, Mikael, to really assess the timing of things. And this is why we now Have slightly this more conservative view on that front.
And finally, it's the ALCO portfolio. And here, If I may, I would be clear on that front. So we face maturities. We face you have all the details on the presentation. And we have the potential to increase the size of our portfolio.
But clearly, we our assessment of the situation is that at current levels, yields do not offer long term value. It's our view. Nominal yields are clearly negative compared to inflation expectations. And we think that it's not to build a portfolio, a long term portfolio at current levels. Thus, unfortunately, we are refraining to rollover maturities or even To expand the portfolio, also great spreads are at the tightest of recent years.
So unfortunately, we're feeling the pain in the short term on that front. And this is why also this is Putting pressure. And you asked also about the arrival. I remember saying that This year, we were facing like a markdown of 12 month arrival of approximately 20 basis points. But this is not linear, Okay.
So this is not 20 basis points every quarter. And in the Q3, it's a little bit more intense. It's Because the year on year comparison is less favorable. So we have a situation where in the Q3 we face repricings of approximately Minus 30 basis points. And this is also having an impact.
So all in all, we have a situation where we are Now estimating NII to be negative by approximately minus 4% or minus 5%. And well, depending On the evolution of fees and the rest of the business, this is why I flagged that we have this Chance of slight undershooting on core revenues. Thank you,
If I may add, Javier, obviously, you made that comment On pressure on NII, I think it's obvious. But there was that comment, Alvaro, on the next generation Funds, and I think this is going to be an important tailwind as Javier said. It's €70,000,000,000 coming down to Spain, which is Probably going to main investments of approximately twice that amount. This is our sort of macro analysis, Well, we think there's going to be bank credit, bank lending of €35,000,000,000 to €40,000,000,000 So that is the impact and obviously we're aiming to get our fair share of that which is not necessarily 25% but more. But we'll have to see.
This is our estimate for the next couple of years, as Javier said, mostly associated to 'twenty And 'twenty three. I have to say, it's difficult and Javier has been quite clear. We do have pressure on NII. This is going to come to an end. You asked about autoimmune of NII, and I think, Javier, it's likely to be next quarter.
But let's make sure we look at the overall picture because It's been a very, very positive quarter. And certainly, what we're doing on fees is quite remarkable. And I'm sure we'll get into the insurance business where there's some one offs that make it not shine as much as it usually does, but there's Absolutely no change in the trend on this business. So we're quite comfortable with the way the business is going And the capacity we have over time to more than offset the pressure on NII with the rest of
Okay. Thanks, Alvaro. May we move on to the next question, operator?
The next question comes from the line of Ignacio Ulargui from Exane. Please ask your question.
Hi. Good afternoon. Thanks for taking my questions. I just have two questions. One is, if you could elaborate a bit more on where the €9 €40,000,000 for the delta of €170,000,000 of savings, cost savings are coming from.
If there is going to be sort of like More it's more linked to headcount or it's more to processes and sort of like internal savings on the admin side. And the other question, it was just a bit to get your thoughts on how the competitive environment is. I mean, I've been Talking about delays on next gen being deployed, how do you think that is going to impact the TLTRO? And whether you see or you start to see competitors being more aggressive in corporate lending? Thank you.
Thank you, Matthew. I would say the increase in cost savings is the result of detailed analysis done, and it includes both The review of headquarters, general expenses and personal expenses and obviously with a higher degree of certainty after 3 months and after having agreed The headcount, we did not provide a detailed breakdown of cost savings We announced the transaction. Hence, it's unless we go back on that, which we think is not the right thing to do now, It's difficult to compare, but I can tell you the color that really we have looked at everything now and we feel quite confident on that front. And on the other part of the question, maybe Javier?
Yes. Well, sorry, it was the question Competitive environment, yes, yes, until the euro. It's well, it's competitive as always, no? But I will not say that it's Much more than in the past. And actually, we are recovering the front book yield as you saw before.
And Precisely, it has been a quarter with a slightly wider corporate lending yields. In terms of SMEs also after the eco lending that obviously led to tighter yields or spreads. We have been gradually recovering. So it's competitive as always, but I could not say that on the segments That are, let's say, that count for TLTR Road 3 purposes. There is, right now, a difference Compared to previous quarters.
And I think that in general terms, all the industry and ourselves also And I can confirm this now. We are on track to reach, let's say, the benchmark for TLTRO3 Benefits and I think that as everyone is more or less on track, we should not expect Much, much, much more intensity than the usual one we have always. So I think that probably is a summary of the situation.
Okay. Thanks, Nacho. Could we move on to the next one, please?
The next question comes from the line of Francisco Riquel from Alantra. Please ask your question.
Yes. So First question, a technical question on the NII. If you can please quantify the impact of the fair value adjustments on NII on a Full year basis, you were previously guiding for a neutral impact. It seems that it's now going to have a positive contribution. And then whether this impact is sustainable in the coming years or if there is any fading impact from the accounting Fair value adjustment on NII.
And then the second question is about the insurance revenues. The life risk insurance Fale quarter on quarter, you mentioned a one off impact. If you can please explain the and quantify this impact. But in any case, the underlying trends in life risk insurance are stable quarter on quarter and then the fees from the sale of insurance products Also fell quarter on quarter, if you can update on the trends here for this quarter and the second half of the year. Thank you.
Okay. Hi, Paco. Well, on fair value adjustments, what I remember saying is that Well, slightly positive at the beginning and then fading a little bit. So I think that this is And then becoming positive again later. But this so it's not linear.
Now It has been positive. It has been close to €15,000,000 this quarter, €15,000,000 But don't take this number As, let's say, a constant one for the rest of the quarters because as you know, as you have different Maturities on assets and liabilities is going to change. But this is positive, a little bit less than this figure In coming quarters for, I would say, 1, 1.5 years, then becoming neutral and then becoming slightly positive again, but Well, past, I would say, 2025 or beyond. On Insurance, well, I mentioned, we had an adjustment of commercial incentives. But the underlying business is doing As before, and you know that I have been giving guidance for this business line On life risk of approximately growing to around double digits, let's say, around 10%.
And we think that we are clearly on track to reach this target. So you should not read much into this noise quarter on quarter. And in Non Life, it's a little bit of the same. We have also Some noise in terms of accounting, but also in this case, as I mentioned before, the rollout Because in for Non Life, the former Bankia, let's say, network is already distributing those products. And we have had during this Q2 the rollout process.
And obviously, we have had here some impact from that effect. But you know that those both life risk and non life were targeted As one of the key drivers of our revenue synergies, this continues to be the case. We reaffirm that those revenue synergies are there. And obviously, this is a business can only do better in coming quarters. This is It's clearly our view.
Okay. Thanks, Paco. Could we move on to the next one, please?
The next question comes from the line of Sophie Petersen from JPMorgan. Please ask your question. Yes.
Hi. Yuri Sassi from JPMorgan. Thank you very much Thank you for taking my question. I already have a question on the revenue synergies. So you got for €290,000,000 of revenue synergies And you say most of it will come from insurance.
But if I look at your NII guidance, no guide for NII We're down 4% to 5% year on year, which means roughly net interest income will be down €300,000,000 Which is roughly €200,000,000 more than what you previously guided for. I mean, is this €290,000,000 of revenue synergies just coming from insurance? And The median of revenue synergies just coming from insurance and you don't take into account kind of NII weakness, but then shall see weakness? Or how should we think about the Gulf of revenue synergies? What's the starting point?
That would be my first question. And then the second question is on your thoughts between dividends and versus share buybacks. How do you view share buybacks? Would you consider doing directed share buybacks from the So those could be my two questions. Thank you.
Thank you, Sophie. Let me Try to answer your questions. First of all, on revenues, I think we need to separate the objectives we have on revenue synergies from the current performance of core revenues. These are two different things. Our revenue synergies are not expected to come in any material way this year.
They are mostly or in fact associated to our insurance business and our long term savings. And on this front, we really need to unwind the existing JVs to really make them happen. So we're going to have and that's why we did not Incorporate that into the short term guidance. But given what we're seeing, We are fairly confident that this will be coming. Obviously, there is part of that that is just buying back Up to 100% of the JVs on the insurance front, which is rather than a synergy, it's just a consequence or just an acquisition of the control of the 100% control of the business, which we quantified at 75 €1,000,000 of this €290,000,000 And obviously, that is not being reflected and will not be reflected until the transaction is completed.
And the rest, we do need for all what has to do with Life business, which is obviously A very large part of that number, we need to have integrated IT systems and bought back the JVs and hence this is more 2022 onwards synergy. Obviously, when you look at the business and we are now An integrated one sole bank for a bit over well, including July now 4 months. We've been looking at all the assumptions we've made and we actually feel quite comfortable given what is happening. At this stage, we thought that the right thing to do was to focus today's change of guidance in The cost savings increase the target as we all know that revenue synergies are a bit softer and longer term. But The way we feel now about revenue synergies is stronger than it was 4 months ago.
That's the reality. Then because this is all into 2022, then we can look at the performance in the quarter, which Javier has explained. And here we have Very strong show on fee business, some one offs on the insurance business, which may generate a question mark. But believe me, we are always Pretty honest, we are as bullish on this business as we were 3 or 6 or 9 months ago. This is going to get where we want on both Protection both on life risk and non life.
But synergies, revenue synergies, which will be on top of that, Are likely to come after certainly after the integration of IT and after buying back The business from in particular from MAPFRE because it's the largest part of the business. So it puts us into next year. The second part of the question is capital. We're obviously Outperforming vis a vis our expectations on capital generation. And it's great to be here With 12.5 percent of ex IFRS 9, we are very comfortable.
That has a lot of us to restore a more normal payout policy, but we have a fundamental Decision to be made ahead of us, which is what do we do with the capital we are going to generate Both this year and going forward. And we want that capital to be available and distributed to shareholders. That's clear. And we have a number of means. Obviously, payout is part of the equation in any case.
And the question is what is the right sort of sustainable levels on payout and What is what we can do on top of that with the capital we generate and share buybacks is obviously one tool Which we will be analyzing, but this has to be obviously part of Sort of a longer term vision, which we are going to undertake and present to the market sometime in the second quarter of next year. But certainly, this is part of what we will be discussing at the time. I am and I think we are all Completely open to use various tools that we have to remunerate shareholders and certainly considering a share buyback It's in the toolkit.
Okay. Thanks, Sophie. Let's move on to the next one, operator.
The next question comes from the line of Max Missim from JP Capital. Please go ahead.
Good morning. Thank you for the presentation and taking my questions. The first one is on the loan book in Spain. Mortgage loan market is probably the best performing in Spain this year and CaixaBank has been deleveraging in mortgages in the past years. I was wondering if you plan to change the strategy a bit now with Bankia inside and be more aggressive in mortgages?
And if not, why not? And considering the perfect loan book of Caixabank, how do you see the mix in the medium to long term? And then the second question is on BPI. You have quite a high common equity Tier 1 ratio at your Portuguese franchise. If I'm not mistaken, it stands above 14%.
Could you explain what is the rationale for operating with excess capital in Portugal? Thank you.
Thank you very much. Let me address the mortgage market. You're right. We have been very, I would say, disciplined in terms of pricing appropriately our mortgages. And also quite, I think, pushy in making sure That we actually offer a fixed rate mortgage, which is in most cases better for clients and better for ourselves.
That has changed completely Our mix of new production and has also changed the mix of new production towards fixed rate mortgages in the overall market because of the weight that we have there and the market has followed us broadly. We are looking at mortgages not as a way to capture new clients. It is an expensive way to capture new And we have plenty of ways to capture and retain clients because of our size, our presence, Our product offering, which is quite diverse. Everybody, obviously, is not of the same view, and there are some people that are being more aggressive. Now I have to remind you when you look at numbers of mortgages, the banks originating banks have to pay for the So it's time duty or the actosuricos documentados, which means that the cost on a running basis is close to 40 basis points.
So You compare spreads and you look at other markets where you don't have that tax, you really need to deduct that from Spreads and then you start looking at well, the profitability of the product is what it is. And honestly, we're not here to Grow our balance sheet for the sake of growing it. We're in the business of being profitable and selective. So that's where we are. Can we be more aggressive?
Yes. We obviously will have to be Tactical because we want to do the right share of sort of Value enhancing mortgages and that is sort of day to day tactical management But I do not think we're going to change our fundamental view. And that is likely to result in some Continued loss of market share in terms of the stock of mortgages, which we are prepared to have. We have had in the past, we still have a 27 Market share in mortgages. And I think we are not going to be driven by one number.
We're going to be driven by doing the right thing economically. That leads me to the mix of the loan book. If you look at the trends, mortgages is likely to come down, Not new production, but the stock of the loan book while obviously we're going to keep growing the consumer book where we see an opportunity and we will see also growing the business and the CIB Book in the coming quarters, if you look at most predictions from June 2021, so basically now, To the end of next year, we're going to see 10% GDP growth more or less, if you look at most predictions Combining what's going to happen in the second half of this year and next year in full, it's like 10%, we're going to see an increase in working capital. This is back also to Previous question we had on expectations from Alvaro on working capital. Obviously, with the GDP Growing 10%, there is going to be an impact on working capital, the next generation funds.
There's going to be growth on that front as well. So I would say in terms of the mix of loan book, we're going to see as a percentage a higher weight of consumer And business and a reduced weight of mortgages that's that wouldn't come as a surprise to you. I will not be able to quantify exactly because we're very happy to do businesses on the three areas, but It's going to depend on the market. Hopefully, we're going to keep growing market share in consumer and businesses like we've done in the last years and likely to have some reduction of market share in mortgages. With respect to BPI, there is no reason rationale for the high core equity Tier 1 other than a result of history.
Because of the pandemic, BPI has followed. Even if it wasn't technically within the recommendation of the ECB, We decided that it was appropriate given the size of BPI in Portugal to also restrain the flow of dividends, which has no impact obviously on a consolidated basis. And hence, most of the profits generated in 2019, 2020 have been retained. And to that, we also have to add the results that are coming from Angola. So it's a result of history.
And I think In due course, it is likely that the levels of capital will equalize to those of the group. But that is a decision That is not a decision for today. It will come obviously when we have to decide on payout policies going forward at the end of the year. As capital is freely transmissible, Whether we have it in Madrid, Barcelona, Valencia or Lisbon is not something that is particularly relevant for the management of the group. There's no penalty for us having more capital in Portugal versus other places.
It would be different if we would be in a different currency or subject to limitations Whatever, like it makes a difference for us whether capital is retained at PFA in Angola or upstream to The Eurozone, but between Portugal and Spain, fortunately, there is no real impact. Thank you. Thanks for your question, Max. Could we move on to the next one, please?
Our next question comes from the line of Marta Sanchez Romero from Bank of America. Please ask your question.
Good afternoon. Thank you very much for taking my questions. The first one is Follow-up on the market share on mortgages. I was wondering how much of a consideration in defining your risk appetite is The fact that you still have a high legacy from the previous crisis between mortgage NPLs and repossessed collateral, is that A consideration in your strategy or you're not too worried about it. And then another question on the NII is the spread on your annuities business is Approximately 6% of your of that line.
We have no visibility on how that contribution is going to taper off Given where interest rates are, we've seen that it's so far is 5%. Could you provide some outlook? It sounds like this year. Can you provide some outlook? And then just quickly on IRB model approvals, can you provide an update on timing for BMN And potentially for BPI and on the latter, what would you expect the rollout of IRB models to add to your capital?
Thank you. Thank you, Marta. On let me start, and then I hand it over to Javier On mortgages and legacies, obviously, our numbers are public and you know them well. And it's up for you and the market to judge whether there is Legacy, I see our NPL ratio in Spain and is below the NPL ratio in Spain of the Top of the next three banks. So I don't think we have a negative legacy.
We have We've reduced in our NPLs. We'll continue to do so. This year, they have increased slightly because of the merger with Bankia. But on that level, again, We are managing those and this aspect in, again, Outperforming our own expectations, obviously, not I don't know what the expectations of the market may have been. But certainly, we're quite happy there, And we are not having any issue affecting new production because of legacy.
I think if that was the case, it would be certainly others thinking about this, not all others because there are other banks that Obviously, have a differential position depending on their history and their specialization. But certainly, most of our peers have higher legacies than we do. And we are quite happy with the way we're dealing with that legacy. We have taken Very prudent decisions to move into Stage 3 mortgages that are still paying because of the current situation. And hopefully, we will also have good news as the economy recovers.
And we see some of these more unlikely to pay that we have classified as a Stage 3 are coming back into performance. So No impact whatsoever on that front. On the annuity business, I'll let Javier expand, but this is a growing business for us. And the product It's not a simple product. It has implications in terms of fiscal consequences.
And I think at this stage, certainly, we have not seen that as a threat to our future business or NII, Quite more as an opportunity. I have to say because we continue to see Very strong growth there. But maybe Javier, you want to elaborate and also update on timing for the Rollout of IRB products.
Okay. Hi, Marta. Well, on the Annuities business, I will not I agree with the comments made by Gonzalo. And also, it's not a business that is tapering off. So, actually, there is quite Very good amount of new production.
Obviously, in this yield environment This is more challenging, no? But you know that we have precisely structured our commercial offer in a way where you have a mix between Unit Links And then with this, obviously, the UniLink is at the risk of the investor. But well, it's a product that is doing really well. And you may see on our feed line there only the part of Unit Links, but usually this product has attached an annuity that has the impact on NII. So there is new production.
So it's not like a legacy portfolio in runoff. So I would like to make this clear. And It's the average life of the current portfolio is approximately 10 years. So also just to have this in mind. And on IRB models, on BMN, our expectation is that this may come next quarter.
So Q3, I mean, in the Q3. And BPI, it's almost sure something for 2022, So this is our expectation. Remember that for BMN models, we were estimating a positive impact of approximately 10 basis points. And on BPI, still pending to be defined, but the amount may be approximately at the same level, Depending on the final portfolios that are included and authorized, etcetera. As I comment this, I made On the slide commenting on capital, I made clear that the net drawdowns from regulatory and M and A impacts Have already ended.
Obviously, this is a net, so compensate each other. Remember that we have here disclosed Three impacts, which is this IRB models for BMN, which is a positive one. We have €300,000,000 of CET1 pending in terms of restructuring costs, the major part into this 2021. And then we have well, the transfer to Our JV with Global Payments of the Merchant Acquiring business that results into a positive impact of approximately 10 bps also. Obviously, there are other unknowns, mainly the final agreements with the rest of the JVs.
But our estimate is that considering everything, we are already done. Thank you.
Okay. Thanks, Marta. Operator, can we have the next one, please?
The next question comes from the line of Jarnesh Mbahim from Goldman Sachs. Please go ahead.
Good morning from my side as well. Can I just start with a follow-up question? Javier, when you were going through your ALCO book, if I understood you correctly, you said that as positions roll off, You just don't reinvest them. So did I get that right? So what happens there?
It just sits in cash? You deposit it back to the ECB? Or what happens?
Okay. Yes. The answer is yes.
The threshold for you to change that approach, How I mean, what which duration of the curve are you looking at? And how high does it need to go for you to start deploying?
Well, you know that we were on up to May, we were on a steepening process of the yield curve That look that it would have, I would say, more or less. And well, since then, the market has reversed. So I think that and I mentioned this in a previous question, also Our view, and we may be wrong or no, but we share our views with you, is that current market levels are not attractive enough In order to be rolling over the portfolio. So we are, I would say, waiting a little bit. This is having some short term pain, as you say.
We are accumulating cash at a cost, but It's our view. So I think that also in the interest of shareholders not to know our strategy there. Obviously, if the situation Changes and goes in the direction we had in the 1st part of the year. Obviously, we'll start moving.
Thank you. I wanted to ask you a conceptual question. So the market shares That you have in Spain are obviously market leading. But I think they also put Caixa in a position where it's very difficult to outgrow the market. You basically okay, investment products aside, but basically, I think when you reach that size, that scale, You share the dynamics of the market pretty much.
Now you've gone through or you're going through a merger, it's going well. You've just increased your cost targets. You've mentioned before that you feel you could move capital Without much friction around the eurozone. And I was just wondering, I mean, why are you ever tempted to Consider redefining the geographic presence of Caixa to add a country within the eurozone to the mix.
Well, Jarne, obviously, a very fundamental question. Let me before I answer, Let me say that our experience in Spain is one of growth despite growth on market share, despite very high market share. We are not a normal bank in terms of how our market share is distributed throughout Spain. It is more balanced now after the combination with Bankia. But before that, we had very large market shares in certain regions of Spain.
And actually, we've seen growth where we had market shares that are Higher than what we have today throughout Spain. So even though it's difficult, we certainly don't give up on the idea of gaining market share. Obviously, the next 6, 12 months are going to be marked by integration. So it makes it even more difficult to gain market share. But we will try.
And as you mentioned, for instance, on the asset management side, the overall It's going very well despite the current period. So I think that we still have the possibility of not just following the market, but doing better than the market. And I know that's difficult and the law of big numbers is the one that you say, but I don't want to give up on that challenge. And certainly, I'm pushing the organization to be ambitious to say 25% It's not good enough for us. But having said that, what you say is obviously a very Fundamental question that is not on the table now because we're going to be so busy We are so busy, but we're going to be very busy next year as well, making sure we actually implement this merger with to its Full potential, no.
But in due course, I think that is a legitimate question that I'm sure the Board will ask itself. I am, I think, at this stage, quite, I would say, agnostic in terms of When we're done, we will obviously look and consider whether there is a new phase that takes a business beyond the current perimeter. But I think it is actually very likely, and at least that's one scenario I wouldn't discard at all that we say actually the current focus on Portugal and Spain is the right one, plus one sort of increasing focus that we have from for our CIB business In the Eurozone, over the last years, we've operated opened and then operated branches in London, Frankfurt and Paris as three areas where Obviously, the CIB business, there's very simple growth for us with plenty of business referred between Companies that operate in Spain but have headquarters in Germany or France or the U. K. Or international companies that have their European headquarters there And where there's a clear business for us to do at sort of at a marginal additional cost.
I think That is certainly part of the strategy. It's been over the last few years. It's probably not been visible enough for some people, but it is increasingly been more relevant and will continue to grow. We have a great Source of deposits in euros. Unfortunately, they make Javier's life difficult with having 1,000,000,000 and 1,000,000,000 of money at the ECB, as you said.
But we also have great corporates that are operating in Spain for decades and where we can obviously compete effectively not only in funding them when it's appropriate, but also In doing transactional banking, project finance, etcetera, all the ancillary business that makes the overall relationship attractive enough. Now that train has left Station, in fact, we did leave the station 3, 4 years ago. And it's going to become, I think, more relevant over the next 5 years. But piano, piano, as they say. We're doing this, being in investment banking for 20 years And wholesale markets, etcetera, we know what the cost is going too fast.
We're going very gradually, and that's why it is not Easy to notice, but year after year, building, I think, a reasonable CIB presence in the Eurozone, which is The logical ambition for us. That was what I could say at this point. But obviously, We'll see how things develop in the mid long term in terms of the more strategic question that you asked.
That's very insightful. Thank you very much.
Thank you. Thanks, Jerni. Next question, please.
Our next question comes from the line of Mario Ropero from Best Investor Securities. Please ask your question.
Hi, good afternoon. Just a follow-up question on some of the comments made on provisions. Can you please tell us a little bit about the timing you foresee in order to consume or release the EUR 1,400,000,000 pending COVID-nineteen Provisions, is it 2022 mostly? Or you think that it will go beyond well beyond this date Due to perhaps pending uncertainties around Nikos or whatever.
Well, we have to see obviously, We build this very large provision and things have gotten much, much better afterwards. We're going to be prudent. And I think we clearly need to get well into 2022 Good to know what the extent of the damage is, but I don't see that it should go beyond that year. And certainly, there is upside on this front. I think month after month when I look at these provisions, I see actually there are obviously many scenarios in which these provisions are not necessary, certainly not in their But I will be careful and I think that is a question that will be clearer during 2022 progressively.
I'm not able to tell you whether it's June next year or October or September or December, But it should be during 2022, and we have clarity on this front, no?
Okay. Thank you, Mario. Next question, please.
Our next question comes from the line of Carlos Jobo from Societe Generale.
Hi. Hello, everybody. Thank you for the presentation and for taking the calls. Two questions for me. One is about the negotiations with MAPFRE to break up the JV.
You were initially allocating some potential costs to break that deal. And I was wondering if you could update on that, how you are Planning to offset that cost with other sales from your insurance partners. It would be helpful See what's your final assessment on that. And on capital, it's a more general thought. You've accumulated more than 100 basis points higher CET1 ratio than when the merger was announced.
Even at that time, you wouldn't count on a lower payout ratio than the 50%, which is consistent with the track record. But even if Caixa delivers and over delivers some capital, we never really have a more generous payout policy. So should we understand that the 50% is for 2021 only and that the underlying payout Could grow in future years. You've already said that you're considering share buybacks. But are those the only options?
Or are you also so when you said you are thinking of possibilities, could you specify a little bit more if bolt on acquisitions A possibility. In that sense, which sectors you would be looking at? It would be fee income business like insurance or asset management. Is that a possibility where we could see deals as some other Spanish banks are doing? Thank you.
Thanks very much. Let me be very direct on MAPFRE. Two things. I don't want to comment on where we are now. There's an ongoing negotiation.
We will obviously get to an agreement in due course, but we need to be patient. We have not included in our core revenue numbers What is going to be the contribution from the business that we acquire? We will see at what point in time it happens. But technically, the results of Banque MaFRE VIDA are for us since the end of the agreement or the agreement was terminated or was communicated as terminated So there's some upside there, but clearly, we need to wait. The Impact of all these, as I think Javier has said, is going to be neutral.
No, it's not we don't want to start detailing on what is the impact of each of the negotiations because obviously that will not be useful for negotiation purposes. But overall, what we see coming from The remaining of the M and A discussions that we have associated to unwinding agreements and the various partnerships have with Bankia plus the last leg of some of the regulatory implications. The total We'll be neutral. That's our best estimate. When You talk about capital and payout.
Clearly, the 50% is a decision for 2021 only. And then we will need to have a discussion on what we do for 'twenty two onwards. Clearly, my implication is that Generos or our distribution policy will be Generous is that there is upside from that level. But once you look at the upside, you have to decide what becomes The ordinary payout, what may become a special dividend, what may become a share buyback, there is no decision that has been taken On that front, at this stage, we have plenty of things on our plate. Obviously, the integration is by itself very time consuming.
But any projection that we do over the midterm results in the generation of very high levels of excess capital. We have no intention of retaining those for M and A, zero intention. And hence, all that excess capital is going to be made available to shareholders. The only discussion is when and how. But I don't foresee Any M and A activity, and we certainly will not want to retain capital for the sake of retaining it, it creates more Problems and benefits, so it will be made available to shareholders.
And obviously, increasing the payout is one option, a special dividend is another and a share buyback is another. And a combination of those is obviously also possible.
Okay, Carlos. Thanks for that. Can we move on to the next one, please?
Our next question comes from the line of Fernando Hu from Barclays. Please ask your question.
Hi, hello. Thank you for taking my questions. Just a follow-up question. You have described the cost synergies and revisited the story. On revenue synergies, you stay the same.
Is this basically because you haven't reached yet the agreement with MAPFRE And you will review afterwards? And can we see a revision on that? And a further question related to that is on the restructuring cost spending, You mentioned this €200,000,000 €300,000,000 additional. I didn't get it, but is this coming into 2021 or is it going forward in 2022? You very much.
Thank you, Fernando. Let me ask answer the first question and Javier can do the second one. On revenue synergies, We want, I think, before we communicate further, 2 things to happen. 1 is effectively closing the agreement with MAPFRE because this is obviously very relevant. It's going to happen, but it is very relevant.
And I think otherwise we're Explaining things too ahead of its time. And then I'd like to see some delivery on this front. The market is well known for its acceptivism on Revenue synergies. So we don't want to come. We've already said what we thought it was at the time of the announcement.
It will come back with Detailed analysis, we want it to be very detailed and hopefully also to be based on things that are already happening. So we want to give us a bit more time on that front, both to close agreement and also to make sure that we build a case that is not just intellectually Appealing, which I know some of you agree with us that intellectually is very appealing, but also that it has some further legs in terms of Something is really happening and people can see what this is actually not just a smoke of good things that may happen, But some real progress, which suggests that we should take some time before We provide further detail. But let me tell you, the fill in we have is very positive. And obviously, we're looking not just at the areas that we had identified in the past, but also to other areas because actually We have very big businesses and we put when we put them together, we discover that there are opportunities that are Obviously, in quite a few areas. So time will tell.
And restructuring costs, Fabio, can help me there? Yes,
Hi, Fernando. It's €300,000,000 in terms of capital. So it has to do Well, let's just then with the headquarter and branch network optimization or restructuring. And also, There are some charts related to IT, etcetera. So approximately, you can assume that 50% maybe this year And 50% into the very beginning of 2022, depending on this, let's say, optimization of the branch network, how it goes, but it's approximate.
So let us please have some leeway on that front. Thank you.
Okay. Thank you, Fernando. And I believe we have one last question. So please, operator, could you let that through?
Our last question comes from the line of Benjie Creelan from Jefferies. Please ask your question.
Hi. Good afternoon, everyone. I mean, all my questions have basically been answered. Maybe just two quick clarifications. First of all, you've included the M and A related Net capital drawdown is finalized.
Just wondering beyond the deal on the card business, which you've announced in the ongoing negotiations with MAP Frey, is there any loss and risk transaction that's feeding into that net equation that we should be thinking about? And then the second question, just given that there was a €98,000,000 contribution from BFA this quarter, is there any update on Potentially exiting that stake or any update on how you see that business going forward? Thank you.
Thank you, Benjie. I would say On the M and A, if I heard you well, I think you didn't mention we also want to I have a discussion on the insurance business we have in the Balearic Islands. There's a different partner there, Caser. That's something that is also pending in terms of where we end up. It's obviously much smaller.
And then there is also the extension of the non life agreement that we have with Seguelcaisadeslas that We'll imply in this case a payment to us for the increased size of the business. So Unless there's something else that Javier can add, but at least those two things. And with respect to BFA, I think there is no change in our position. The change financially is obviously An attractive one in terms of having both agreed to a good payout for These 2020 results that are being paid in 2021 and also this capital Reduction, which is obviously logical because BFA has a very, very large very, very high Equity solvency ratio, but our position is the same. This is not our core business.
This is a business in which we would like to I'll reduce our position in due course. It is becoming less and less Financially relevant in terms of the size of the group and the book value that is going to come down obviously with this capital reduction, but it's not part of our strategy to be there. At the same time, it's a great bank. It's doing well. It's providing us good returns.
So we have to be patient in finding when is the right time, both in terms of the attractive valuation and also our solution. It's a very important bank for Angola. And we will be patient until that time comes. But this patient that is being rewarded by very good financial performance, so Not really any longer into the program category.
Okay, Benjie, thank you for that. And I think we have no more With that, let me just say it's been a pleasure to host you one more quarter. And if you do have some time off after results season, Let me wish you all the best and see you next quarter. Bye bye.