Good morning, and welcome to CaixaBank Results Presentation for the fourth quarter and the full year 2025. We are joined today by our CEO, Gonzalo Gortázar, and by Matthias Bulach, our Chief Accounting, Management Control and Capital Officer, who also sits at the management committee. Our CFO, Javier Pano, is temporarily away on sick leave, but he's recovering well and expected to return shortly. In terms of logistics, same as usual, we plan to spend about 30 minutes with the presentation and about 45 minutes to 1 hour with the Q&A. The Q&A is live, and you should have received instructions by email on how to participate. Needless to say, my team and I will be at your full disposal after the call. And without further ado, Gonzalo, the floor is yours.
Thank you, Marta. Good morning, everybody. Thanks for taking the time. I will start with the highlights as it should be the case. A very good year for us. I think, when I look back, it's probably the best year over the last 12, 13 years since the great financial crisis. And it is because we're really seeing a very balanced growth in the activity. Obviously, NII has recovered from June, and this quarter, you see again a 1.5% growth. But when I see a balanced growth, it is really that we are seeing volumes pretty much at 7%, both in the customer funds and on the lending side.
Well above what we were expecting for this year, which was even at the time, you may remember, when we presented the plan, it was seen as on the sort of too optimistic side. In the end, fortunately, the economy has proved that actually that was possible, and we have bet our target, we have beat our targets with some ease, and not just because the economy is growing, also because we're gaining market share. Revenues from services are up, as we say, in line with improved guidance. We started with low-to-mid single digits growth for the year, and in the end, we have that 5.4%, with a stronger fourth quarter.
Asset quality, it has been a trend for some time now, but the fourth quarter has shown an acceleration in terms of the reduction of non-performing assets and cost of risk has ended up at least 22 basis points now. So when you look at it, it's been sort of very round in terms of capital creation, also a fairly positive year. It's allowing us to set a dividend per share, which is growing 15%, and really establishing the payout at the upper limit of our 50%-60% range.
Very complete, and it also feels a year that is, is not just a one-off, but, is part of a trend and, a year which we want to capitalize on to 2026, which has started, I'd say, in very, with very good conditions and, and, basically continuation of what we have been, seeing. Return on tangible equity at 17.5%. With all what, I've said, we obviously have, reconsidered our targets for now next year, for 2027. I'm sure by this time now, you're all familiar with the new targets, but I think it's important to, reiterate which they are. Return on tangible equity at, 20%, give or take.
That compares to the above 16% that we set a year ago. So it's obviously a remarkable one year, allowing us to increase four percentage points our guidance for return on tangible equity. For the average of the period, now we expect it to be above 18%. So obviously, that's probably the headline, but the other important targets for us, cost income from low 40s to high 30s. NII now seeing EUR 12.5 billion as the reference figure for 2027, which means a 4% annual growth versus the flat that we had set in November last year. Revenue from services and cost in both cases, we're maintaining our guidance, mid-single-digit growth for services and 4% area for costs.
Volume growth, we set to 4% in the case of lending and above 4% in the case of customer funds. We're now rounding all that up to around 6%, compared to that above 4%. Again, I think we have a pretty good traction here to be not necessarily just at or around 6%, but possibly slightly above that level. Non-performing loans below 1.75%, compared to below 2%, and most importantly, cost of risk, which we feel confident now we're gonna stay below the 25 basis points number compared to 30 basis points that we said a year ago. So this is our revised ambition for 2027 or for the three-year period.
In terms of capital, no real change, same payout, 50-60, same, capital targets, of 11.5-12.5, and, and the threshold for additional distribution, which for 2025-... is 12.25%, and obviously we're, clearly above that level. For 2026 and 2027, it will stay at 12.5, no? So this is a revised ambition. I'd say the strategy is very similar. It's just that we can do more, and we're obviously gonna try, to make it happen. Macro, we should be, seeing the maybe public, already, because I think it was, expected at around 9:00 A.M., the GDP figure for Spain.
We are expecting 2.9% for this year, 2.1% for 2026. I have to say, this is a relatively old projection, and based on the most recent data, I think it's likely that this figure will be revised upwards, but that's subject to the information that we get on the fourth quarter economy for Spain. Portugal is doing fairly well, again, with pretty strong dynamics also in the Portuguese case. So, we feel there's clearly some upside. In any case, since the pandemic, you see both Portugal and Spain as very much leading growth in the Eurozone, and the factors behind that are still there, no? Population growth, employment growth.
We had 600,000 new jobs created last year, 2.8% growth in employment, pretty impressive. Finally, the unemployment rate becoming a single digit one. Hopefully, will continue to go that way. At least that's what we are seeing, an economy that is now powering ahead on the back of private consumption and investment. So the domestic strength is pretty relevant, and hence, it also gives us some protection of international environment, which, despite all the risk, is still, doesn't look that bad either, no? High saving rates, the growth in disposable income, and the very low private sector leverage, which is still, as you see, 31 percentage points below the Eurozone.
All of that gives us sort of room to grow. Also comfort, if or caution, if at some point news are not as good. The rate environment is obviously more positive than we had at a year or not at year-end, because our strategic plan was based on September figures, as you see there. But obviously, the current yield curve is more attractive, is higher and steeper. From that point of view, it's obviously a tailwind for our NII, you know? So I started saying growth and had a very strong year for us and compared to the previous decade, I would say.
This is why when you look at clients growing 390,000 in the year, look at market shares, and there you have client penetration up to 40.4%. Customer lending and customer deposits, in both cases, 14, 12 basis points growth in market share. These are not huge growth, but with our size and also with our prudent approach, this is exactly the kind of market share gains that we're looking for. Savings insurance, and then on the life risk, you can see 158 basis points market share gains on the non-life. We've also had very significant market share gains across the board, really, in health, in motor, and in household.
Non-payroll deposits, very important, also up 27 basis points. So it's not only what you can see on the right-hand side, which is volumes doing very well, close to the sort of 7% area versus the 4% in general, case by case, but I won't go through it because it's pretty visual for you. But it's not just volumes, it's also relative performance and market share that indicates that the organization is in really full shape with all engines working, you know? Imagin continues to be a key part of our growth strategy, particularly in terms of number of clients. Clients that bank with imagin, they're not clients that just do one or two specific transaction categories, but have imagin as their bank.
And you can see that because when you look at business volume, it's actually fairly balanced and ample. Transformation. I talk about growth, but transformation was the other pillar of our three-year plan. And obviously, it's a bit more difficult to measure. Growth is easier from that point of view, but just a few highlights. The new app, which we have deployed during the year, actually gradually through small improvements rather than sort of a big one-off. And it worked out very well because it hasn't created turmoil. The app is rated now number one in Spain, and that includes sort of established banks and new entrants.
Makes us obviously very happy with that, but we need to continue, and we are continue working daily to make sure we we keep improving it. And some of the onboarding and digital sales numbers that you see there are are clearly results of that of that strategy. AI we are making major efforts in adopting AI throughout the organization. Every employee has access to AI tools, namely Copilot. But we have obviously developed use cases throughout the organization in all areas. I would just highlight that we have I think in in an important progress this year when we get all commercial managers through the Salesforce platform to access AI.
That is going to lead, one example, to 75% reduction in the, in the prep time for client interviews, which is obviously very significant productivity improvement. The quality, the depth of the interviews will also be improved as we obviously have more information. I didn't want to go through a very long list of things we're doing, because obviously this is affecting back office, it's affecting IT, client claims, client support, all, all areas in the organization. But some of these, I think, are going to bring results sooner. IT professionals, we remember, remember in this transformation, we wanted to internalize and insource many capabilities, and that's what we have been doing, expanding our digital capabilities during last year.
It's remarkable to have been able to hire 650 new IT professionals when there's obviously strong competition for talent. They like to come and work with us. And new solutions, you've seen the development of Facilita Coches and on the car side, and Facilita Casa during this year. Both are, I think, very significant successes for us, working very well, and some of the results you see there. Financing for vehicles has increased 30% this year, and we have developed this new portal with 1.6 million visits already. The cashback that we launched just in November already has 1.3 million clients. So certainly a pretty significant sort of development of new solutions.
So this is obviously something to continue for us. Lending growth 7% on the performing side, and you can see residential mortgages, 6.5, consumer lending 12.4, business loans 7.6. Very strong growth across the board, very balanced. That 7.6% is both in Spain and internationally, but Spain is at 5.5%. Again, basically gaining market share and defending profitability across the sector. And on the customer fund side, again, almost 7% growth, 6.8. You can see that finally, market effect has been positive, almost EUR 10 billion, EUR 9.7 billion, but net inflows and growth of on-balance-sheet deposits have been very significant as well, now.
So, again, outperforming, growing market share, and, I'll get into some more detail, but obviously this is, this is key strength and, key attraction of our business, going forward. Now, wealth management, we have, grown net inflows almost 40%. A lot of it mutual and pension funds, but also a strong, performance in, in savings insurance with market share gains that I-- as I said, as I said before, and, basically a business that keeps doing very well. The figure for AUM at the end of December is already 7% higher than the average AUM during the year. So it gives you an indication that, we're clearly seeing, good potential, and, the market, in, in general have been positive for, certainly for our AUMs.
Protection insurance has been stellar, 13% growth, and you can see that both life risk with very strong mortgage market, but also with very strong MyBox Jubilación and our sort of standalone life risk products doing very well. But non-life is picked up to 11.7% as well. And here you see on the right-hand side precisely the gains in our market share that I mentioned before in non-life, you know, and in life risk, even more significant. But it's pretty good outcome for the year, now. The speed at which we continue to grow this business is remarkable, and obviously, as you know, it adds quite a lot to our bottom line.
With that, comment on shareholder value creation and shareholder remuneration. Earnings per share up 5%, dividend per share up 15%, round number, EUR 0.50 per share. Look at growth in book value per share and dividends in the year, basically 16%. And obviously in on the share buyback front, we are not even half through the seventh share buyback with EUR 0.5 billion. And obviously, as our capital is at 12.56%, our threshold for 2025 is at 12.25%. We have excess capital, again, to continue with this share buyback program. Which, as you know, we'll announce when it is formally approved by the ECB and on the board.
In the meantime, we still are on half time before we conclude our 7th share buyback. Distribution plan for next years stays the same. The only difference is, while the threshold for this year was 12.25 in capital, as you know, because of the counter-cyclical buffer, it will move to 12.5% in 2026 and beyond. So that's my part, and with that, Matthias, the floor is yours.
Thank you very much, Gonzalo. Good morning to everybody. Today, it's up to me to guide you through a little bit more of detail on the income statement and on the main caption of the balance sheet. Starting with the income statement for fiscal year 2025, as Gonzalo said, EUR 5.9 billion of net income, up 1.8% in the year, and actually checking on all the boxes of what was our guidance that we gave out and updated throughout the year 2025. NII down 3.9%, in line with the -4% guidance. Revenue from services in line with the mid-single-digit guidance, up 5.4%. Expenses up exactly 5.0%, in line with the guidance and cost of risk.
We guided for below 25 basis points, and we are closing with 22 basis points, so clearly below that guidance, with return on tangible equity standing at 17.5%, so on the higher end of the around 17% guidance that we updated. Looking into Portugal. Portugal net income reported of EUR 473 million on the back of very strong commercial dynamics, and business volume up 7.5%, and actually with a stronger dynamic than the group as a whole, gaining market shares across the products, but specifically on the liability side, on deposits, and on savings insurance. Another year with strong market share gains, helping bringing down efficiency all the way to 42% on very solid levels.
Profitability up to 19.2%, also above overall group levels, and already a significant characteristic of BPI, with a very strong asset quality, 1.5%, almost half of the sector average, and with very strong coverage ratios. And that is also taken into consideration by the rating agencies, which are upgrading throughout the year or putting us in outlook positive in BPI. Moving to the typical quarterly income statement analysis, and we will be getting into the details of some of the income lines. Obviously, NNI- NII up 1.5% in the quarter. Another quarter of strong NII recovery.
Results from services, revenues from services with a very strong quarter, up 6.3%, Q-on-Q, and 4.7% year-on-year, both on the back of a strong wealth management contribution, but this quarter, specifically on protection insurance, which is up 7.5% on the quarter. The expenses line down on the quarter, 0.2%, to meet that 5% guidance on the fiscal year 2025. And net, net income pro forma, the accrual of the banking levy of 2024, a linear accrual, up 5.5%. Maybe a couple of comments here on the tax line.
The tax levy on the banking industry, we registered EUR 611 million throughout the entire year, which is a little bit higher than the EUR 600 that initially we guided for, basically on the back of stronger performance, both in NII and in fees, and you know that is the basis for the calculation of that levy. On DTAs, we wrote up 171 million in the fourth quarter for a total of EUR 420 million of DTA write-up throughout the year. Basically, given the better visibility and the full visibility that we had in the last quarter, both on pre-tax income for the year, as well as on future profitability, which is the basis of those write-ups.
So a certain acceleration of the pace to an overall year of EUR 420 million. Going line by line, looking into NII, as I said, a strong quarter again, consolidating our recovery, leaving clearly behind the trough of NII in the second quarter of 2025, at 1.5%. Still, obviously, impacted by client yields and loan yields, which are still reducing, but on less intensity, I would say, than the last quarters. So a fading impact from client yields compensated, more than compensated, both by a strong evolution of business volumes both in the asset and the liability side, as Gonzalo was pointing out, and an increase of the contribution of the ALCO to EUR 45 million.
We increased hedges on the quarter by almost EUR 10 billion to stand at EUR 68.4 billion, and the ALCO book was stable Q on Q to stand at EUR 76 billion by the end of the quarter. Customer spread down by just 4 basis points to 302 basis points if we adjust for hedges, and this is on the back of a positive evolution of our client fund costs, which go down 2 basis points from 49 to 47 basis points, again, ex hedges.
and the reduction of the loan yield, as I said, is fading 6 basis points down in the quarter to 349, and that compares to 20 basis points down last quarter. Now, so clearly, fading impact from negative loan rate resets. Looking at the crown jewel of our balance sheet, and hence the supporting factor of the NII evolution of our non-interest bearing deposits, up EUR 17 billion in the year, EUR 2.2 billion in the quarter, with respect to, or in contrast to interest-bearing deposits that are just up EUR 5.6 billion over the year, 2.2 over the last quarter.
The total average share of interest-bearing deposits is stabilizing at around 27%, and that is at lower levels than we initially expected in the strategic plan when we were guiding for around 30% of that of that share, which is now clearly stabilizing below those below those levels. I would like to point out also the reduction of 10 basis points of our deposit costs in that in a quarter, and I think this is remarkable remarkable, where the overnight rate actually was stable on average levels at in the quarter, and still the deposit cost is coming down.
That means that the 50% of indexed rates was pretty stable, but the other part, which is term deposits, we still have been able to reprice them down by almost 20 basis points, leading to this 10 basis points of reduction of overall cost. So there's still some room of positive repricing downwards of our term deposit base. Moving to revenue from services, as I said, a very strong quarter and a very strong evolution year-on-year, focusing on the year-on-year, 5.4% up on the back of wealth management with 11% growth, protection insurance, 4.8% up. And if we adjust for an extraordinary impact from BPI last year in 2024, that would be actually up 6.3%.
Banking fees still subdued at 0.6%, but supported by CIB fees that are up actually 33% year-on-year on the full year, on the full year number. So if we take only these driving forces and our growth engines, wealth management, protection, and CIB revenues, actually, that composition would be up almost by 11% year-on-year. So putting a clear sign on the strength of our growth engines here. Costs not much more to add to what was said already. Q-on-Q, stable, down by 0.2%. Cost to income remains at very low levels and is now below 40%, at 39.4.
Clearly below peer average in European peers, and also with a much stronger evolution over the last 5 years, outperforming the evolution of European peers by 10 percentage points, as you see on the down on the bottom right side of the page. Moving to the balance sheet, asset quality very, very strong again in this quarter, down 20 basis points, our NPL ratio to 2.07. And this is bringing forward actually by two years, what was our target set in the strategic plan, where we wanted to be at around 2% by the end of 2027. So we're bringing forward the completion of that target by approximately two years. Nice reduction across all the segments, as you see on the bottom left part.
So there's no single segment, there's no single part of the portfolio, actually, that is not experiencing that positive evolution. Coverage up by 8 percentage points in the year to 77%, and remarkable that we are still holding EUR 311 million of unassigned collective provisions. That is down EUR 30 million in the quarter and also in the year, as in the end of the year, we've been assigning part of that provisions to specific provisions, but the bulk of it still available, and still available to protect into the future and into 2026, our cost of risk.
Cost of risk down to 22 basis points in this last quarter, down from 24 basis points in Q3, and that is basically on the back of a slightly lower seasonality this quarter of provisions than we experienced last year, and hence cost of risk standing at those 22 basis points, clearly below the 25 basis points that we guided for. Liquidity, I think already very structurally message here. Very strong LCR, above 200%, NSFR just below 150. Loan to deposit stable at 87%, as both loans and deposits are growing approximately at the same speed, and hence loan to deposit still very very comfortable.
EUR 226 billion of liquidity sources, with very positive comparison to peers and to peer levels, as well as a very strong and stable deposit base based on transactional retail deposits, and with a very high percentage of them being insured by the deposit guarantee fund. Moving typically to the annual review that we share on the MREL position, MREL standing at 28.18%, and that is three hundred and twenty-seven basis points or EUR 8 billion of MDA buffer over requirement, mainly covered by subordinated MREL instruments. Actually, subordinated subordinated MREL stands above the total MREL requirement.
After a year of very intense activity in the markets, EUR 9 billion of issuances across all the asset classes, and two-thirds in euro, but one-third also in currencies that are not euro, specifically in dollars. We started 2026 already very successfully with senior non-preferred issue combined with the tender offer, EUR 1.25 billion of issue and EUR 0.5 billion from the tender offer. And that is supported by the positive and strong view of our rating agencies, which are similar to what I explained in Portugal, actually upgraded us throughout the year or put us in outlook positive as the case of Fitch.
Coming to capital, Gonzalo already went into some detail, 12.56, 13 basis points up in CET1, and clearly above this 12.25 threshold that is in place for the end of year 2025. Capital accretion positive of 63 basis points. Organic RWA increase just 5 basis points, and this is supported by 3 SRT transactions, significant risk transfer transactions, that we executed actually in this fourth quarter, impacting positively by just below 15 basis points on that caption. So positive evolution supported by market activity, dividend accrual, and AT1 coupons, obviously, then deducting 38 basis points, and markets and others coming down 8 basis points. And here, as every fourth quarter, we are updating our operational risk RWA models.
That is a yearly update, and that impacts also just below 15 basis points on that. On that part, that means that the remainder moving parts of this market and other bucket are slightly positive. On shareholder value creation distribution plan, nothing to add to what Gonzalo has been pointing out. Fiscal year 2026 guidance, you've seen that all this morning already. Gonzalo mentioned the 2027 view, and just to say that the 2026 view is fully consistent, obviously, in this journey towards 2027 targets. NII expected to be above EUR 11 billion, and that is bringing forward by one year that initial target that we had for the fiscal year 2027.
Clearly on the way then to move up to that around EUR 12.5 billion target for 2027. Revenue from services up 5% within that mid-single-digit range that we also are envisioning for the entire three-year horizon. Operating costs up by approximately 4.5% after a 5% increase in 2025, 4.5% in 2026, and clearly on track, and we reiterate our commitment and our guidance of 4% CAGR for the entire three-year strategic plan horizon. Cost of risk below 25 basis points on the back of the very strong asset quality, and return on tangible equity at around 18% to fulfill that around 18% average return on tangible equity over the three-year horizon and the approximately 20% in 2027.
On capital targets and distribution, nothing more to add. This is all well known to you. With that, I think we are ready for questions.
Yes. Thank you, Matthias, and thank you, Gonzalo. Operator, we're ready for Q&A, so you can go in the next question, please.
Next question is from Antonio Reale, Bank of America.
Hi. Morning, all. It's Antonio from Bank of America. A couple of questions from me, please. One on NII and one on use of capital. So starting with NII, you're guiding to be around EUR 12.5 billion in 2027, and you've added in the quarter almost EUR 10 billion, and from structural hedges alone, volumes are growing 6%-7% a year. So just my question is, what are the key assumptions you've made that drive your NII outlook here? Particularly, if you could talk about rates and volumes assumptions, please. My second question is on use of capital. You are at 12.56%, just above the new go-to level, and you've been paying 100% of your excess capital out in the form of share buybacks.
With the balance sheet that's growing and the, the returns that you're now making, you're guiding for 20% ROTE in 2027, how should we think about sort of best use of capital for Caixa? What's your appetite for additional buybacks here? Thank you.
Thank you, Antonio. Let me start with the second question, and I let Matthias address the NII in some detail. There's nothing new about the use of capital. You're seeing higher growth, which means obviously more capital that we can employ in the business. And as the business is targeting a 20% return on tangible equity, that's great news. Really, that's what we would like to see become... I would discuss this a year ago, or become a compounder on in terms of high ROTE and good growth. That's, I think, what will lead us to the best outcome for shareholders.
The reality is that as the growth is coming together with higher profitability, we still see the future as a scenario in which we can have a high dividend per share as this year, and in that 50%-60% payout, grow the business, and grow faster than that we were expecting at 6 rather than at 4. But still, in our numbers, we continue to generate capital, and obviously one proof is that we already have excess capital at the end of 2025, so you know there's sort of cash in the bank for further share buybacks already. Going forward, we continue to see that despite higher growth, we will be generating excess capital between our targeted levels.
Now, we'll continue to monitor developments. We are using slightly more intensively SRTs as well. Matthias mentioned that we had some positive impact in the fourth quarter that will continue to be there. So no change in capital. This is high growth, higher profitability, but also higher capital available for shareholders. So, it looks too good, but it is really how we are seeing the business. It's a very strong conditions. Matthias, NII, all yours.
Sure. Thank you very much, Antonio. What are the main drivers behind what we see for NII evolution, both into 2026 and, specifically beyond, no? I think on the one hand, obviously, it's, it's volumes. We guided now for an update of around 6% CAGR, both on loans as well as on, on liabilities, up from that 4% guidance that we gave you back in the, in the strategic plans, investor day. Now, there's obviously volume growth that we've seen already this year at around 7%. The guidance is for CAGR of 6%, and that means, we are positioning volume growth both in 2026 and 2027, probably around 5%-6%.
So that is, I think, the main driving force behind our, our expectation for NII, evolution over the next, over the next couple of years or, or even beyond. Secondly, obviously, rate, rates evolution. Rates has been, a drag on our, on our NII over the last, over the last quarter. So obviously, we expect that drag actually to fade out, over the next two quarters. The loan yield resets, should move into positive territory from the third quarter onwards of, twenty twenty-six, and hence, still a certain drag over the next two quarters, compensating, partially that, that volume effects that I, that I was talking about.
But then from the second half of 2026 onwards, and specifically into 2027, and I would say beyond into 2028, we see a clear positive evolution on the back of rates. On the back of rates, because as you know, there's a significant part of our portfolio which is actually on variable rates, and we do believe that we will be able and capable of controlling client fund costs, controlling and limiting growth of deposit costs. As we said, currently at 47 basis points, we believe actually those levels of year-end to be quite structural.
We should be able, even though there might be some pressure from the index part of our deposits, we should be able to control that evolution of deposit costs over the next, over the next quarter. I would say if 47 basis points is our year-end number, we should be, in the mid-40s, probably, in during 2026.
As the certain pressure that we might have from the index part, we should be able to control and to limit that both from still some repricing from the term deposit part, as well as increasing the share of or growing stronger in the non-interest bearing deposit part and in the interest-bearing deposit part, and that should help us to control and to keep deposit costs down over the next quarters, and also actually to very nicely control that once rates are picking up. So volume effects, which are already occurring and which we expect to keep on in that benign macroeconomic environment, rates should be picking up and helping us on that front.
A small detail on what we see in the more quarterly evolution over the next few quarters. We do expect NII 2026 actually, on a quarter level, to grow year-on-year in each and any of the quarters, but there might be a certain reduction, a limited reduction in the Q1 NII respect to Q4, basically for some seasonal effects that typically happen in the first quarter. The first quarter tends to be some more weaker in terms of average fund balances, as January tends to be clearly a weaker month than December. We do have two days less in the first quarter than we do have in the fourth quarter.
And also there's more negative loan repricing actually in January. There's a certain seasonality here. So what we would expect is Q1 to fall slightly against Q4, but then picking up growth right after, and specifically accelerating growth into the second half of 2026 and obviously into 2027. On the back of all those, let's say, more business and external rates factors, we do have also significant idiosyncratic factors, let's say, that are based on the structure of our hedges. Recall, and the page 30 of the webcast presentation, you have got all the details.
But recall that, between the fourth quarter of 2026 and the first quarter of 2027, actually we do have around EUR 15 billion of legacy deposit hedges that are maturing. They're maturing actually at negative rates. So we would assume a rollover of that hedges at current market forward rates, that would give us an uptake of about 2.5% on those EUR 15 billion of legacy deposit hedges, and that is annualized around EUR 400 million of NII boost that will be coming from this natural rollover of those hedges. So there's no external factor that is pretty much already in our balance sheet, and it's a natural and automatic thing to happen. So there's a clear boost for 2027 NII from that front.
On the other hand, we also disclose maturity profile of our ALCO book. Actually, in last year, 2025, EUR 6.5 billion already matured at 0% rates. And you have seen that our ALCO portfolio actually grew by EUR 12 billion in 2025, so that is renewed, and that generates obviously some support for the 2026 NII, as this is maturities from 2025, and once they are renewed, obviously they help in the year-on-year evolution into 2026. And that goes on. In 2026, there is EUR 9 billion maturing at a 0.4% yield, and there might be a reinvestment capacity of increasing that yield by 2.2 percentage points, generating EUR 200 million of annualized NII through that 2026 maturities.
That goes on in 2027. There's EUR 8 billion maturing at 1.6% that would, reinvested, would lead to EUR 100 million of annualized NII. And in 2028, also, there's EUR 14 billion actually maturing at 1.1%, that also would give EUR 300 million of annualized NII support, no? So from all those factors, both external factors, let's say, business evolution and market rates, we feel very upbeat, specifically in 2027, as we are guiding for this EUR 12.5 billion, as well as, beyond, looking into 2028. And then there's those internal factors from the maturity of hedges as well as from the ALCO book.
So we actually feel very strong in 2027, and we do feel similar also into 2028, based on all these factors that I was just explaining.
Okay. Thank you, Antonio. Operator, next question, please.
Next question is from Ignacio Ulargui, BNP Paribas.
Thanks very much for the presentation and for taking my questions. I have two questions. I mean, one is on deposit growth. I'm coming a bit back on what you were commenting, Matthias. Looking a bit more on the volume, so you said 6% customer funds growing in the plan. If you could break that down between deposits and how do you think kind of interest bearing and non-interest bearing would grow into 2026 and 2027? That would be very helpful. And a second one on credit quality. I mean, asset quality has performed very strongly. I think it's the lowest fourth Q gross NPLs in a decade.
Your target of NPL is 1.75, which, I mean, if we extrapolate a bit the trends that you have seen in 2025, probably it still is very conservative. So I just wanted to get a bit of your views about cost of risk, asset quality, dynamics, so that to get a bit of comfort on the improvement of the 5 basis points of cost of risk and how much generic overlays you have still planning. Thank you.
Thank you, Ignacio. I'll take the second question as well. I'll start with asset quality, which starts from the economy. The economy, I was saying that, the GDP numbers were about to be published, and in fact, they have been a very strong fourth quarter for Spain, 0.8% growth, quarter-on-quarter on GDP. To give you an idea, we're more in the 0.5% expectation. We knew, based on the numbers of the last few weeks, that this was going to be higher, but clearly a very good number. There's been some revision of previous quarters, so the overall growth has been 2.8%, but most important is just looking at 2026.
The outperformance of the fourth quarter already gives us automatically just, if we don't change any other assumption, just the rebase of the fourth quarter would mean that growth would be 2.3%. And looking at the numbers, private consumption is up 1% quarter-on-quarter. Gross fixed capital formation, so investments, basically, is up 2.2% on the quarter. Exports are up 0.8%. These are very, very strong numbers, no? And as long as the numbers continue to be there, there's absolutely no reason to think that asset quality is, we're gonna have any negative surprise? We, Matthias mentioned, we have still this stock of non-assigned provisions about EUR 300 million. Economy is doing well.
Our clients are less leveraged than ever, and we do not see any problem in any part of sort of big, broad categories, be it mortgage or consumer segment. The statistics for January in terms of asset quality make it the best January I remember. You know, January is typically a bad month, the famous Cuesta de Enero, as we say in Spanish. That's reflected, and this year we're seeing a much lower impact than others. So we internally have all the confidence that, yes, so that should make sense for us to be below 25 basis points. And we tend to be conservative, particularly in cost of risk, because there's an element of unpredictability on it, and you cannot rule out completely.
Obviously, the international environment and whether we have a sort of a major crash in markets or some other big impact elsewhere that eventually feeds into the economy and hence changes things is always a possibility. It seems unlikely and in any case something where we have pretty good caution. 175% may actually be conservative, I agree. I think if the trend continues, we will go beyond that number fairly soon. But you know, we're a conservative organization when giving guidance. We look at guidance, and there's a very high percentage of cases where we have done better than guidance versus occasions that have happened where we didn't meet our guidance because something happened, no?
I would be pretty confident on these numbers on cost of risk for the next years, as long as the economy stays where it is, which we have no indication that is changing from that position. No, we're seeing on the opposite, sort of stronger numbers.
Thank you very much, and good morning. Good morning, Nacho. On deposit growth, I think we've been guiding for overall customer funds to be growing at around 6% now during the three-year horizon versus the initial target that we have of around 4%, of which we said 3% of that would be customer deposits, no? So I think it's 2025 might be a quite good starting point when thinking about composition. So obviously, we do still see significant upside on wealth management after 9.7 year-on-year growth in 2025. And we do see capacity to grow in deposits after this 5.3% growth in 2025 also. We moved that target to now 6% overall.
That means, as I said before, we might be somewhere around 5%-6% on the overall customer fund. And the structure that we've seen in 2025, we expect that more or less to be also into 2026 and beyond. So, having said that, we do think. We do see deposit growth now very clearly in the mid-single-digit zone for the strategic plan horizon. That is outperforming our initial target of above 3%. And why? Because we do believe, and as Gonzalo was just pointing out on the macroeconomic evolution, we do still see a very strong disposable income growth, and savings rates actually remaining at high levels.
It is coming down slightly, but we still do see at a very high levels with respect to historical average. Loan growth is strong, and that multiplies also into deposit growth in the, in the sector, and hence, gives us opportunities to keep on growing, significantly here. And as I said, we have a focus on growing nicely the client base, 390,000 clients, this year, and that obviously also gives capacity to grow in deposits, from new clients, and that means in, in transactional, deposits, and not, shifting around the savings of our existing clients, but actually growing into new, new client base and growing into transactional, transactional deposits, no?
So, thinking then about what is the part of non-interest bearing versus interest bearing, I would say the current rate environment, which is stabilizing, after the up and down over the last three years, stabilizing and with certain tendency to and the forward rates to increase, but clearly on a very gradual pace, you would expect that actually non-interest bearing deposits being rather stable, and I would say rather stable even in absolute terms, not necessarily in relative terms. Obviously, potentially growing slightly, but we would expect that the interest-bearing part actually clearly growing slower than the non-interest bearing part, and hence we don't expect any shift from one to the other.
As I said, growth should also come from new clients, new transactional relationships with our clients, and hence, we see strength in the growth of that crown jewel of ours, which are the non-interest bearing part.
Thank you, Nacho. Operator, next question, please.
Next question is from Maksym Mishyn, JB Capital.
... Hello, good morning. Thank you very much for the presentation and taking my questions. Two questions for me, please. The first one is on loan book growth. Your peers mentioned that mortgage market is less attractive due to competition at the moment, and you seem to be growing above the market. Could you share your thoughts on why it is attractive for you and not your peers? And then if you could also break down the upgraded loan growth target by segments, that would be very helpful. And the second question is on capital. Just wanted to hear your thoughts on the recent proposals by the ECB to simplify capital regulation for banks.
Max.
What implications it might have?
Max, we are not hearing you properly. Can you maybe take the cell phone a little or a little bit away, and repeat the question because we lost you.
Is it better?
Yeah. Yeah, this is better. Yeah.
Is it better?
Yes.
Yes.
Yeah. Thank you. Thank you. Sorry. So the first one is on loan growth. Your peers mentioned that the mortgage market is less attractive due to competition, and you seem to be growing above the market. Could you share your thoughts on why it is attractive for you and not the peers? And also, if you could break down the upgraded loan growth targets for the next three years, that would be super helpful. And the second, just wanted to hear your thoughts on the recent proposals by the ECB to simplify regulation for banks in the Eurozone. Thank you.
Thank you, Max. I will start, and Matthias, you want to compliment anything you tell me. On the mortgage market, I would say, there's a very strong competition. There's always been... 10 years ago, five, 15, 20, it has typically been more on the floating rate mortgages. The market has moved almost completely, but not completely, but to a large extent, onto fixed rate mortgages. And that means that different players find it more or less attractive, I think, depending on the structure of the balance sheet, their outflow liabilities, the liquidity position. I'm just saying this is an important factor to keep in, to keep in mind. But whether it was floating or now on the fixed rate, we have obviously a very, very competitive margins.
What we're doing, our share of new production is very much in line with our stock, around 25%. Slightly, it's 26%. So the figures up to November in terms of share of new production versus a 25% stock. So that's why we're gaining 12 or 10 basis points in market share. But, but it's basically we're maintaining our position. I think that's reasonable for us. And, and what you see is some players are being much more aggressive than others, and I think it has something to do with the structural balance sheet.
And then the other big factor, which obviously is also differentiating, is to what extent you cross-sell, because we know mortgages are now below funding costs after the various sort of subsidies that are given by banks and on average the market rates that are being given to the ECB. Latest numbers I've seen in November is 2.4% for fixed rate mortgages, so obviously below the swap rate, but that's after the bonifications for all kind of business that clients bring in. And on that front, we obviously have an insurance business that is absolutely different from what others have. I was just looking at the premiums on the non-life for our affiliate Adeslas , is around EUR 6 billion.
You look at the numbers of our two main competitors, the premiums for non-life are around EUR 600, huh? So it's not just a bit more than our fair share, it's 10 x more. And that gives you an indication that once a client is in the universe, Caixa, our clients are more profitable, and hence when you incorporate that, you probably see that both because of our funding position and our ability, given our sort of 36% market share in payrolls, our ability to hold long-term fixed rate assets, number one, and our ability to cross-sell, the market is moved to an area where we have a competitive advantage versus others.
But still, I think we're being very disciplined because, again, stock of back book and, and the market share in new lending is very much aligned, you know. So that's a background. And, in terms of simplification, we're watching, and obviously would love to see, moves, from that point of view on, simplification for, for banks. And I think something is going to happen. I'm afraid it may be less than we would have hoped for, and I think, the progress we're seeing so far deals more with operational issues, which is, great because it's gonna lead us to sort of spend less time and maybe have less people, sort of, spending time on, supervisory matters.
That's good, but that's not really going to change the game. I think sort of changing capital requirements is something that is unlikely. I personally don't find it desirable. I think the current capital requirements, yes, are very ample and solid, and gives us as a system a great degree of stability, and I think that's good over the long term. What I think is important is that we provide stability and that there's no doubt about capital levels going forward, because the current levels are more than enough? I think supervision needs to be simplified. We have 27 supervisors, and we're not one of the most complex financial institutions in Europe.
We're operating basically in, in the Eurozone and mostly in, in two markets, no? It's, it gives you a sense of, of complexity, and, and some of that, should be addressed. And, you know, there's obviously progress, specifically on, on, on disclosure on, topics, affecting sustainability, on, securitization, which is, very likely. I think the, sort of development of instruments for Savings and Investment Union, which is not exactly simplification, but it, it has a, a relationship with, are, are also quite, quite relevant.
We'll have to watch and see, but this is, I think, going to take quite some time, and we may actually end up in a position that is not too far away from where we are now, barring sort of some, as you say, operational matters. And the other one, which I think is very important, is stopping the flow or significantly slowing down the flow of new rules, Level 2, Level 3, which is obviously, I think, more of a concern and easier to stop because it's more of a political willingness to change the way future things are done. To change the status quo is gonna take time and may not be as significant as we would hope for.
If you allow me to compliment Gonzalo on... Max, good morning. On your question on breakdown by segments, of that, loan outlook, no, that you, that you're asking for. 2025, we grew 7%, our performing loan basis, of which 6.5% was growth in mortgages, 12.4 in consumer lending, and 7.6 in business lending, no? Now, we are guiding for a 6% CAGR over the horizon of the strategic plan, and that implies somewhere between 5% and 6% for the remainder two years, and hence, let's say, that the adjustment you would have to make to the 2025 numbers.
I would say the structure of 2025 is a reasonable one that you would be seeing also in the future, as basically the main driving forces, macroeconomically speaking, as well as from the market, we still see them holding true also for 2025, for 2026 and 2027, no? So let's take the structure of 2025, and as Gonzalo said, we want to be active in business lending, specifically in SME lending. We want to be active in gaining market share in consumer lending, and typically be more in line with the market and hence maintain our position for all the reasons that Gonzalo was commenting on, on mortgages, no?
That is more or less the structure that we had in 2025, and that is what we would be expecting in 2026. Why do we guide for slightly lower growth rates on the business volume? Even though macroeconomic performance is strong and keeps strong, there is a certain reduction in the pace of growth. Obviously, as Gonzalo said, 2.8% this year with the figures that were just published, and that might be slowing down slightly over the next two years, obviously. So together with that evolution of macroeconomic growth, obviously, we see nominal GDP growth as an anchor point both for growth in assets and in liabilities.
And this is why we are thinking that there might be a certain slowdown from 2025 levels. But then again, future will tell, and obviously, we will do all the best to do better than that. But this is what is our current view.
Thank you, Max. Next question, please.
Next question is from Francisco Riquel, Alantra.
Yes, hello. So, thank you for taking my questions. The first one is on fee income guidance, that you are not changing, but wealth management and long-term savings volumes are growing ahead of expectations. So if you can explain what is the offset here, if it is, again, banking fees that you see weak trends, or if you can please elaborate on the fee income guidance, given that wealth management is ahead of expectations. And second is on the cost guidance that you have maintained also in the new plan. I wonder if you are investing more in AI and in the technological transformation that what you were anticipating at the beginning of the plan, and what type of productivity gains shall we expect, and when? Thank you.
Thank you, Paco. I would say, again, leaving the fees for you, Matthias, if you agree, on costs and AI. Yes, this is a key factor for our investment program, which is going according to plan. So in terms of the big numbers, we are reiterating the costs and the OpEx, CapEx spent last year, this year, 2027. And in terms of the efficiencies or the productivity that we expect here from AI, I think is twofold. Most importantly, in a growing market and in an organization that is actually growing market share, it's going to allow us to have more revenues over the same platform, basically. And I think this is very important for us.
So that's, that's the main factor. And the second one, obviously, it's on the cost base. We, and particularly when you look at sort of the engine room, I would say there are two places where we expect efficiencies. One is IT, and this is one where it's actually first we need to invest more also in terms of people, and with this Cosmos program, which is the whole sort of technology upgrade that we're doing. We now have over 2,000 people working full-time on that. Not all. Some of them are internal, some of them are from partners, and hence, call it outsourcing. And this is going up, it's gonna come down.
We said at the time of the plan, we would start with 6,000 people, of which basically 1,000 were internal IT employees and 5,000 external. We expect by the end of 2030 to have reduced that to 4,000 people, but to have more people internally. So we are basically insourcing, but the total, FTE expense, internal, external, is gonna come down. And this is something that you, you're going to start feeling really, 2027 onwards, because in the meantime, what we need to do is, as we transform, have actually more resources. And then there's operations as well, where we have significant outsourcing, and I think that's likely to come down. So those are the sort of big areas to look for.
But again, I'd say most of these efficiencies are coming into 2027 and beyond. That's why also, if you look at our implied guidance for 2027, is more in line guidance of growth in order to make the numbers, is more aligned to the 3% number compared to the 4.5% that we're doing this year. That's because not only, but among other things, because we're having efficiencies already materialized in 2027, and obviously, that should continue beyond.
Thank you. On fees, Paco, I think obviously, as you said, we are very upbeat on wealth management fees coming from that caption. As we said in the... actually, in the strategic plan, mid- to high single-digit growth year. 2025 has started very, very strong, and we do see strong growth also going into the future. As Gonzalo said, year-end balances in wealth management are 7% higher than average year balances of 2025, so we do see a very good starting point also here into 2026 and beyond. So that means that, yes, we are more cautious on banking fees. Actually, of our banking fees, 20%, more or less, are CIB fees, and 80% are recurring banking fees.
We said the CIB has a very strong dynamics. We've been growing 33% year on year full year 2025. So there's a very strong backwind and tailwind here even though obviously those growth rates tend not to be sustainable. We do believe the levels are sustainable, and we should be able to grow still from there, but obviously at a certain lower pace. And that means that the drag we still do see coming from recurring banking fees, at 80% of fees, of which more or less half probably are types of fees which are basically exposed to quite some competitive pressure.
Namely, speaking about account maintenance fees, payments and transfer fees, or credit card fees, which obviously in that competitive environment and that profitability environment of a client relationship are under pressure because they are lower value-added services, no? And that captures, obviously, we still do believe that there is actually potential that these type of fees are still reducing over the next years, as competition will be fierce in that area. And innovation in those areas, obviously, will also have an effect of bringing fees down.
And that should then be compensated, and this is our job, by the other part of the fees on other transactional services, such as security trading, foreign exchange, or loan-related fees, that we do expect a positive evolution, obviously, from the macroeconomic environment and from transactional increases. So there we do see a positive way to partially compensate that reduction in recurring banking fees.
Thank you, Paco. Operator, next question, please.
Next question is from Cecilia Romero Reyes, Barclays.
Thank you very much, Gonzalo and Matthias, for taking my questions. The first one is on deposits. Obviously, the reduction in deposit costs is slowing, and in part, is because obviously rates are stabilizing. Some competitors have extended their attractive campaigns. How do you assess the current state of deposit competition in Spain, and are you seeing any incremental pressure from neobanks? And my second question is just a follow-up on the, on the fee question. Could you remind us where are SRT costs, including, included within your fee line? And is an acceleration of SRTs making your view on banking fees more conservative if included there, or is this not having a big impact? Thank you.
Thank you, Cecilia. On deposits, I would say no change. We're not changing our strategy, and we are very comfortable about our position. We're not seeing any particular negative impact or difficult environment associated to neobanks. On fees,
Yes, the SRT, as I said, the SRT part is in the banking fees, and hence, yes, there is a certain impact there. And as we are speeding up, and as you have seen the fourth quarter SRT activity, there will be a certain drag also on banking fees, on other banking fees, based on the SRT activity. Actually, in Q4 2025, there was EUR 12 million of impact, and that is EUR 5 million down year-on-year, if you look at the quarterly data. And in the full year 2025, there was EUR 36 million, actually, EUR 12 million more of fees paid on that, on that caption. So yes, that is generating, obviously, as we are picking up activity here, a drag on banking fees.
... Okay, thank you, Cecilia. Operator, next question, please.
Next question is from Sofie Peterzens, Goldman Sachs.
Yeah, hi, this is Sophie from Goldman Sachs. Thanks a lot for taking my question. So my first question would be on your customer margin, which came slightly below 300 basis points. I know you talked quite extensively about kind of, deposit costs and also, lending rates, but how should we think about the, the customer margin? Is it fair to assume that the 297 basis points is the trough, or could it kind of fall a little bit more in coming quarters? And then my second question would be, 20% return on tangible equity that you guide for in, 2027. Is that sustainable to assume, that will be the new run rate beyond 2027, so 2029, considering volumes look good?
You mentioned cost efficiency should start to kick in post kind of 26. So how do you think about, like, the longer term return on tangible equity level? Thank you.
Thank you, Sofie. On the profitability, I think we said, and Matthias also mentioned, and I and others, we see environment continue to be fairly positive beyond 2027. So by definition, that should be positive for return on tangible equity, no? You are somehow asking about our next three-year plan, and that's a bit too early for us to get into the detail. But to be honest, my sense is this is not just the level that is sustainable, the 20%, but it should be actually the level on which we start working towards further improvement in profitability.
But that's my qualitative sense based on what I have seen, and obviously we also have a very positive view for 2028 in particular. On customer margin, Matthias.
Yes, thank you very much, Sophie. Good morning. On customer spread, I'm, I'm afraid to say that the 297 or 302, depending on whether it's with or without hedges, has not yet been the trough. As I said, customer deposit cost at 47 basis points might be rather stable, or we do see some potential here still for certain improvement, but probably a minor one. And yes, we do still see negative loan yield repricing, specifically into the first quarter in the first two quarters of this year, 2026. So we would expect that to come down still slightly into the second quarter, but then we should be starting to see recovery.
We still see the area of 300 basis points as our, as our sustainable level once rates are picking up slightly over the next, over the next quarters.
Thank you, Sofie. Operator, next question, please.
Next question is from Alvaro Serrano, Morgan Stanley.
Good morning. Thanks for taking my questions. It's kind of a follow-up, one for you, Alvaro. Is the implied cost growth in 2027 looks like around 2.5, and with the revenue growth, your cost income gonna be in the mid-30s. And obviously you've laid out, both Matthias and yourself, how there's more to go for in 2028. So the question is kind of where should we be thinking that 30% cost income ratio over time is possible? Or the bigger question is, at what point, Alvaro, do you think that it's better to invest in the business because you think that you might be missing out on growth or on the investment?
Just help us to think how you're thinking about the business and the long-term potential in the new world. And second, on the 6% loan growth CAGR, I realize it's a touch lower in the outer years, but still above what Spain is growing, and of course, there's some international growth there. But the question is, are you factoring further sort of market share gains, or you're expecting the growth in the market to accelerate significantly or a bit of both? Just a bit of sort of color on your market share expectations. Thank you.
Yeah, on the second one, market share, I'd say yes, we are gaining market share now. We gained market share this year. It's likely, if we have a position that I think is very strong on a from a competitive point of view, that that process will continue. And we aim to do that subject to appropriate risk and pricing decisions. So if the profitability is not there or the risk criteria is not strict enough, we will certainly not not grow faster than the market. But we have seen that the market is very big, and given our positioning, we can do that. And I think there is clearly potential to see lending above nominal GDP, which is kind of the logical assumption to be made.
But when we look at, relative to our past and relative to Europe, with 31 percentage points lower leverage of the private sector and an economy that is clearly outperforming, you can see obviously, some cycle there, no? So I think 6% is reasonable, and yes, it includes some, m- some market share gains. But again, when we talk about market share gains, we're talking about 10-20 basis points. Generally, this is the kind of, of market share gains that are consistent with good pricing decisions and good risk decisions, not, something that is huge, no? And, in terms of the, cost, income, I think it's important, to say cost income for us is an output, it's not a target by itself, you know?
Now, you look at our numbers and round numbers, we have 18% return on tangible equity this year, 40% cost income, a bit below on the cost income. But our aim is not to bring down the cost income at all costs. Our aim is to create value. And obviously, if we can do the same volume with lower cost income, that's great. But very often, if you just focus on bringing down the cost income, you're not gonna do investments at 18% return on tangible equity. So once you get to... And many banks would dream in Europe, as you know well, Álvaro, to have a 40% cost income. And once you have a very profitable platform, you actually want to create value, and that means growth.
That may mean doing and taking business initiatives at 40% cost income that create a lot of value, 18% return on tangible equity, but do not contribute to the objective of reducing further cost income down to 30%. Now, as an output, if our strategy is successful and we continue to grow the business, the cost income should continue to go down. But it's not gonna be our target. It's gonna be a consequence of sort of management of revenues and cost to make sure that we produce sort of value when we make investments. So, it will come down, but we're not targeting a given cost income. We're targeting the share value, shareholder value creation.
If I may just remind you of the case of Banco Popular, 25 years ago, they were managing for raises on return on tangible equity and cost income, and at some point, that doesn't make sense. And we're certainly going to be looking at NPV positive value decisions, and that, if our strategy is successful, will lead to lower cost income. We'll see when and to what extent, no?
Thank you, Alvaro. Operator, next question, please.
Next question is from Marta Sánchez Romero, J.P. Morgan.
Good morning. Thank you very much. I've got two questions, one on the structural hedge and the other one on capital. So on the structural hedge, you're adding receiver swaps, but you're reducing your holding of sovereign bonds. Can you explain the rationale of that? Any worries on the sovereign debt market? And also, what is behind keeping the sensitivity still at 7.5%, versus the 5 you had at the beginning of the year? If you could help us model how the ALCO portfolio size should expand going forward, that would be very helpful. And then on capital, two quick questions: What are you expecting in terms of RWA growth? In the previous plan, you were growing more slowly than loans. I think, it's 3% CAGR you had at the time.
Now, you've got 6% growth in performing loans, how RWA should grow? And just quickly on the buyback, have you already put forward a request to pay that surplus capital to the ECB and the board? Thank you.
Thank you, Marta. On the second point, capital, we've made a policy out of it, finally, to say, "Let's be consistently, we will not talk about when we do internal approvals and discussions with the ECB. We'll just communicate to the market when we have it, and it's formally approved by the ECB and the board." Absolutely no change in what we've been doing. We're talking about the seventh, eighth share buyback now. And you know how we behave, that we're fairly quick, very disciplined. Look at all the banks in Europe, they say, "This is our target," but then you look at the capital, and it's way above the target. We are... It's a bit like an ATM. As soon as we generate the capital, we give it back beyond.
Don't worry about that. It's something we're gonna continue. RWA growth, obviously, is gonna be a bit higher if lending grows at 6% than at 4%, and I'll let Matthias elaborate on it.
Yes, thank you very much, Marta. As you said, we were guiding for 3% performing loan growth back in the Investors Day, and that translated into about 2% growth in RWAs. Now, we are guiding for 6% growth, and we do think that also, helped by both the Basel IV impact, that at the end of the day was more positive than we expected, as well as an uptake, and most probably SRT activity, that we should be able to actually adjust that growth rate downwards and actually generate a sort of potential two percentage point gap between loan performing loan growth and RWA growth, helped by these two factors, no?
On sensitivity, we do feel quite comfortable in that 7.5% sensitivity that we are managing right now. Recall that we are coming from the ranges of 20%-30% back in 2021, when obviously rates were negative or very, very low. Bringing that down to 5% last year, and now we are hovering around those 7, 7.5% levels.
In that environment, where the ECB signals that the rate-cutting cycle may have come to an end, and the market expects a certain increases from the current state, and the yield curve is actually pointing out to a steepening, we do think that 7.5% level is a level that we feel comfortable with in an environment in which we obviously would have been or are exposed to macro risks, both on the upside as well as on the downside. As to hedging strategy, we use both instruments, both ALCO book in order to invest and structural hedges.
This quarter, we've been using approximately EUR 10 billion of structural hedges to hedge and to assure this sensitivity of 7.5%. That might change depending on the size of the books, depending on sensitivity, that depending on opportunistic behavior also, if sovereign spreads we feel are at the level they should be, we feel investment opportunities, we might be using more longer maturity instruments such as adding to our ALCO portfolio and picking up some of that sovereign spread, or being more in the shorter range of maturities, which we typically do with the deposit swaps, no? So I would say, we will see in the future.
We want to keep some flexibility here, to be able to react to market circumstances as they unfold, and no clear guidance at that point on to which part of the portfolio should be growing more or we would be using more.
Thank you, Marta. Operator, next question, please.
Next question is from Ignacio Cerezo, UBS.
Yeah. Hi, good morning. Thank you for taking my questions. So I have two small ones, actually, and one is slightly more qualitative. And the numerical ones are, if you can give us the NII in 2027 with no rate hikes, so we have actually flat as a pancake type of yield curve. The second one is if you can give us actually the percentage of natural attrition you have on your headcount every year. And the qualitative one is on consumer lending, obviously growing quite strongly, 12%, I think it is, at the end of the year. I mean, mimicking, if you want, actually, the trends we're seeing on a sector basis.
I mean, does this raise any concern around asset quality, about the kind of clients actually you're targeting, or you're still within pretty tight kind of risk standards with your own client base, pre-approved, like you have been doing the last yeah 3, 5 years? So if there is any change in terms of the risk profile of the clients you're acquiring on consumer. Thank you.
Thank you, Nacho. Risk profile, no change in asset quality. We keep our standards, and, we're very comfortable with them. And, that's perfectly consistent with good growth when you have such a large position and, and a lot of information with, with clients. Natural attrition for the headcount, I think we may actually want to come back, to you, obviously. Want to make sure we give you the, the right number is, is a small NII.
Yes, NII at 2027 actually is not largely dependent on interest rate hikes. As I said, typically, the repricing of the portfolio is somewhat backloaded, and in the current interest rate curve, that increase that we are expecting slightly for 2026, but slowly and a little bit into 2027, actually would not have a significant impact on our EUR 12.5 billion guidance. As then, the interest rate hike is much more backloaded and would much more positively affect 2028 and beyond, no? So I would say, obviously, that would have an impact, it would be below, most potentially that twelve point five, but not far from guidance if interest stayed on current 2% deposit facility rate.
Thank you, Nacho. Operator-
Thank you.
Next question, please.
Next question is from Andrea Filtri, Mediobanca.
Hi, thank you for taking my question. You said consolidation will continue in Spain, and that you're not interested in moving abroad. Can you elaborate on what you meant by that? And also, you made positive considerations on the US as a market, what do you plan to do there? Thank you.
On the U.S. as a market?
What you said, last question, Andrea, we didn't hear it properly.
Yeah, I also read positive comments on the U.S. What do you plan to do, do there?
Yeah.
Yeah. Consolidation, very clear, no change. We are not interested in consolidation. We have a very strong position in Spain, and we do not want to grow, and we do not need to fill any product areas through consolidation. We want to grow organically. In Portugal, we have a great operation. We have a lower market share, but actually a business that is growing even faster than the Spanish one. So we're very happy with what we have, and what we see is increased value creation by combining the engines and the way we do business between Spain and Portugal, with the whole, obviously, autonomy that BPI has, because it's a great Portuguese, and it needs to stay as a Portuguese bank.
And we're not seeing value creation in cross-border, to be honest. This is a sort of a discussion that takes a very long time, but we don't see synergies. And as we look for shareholder value creation, we do not think we're going to find it in cross-border M&A. The U.S. is certainly even further away for us from the point of view of of M&A. Absolutely no interest there. Still, is a market where obviously, we bank with many U.S. companies that are mostly operating in Europe. And it's a market that we follow closely because it's relevant for the whole world, no?
Thank you, Andrea. Operator, next question, please.
Next question is from Borja Ramirez, Citi.
Hello, good morning. Thank you very much for taking my questions. I have two. Firstly, on the NII guidance, I would like to ask if you could provide the assumption on the deposit hedge growth, and also the EUR 10 billion of deposit hedges. Could you remind me which interest rate they have been acquired? And then, my second question would be on the SRTs. If you could remind me what is the expected underlying benefit and the fee cost, please. Thank you.
On the deposit hedge growth, we don't give a specific guidance on what the volume is, but structurally thinking about what we should be doing is obviously we are adding, let's say, non-maturing deposits on our liability side. And by the way that we are adding those non-maturing deposits, we need a natural hedge on those, either through increase of the fixed mortgage portfolio, for example, or other fixed-rate assets in the loan book.
Or if that is not enough, then in order to manage the 7.5% sensitivity, obviously, other types of instruments should be used, namely being either hedging our deposit base or investing into fixed rate assets, no? So, structurally, I would be thinking about the evolution that you're putting into your model in terms of non-interest-bearing deposits, which is our fixed rate liability side, and then a combination of investing into fixed income assets, both on the loan side as well as on either of the two instruments, fixed income portfolio on the ALCO book or structural hedges, huh. And on,
Sorry, on the interest rate acquired, we do disclose the detail of the information of the next, actually 4-5 years of the maturities of the ones that we acquired. So, you have a very detailed portfolio evolution of those. Obviously, in the moment we acquire, as I said before, we typically tend to invest a little bit more long term, when it is ALCO book and fixed income portfolio, and a little bit more short term in duration when it comes to hedges, no? And this is already obviously then already, and you can see that in the differences of those maturity rates that we have in the page 30 of the disclosure.
And then the SRTs, and Matthias mentioned that before, but it's also in the presentation. It's minus EUR 12 million in the fourth quarter and minus EUR 36 million for the full year 2025. So for the cost of SRTs in the fees. Thank you, Borja. Next question, please, operator.
Next question is from Miruna Chirea, Jefferies.
Good morning. Thank you very much for taking my question. It was on costs, more specifically on your investments in digital. I think one year ago at the Investor Day, you were talking about EUR 5 billion as total investment in digital over 2025, 2026, 2027. Could you remind us, please, what is the phasing of this in each of the two years, and how should we think about investment in digital going forward? So what is the run rate from 2028 onwards? Thank you.
Run rate from 2028 onwards, we will obviously explain at the time. There's no decision made, but clearly the effort that we're doing with 2025-2027 is a special effort that is not something we're gonna repeat or are planning to repeat in 2028 13. But again, a special specific numbers, we need to wait. And in terms of the breakdown of that investment, I think there's no change from what we said. But Matthias, if you want to-
There's neither change in the breakdown nor on the phasing in of that. Obviously, there's a certain ramp-up phase when it comes to the investments in the first year in terms of incorporating the staff, incorporating the workforce that we wanted to incorporate, and this is obviously a phasing. On the other hand, there's a certain front loading then with expenditure with our partners. So I would say the most reasonable assumption is that is in that three-year horizon rather stable in terms of investment needs over this, over these three years.
Okay. Thank you. Operator, I believe we have time for one more question, please.
The last question is from Lento Tang, Bloomberg.
Hi, good morning. Thank you for taking my question. I have two follow-ups, please. The first question is on structural hedges. On page 30 of the slides, you have this maturity profile. In the past few quarters, they were mainly added in the second quarter of 2027 to the first quarter of 2028. But this quarter, you added significantly in 2029. So just wondering if you could give me a thought, your thought process while doing why the change? And the second one is on SRTs. So you previously guided EUR 6 billion by 2027. I just wonder if you have any change of view there given many peers have ramped up activity there. Thank you very much.
Starting with the second one on SRT, we guided for the EUR 6 billion gross issuances by 2027, and as I said before, loan growth is stronger. We expect now 6% performing loan growth with respect to 4% that we expected in the strategic plan. So there will be an uptake most probably of volumes. We don't have a specific updated number on those, as we will be making that dependent on market conditions.
We want to be active in, in that market, but we also want to be very sure that we well manage maturities, that we well manage the reinvestment risk of those, and obviously that we, to some extent, don't, don't go crazy about it in the sense of adding too much reinvestment risk in our, in our CET1 capital ratio, no? So, yes, expect us to be more active in that market. Expect us to add some billions on that, on that target, but, but not excessively, neither, no. And on, and on structural hedges, as I, as I discussed before, we are typically taking those decisions on a, to a certain extent, on a operational basis each quarter.
When we see what is the interest rate curve environment, we are updating our business volume forecasts obviously into that 12-24-month horizon to which we are managing our sensitivities. And then depending on the structure of the curve, depending on the structure of the sovereign spreads, we are managing that on an opportunistic basis. There's no such a very predefined strategy other than, as I said, on the long tail of the curve, we tend to be in fixed income instruments, and for the rather short term we tend to be in deposit hedges. And then we will be deciding quarter by quarter, depending on business outlook and market conditions.
Okay, thank you, Lento. So that's all we had time for today. Anyone left of the queue, our team will contact them later. Thank you all for joining us. Thank you, Gonzalo. Thank you, Matthias. And, bye-bye. All the best.
Thank you very much.
Thank you very much.