Good morning, welcome to the CaixaBank results presentation for the second quarter of 2026. As usual, we are joined today by our CEO, Gonzalo Gortázar, and our CFO, Javier Pano. In terms of logistics, a brief reminder, we plan to spend about 30 minutes with the presentation, followed by a Q&A. You should have received instructions via email on how to participate. We have the press conference immediately afterwards. We will need to be mindful of the time today and wrap up promptly. My team and I will be at your full disposal after the call for follow-up questions. Without further ado, Gonzalo, the floor is yours.
Thank you, Marta. Santa Marta today, on top of the World Cup. Anyhow, second quarter, I'd say the highlights are very clear. It is how successful we have been in the market in terms of our commercial traction. You have a few figures here, customer funds and performing loans both growing 8% level, well above what we were expecting. We are very pleased to have seen this kind of growth. We are also growing in net new clients, over 400,000, to over 1.1 million in terms of gross new client acquisition. Insurance is doing very well. You can see that on market shares, where we are gaining market share as we like. It is just gradual. We are too big to be growing too fast in this market. It is just a gradual trend, 15 basis points in payroll is very relevant.
You look at the insurance side, where we have a very clear, strong position in life savings and life risk. We see very strong growth. Also in non-life insurance, we are increasingly becoming a leading player in the market. Very satisfied to see that our commercial machine is working at full speed. Revenues are growing as guided in terms of NII, in fact, accelerating. Revenues from services 7.4%, NII was up 2%. Asset quality, big improvements, coming down from 2% to 1.8% in non-performing loans. Coverage ratio, having looked at our competitors so far, way ahead of all others, above 80%, while everybody else is below 70%.
Generating capital despite the very strong growth in this quarter, which is obviously also seasonally very high. That is combined with profitability in line with what we have guided, just already at 18%, consistent with our guidance of being above 18% by year-end. Net income up 8.5% in the total of the two quarters of the year, 10% if we look just at the second quarter. Very strong second quarter. The economy is doing well. We are actually upgrading back our estimates for growth in Spain from 2.1% to 2.4%. As you know, we had some softening of our expectations once the Iran war started. In the current, obviously, there is a lot of volatility. We cannot have a point estimate with certainty of what GDP is going to look like at the end of the year.
Taking into consideration what we're seeing within that volatility, we feel that the economy may end up growing at 2.4%, which is obviously very significant when you look at a comparison with the Eurozone at 0.5%. Portugal is slightly below that level, but close to 2%. Within some slowdown in Spain, still hovering about 2% for next year. Good trends, likely to be sustained. Volatility in rates, I'm sure we'll discuss a lot on rate curve and expectations. You can see, obviously, a steepening, very significant steepening of the yield curve, particularly again, not just during the second quarter, but also in July. As you know, we keep having in Spain some structural reasons for this strong growth, which we expect to last for the foreseeable future.
The detail of commercial momentum, as you can see, business volume up 7.8%, is actually accelerating from last year. This is kind of the trend we see almost at every indicator we look at. Strong growth, and even if last year it was pretty good, we're seeing it even better now. Customer acquisition, payroll, and you see that gain in payroll deposits, 36%. We keep obviously improving our position in the market, and as I said, very significant increase other than deposits and private sector loans, also in insurance, where the numbers are actually very high. I wouldn't say surprisingly high, because we have been delivering those very often in the past, but they still are quite shocking. Imagin, I would say no news, continues to do very well, 20% year-on-year growth.
I just wanted to make sure that everybody understands that despite the very strong competition that we have from established and new entrants in the market, imagin continues to do very well. As you can see in some comparison with neobanks is clearly, in terms of business volume, the leading neobank in Spain, and we're planning to keep it that way. Transformation is critical, less easy to observe, but obviously a driver of long-term competitiveness for us. We continue to maintain our app as the number one ranked according to Google Play in Spain, which is no small feat given how many, talking about financial apps obviously, there are. What you can see is very significant growth. I'd say digital continues to grow, whether it's sales leads, users in our app is now combined imagin and CaixaBankNow, it's up to 13 million users.
Some of the benefits of AI, which we have introduced already, 40% of our product inquiries are now being solved automatically by AI and other occasions obviously they are diverted to a human in the loop. This has gone ramped- up very fast. We are in the process of deploying throughout the network the AI agent that basically help us in preparation of commercial interviews, which is going to, A, reduce, as you can see, commercial preparation time, but also increase the effectiveness of our teams, of our people. Again, looking at AI as a facilitator, as an enabler to allow us to do more and to obviously keep growing our market share, our revenues. On the lending side, very strong growth, residential up 6.7% year-on-year, consumer residential mortgages, consumer more than double-digit, 11.5%, and business lending also in double-digit territory.
Obviously in business lending, there's a contribution. Around half of that growth is coming from outside Spain and Portugal, i.e., our international branches, which continue to grow nicely, even though they will gradually keep, I'm sure bringing some growth to the overall loan book, but at a decelerating speed, slowing down in terms of how much more we grow vis-a-vis what we grow in Spain and Portugal. Very relevant, gaining market share in SME loans. That has been very significant now for the last couple of years. Again, we look at granularity in our franchise, our ability to get to sort of the small part of the market, which is more profitable, is being proved quarter- after- quarter. Consumer lending also as another interesting sector in terms of risk-reward is also growing in terms of market share.
The customer funds, we had extraordinary quarter, particularly the market impact after a weak first quarter with the Iran war has made these figures even better. That's why you see wealth management numbers 13.9% growing year-on-year and almost 7% in the quarter. Look at deposits and balance sheet. Performance is also very good. Has also been very good, particularly if you exclude the public sector, more volatile and less sort of margin and irrelevant deposits. You see growth of 5%. Gaining market shares, a light gain, but that is what is kind of natural given that we are already at 26%. Honestly, the market has also been very solid in terms of net inflows into wealth management. You will see that in some detail in this slide.
EUR 4.3 billion, it's an increase of 31% over the last quarter of, over the equivalent quarter, the second quarter of last year. Again, pretty balanced between savings insurance and mutual funds. Overall, we're now with AUMs that are above EUR 300 billion. Again, growing, whether it's mutual pension or savings insurance at very high rates and maintaining those leading market shares that we have in wealth management in Spain. Protection insurance has been having a great first six months of the year. Look at premiums up 11.8%, and actually that is pretty balanced between life risk and non-life, 12.8%, 11.2%. Health, auto, home, and obviously life risk are doing very well. The market shares that you have on the bottom of this slide speak by themselves really. No?
Long-term track record of growth in life risk is staggering when looking at what the market has done over the last 10 years. That's really it. We continue to look at the future with confidence. We have a great, certainly in relative terms, great economies in which we operate. Our clients are very well-positioned in terms of the leverage they have relative to the EU average, and that makes a difference because they are, A, more resilient, and B, we have more potential to growth. The rate outlook is certainly positive, even if it generates obviously volatility. We have the franchise, the momentum, and the balance sheet to keep delivering and that's what we plan to do. Thank you.
Okay then, from my side as always, good morning, sorry. As always, the usual comments on the P&L and the balance sheet. On the first slide of my part of the presentation, here you have the consolidated income statement, a net income of EUR 1,631 million. This is up by slightly over 10% year-on-year, also up by close to 4% quarter-on-quarter, 18% RoTE as Gonzalo already commented. Moving upwards to revenues, NII, its growth is gathering pace, up by 3.5% year-on-year, 2.5% quarter-on-quarter. Details in a couple of slides. Revenues from services, exceeding our initial expectations, honestly here, with strong momentum from wealth management and protection. As you may see, revenue from services up by more than 7% year-on-year and also up quarter-on-quarter.
On other revenues, everything is pretty much in line with the strong contribution from equity accounted, basically from SegurCaixa Adeslas, and slightly weaker trading this quarter. On expenses, everything also is evolving according to our plans, up by 4.3% year-on-year. On loan and loss charges, we have a slight increase in euro terms, but as you may see, in terms of cost of risk, we are pretty much in line at 24 basis points. This is due to the recalibration of the macro scenarios for IFRS 9 models, that something that we can discuss in a few slides. Other provisions, slightly better also than initial expectations. On gains and losses, we have a strong profit here from the disposal of other real estate assets, repossessed assets, basically, taking advantage of very good market conditions in Spain.
This is something that may continue for some more quarters as we continue to dispose at a very good pace and with good margins. On taxes, my final comment on this slide is going to be that we have a write-up of EUR 135 million DTAs, as in previous quarter. We go to Portugal now with a net income for the first half of EUR 218 million. Business volume is also doing very well in Portugal, as you may see, up by 7% year-on-year, with a clear outperformance since we took control versus the industry. We are gaining market share in Portugal across key products, from mortgages to business lending and wealth management, as you may see. Also with high profitability, with an RoTE at 16.7%, pretty close to the average for the group. Strong balance sheet also. NPLs just 1.5%, strong coverage 81%.
Rating upgrades also at Portugal level. Fitch A+ from single A, and also an upgrade from Moody's to A1 for seniors. We have some KPIs of the AI and IT transformation that is also taking place in Portugal as in group level. Let's move to the core of the presentation, the usual NII slide, focusing first on the central quarterly bridge. You may see here, on a quarter-on-quarter basis, NII up by 2.5%. We have a slight negative from client yields. There is some impact from some non-recurrence we can discuss. Well, this is set to clearly improve in coming quarters, adding to NII progression. On the right-hand side, you may see a comment on front book loan yields already being accretive and moving upwards, so this is going to support also that part of the NII bridge. Strong support from volumes and also ALCO.
If we move to the upper left chart here to take a broader or longer-term view, you have the comparison of the same bridge for the first half this year, first half last year, where you may see that the negative from client yields due to the repricing of floating rate loan books is much more than compensated by volumes and ALCO. Talking about ALCO, I commented last quarter that we had, to some extent, front-loaded plenty of our hedging activities to the first quarter, taking advantage in March of a strong increase in market rates. This quarter, the activity has been more subdued. We have added EUR 2.7 billion to hedges, current stock EUR 77 billion, and a slight increase on the fixed income portfolio to slightly over EUR 79 billion. Below, you have the spreads and yields. The customer spread down by 4 basis points.
There are some technicals here. You see this better on the right-hand side of that chart. You may see the back book loan yield is coming down by 2 basis points. There is here, on top of those non-recurrence, some technical aspects. Without those, it could have been positive by 1 basis point. Then on client funds, we have an increase of 2 basis points already, client fund costs taking into account the increase in market rates. Precisely on talking about deposits, let's zoom in on precisely our deposit balances. Here, remember, we have the quarterly average evolution. You may see that it's up by 4.7% year-on-year, but the most interesting part, as always, is the mix, where you may see that non-interest bearing are progressing pretty well, up by 5.5% year-on-year, while we keep interest-bearing pretty much stable, circa 26%.
You may see stability since already some quarters. On the right-hand side, you may see precisely that higher market rates are already being passed on to a certain extent to the cost of our interest-bearing deposits, up by 5 basis points to 1.61%. You see below that 12-month EURIBOR this quarter up by 44 basis points, an upward trend that already started some quarters ago. Moving to another key P&L line, revenue from services that are doing pretty well. Also taking, let's say, a longer-term view on the left part of this slide. This is first half versus first half. You may see clearly that wealth management and protection are well into double-digit progression, and a slight negative from the rest of banking fees. If you combine wealth management protection and CIB, this is up by more than 12% year-on-year.
First half this year, first half last year. Quite a good performance. You see the quarterly evolution, and what is behind the strong performance in wealth management is what Gonzalo already commented, strong inflows, very positive momentum on that front, with inflows, I would say, in line with the pace of last year, and also with a strong contribution from market effects, which is also quite a positive. Then protection insurance, also strong growth. You saw the increase of insurance premium. That is also clearly above double-digit. We are having quite a strong commercial momentum on that front, both on life risk and non-life, and what this also, it's a key cross-selling product on our front, and is doing pretty well.
On banking fees, I would like to remark that on this line we have the, also we are including on fees the impact of the SRTs. You have all the details on the full note below, and take note that we are being more and more active on that front. This is also having some small impact into, let's say, recurring banking fees evolution. Costs, not much to say. If you look first half versus first half, up by 4.5% in line with our guidance. You may see that general expenses and depreciation are growing at a faster pace as a result of the execution of our intense plan on AI and IT transformation. We have cost to income slightly below 40%, which compares extremely well with the peer average that is still over 50%. We move to NPLs and cost of risk.
On NPLs, you may see that we have a strong reduction of the stock, circa EUR 500 million. There are some portfolio disposals, on top of that, there is a very positive, let's say, NPL organic evolution. The ratio comes down to 1.78%, coverage 81%. You may see that the evolution of NPLs across the different segments is very benign, very favorable, we are not observing any sign of deterioration at all. Then on IFRS 9 models updates, back to my initial comment, we have included a program recalibration of the macro scenario weightings, including an additional scenario that is weighting 10% of supply shock. Let's say a downside risk scenario as a result of a supply shock.
As a result of that, we are assigning EUR 40 million of the overlays, and we are having an extra impact on loan loss charges approximately of circa EUR 30 million, which is basically what explains the increase second quarter versus first quarter. As I was saying before, cost of risk, 24 basis points, we are really comfortable about future evolution. Liquidity, as always, very ample, EUR 225 million of liquidity sources. Liquidity coverage ratio 184%, NSFR 143%, the loan-to-deposit ratio that although is growing as we are growing faster on lending than on deposits, but very comfortable levels. All that compares extremely well with peers, as you may see below. This is as a result of a strong and stable deposit base with two-thirds the weight of stable retail deposits and operational corporate deposits being almost two-thirds of our deposit base. MREL, a few words on that.
An MREL ratio of 27.26%. That's an M-MDA buffer of 286 basis points. The MDA buffer is also in this slide, very comfortable, 339 basis points. On the right-hand side, you have the performance of our issuance plan that we are executing successfully, more than 60% already executed, and slightly over 40% issued in foreign currency, hence strongly diversifying our investor base. I would remark AUD 1 billion senior preferred in May and $2 billion US dollars senior non-preferred in April. Rating upgrades at group level. We already disclosed about Moody's last quarter, but here you have also Fitch with an upgrade also at group level to A+ from single A. Finally, capital. We have capital accretion this quarter of 69 basis points. We are investing into organic growth, 23 of those. Then we have for dividends and AT1s, 42 basis points. No other impacts.
We are ending the quarter with CET1 ratio at 12.54%. Finally, on the right-hand side of the slide, you have the evolution of the book value per share, up by 14.5% once adjusted for the DPS. My final comment is going to be that the board is planning to approve an interim dividend of between 30% and 40% of the first half net income to be paid in November. Thank you very much, and I am sure that we have a few questions. Thank you.
Operator, we are ready for Q&A, please.
Thank you. The first question is from Max Mishyn, JB Capital.
Hello. Good morning. Thank you very much for the presentation, taking our questions. Two questions from my side. The first one is on loan growth. It seems that the growth in corporate loan book keeps on being driven by international business, as you mentioned. Looking forward, how large can this portfolio become? Could you share additional color on geographical and sector exposure there? The second question on NII in 2027. Given the strong loan growth and the higher interest rate curve, what prevents you from becoming more positive on the NII guidance for 2027? Thank you.
Thank you, Max. I'll take the first question on international growth. Our loan book is currently around just above EUR 40 billion. This is mostly concentrated in the four large branches that we have in London, Frankfurt, Paris, and Milan. I would say Italy is a bit smaller. It's more recent, but the other three have similar weights. It's basically investment-grade lending, where obviously we have good returns. We have risk-adjusted returns around 20% in overall the branches, the international branches. We're obviously being very selective, but we started there with basically nothing 12 years ago. We have grown our presence gradually over these 12 years to make sure that we make no mistakes. We obviously also have attractive presence in both Poland and Morocco. In terms of balance sheet, it has a lower weight than the larger European economies. We're very satisfied with it.
Clearly, the speed of growth is going to come down. We will keep building profitability of these branches, which I say already is quite attractive. In terms of giving exact numbers and percentage, I think is something that I wouldn't do at this stage. We need to do a bit of planning, then we're very soon going to come into what's going to be the next three years after 2027. Clearly, you would expect some growth faster than in Spain, but not as fast as we've seen in the past, and gradually converging. That's really the plan. Again, it's good use of capital, obviously, otherwise we would not have undertaken that route. It's an attractive risk reward, no question, because it's very complementary, very connected to our existing business, no?
Okay. Hi, Max. Well, on 2027, we are today reconfirming our targets for 2027 that were revised upwards in January. That precisely on NII, more specifically, that target already accommodates quite a wide range of potential outcomes in terms of rates, not only levels, but also the shape of the yield curve, that this is also having some influence, and volumes. Well, we have a chart on the initial slides with the evolution of the yield curve at different moments in time. It's very volatile. Actually, it's difficult to guess which is going to be the final level for rates. If you look at the implicit rates for 2027 by the end of June, were approximately 30 basis points higher than by the end of December 2025. 30 basis points, okay?
Higher rates is always a net positive, but in March it was higher than that, and now as we speak, it's also higher again. Who knows how it's going to be in a few days or weeks or after the summer. Well, we are reconfirming our guidance and we'll see. This is also on the back of certain volumes that are, by the way for the time being, are doing better than the initial expectations, mainly on the lending side. Well, we are talking about NII for 2027 that we have to, let's say, plan what is going to happen a year from today. I think that, as I say, by reconfirming our guidance, we are very comfortable and happy with that. We need to be reconfirming evolution of the yield curve, the flattening or steepening, volumes, et cetera.
We are operating in an environment that is not exempt of certain volatility from a geopolitical point of view. I would say that this is basically the rationale for keeping it unchanged. Thank you, Max.
Thank you, Max. Operator, next question, please.
Next question is from Marta Sánchez Romero, JPMorgan.
Thank you very much. My first question is a follow-up on net interest income. I understand that the scenario is complex, volatile, but if you gave us the tools to have a certain level of conviction or making sure that we are running the math well, with rates landing at 3% for EURIBOR 12- months on a curve under the current shape, do you feel comfortable with the consensus number of almost EUR 12.8 billion for 2027, and beyond the EUR 13.6 in 2028? My second question is on revenues from services. You're running way ahead of your plan, 8% almost in the first half of the year. Your guidance is 5%. Why haven't you updated or upgraded your guidance? Related to this, I wanted to hear your thoughts on daily banking fees or your recurring fees, what you call it, stripping out SRTs, you're down 1% year-on-year.
You're running volumes at 8% on the loan side, at 4% on the deposit side. You've been cleaning for years, that line. I understand the environment is very competitive. When do you expect to close that gap between volumes and that income line, if ever? Thank you.
Thank you, Marta. [Non-Engliah content] as well for Santa Marta.
Yeah, [Non-English content].
Anyhow, lots of guidance and consensus-related questions for you, Javier. I would first make just a couple of comments on fees and revenues from services. Obviously, the speed at which we are operating now suggests there is a very clear upside. There's no question in revenues from services. In terms of banking fees, the reality is, as you well say, Marta, that this line has own weakness because we've been just sensitive to making sure that we do not lose clients as a consequence of fees when clients are overall profitable in a more positive interest rate environment as we have had for the last three or four years. I think we're still going to see some weakness in this line, but we're probably going to stabilize that line going forward, maybe not this year, but later on.
There's, as Javier said, some impact of SRT transactions there. I would say growing in line with the business volume growth is going to take longer, but at least not seeing falls in this line is something that hopefully we're going to be able to deliver over the new year 2027. In any case, we're always going to prioritize it. We'll at some point see that fees are sort of negative NPV because the client is sensitive to fee and overall is producing profits. We will obviously reverse the strategy. We've been, as you said, dealing with that for a while now, and I think it's relatively safe to say that this is going to gradually sort of stabilize.
Okay. If I may add, Gonzalo, a follow-up on that one. If you look at the evolution for the first half of this year on, let's say, recurring banking fees, that if I am right, are down by 2.4%. More than half of that slowdown is coming from SRTs. Just to give you an idea of the impact, which is not that material, but is there. Well, in terms of, let's say, consensus and guidance, honestly, I think that we are providing a lot of information. Detailed information about sensitivity, hedges, maturities, yields, et cetera. Honestly, I am not going to comment on the consensus today because I did that last quarter about 2028 because it was the first time we were disclosing our internally compiled consensus, and we thought it could be helpful.
Basically, what I wanted to emphasize back then is that NII is not flattening in 2027, and the positive evolution is continuing beyond that. I wanted to emphasize that. I think commenting on consensus is unhelpful at that moment in time when we are not, let to say, revisiting our guidance. Because implicitly I would be, let's say, giving you guidance. I think that we have plenty information in place. Higher rates is always a net positive, so you have this 100% clear. The pace of the impact of higher rates is true that it depends a little bit on the steepness or flattening of the yield curve.
At the end of the day, after some time, it has the impact it has to have. That's my comment, Marta. Our guidance already accommodates an ample range of scenarios. I think that when we are closer to that, and for sure by when we are presenting year-end results, we are going to be able to fine-tune. Thank you.
Thank you, Marta. [Non-English content]. Next question, please.
Next question is from Cecilia Romero, Barclays.
Thank you very much for taking my questions. I have two. The first one on deposits and the second one on capital allocation. On deposits, ECB data shows that the Spanish annual deposit growth remains healthy but has moderated somewhat in recent months, particularly in households. What do you think is driving down moderation on growth, and are you seeing signs of greater competition for deposits across the sector? What is driving the increasing cost of deposit quarter-on-quarter? Is that rates alone? On capital allocation, with organic capital generation remaining quite strong, how do you think about the trade-off between pursuing bolt-on acquisitions and returning excess capital to shareholders, and what hurdles would an acquisition need to meet to be preferred over additional distributions? Thank you.
Thank you, Cecilia. On deposits, obviously, we have had a very good three months and year. When you look at the overall sort of quarterly changes, my experience is that sometimes we need to take sort of the numbers with a pinch of salt because you need to look at longer periods to see trends. I would say in the second quarter, you have had higher inflation in most countries, certainly in Spain. I think from a macro point of view, it makes sense to see that the generation of excess deposits is lower in that environment. I think people tend to obviously save less in that environment. Given that the pickup in inflation, hopefully, if we look at the futures, is going to be temporary, I think this sort of macro impact may disappear and be less relevant on a full-year perspective.
I would say other than that, in terms of competition, this is a competitive market. We know it's very visible what various banks are pursuing different strategies, and I think that is not substantially different from what we've seen last year or what we have seen last quarter. I wouldn't say there are structural or any other relevant changes from that point of view. Again, obviously on the basis of a very competitive market. With respect to your second question on capital allocation, we have said very clearly that we want to make sure that we grow organically, always subject to appropriate returns, and that that is our first priority, organic growth. This is clearly the case this quarter, where I would say growth is probably even higher than normal because of some seasonality and actually a very good quarter. This is our priority.
Second priority, and completely compatible with the first one, is to maintain attractive remuneration policy in terms of dividend payment with a 50%-60% payout. The reality, because we are fairly profitable at this point, is that we generate capital on top. As we generate that capital, we have obviously been implementing share buybacks, and we will continue to do so. M&A is different. M&A, we said, is not our priority. We're basing our strategy on organic growth, doing very well. I think that's what makes sense. We've been active in M&A from time to time, but last time it was, I guess, over five years ago when we did the Bankia transaction, and then almost 10 years ago now when we did BPI.
It's very rare for us, and obviously it only makes sense if and when we see an opportunity to deploy capital that is, I'd say, well above and comfortably above our cost of capital, which means that we have really no room for mistake. If we ever do something, it's because it's a clear value-enhancing move. Again, it's not a base case.
Thank you, Cecilia. Next question, please.
Next question is from Francisco Riquel Alantra.
Yes, thank you. My first question is about the loan yield in Portugal, which fell 9 basis points Q- on- Q in Q2. Spain fell just 1 basis point in the loan yield. You mentioned non-recovering impacts, probably still to Portugal, if you can please elaborate. You also mentioned positive front book dynamics in Spain in Q2, but I wonder if you can also share with us front book pricing in Portugal so that we can reassure that this is only non-recovering technical impacts here. As a follow-up on deposits, I see demand deposits slowed down 6.1% in Q1 to 3.9% in Q2. I think the sector is growing over 5%. You are still printing market share gains in household deposits, but 5 basis points in Q2, but less than in Q1, 16 basis points.
You can comment on the increased competitive landscape in payroll deposits and how you are fending off your deposit franchise. Ending, if you can update on the cost of deposits. Going forward, how do you see that? You see the customer spread exceeding 300 basis points in the second half of the year after these one-offs in Q2. Thank you.
Thank you, Paco. I'll leave Javier to answer on the third one, and Javier may elaborate because it seems I haven't been convincing enough, which is something perfectly reasonable. Again, I will not make a lot of quarterly point data on deposits because there are deposits that are very granular and recurring, and others that have a different nature. Again, when we look at very often gradual month-on-month and how the trends evolve, how the variation, the changes are as we track it, we continue to see pretty good trends. Javier, please elaborate.
Yes. Hi, Paco. Continuing precisely with that topic of deposits, you could see, Paco, that we are disclosing the evolution of our deposit base ex the public sector. This is quite significant. Public sector, we are holding circa, on average, EUR 25 billion of deposits, but with a lot of volatility. I think that is good to disclose you the evolution excluding those effects. If you look at that, it's circa 5%, so I think that it's good. Gaining market share in households. I think that it's a positive development. If you look at the evolution of non-interest bearing, up by 5.5% year-on-year, I think also it's a positive development. I have to say, because you had questions about Portugal, that this is a trend that is also happening there.
In Portugal, BPI is doing really a good management of the deposit franchise recently. Actually, the percentage of interest-bearing deposits is pretty much stable, circa 46%. You know that it has been structurally higher than in Spain, but it's completely stable, and the cost of those interest-bearing deposits is now circa 1.5%. Really, good management of that part despite that is a market with stronger competition. You had a question about non-recurrence. Yes, you are right. The major part of the non-recurring we are mentioning that is overall a little bit less than EUR 10 million on a quarter-on-quarter basis, but the major part of that impact is coming from Portugal as the accrual period for certain mortgage expenses has been shortened. As a consequence, there is some catch-up effect of this situation on a quarter-on-quarter basis.
That obviously, as the amounts involved are clearly higher versus, on relative terms, versus Portugal, is what explains the evolution of the loan yield that you could see. Looking at the front book, yield is also accretive in Portugal. I would say that the situation in Portugal is pretty calm. Competitive as always, with additional touch of competitiveness versus Spain. BPI is defending the situation honestly pretty well so far this year. On the customer spread, what we saw this quarter is clearly a trough because, it's impacted by all those, non-recurring and technical factors that are also impacting the back book yield of the loan book, some kind of seasonality depending on the day count that is impacting the yield, and from here is going to be gradually recovering.
I think that the 300 basis points area is the place to be soon, maybe by the end of the year. I think that we are safe on that front. Thank you, Paco.
Thank you.
Thank you. Next question, please.
Next question is from Ignacio Ulargui, BNP Paribas.
Thanks. Thanks for taking my questions. Good morning, and happy names day, Marta. I just have two questions for you guys. One is on the disposals and sort of gains and losses and disposals of real estate assets. There was a big step up this quarter. I think Gonzalo, you flagged last quarter that we should expect this to be positive in the future as you accelerate the disposal of assets from real estate for closed assets at a positive with capital gains. There has been a very big acceleration of decline in the assets. You have sold EUR 400 million of gross assets this quarter versus an average, I think it should be around EUR 200 million in the previous five quarters. How should we think about this? Is a bit of a granular strategy or it's more that there was a big asset disposal in the quarter?
Just to be mindful of how should we think about this line going forward. The second question is on deposits, customer funds, and the implication that that also has into the fee guidance. If I just look to your customer funds, they are growing in line with performing loans. While I understand that there is a bit of a shift of deposits into customer funds, I just wanted to get a bit of how should we think about that trend and what impact should we have that on inflows in wealth management. Linked to that, I don't know if you have replied to that, but I have lost the answer on it. You are running revenues from services growing 7.4% with a guidance of 5%. What prevents you to be not upgrading the guidance here? Thank you.
Thank you, Ignacio. On real estate, yes, we had significant gains in this quarter, and we had more activity in the quarter than you would typically expect for any given quarter. As we said, I think this is relevant because this was consistently negative, and it's going to be consistently positive. I wouldn't just look at it as a one-off. The question, as you correctly say, is what's the level of the consistently positive? Unfortunately, I'm not in a position to say. Clearly, it's not going to be at the same level in principle than this quarter. There will be some volatility, ups and downs. Again, we're not expecting this line to be negative, and certainly, there will be a contribution.
What we're doing in terms of granular sales, from time- to- time, we do a block here and there where we see it makes sense. Granular sales, what we're seeing is close to 50% profit on what we sell. It's fairly significant. The current book value of what we have in terms of foreclosed assets, if we exclude the rental assets, is EUR 900 million. Then we have close to, and these are round numbers, but close to another EUR 600 million in rental assets, which obviously are also coming down, even if they may not come down at the same speed. I think we're going to have some quarters to come with a positive contribution in this line. Clearly above zero, not as high as this quarter, most likely. Somewhere in between.
It won't be just zero or plus one, but something more significant, but not as much as now. On the other points, I honestly didn't fully-
No,
understand the second question, but I think you did.
I take it. Hi, Ignacio. Well, on wealth management, my comments would be that the pace of inflows is really good. Moreover, inflows are increasing into, let's say, long duration products. I mean by duration not only fixed income, but also equities and global equities, which results into, let's say, products with a slightly wider margin. It's a positive. You know that we have this kind of skills to manage adequately the flows between off-balance sheet long-term solutions, time deposits, obviously, side deposits, et cetera. I would say that everything is doing so far according to our initial expectations. Let's say, assuming that there are no major changes, I would say geopolitically speaking, that always may result into markets correcting or volatility, et cetera, that can affect that pace of inflows into long-term saving solutions.
We are pretty confident that we are going to be delivering volumes in line, let's say, with last year, which was already a record high year. As a result of that, and that connects to your last question. As a result of that, the evolution on wealth management and also protection, I would include protection in my comment, although it's not strictly related to your question, is expected to perform in terms of P&L, if not at double- digit, very close to double- digit for the year. It's true that we have not updated the guidance, but basically because we thought that we had the major part of our KPIs open-ended, basically the most important one, which is our RoTE. Hence, would be able to accommodate any outperformance coming from revenues from services, which I think that is going to be the case.
I think that the base case is that we can do better than this circa 5%, or at least we are going to be clearly at the upper bound of that guidance. Thank you, Nacho.
Thank you, Nacho. Next question, please.
Next question is from Álvaro Serrano, Morgan Stanley.
Good morning. Thanks for taking my questions. Sorry, I've got another one on NII. Thanks very much for the disclosure. I do think your disclosure is probably one of the best in the sector. You spoiled us. On the guidance, Javier, in previous quarters You've talked about 150 basis points loan spread as where the loans should settle. Obviously, you've already discussed the moving parts in this quarter, but should we still think with the current curve that 150 basis points loan spread once the loan book reprices is where things should settle? That's the first question. The second question is on capital generation. Obviously, you've had very strong loan growth this quarter. Part of it is seasonal, which means the capital generation hasn't been as strong, for good reasons. I'm just thinking in subsequent quarters, how should we think about it?
Do you have room and appetite to do more SRTs? What I'm thinking is there going to be room to do more buybacks? If loan growth continues at this point, at this pace, you would caution to expect more buybacks for the foreseeable future. Just want to get your thoughts on that. Thank you.
Hi, Álvaro. Good morning. Yeah. Well, on loan margins, when I mentioned this kind of 50/50 between loan spreads and deposit spreads, it was like a broad message, no? If you want me to be more specific, if it's going to be 160 basis points and 140 basis points or 160 basis points and 150 basis points. Now, it's probably too early to say, no? The general dynamics in terms of lending are good ones in terms of margin. I would say that on consumer lending, on SMEs, on corporates, also on all the new lending that is coming from our CIB international branches, is lending that is meeting all our criteria in terms of profitability, of yield accretion, et cetera. You have not to worry about that. On the other hand, there is a segment that is different, no? Which is the mortgage segment.
Which I don't want to elaborate, you know that it has its own dynamics, and to some extent is also impacting the overall end result, no? Yes, broadly speaking, I think that 150 basis points should be the place to be, around that level, no? Difficult to be more specific considering the dynamics of certain segments, no? On capital, yes, we are more active on SRTs. I can already tell you that this second quarter, we closed at EUR 2.5 billion SME SRT that resulted into risk-weighted asset released of slightly less than EUR 1 billion. You know that we are planning to be active on that front. We have plenty of, let's say, projects on the table on that front. We're on that, no?
The idea here is to deliver risk-weighted asset growth that is growing at a slower pace than the pace where the loan growth is growing, no? We are targeting, let's say, circa 150 basis points less than the loan book. On the other hand, it's true that you have some kind of reaction function here, no? The loan book is growing faster than our initial expectations. We need to catch up to some extent on SRT strategies. We'll see, no? The market is there, is liquid. There are more and more market participants. Costs are fine. We think that there is room to keep doing, no? Yes. Thank you, Álvaro.
Thank you. Thank you very much.
Thank you. Next question, please.
Next question is from Sofie Peterzens, Goldman Sachs.
Thanks a lot for taking my question. Here is Sofie from Goldman Sachs. My first question would just go back to the loan growth. It was very helpful, the comments you made around the international CIB loan growth. How should we think about loan growth in other segments? Mortgages look very strong, 6% year-on-year. Consumer loans, + 11%. Corporate loans, + 10% year-on-year. How should we think about the upside risk to your previous loan growth guidance? If you could comment on this. My second question would be around wage inflation. How should we think about the wage inflation in 2027 and 2028, given higher inflation expectations and, I guess, also upcoming salary negotiations. Thank you.
Thank you, Sofie. Maybe I'll comment on the second question. Obviously, when we talk about wage inflation, the second part of the expression, inflation, is going to be very relevant. What we have is some uncertainty on that front. Basically, we're seeing
the ECB is credible enough to contain inflation, and that's why long-term inflation expectations are still just above 2%. I think that is very relevant. In the shorter- term, obviously, depends on energy prices and whether there is some contamination of other related sectors. We're having in Spain, actually, last figure for inflation is 3.2%, 2.9% is the underlying inflation. It is higher than the 2.8% inflation rate in Europe. This is going to be relevant, and obviously you can estimate, depending on which macro scenario you want to run, where the number is going to be. What we've seen so far in Spain, it's salaries growing around 3%, which is in line with what the ECB is actually forecasting for the Eurozone, like it was last year. Again, I guess this is going to be data-dependent, as the ECB said.
Inflation may pick up or not. There's some clear uncertainty, and that's the uncertainty around rates environment that we also commented or Javier also commented on. I don't want to be more specific than that because there will be next year, again, a new negotiation of collective bargaining agreement, both for former saving banks and former commercial banks. Obviously that will have typical negotiation dynamics. We are confirming our guidance in terms of the overall cost evolution for this year and next year. That doesn't mean that there are no pressures here and there. We'll need to see how we deal with them, but we also have our own programs to contain cost growth in other parts of the business. Both inflation environment and obviously technological expense are putting pressure.
We're still confident that we can keep our guidance where we want it to be, which is where we have obviously guided you for growth, which is coming down next year significantly from the 4.5% that we have guided for this year.
Hi, Sofie. Good morning. Well, on lending, you are right. True, we are doing better than our initial expectations. Year-on-year up by, let's say, circa 8%. Our initial expectation was more like 5%- 6%. I think that considering the momentum and always with the disclaimer about external circumstances. Considering the momentum and the pipeline that we have, I think that probably we are going to be ending the year closer to 7%. By segments, I think that mortgages may be 4%, consumer lending, if not double-digit, close to double-digit. Then businesses with, to some extent, a little bit more volatility here from CIB, larger tickets, et cetera. Very probably, if not at 8%, very close to 8%. I think that's a little bit the picture.
As I was saying to a previous question, in terms of margins, in terms of yield accretion, in line with expectation on that front. Thank you, Sofie.
Next question, please.
Next question is from Miruna Chirea at Jefferies.
Good morning. Thank you very much for taking my questions. I just had two quick ones, please. Firstly, more of a clarification on the cost of deposits in the quarter. Will you help us understand if the increase in the cost of deposits in the quarter was driven entirely mechanically by the index deposits, or did you also choose to pass something on the non-indexed term deposits as well? How do you see the dynamics from here for the rest of the year? Do you expect to have to pass on the non-indexed portion, given any potential rate hikes from the ECB in the second half? Then just a question on your strategy in consumer credit. We remember that in your Investor Day a couple of years ago, you were targeting to increase your market share in consumer credit.
We're seeing that is on track, but it still remains pretty low compared to your natural market share of 25%. Just curious, what are the active actions or campaigns that you're undertaking to organically growing consumer loans? Thank you.
Thank you, Miruna. On the point of consumer credit, we have obviously number of channels and initiatives. We have been very successful, given the information we have on our clients and the fact that we have the payrolls. On payrolls, we have EUR 6.4 million, other income that comes periodically, whether it's from sort of self-employed or unemployment subsidy, et cetera. It's really over EUR 10 million. It's some 10.4 million clients where we have their income periodically with us. That allows us to have pre-authorized lending to a very large universe of people, which is very consistent with a low cost of risk, but very convenient ease of disposal of consumer lending. That has worked very well for us, and it continues to do. Here, a lot of the improvements we're doing in terms of facilitating on digital and even AI-assisted contracting of consumer lending is very relevant.
We have plenty of upside, for instance, in imagin. Again, the trends are quite positive. Together with that, we have made substantial improvement in terms of volumes, what has to do with auto financing. The Facilitea Coches, we call the Facilitea Cars platform that we launched over a year ago, has been very successful. We currently have 18,000 speaking from memory, but it's around 18,000 used cars. Average price, close to just a bit below EUR 20,000, so it's meaningful tickets, certainly, for consumer lending, and obviously a lot of automation around it. That has allowed us not only to grow car lending in this platform, but also because auto dealers are very happy to be able to sell the secondhand and the used cars that they get when they sell a new one and sell it through our platform.
What we are is, obviously, increasing the scope also of the direct lending we do for first-hand cars that they sell. That has meant that mobility generally has grown at a very significant rate, and those are trends that we think are fairly well established and are likely to continue. That's what I would highlight in particular. On cost of deposits index and non-indexed, I guess there's a bit of both.
Okay. Yes, it's a bit of both. Well, you know very well that approximately 50%, a little bit less than that, of our interest-bearing deposits are indexed, are repriced automatically as rates move. A big part of those are indexed to the overnight rate. Actually, it's not until the overnight rate goes up or down that you have a change, but there is also another part that is indexed to three-month or even six-month, or even 12-month EURIBOR. I say the bulk is the overnight. As the market was already pricing rate hikes before those happening, part of that is already being filtered on the indexed deposit part. On term deposits, it's the same. With market rates approaching 12-month EURIBOR here is like the benchmark for time deposits.
As this yield is getting closer to 3%, if not at 3% at some moments, obviously the new production of time deposits has to adjust. You will allow me not to give you all the details about our strategy or commercial strategy on that front. It's clear that there is a pull upwards of higher market rates into the yield of the new production. This is going to happen. Having said that, to give you the broad picture, we expect a deposit beta. Back to the deposit betas and back-testing how this is going. We are expecting a deposit beta in the low 20s, that's the plan. We expect that the cost of our deposits ex hedges to be slightly below 50 basis points as an average for the year.
That means that obviously will gradually be increasing according to higher market rates. Thank you.
Thank you, Miruna [crosstalk]. Next question, please.
Next question is from Andrea Filtri, Mediobanca.
Thank you for taking my questions. The first is on the digital euro. You've been a pioneer in the project so far. Why are you not in the digital euro pilot? The second question is on the Danish Compromise. Can you explain how the process works with ECB in case of an acquisition of an insurance business? As a financial conglomerate with Danish Compromise already approved, do you have to ask for Danish Compromise usage on a case by case for each deal, or is it an automatic adoption after EBA clarification on the Danish Compromise squared? Thank you.
Thank you, Andrea. On the second question, the most honest response is I don't know because we're not dealing with anything that is on the table. Clearly look at what we've done in the past. We've maintained the Danish Compromise without any special process around that. It is through all the transactions that we've done, didn't put into question the fact that we are inside a financial conglomerate sort of rules. I think that's generally the guidance. Again, with all due respect, it's not something I am particularly, at least now, familiar with because we're far away from that sort of topic because it doesn't really affect us. On the digital euro, we have obviously supported the various efforts with the digital euro.
We continue to be of the view that the digital euro, A, is going to take place, and B, it's not a bad thing, provided that it has the guide rails, appropriate sort of protection in terms of limits and non-remuneration and all that, which is something that I'm confident that will be the case, even though it could have been made it clear soon. It's fairly obvious at this point that we will have a digital euro, and it will not be a threat for our deposits, but it will obviously generate new services that people will base on the digital euro. We're certainly planning to be on that league. At the same time, digital euro is one of the new means of payment. We have stablecoins, we have tokenized deposits. We're working with Agora, we're working with Pontes in Europe.
We are obviously looking at our own initiatives, key values on stablecoins. This means that we have limited resources, we have directed those towards the areas where we think is most needed and most pressing, compared to the timing of the introduction of the digital euro and the relative preparedness that we think we have, and the fact that actually a lot of the work we are doing and other projects is going to be usable for digital euro. There is nothing different from that. I would not say the digital euro is the game changer. I think the digital euro, the tokenized deposits, maybe stablecoins, obviously direct P2P that we have with integration of Bizum and Wero and others in Europe, and Beeps, et cetera. The combination of all these is very much, I think, a very significant game changer for the industry.
This is going to happen over the next years, with the digital euro being obviously one relevant milestone, but not the only one. We are, to be honest, very well prepared to deal with all these various projects that are going to be a reality in the rest of this decade. Nothing else.
Thank you, Andrea. Next question, please.
Next question is from Britta Schmidt, Autonomous Research.
Good morning. Thank you for taking my questions. I have a question on your funding structure. This quarter, if I look at your average loans and bonds, they outgrow the average deposits in terms of Q- on- Q increase. The marketable debt was actually down Q- on- Q with higher interbank usage. How should we think about your issuance plan in the second half? You have executed 60%. What is still to come, and how should we think about the funding cost, given that the maturities have got a very low spread, those coming up in the second half? My second question will just be a clarification. What would be the underlying customer spread x one- off and technicalities that we should use for making our forecast versus the 2.89% reported? Lastly, there was some media reporting about interest in a potential consumer finance book in Spain.
Can you perhaps comment on that, whether there is any interest or confirm or deny any interest? Thank you.
Thank you, Britta. I made some comments on some indirect questions about the third topic and on sort of specific rumors that come to the market. We have a policy not to comment. I only want to reinforce the messages I gave before of what is very clear preference in our case for organic growth, which we have consistently done and delivered and created value through that. The fact that when we have engaged into any M&A activity in the last two transactions, where Bankia and BPI, we saw very meaningful value creation well above our cost of capital. In fact, I think with the benefit of hindsight, these were two very value-enhancing transactions. We are not changing our strategy, continue to have a strong preference for organic growth, and we will not comment on market rumors as a matter of policy. Thank you.
Hi, Britta. Well, on funding, we are executing our plan. What is pending for this year is maybe an additional senior preferred. You have all the details, what has been issued, what is pending. For next year, we are going to be almost across all asset classes. It is a question about rolling over maturities and eventually calling Tier 2s and AT1s, as you know, that we have not a predefined policy on the topic. We will decide depending on circumstances. I would like to mention two things here. First thing is that we are issuing in foreign currency. We usually do not convert that funding in foreign currency into euros, as at the same time, we have to fund foreign currency loan books, basically coming from CIB. Mainly in U.S. dollars.
My second remark on funding is that, remember that we usually swap into floating all new issuances. When you look at the cost of the funding, it is not only the spread, but it is also how, let us say, short-term market rates move because it is having an impact. Usually it is swapped to the three-month or the six-month EURIBOR. There are constantly new fixings because it is already quite a large position that is being hedged into floating. We are constantly having new fixings, now with higher short-term market rates. That part, the cost is moving upwards because it is swapped into floating. The clarification for the customer spread is the following one. The back book yield of the loan book, ex non-recurrence and ex this technicality for the day count, should be higher by 3 basis points.
Hence, the customer spread, instead of coming down by four, should be by one. Moreover, if you exclude Portugal and you look only at Spain, the customer spread should be flat quarter-on-quarter, excluding, let us say, ex Portugal, ex non-recurrence, and, well, the non-recurrence are basically in Portugal. The technicality of the day count in Spain is flat in the quarter. Thank you.
Thank you, Britta. Next question, please.
Next question is from Ignacio Cerezo, UBS.
Yeah. Hi, good morning. Thank you for taking my questions. The first one is on the commercial gap. Obviously, being widening in the last two to three quarters, loan growth accelerating while deposit growth is decelerating. Just trying to understand actually how you're planning to deal with that, if it's use of excess liquidity, if you're planning to re-accelerate the growth of remunerated deposits, just having a feel basically on that. The second one is on the deposit hedges. I'm basically asking whether it would make sense as a base case to be rolling over those hedges given the current yield curve. I mean, swap obviously like 40 basis points- 50 basis points higher than necessary. We need to work under the assumption basically that those hedges are going to be rolled over.
On the international lending book, if you can give us a feel basically around the lending yield. It doesn't need to be a precise number. What is the loan yield in relationship with the blended loan yield of the group, higher or lower? Thank you.
Okay. Thank you, Nacho. On the commercial gap, while you mentioned that deposits are growing at a slower pace, again, I would like to try to emphasize that excluding the public sector, that is always more volatile, are growing at 5%. It's true that is slower pace than the loan book. Not by that much, okay? Considering the liquidity reserves we have, which we think is clearly a competitive strength versus competitors, we think that we are far from a situation where we need to change our, let's say, commercial strategy because of that situation. We are not planning to do something different because of this situation versus what we are already planning to do in terms of our client funding. Retail funding or even corporate funding.
On deposit hedges, about rolling over, I would say that yes, that this is the base case, that is like the ALCO portfolio. It's true that this will depend also over time on how finally or actually evolve the different parts of the balance sheet. You know that we are growing on mortgages, which is a fixed rate. We are growing also non-interest bearing, which is like a fixed rate also on the other side. We have a forecast about the evolution of all that, reality may be slightly different than that, and we'll have to accommodate the hedging activity to the reality. The base case is that the rollover of those hedges to a large extent is going to be needed, maybe not 100%, but to a large extent, yes. Yes, you can assume that.
Having said that, note that as of today, the yield curve is going to be really flat very soon because short-term rates are going to be, let's say, two and a half to three quarters. Long-term rates on swaps are going to be pretty much at the same level. The extra yield may be there, but obviously in case of that, eventually we have lower rates, definitely yes. This is why we follow quite, let's say, a strict hedging policy. You never know what may happen. In terms of the yield at international branches, I would say that is pretty much in line with the average. It's not far from that. Well, we are comfortable. It's a business that is gaining traction.
I think that Gonzalo has already made plenty of comments about the topic. In terms of yield accretion, is perfectly in line with the average. It's not having a material impact, nor positive or negative. Thank you.
Thank you very much.
Thank you, Nacho. Next question, please.
Next question is from Borja Ramirez, Citi.
Hello. Good morning. Thank you very much for taking my questions. I have two, please. Firstly, on the NII one-offs, I understand that the impact from the base effect and also from Portugal one-off are 3 basis points in the loan yields. That, based on my calculation, it is around EUR 28 million. If you could kindly indicate how much is linked to Portugal one-off, please. My second question would be, according to press reports, the holding company of the stake in CaixaBank from the Spanish government has been moved to the Ministry of Economy directly. I would like to ask if that could have any potential implications. I understand the deadline for the disposal is December 2027. Is that still correct? Thank you.
Thank you, Borja. On the second question, yes, what we see is based on the public information and our understanding of the situation, is absolutely no impact on the state stake. It is just been within the same ministry, the Ministry of Economy, rather than being held through the FROB, it is going to be held directly, the BFA stake. The statements that have been made is that there is absolutely no change in the stance in which what we see is no interference in the management, no attempt to interfere in the strategy, and a very high degree of satisfaction with the way things have evolved at CaixaBank. To give you an idea, the total shareholder return for the state since the conversations with Bankia started is basically in round numbers times 10.
They've multiplied, including obviously the share buybacks and the dividends, the share price increased 10 x their investment, as you can imagine, that makes them very happy. With respect to the official deadline, is no change either. We know that it can be changed at some point in time through a decree the government can pass, which is what had happened in the past. I am not here to speculate whether it will happen or not, my expectation is that there will be no certainly disorderly sale in the market.
Hi, Borja. About the technicalities, just to reconfirm. We have two different things here. We have some non-recurrence that are having an impact in euro terms, and the major part of that is coming from that accrual, a different timeframe on the accrual of certain mortgage expenses. Overall, the non-recurrence are slightly below EUR 10 million, of which EUR 6 million on a quarter-on-quarter basis is what I mentioned from Portugal. That different accrual period on mortgage expenses. Beyond that, it's more a technical effect on the way the yield of the loan book is calculated, that it has a few basis points that are moving up and down depending on the day count. This is not actually an economical impact. Okay. It's more like the way the yield is calculated. Are two different things. Thank you, Borja.
Thank you. That's all we have time for today. Have all of you a wonderful summer, thank you for joining us on the quarter. Thank you, Gonzalo. Thank you, Javier.
Thank you.
Thank you.
Thank you, everybody. Have a good summer.