Good morning. Thank you for joining us on Banco Sabadell's first quarter 2024 results audio webcast. Please be welcome. In the next minutes, our CEO, César González-Bueno, and our CFO, Leopoldo Alvear, will present the main highlights and details of the commercial and financial performance in the first quarter of the year. The presentation will be followed by a Q&A session. We have a schedule around one hour, one hour, and 15 minutes for the whole session. Let me now hand it over to our CEO, César González-Bueno.
Thank you, Gerardo. Good morning, everyone, and welcome to Banco Sabadell's first quarter 2024 results presentation. I will start by going through the key elements of this quarter. Firstly, NII of the group grew by 1.7% quarter on quarter. More remarkable, customer margin increased by 10 basis points in the quarter and stands at 3.09%. Secondly, asset quality continues improving. The management actions we have taken to improve our risk models and processes are delivering results in the form of lower cost of risk. At the end of the first quarter, group's total costs of risk stand at 50 basis points, having improved by 5 basis points in the quarter. Thirdly, group's net profit reached EUR 308 million in the quarter. These results include the impact of EUR 192 million of the Spanish banking tax recognized in full in this quarter.
Fourthly, following approval by our annual shareholders' meeting, the share repurchase program for up to EUR 340 million is being launched today. This completes our shareholder remuneration on the back of 2023 results. At current share prices, this buyback represents around 4% of the bank's market cap. Finally, our common equity tier one fully loaded ratio reached 13.3%. Moreover, the return on tangible equity stood at 12.2% considering the last 12 months. Moving on to slide five, quarterly evolution of performing loans. Volumes performed well despite quarterly seasonality. Performing loans in Spain remained stable in the quarter and increased by 2.3% quarter-on-quarter in TSB, which is 0.8% at Constant FX. This behavior is a shift of the trend we observed in previous quarters. We believe that this performance should continue improving throughout the year. Moving now to customer funds on the right-hand side of the slide.
On-balance-sheet funds remained stable in the quarter. We can observe a year-on-year reduction as customers transferred funds from their current accounts to other higher yielding off-balance-sheet products such as mutual funds, pension plans, and savings insurance. This trend, along with a good performance of financial markets, explains the increase in off-balance-sheet funds by 3.9% in the quarter and by 6.7% in the year. In Slide six, I would like now to comment on the main initiatives we have implemented to support lending growth and, at the same time, reduce cost of risk. For each product and segment, we have deployed specific actions to foster and steer lending growth and to improve our risk quality. In mortgages, we keep improving our distribution model. We have currently deployed 250 remote specialized relationship managers who are supporting 100% of our branch network.
Furthermore, these specialized RMs are attending customers through extended service hours, both in the morning and in the afternoon. Besides improving our distribution model for mortgages, we have improved our pricing models to increase the price segmentation so that prices can be adjusted even more to different risk profiles. In consumer lending, we have increased the number of customers with pre-approved loans. This is relevant not only to enable growth but also to grow in a healthy manner from a risk perspective. Just two illustrative results of our actions in retail banking: mortgage specialized RMs originate 55% of our mortgage new lending, and 86% of our new consumer lending in the quarter was granted through pre-approved loans. In business banking, I would like to share four initiatives. First, new customer segmentation.
Since January this year, we are offering to SMEs the premium relationship model that we offer to large companies: more skilled relationship managers, improved value proposition, etc. Second, we have extended the amount of pre-approved loans for companies. This is done in a different way for each segment according to their specificities. For instance, we have digital pre-approved loans in the self-employed segment, while in larger companies, excluding corporate and investment banking, there is a pre-approved limit for each target customer complemented with an accelerated risk granting process. Third, we have specialized a large number of risk analysts and relationship managers by sectors. This results in a more agile and accurate response to new demand. Fourth, we have intensified even more the usage of data analytics to support RMs and risks analysis.
This enables a better identification of target customers, meaning customers with good risk profile, while identifying opportunities to grow. At the right-hand side of the slide, you can see some of the results of these actions in business banking. We have more than EUR 20 billion of pre-approved loans for self-employed and businesses, and more than EUR 13 billion for SMEs and larger companies. All in all, relevant initiatives aligned with our strategy to grow volumes as the market picks up while reducing cost of risk. On slide seven, we will talk about lending origination in Spain. Mortgage origination fell 11% year-on-year, although it increased by 20% on a quarter-on-quarter basis. We are observing higher demand for mortgages, and we are also reaping the benefits of the transformation carried out during the last three years, which I just explained briefly.
As you can see in the right-hand side of the slide, we are optimistic about the upcoming quarters. As you can observe in the chart, the number of early-stage applications in a given quarter is a good indicator of mortgage volumes in the next quarter. In Q1 2024, we have had a remarkable increase of early-stage applications, which have increased by 59%. We don't necessarily expect mortgage origination to grow by that number next quarter, but we certainly expect a significant increase in Q2 versus Q1. Finally, origination of consumer loans continued to perform well. It grew by 13% on a year-on-year basis and 6% on a quarter-on-quarter. Let's go to slide eight, business banking. Origination of loans and facilities increased by 45% quarter-on-quarter and by 48% year-on-year.
Part of this significant growth is explained by a limited number of large structured finance single names, which are volatile by nature. However, if we didn't take this into account, the quarterly growth would be above 30%, which would still be a very positive growth rate. Furthermore, medium and long-term loans have now been the main driver of lending origination, which is also a very positive sign. Finally, working capital financing is stabilizing after posting relevant increases during 2022 and the first half of 2023. New origination fell by 5% on a year-over-year and 4% quarterly, impacted by seasonality. On slide nine, we can see the payment-related services that continue to perform well, both in terms of turnover and number of transactions. Card turnover increased by 7%, while point-of-sale turnover increased by 11% year over year. Quarter-over-quarter, turnover decreased in both cases, clearly due to seasonality.
At this point in time, I would like to update the status of our agreement with Nexi, which we expect to close in the second quarter this year. Once the closing is executed, we will obtain a capital gain, which could be used in management actions that make sense financially. In the following results presentation, we will update you on this matter. In the bottom of the slide, we can see the evolution of customer funds in savings and investment products in Spain, which reached a total of EUR 58.7 billion in March 2024. This represents an increase of EUR 2.1 billion compared to 2023 year-end. Term deposits increased by EUR 500 m illion, while off-balance sheet products increased by EUR 1.6 billion. In this regard, we had a positive performance in mutual funds and net subscription reached EUR 650 million in the quarter, mainly among private banking customers.
In slide 10, we present our performing loan book ex-TSB by segment and by product. Mortgage lending in Spain declined slightly in the quarter, changing the trend from previous quarters. This was supported by higher production, as we have just seen, and lower prepayments. On the other hand, the SME and corporate loan book increased slightly in the quarter, and consumer loans maintained the growth momentum delivered in previous quarters. Altogether, performing loans in Spain remained stable in the quarter and decreased by 3% year-on-year. Finally, as you can see on the right-hand side of the slide, lending volumes in our international businesses increased by 0.4% in the quarter and north of 5% in the year, mainly driven by Mexico. Moving on to the U.K. business on slide 11. We are starting to see positive dynamics in the U.K. mortgage market.
New mortgage lending increased by 14% in the quarter and by 41% in the year. These new lending volumes delivered positive loan book growth, and performing loans increased by 0.7% in the quarter, reversing the trend of previous quarters. Moreover, mortgage applications, which are a leading indicator of new lending volume in the future, keep growing. This suggests that mortgage lending should maintain this positive momentum looking forward. On the liability side, the gradual trend of customer funds switching from accounts to savings accounts continued during the quarter. This migration largely explains the increase in the cost of deposits, which closed the quarter at 1.47%, nine basis points above last quarter. This quarterly increase is much lower than in 2023, when the cost of deposits increased by 24 basis points on average each quarter.
Moving to TSB's financial performance in slide 12, TSB contributed EUR 46 million to group's net profit this quarter. NII evolved as expected in the quarter and increased slightly versus the previous quarter. We have a positive view on the evolution of lending volumes, but this has had no material impact on NII in the first quarter yet. Total recurrent cost increased by 4% in the quarter due to higher administrative costs but remained broadly stable on a year-on-year basis. We expect significant performance improvements in this line in the coming quarters, as savings from TSB's efficiency plan will start coming through from the second quarter of the year onwards. Provisions declined by 33% on the quarter but increased slightly year-on-year.
Out of its 2023 net profit, TSB distributed GBP 120 million in a cash dividend to Sabadell, which represents a 70% dividend payout. After this distribution, quarter one still stands at a very high level of 16.4%. In the right-hand side of the slide, we recap on the main trends for TSB's P&L for the rest of 2024. NII will gradually improve as the cost of deposits stabilizes and the structural hedge contribution increases. This will be more material in the second part of the year, but specifically in 2025, as I will explain later. No one-off items are expected on fees, which we expect to remain stable at 2024 first quarter run rate levels. On costs, 77 out of the GBP 53 million total savings expected for 2024 have not yet materialized in this quarter.
This leaves ample room for costs to improve throughout the year. In terms of provisions, cost of risk will remain stable considering the first Q provisioning going forward. Finally, I would like to talk a bit, and Leo will talk more about this, about the structural hedge at TSB. The structural hedge is a GBP 22 billion portfolio of five-year swaps for which TSB receives the fixed-rate leg. Every month, some swaps mature at low yields and are renewed by new swaps at significantly higher yields. Maturing balances have an average yield of 1.5% and will be renewed at the prevailing five-year GBP swap rate, which currently stands at around 4%. However, due to a technicality of the structural hedge, which Leo can explain later in more detail, the balances of monthly swaps maturing in 2024 are not fully renewed.
But from 2025 onwards, swap balances maturing at low yields will be 100% replaced by new swaps at much higher yields, and that's why the contribution of the structural hedge to TSB NII will grow very substantially in the second half, starting in the second half of 2024, but much more substantially in 2025 and 2026. Considering these dynamics, we expect TSB's net profit to improve in the second half of 2024 and improve much more materially in 2025. In slide 13, we present a summary of our quarterly financials on a group basis. We recorded a net profit of EUR 308 million in the quarter, and our return on tangible equity reached 12.2% considering the last 12 months. Our core results, which include NII plus fees minus total recurrent cost, grew by more than 13% year-on-year, supported by NII performance.
Additionally, provisions keep decreasing, underpinned by improved asset quality. On the back of our solid quarterly results, we are improving our return on tangible equity guidance for the year to more than 12%. In terms of solvency, our capital ratio stands at 13.3%, which implies a solid increase of 52 basis points in the last 12 months. Finally, I would like to remind that today we kick off our share buyback program for EUR 340 million, which completes our payout on the back of 2023 results. With this, let me hand over to Leo, which will cover the financials of the bank in more detail. Thank you.
Thank you, César, and good morning, everyone. Now, moving on to the financial results, we see that net profit reached EUR 308 million, having increased by more than 50% year-on-year, with figures broadly similar to last quarters. Nevertheless, it's important to take into account that these quarterly results include the full impact of the Spanish bank tax, which in our case amounts to EUR 192 million and is non-tax deductible. This contribution has increased by more than 20% compared to last year, as it's linked to revenue growth of the domestic banking business. Now, the aforementioned net profit represents a 12% rolling return on tangible equity of 12.2%. In terms of P&L, we will take a closer look at the figures in a minute. In any case, overall, the quarterly evolution was healthy, which reflects the good momentum of the business growth.
NII grew at 1.7% Q-on-Q, mainly driven by a positive customer margin evolution, while on a year-on-year basis, the increase was close to 12%. Fees increased slightly in the quarter, explained by a stable quarter in terms of both service and credit risk fees. And on a year-on-year basis, the evolution has been -3.1%, in line with our guidance. Recurrent costs remain flattish, which is in line with our expectation of contained inflation for the year. Now, taking a look at our core results, the addition of NII plus fees minus recurrent costs, you can see the performance has been positive, as they grew 2.6% Q-on-Q and 13.8% on an annual basis. These core results, combined with a downward trend in provisions, consistent with the benign context for asset quality as we anticipated, boosted the net profit figure.
We will now go through the different P&L items in more detail, starting with NII in slide 15. NII increased, as mentioned previously, by 1.7% Q on Q and by 12% year-on-year, assuming a positive quarterly growth trend. On the top right-hand side, as always, you can see the drivers that explain the quarterly evolution. Moving from left to right, customer NII was by far the main driver, contributing EUR 20 million. Within it, customer margin added EUR 32 million, as it continues to improve, as we will see in a minute. On the other hand, as you can see, average volumes for the quarter had a negative impact of EUR 20 million, while the FX effect was positive and added EUR 8 million, mostly explained by the sterling appreciation.
The higher ALCO contribution, driven by a slight increase in size of the portfolio and lower excessive liquidity due to seasonal tax payments offset each other. The lower household funding costs are explained by the fact that maturities more than offset the cost of new issuances. This combination of factors produced a positive impact of EUR 3 million. And finally, day count represented an impact of minus EUR 6 million in the quarter, while other items added EUR 3 million. Moving on to the following slide, we can see that our NII is performing better than what we budgeted at the beginning of the year.
This is reflected on the evolution of the customer spread and NII, both at group level but also, and especially, in the customer spread in Spain, which was driven not only by a resilient loan yield underpinned by both Euribor repricing and fixed loans rotation, but also by the evolution of cost of deposits. In fact, we are already seeing both front book pricing and migration from sight-to-term accounts stabilizing. Customer spreads at NIM and NIM at group level grew by 10 basis points and 7 basis points this quarter. On the other hand, in Spain, the loan yield grew by 15 basis points, while cost of deposits increased only one basis point, which represented a deceleration versus the quarterly rate of plus 20 basis points throughout 2023. As a result, customer margin increased by 14 basis points in the quarter, at a higher rate than last quarter.
With all this in mind and given how interest rates have evolved year to date, we can now be more precise with our guidance, and we believe that group NII in 2024 will grow around 3% on a year-on-year basis. Moving to the next slide, we show that the expected dynamics will continue to support our NII also in 2025. As usual, we split NII into three different repricing blocks for both 2024 and 2025: customer NII excluding TSB, the contribution of capital markets (in other words, ALCO household funding and excess liquidity), and thirdly, TSB's evolution. Let's start with 2024. As per the ex-TSB customer margin, we still have EUR 5.5 billion of fixed-rate loans, mainly to corporates, to reprice in the remaining part of the year.
Additionally, the evolution of deposit costs already accounts for a front book yield of term deposits below the back book in Spain, as well as a migration from current accounts to term deposits, which is, as we said before, stabilizing. Therefore, cost of deposits is increasing, but at a much slower pace than in 2023. On the other side, ALCO repricing and higher liquidity will be able to contract both the non-remuneration of the minimum reserve requirements as well as the higher household funding costs, as more expensive new issuances replace maturities and low-yield instruments. As a result, these two first blocks will more than offset the low single-digit decline in NII in TSB.
The evolution of NII in our UK franchise is determined by the fact that the increase in the structural hedge contribution will not be enough to offset the rest of the headwinds (that is, the spread tightening in mortgages and the higher cost of deposits). Nevertheless, putting these three drivers together, as we have afore mentioned, we estimate that NII at a group level should increase by around 3% already this year in 2024. Now, moving to next year, to 2025. The ex-TSB customer NII will be driven by basically two movements: on the one hand, the negative one: a wider downward trend in loan yield than the benefits of lower cost of deposits, both driven by a lower interest rate environment.
On the other hand, the positive one: more dynamism in volumes and 60% of mortgage stock in Spain in fixed rates, along with more than EUR 4 billion of SME and corporates fixed-rate loans to be renewed with a pickup. In any case, we expect that the impact of both movements will drag down NII in 2025. Nevertheless, with regards to ALCO and household funding and excess liquidity, we see them overall as a positive contributor for NII in 2025, as we are managing assets and liabilities to lower the balance sheet sensitivity to interest rates. In the case of ALCO, we are doing this by reinvesting our maturities at fixed, higher rates, whilst for household funding we are benefiting from lower costs as we have a large part of the portfolio which is hedged into variable rates.
Finally, NII in TSB should increase in 2025, mostly driven by higher contribution from the structural hedge and positive loan volumes offsetting any other headwinds. Therefore, all in all, with these three moving parts, we believe next year's overall NII should be flattish versus 2024. Moving now on to fees: these posted a marginal increase of 0.2% Q on Q and a decline of 3.1% on an annual basis. This quarter, the stable trend was mainly attributable to credit risk and service fees, despite their positive seasonality in Q4 2023. Asset management fees posted positive growth in the quarter on the back of a stronger performance of the capital markets, as well as the net inflows of mutual funds, as César mentioned earlier.
It is important to mention that these fees still contain our merchant acquiring business, as we have not yet closed the agreement with Nexi, which is pending the final regulatory authorizations. We are expecting to close the deal during Q2, and once this agreement is completed, the reclassification of P&L items will push our fees downwards towards the mid-single-digit decline that we guided. But nevertheless, as previously explained, it is important to mention that the reclassification of fees will also reduce costs and provisions, and therefore it will not impact the overall profit before tax of the group. Leaving the revenue lines to one side and moving on to costs: this quarter, costs remained stable when excluding TSB's non-recurring costs of fourth quarter 2023. In year-on-year terms, costs increased by 2.9%.
Considering that the costs introduced from the efficiency plan announced in Q4 last year in the U.K. have not yet come through, the year-on-year underlying trend is very much in line with our guidance for the year. As you can see on the right-hand side, cost-to-income ratio was down this quarter by almost 4 percentage points when compared with last year's ratio, and even when including TSB restructuring costs incurred in 2023. When we exclude TSB, the cost-to-income ratio stands at 41.5%. Therefore, once again, we are within our budgets to meet our guidance for 2024 of circa 2.5% growth versus 2023's recurrent cost, which stood at EUR 2,883 million. In the next slide, we cover cost of risk and the P&L items between pre-provision profit and profit before taxes.
The group's credit cost of risk stood at 41 basis points, supported by an asset quality with no deterioration, as we will see later. This represents a reduction from previous year's levels and, as we mentioned back in February, we believe that it can be maintained, if not improved, throughout the year. The group's total cost of risk for the quarter stood at 50 basis points, which implies a decrease of five basis points versus last year and is even better than our expectations. Taking a look at the breakdown of total provisions, as always on the top right-hand side, from left to right we can see that we booked EUR 166 million of loan loss provisions (the equivalent of the 41 basis points of credit cost of risk that I have just mentioned).
We released EUR 1 million in foreclosed asset provisions, as we are setting these assets as a premium. EUR 31 million of NPA management costs, which could be considered a run rate. Finally, other provisions which are normally mainly associated with litigations and other asset impairments stood at EUR 12 million. As you know, this line shows a little bit more volatility, but as we do not see any new sources of litigation, we do not expect this item to grow, on average, throughout the year. Going forward, a stable favorable microeconomic context for households and companies, together with more idiosyncratic factors such as our fixed loans or, more importantly, our risk management actions, should lead cost of risk to continue the positive decreasing trend throughout 2025. Moving on now, in the next section, I will walk you through asset quality, liquidity, and solvency.
Before reviewing our asset quality evolution in the quarter, allow me to take a step back to review the nature and composition of our current loan book. Sabadell's group performing loans amount to EUR 151 billion. Retail mortgages, probably one of the safest products in terms of credit risk, account for 51% of the book. Mortgages are evenly split between our mortgages business in the TSB in the U.K. and our mortgage business in Spain. Mortgages at TSB typically have low loan-to-value. Additionally, the mortgage portfolio is very granular and widespread across the U.K. Buy-to-let portfolios represent only 12% of the franchise and have steadily reduced its weight over the last years, while the interest only has also evolved in a clear downward trend. All these characteristics provide a business with a very low cost of risk.
The other half of our mortgage portfolio is in Spain, which comprises one quarter of our loan book in Spain. More than 60% of this portfolio consists of fixed-rate mortgages, which are much more resilient in the current interest rate environment. This means that the bulk of our variable-rate mortgage exposures were originated many years back. In other words, the borrowers have been paying down debt for a long time, and the principal has been considerably reduced. The SME and corporate segment represent 39% of Sabadell's loan book and is characterized by long-standing customers. This is a segment that we know very well, and more importantly, where growth is targeted on the back of risk profiling, which should produce a lower cost of risk as new vintages start to come through.
Regarding the consumer credit segment, more than 95% of the new lending at Sabadell and TSB franchises is with existing well-known customers. Moreover, we have been increasing the percentage of new lending through pre-approved loans, and they represent now 86% of the new lending, showing a significant upward trend when compared to previous years. This targeted approach is yielding very good results in terms of cost of risk for the new consumer loans vintages already. It will take some time to see the results from all these improvements in credit risk management, as well as the initiative that César mentioned before, but we are confident that they lay the foundations for better asset quality and, therefore, better cost of risk in the future. In the next two slides, we show the evolution of non-performing assets, starting in 2023, looking at the exposures by stages.
Coverage on the right-hand side our stage two exposure as a percentage of the loan book dropped by 125 basis points year-on-year, which amounts to more than EUR 2 billion or EUR 400 million in the quarter. This evolution was mostly explained by repayment of those loans or reclassification mainly to stage one. We also managed to reduce the stage three loans by around EUR 200 million in the year. The NPL ratio stood at 3.46%, decreasing by 6 basis points in the quarter. Finally, it is worth noting that the group coverage ratio improved slightly in the quarter, standing now at 59%. I would like to highlight that in this quarter, as in most recent ones, we have been able to decrease our NPLs in absolute terms, while increasing their coverage and, very importantly, when we have done so whilst incurring at a lower cost of risk.
As we have guided in the past, we think that this capacity to reduce NPLs and cost of risk will be maintained going forward into 2025. Moving on, in terms of foreclosed assets, it is worth noting that the stock continued to decline both in quarterly and annual terms. This reduction amounts to 16% of the stock on a year-on-year basis. These assets benefit from having a sound risk profile, as 95% of them are finished buildings, while coverage remained broadly unchanged at 39%. We continue selling around 20% of our foreclosed assets portfolio every 12 months, and we continue to sell them at a premium (5% in the last 12 months). We believe this trend constitutes a clear proxy that shows that our foreclosed assets are correctly marked to market in our books. Overall, total NPAs, which include both NPLs and foreclosed assets, are down 5% year-on-year.
Gross and net NPA ratios stand at 4% and 1.8% respectively, and total coverage remains stable at 56%. Turning now to liquidity: as you can see, after having fully repaid TLTRO III, our LCR remains at sound levels explained by our substantial liquidity buffers. Our NSFR reached 144%. The loan-to-deposit ratio remains stable at 94%, while total liquid assets stand at EUR 60 billion, of which EUR 44 billion are high-quality liquid assets. Moving on to the central bank funding, which is illustrated on the bottom right-hand side of the slide: firstly, the EUR 32 billion drawn from the TLTRO III facility has been fully repaid in less than two years. As for the U.K., we repaid GBP 0.9 billion of the TFSME in the quarter, leaving GBP 3.1 billion outstanding, most of which will mature in the second half of 2025.
To end this slide, I would like to highlight the recent upgrade to our S&P credit rating, which has been raised from BBB to BBB+. This upgrade reflects the agency's view that Banco Sabadell has strengthened the profitability of the business franchise, which is now commensurate with that of other peers. Along with this upgrade, our outlook is still rated positive by two agencies, namely Fitch and, more recently, Moody's, which revised our outlook to positive from stable, in line with its recent upgrade of Spain's sovereign rating. In the following slide, we can see our current MREL position: this quarter, the MREL and subordination requirements for 2024, applicable to us on a consolidated basis, have come into force. As you can see, Sabadell has ample buffer on the requirements in terms of risk-weighted assets and leverage ratio exposures, both in total and subordinated exposures.
This first quarter, we have front-loaded our plan by issuing more than EUR 2.2 billion across the capital structure, including Tier two issuance, senior preferred, and senior non-preferred transactions. Additionally, TSB issued an inaugural covered bond in euros, which received very good acceptance from the market. In the following slide, we see that we continue to generate capital organically as our profitability improves. Our fully loaded CET1 ratio stands at 13.3%, having increased by 9 basis points in the quarter or 52 basis points year-on-year. Looking at the detail of the quarterly evolution, we can see that the organic capital generation, excluding the banking tax and considering the accrual of 50% dividend payout, was 21 basis points in a context where RWA subtracted 8 basis points in the quarter. We exclude the 12 basis points impact of the Spanish banking tax to reflect the underlying capacity to generate capital.
This quarter, the fair value adjustments of our fixed income portfolio had no impact in terms of capital. From a regulatory perspective, the CET1 ratio stood at 13.3% on a phasing basis, with an MDA buffer of 437 basis points, increasing 9 basis points in the quarter. Finally, in terms of shareholder value creation, tangible book value per share increased 15% year-on-year, including the distribution of EUR 0.05 through dividends paid to shareholders in the last 12 months. Moreover, we identify the impact of the former 2022 share buyback program, which is equivalent to EUR 0.04 per share. On top of this, as César explained previously, we are starting our 2023 EUR 340 million buyback program today. With this, I hand over to César, who will conclude our presentation today.
Thank you, Leo. To finish our presentation, I would like to recap on our guidance. We are upgrading our 2024 NII guidance from low single-digit growth to around 3% growth. Fees decreased by 3.1% on an annual basis, as anticipated, in line with our mid-single-digit decline guidance. Total recurrent costs grew by 2.9% on a year-on-year before savings from the TSB efficiency plan have to come through. This means we are on track to meet our target of 2.5% increase for the year. Total cost of risk reached 50 basis points, which is in line with our target of less than 55 basis points. All of this has brought our return on tangible equity to 12.2%. The good start of the year and the trends observed in NII and cost of risk allow us to improve our return on tangible equity guidance for 2024 to above 12%.
Also, very important, given the current trends and what Leo has explained in detail, we see return on tangible equity improving further in 2025. With this, I hand over to Gerardo to kick off the Q&A session.
Thank you, César. We will now begin the Q&A session. Please remember to press star six to unmute your lines. Operator, could you please open the line for the first question?
First question is coming from Maksym Mishyn from JB Capital. Please go ahead, pressing star six.
Hi, good morning. Thank you for the presentation and taking our questions. I have three questions. The first one is on your guidance for ROTE improvement in 2025. You explained the NII and cost of risk assumptions, but how should we think of the fee revenue lines and cost lines? And also, what kind of ROTE evolution you expect for Spain and the U.K.? The second question is, could you please remind us on what capital gain and capital impact you expect from the disposal of the payments business and what kind of options you could consider as potential ways of deploying these gains? And then lastly, what is your view on the possible introduction of the neutral macroprudential buffer discussed by the Bank of Spain, and can it have any impact on your lending appetite or distribution policy? Thank you.
Leo, would you like to take the two first ones?
Sure. So basically, I mean, we've given guidance of NII and cost of risk for 2025. As per fees, we're still seeing I think they should grow from probably have a positive stand from this year because this year we have the impact of the Nexi transaction, as I tried to explain before. So from here onwards, I would expect fees to go up. In other words, total income should be positive next year, in my opinion. As per costs, we are very committed to cost control and to keep any potential inflation as low as possible.
Perhaps we can elaborate more on that next quarter on the basis of the management linking this with your second question on the basis of the management actions that we are reviewing in order to be able to use the capital gain coming from Nexi in the best possible way to foster return for the bank going forward. So answering to this question, again, we are not considering that capital gain because, as I said, we are considering alternative uses of that capital gain in order to which make financial sense, obviously, in order to foster the future profitability of the bank.
On the third question, what would be the impact of countercyclical buffer? To begin with, there's no absolute clarity about what would happen. But to start, our current capital situation, 13.3% Core Tier 1, offers an MDA buffer of almost 440 basis points. We think this is a healthy buffer, but of course, any potential not-foreseen change will have to be analyzed when it happens. Specifically, on a potential countercyclical buffer for 50 basis points increase, it would represent 30 basis points impact on requirements because 63% are Spanish RWAs. It seems that that kind of impact would be manageable with the buffer embedded in our 13% post-Basel IV level. In any case, we will have to wait and see what is decided and what does it imply.
Thank you. Operator, can you please move on to t he next question?
Next question is coming from Antonio Reale from Bank of America. Please go ahead by pressing star six.
Good morning, everyone. It's Antonio from Bank of America. I have two questions, please, one on NII and one on the U.K. business. Well, you guided to NII growing about 3% this year and then to stay flattish in 2025 versus the level of 2024, which is significant in terms of earnings revision due if that was to materialize. So I'm trying to understand better what are the key assumptions here, maybe in terms of interest rates, volumes, deposit remuneration, ALCO portfolio. I mean, slide 18 is very useful, but if you could back that with some numbers to sort of get us an understanding of how confident you are on the delivery. I mean, it's a bold guidance. So we've seen quite a bit of volatility in the forward curve, so I'm trying to understand your assumptions here. That's the first question.
The second one is on the U.K.. The U.K. has not been an easy market to navigate. TSB has come a long way. We've seen increased consolidation in the market. I'm just wondering how you're thinking about your franchise. Do you think you have the scale to be able to compete in equal terms? And just related to the first question for the U.K., if you could talk a little bit more about the margin pressure you expect for this year and then the contribution from the replicating portfolio skew to 2025? Thank you.
Should I take the first one? Yeah. Sure. So, I mean, the assumptions that we're taking into account for 2025 are basically we believe that we're taking into account the forward curve. This is not basically, we're taking into account four cuts this year and then an additional three more for 2025. So within that, there's really no difference with regards to what the market is seeing right now. So we've been I don't know if conservative is the word, but certainly, we're not getting away from that. We believe that loans may grow a little bit, but we're not considering a huge amount.
So basically, we have not changed our budget for 2024, which was a slight decrease despite the fact that I think loans will be better than that, as we have seen in Q1, and probably a little bit of growth in 2025, but I think we took into account 1%. So again, not aggressive assumptions at all. What we have to consider is that out of the I mean, another lever that we have, it's basically the reduction on the yield of deposits.
I mean, it's worth to take into account that, for example, in Spain, almost half of the cost of deposits, 44%, comes from three segments, basically public sector, institutional customers, and private banking. We're currently remunerating about 50% of our private banking deposits, and the beta is very close to 1% on those, and almost 80% of the deposits of the other two segments. This is institutional customers and public sector, and the beta, there is one, if you wish. So this shall bring a significant reduction in the cost of deposits going forward because they're completely linked, as I said, with these kind of betas to the deposit rate evolution.
As per the contribution of the ALCO book and wholesale funding and excess of liquidity, well, I think the management actions that we're taking in order to reduce the sensitivity of rates are being done mostly through the basically, through the hedging of the ALCO book and the wholesale funding. So as I explained in previous quarters, basically, what we're doing we've been doing for a few quarters, and we keep on doing is we are reducing the part of the ALCO book which is hedged to floating. It used to be up to 48%, and now it's 38%, and it will continue to be so in the coming quarters. We have about EUR 2 billion of bonds to mature this year, which will be replaced by fixed-rate bonds at a much higher rate.
We still have the option to increase slightly the size of our book towards the EUR 30 billion. On the other hand, we are doing just the opposite on the wholesale funding. So while only 50% of the wholesale funding was floating perhaps a couple of years ago, today is north of 61%. So these actions allow us to believe that the contribution coming from this bucket, this is ALCO minus wholesale funding plus excess of liquidity, should be considerably positive next year. As per the U.K., do you want to talk a little bit on the?
Yeah. Well, on the U.K., I think we have been saying for a while already that 2024 would be a transitional year. Nevertheless, we start to see and you mentioned margin pressure. We see that the trend of increase of the cost of liabilities has been 9 basis points. As I mentioned, it was 24 basis points as an average for the previous year, 2023. That's a slowdown. We still have to see if it is confirmed, but we are starting to see slightly higher margins in the mortgage production together with a slight increase in volumes, as you have seen in the presentation. Margins, I think, for sure, they are under pressure. It's a difficult market. It's a tight market. We see some signs that could be a little bit encouraging.
I think all along, we have been defending this franchise because we think that it is still far away from its potential. The structure of the caterpillar makes that it doesn't rip all the benefits of increase of interest rates in the short term, but it spreads that advantage over time, as Leo probably will be able to explain in more detail. TSB has generated capital organically by around 2 percentage points in the last two years. Based on that, on 2023 results, it has distributed GBP 120 million in cash dividend with a 70% dividend payout. There is no change in our strategy.
We, anticipating that the margins were complex and that 2024 was a transition year, we, together with the team I mean, the team in the UK and our colleagues took the decision of doing a restructuring that will yield also an improvement on the cost to income, which related to your question, you asked, well, is the size sufficient? Well, it's a matter of reducing the costs and progressively increasing the volumes. 2024 is a transitional year because the second half is going to be better than the first half, as we explain in the chart, and we are much more optimistic about the outlook. The provisions that we did of GBP 53 million in Q4 2023 have to show their positive impact on costs from the second half of 2024 onwards. So we remain optimistic about our franchise in the U.K..
If I may add a little bit on the U.K. and NII. On the one hand, as César mentioned, we're still seeing quite a lot of pressure, as you mentioned, Antonio, on the mortgage spreads. Nevertheless, in the last few months, we have seen those spreads continuously growing despite the fact that they're still below the backbook. Sorry, yeah, below the backbook. But it's true that in March, they were very close to the backbook. We'll see what happens going forward. But the trend has been clear for a number of months already. But in any case, as I said, 2024 will have quite a lot of pressure, but it seems like it's coming to an end or close to an end.
On the deposit front, as César mentioned, only 9 basis points increased this year. But the good news is that the front book of deposits have not moved since September. So basically, the movement is driven by the mix from current accounts to savings, while, as I said, the remuneration on the front book has been stable for the best part of six months already. So taking into account the forward curve and the assumptions that are there, I'd be surprised if we see big movements on the front books on this regard. And then finally, on the structural hedge, I'll try to explain it as simple as I can. So basically, we have around EUR 21.5 billion-EUR 22 billion portfolio, okay.
So this is a five-year swap. Therefore, it reprices about a fifth every year, okay? So that's around a little bit north of EUR 4 billion every year. But in 2022, because the size of the portfolio came down from 2024 to 2022, we are only reprising half of what it should be reprised, EUR 2 billion, okay? This is EUR 2 billion times the difference between the backbook, which is close to zero for the next three years, and the front book, which is the five-year swap. So it's 350-400 basis points times EUR 2 billion this year, but times EUR 4 billion in 2025, times EUR 4 billion in 2026, times EUR 4 billion in 2027. And the backbook of these three repricings is fairly close to zero, okay.
So in other words, in the coming three, four years, we will see that these EUR 22 billion, which are currently pricing 1.5%, they should be pricing the full five-year swap, so 350, 400 basis points. So 200 basis points times EUR 22 billion, well, that's around north of EUR 500 million, part of which will come through in 2024, but a small part. And the remainder will come through in 2025, 2026, and 2027. I hope this clarified a little bit. Yeah.
It's good answers. Thank you very much.
Ain't easy. Ain't easy, [guess] the counter pillar.
Thank you all. Operator let's, please move on to the next call.
Next question is coming from Francisco Riquel from Alantra. Please go ahead, pressing star six.
Yes. So thank you for taking my questions. First one, I wonder if you can elaborate more about the initiatives to foster loan growth in Spain. So you are focusing on pre-approved clients, which is good for the cost of risk. But why do you think your existing clients have not been borrowing more from you to date? Are they clients of other banks, and will you be gaining them through price competition? Is it about the new remote managers approaching the clients? So the guidance you have given is very limited growth in absolute terms. I don't know if you expect market share gains. So you can elaborate more on the guidance of loan growth for the whole and by category. And the second question, you are guiding for a lower cost of risk in 2024 and farther in 2025.
So I wonder if you can quantify these guidance and if you can comment specifically about the ex-TSB cost of risk and how different you see yourself through the cycle versus local peers at 30, 40 basis points currently? Thank you.
So if you agree, Leo, I will take the first question and leave you the cost of risk. Growth. I think we stated very clearly in the roadshow and during last quarter that we were ready for growth if the market showed some signs of reactivation. As a matter of fact, we have been preparing for the last years for this because I think there were a ton of things to be done historically. Of course, we continued to improve the backbook and continued to increase coverage while we were reducing cost of risk. But from a commercial point of view, we had a lot of things to do.
This started with consumer lending. It started with consumer lending because it's the easiest block. There, what we did was the technique that we all do, which is pre-approved loans. We have been quite cooperative between the business lines, and we have been able to expand technicalities like the funnel conversion that we use in retail to the funnel conversion that we use now in private banking or that we use also in SMEs and others. We have been developing the models both of pricing and of risk. You asked a more granular guidance, and as I mentioned, in mortgages. Well, it's very difficult to know how much we are going to grow, but certainly, we think it's going to be better than we forecasted originally where we said that it was going to be flattish for the year.
It increased, as you saw, by 20% this quarter. The demand has been recovering. So it's probably not only us who are going to show healthy growth in mortgages, but we are accelerating during the quarter. And what we see is that the pricing segmentation, because the risk models were already in place. But in mortgages specifically, the improvement in the pricing segmentation allows us to access and the average of the mortgages that we are producing is becoming higher because we are pricing better for the really low risks and high volumes. And also, all the methodology, which also helps conversion, which is having much more specialized RMs, which are centralized and working very well in coordination with the lead generation that is originated at branch level. Consumer lending, we expect double-digit increase. Here, we always had a low market. We started with a low market share.
We had a low market penetration in our client base. In 2020, we grew a little bit too fast without the right models, and it created some complexities. But right now, the critical element is, well, what are the areas 30 days later because consumer lending is dynamic ? And the numbers are better than they have been in the last two years despite the higher growth. So we are very happy with the cost of risk of consumer lending and the growth. And we still have room to penetrate further our customer base, which is not penetrated enough. In corporates and SMEs, as we mentioned, the credit facilities increased by 45%. There has been stronger demand and some single names. And it is important to note that without those single names, which are more volatile, the growth would have been 30% quarter-on-quarter.
We see an increase in demand, but certainly, what we see is that the volumes of pre-approved that we have analyzed in detail and this has taken a long time to produce these new methodologies allows us to know the probabilities of default and, therefore, the expected loss on a client-per-client basis. This allows a much more proactive commercial approach because it's very different to approach a customer and say, "Well, let's talk. What do you need? Whatever," than to go there and to say, "Okay, this is what we have for you because we have pre-analyzed you." And in some cases, it requires some additional documentation, and in some cases, it's quite straightforward. So the agility of our commercial bankers is very much improved. And we are doing it on focused targets. So we are optimistic.
We are putting a lot of management actions above the trends that are positive because the trends in this resilient economic activity and with the potential of interest rates and the forward curve going slightly down is this demand that was spending is starting to show, and we are just ready to grab it.
Going in-depth in your question regarding cost of risk, I think the movements of cost of risk or asset quality, for that matter, are driven by basically the macro, or the context. I think the macro is benign, the current macro, both in Spain for both 2024 and 2025 unless something geopolitical happens. GDP is going to grow. Unemployment has been very strong. There's no problem with the price of real estate because we haven't had the bubble. The uncertainties that we had last year, one was inflation.
It seems like now it's coming to a more normalized number. As a matter of fact, I think wages will grow in general in Spain more than inflation this year as they did in 2023. So that's not an issue anymore, in my opinion. And then there's the interest rate rise. And we had doubts about this previously, but I think the outcome has been fairly good for two reasons. On the one hand, the starting leverage of the starting point of the leverage of the private economy was really, really healthy because of all the deleveraging that took place in Spain. And second, and then this is more micro, per company, per bank, in our case, 60% of our mortgages are fixed. And almost all of the floating ones have north of 10 years vintage, if you wish. Therefore, the principal has gone down dramatically.
Therefore, we expect no issue whatsoever in the mortgage books. This was a drag last year when NII was going up because 60% of the books were fixed. It should be some kind of good news when rates go down because we will reprice slower than the rest and less than the rest. And it will be, for certain, good news in terms of asset quality and, therefore, cost of risk. Now, on top of this, what we've been seeing in the last few years is that there was a difference between the credit cost of risk and the total cost of risk. We used to have 20 basis points there. I think that's reduced to around 10-15. I am reasonably optimistic with this in the future. So that gap should remain where it is more or less right now.
Then as per the credit cost of risk in Spain, it used to be close to 60 basis points. And this quarter, we are in the high 40s. And because of the management actions together with the benign context that we just disclosed, but the management actions that we have taken, for example, in the consumer finance that César was already explaining before, we're already seeing those new vintages in the cost of risk today. But there are other management actions that we've done, as César explained, on the mortgage books and, more importantly, on the SME and corporate books, which will be starting to be seen by year-end and, moreover, in 2024. Therefore, we do expect that the credit cost of risk in Spain should come down steadily in the coming quarters and also through 2025.
So as a summary, we are quite comfortable with our guidance that we're going to keep on seeing improvement in the cost of risk in the coming quarters, including, of course, 2025.
Thank you. Operator let's, please move on to the next question.
Next question is coming from Ignacio Ulargui from BNP Paribas. Please go ahead, pressing star six.
Hi. Thanks for taking my questions. I just have to, if I may. One is a bit linked to what you were commenting a little before on the other provisions and also linked to the potential capital gains from the Nexi transaction. I mean, is there a chance to reduce the NPA management costs? I mean, is there a way to kind of reduce further that through reaching an agreement with Intrum? And the second one, on the NII outlook for 2025, have you increased further the swapping of your wholesale funding so that you have less exposure on that side? Thank you.
Okay. So yeah, I mean, on the first one, I don't think that's one of the we are very happy with our relationship with Intrum. Things are working very well in that regard. We are managing to reduce NPAs. What we're doing on the foreclosed assets, I think it's fairly good, to be honest with you, because I think we've touched about this before, but no bank has the ability to put on the market all their foreclosed assets portfolio because a part of it is still through courts and so on and so forth. So selling 20% of the stock, in my opinion, is a very good number.
Moreover, as an average, we are selling with a premium of 5%. So we are fairly happy with our relationship there, and I think things are working in the right direction in that regard. So we think about other management actions, but not that one. And as per the NII in 2025, yes, as I tried to explain before, we keep on reducing our sensitivity to negative interest rates. And therefore, we have increased the part of our ALCO book, which is fixed. Okay? And I think from the peak, we have increased that by north of 10 percentage points, if I recall correctly. And on the wholesale funding front, we have reduced the part that was fixed from, again, around 10 percentage points.
When we compare the part of the books that are basically hedged on a floating stand, three years ago or two years ago, we had around EUR 9 billion of the ALCO book, which were floating, while 12.5% of the wholesale funding were floating. So that gave us a net of EUR 3.5 billion of liabilities at floating. While today, those numbers have more than doubled to EUR 7.4 billion of liabilities at floating, therefore, and that's the net number of both. And therefore, that will benefit from interest rate cuts.
Thank you. Let's, please move on to the next question.
Next question is coming from Andrea Filtri from Mediobanca. Please go ahead, pressing star six.
Thank you for taking my questions. They've actually been largely answered already. Just one clarification from me. I wanted to understand if I understood correctly that you are targeting 13% CET1 post. B asel IV even with a potential 1 percentage point increase in the CCYB requirements? Thank you.
I think there is no change at this point in time in any guidance about capital. As you know, this quarter, we have generated 21 basis points of quarter one organically, excluding the banking tax. We advance to getting closer to the 13% pro forma post Basel IV equivalent to approximately 13.5% for this year. It is obvious that the pace at which we reach that level and when we could be achieving it will be basically depend on the performance of volumes. As I mentioned before, I think on whatever countercyclical buffer there might be and whatever the volume that is, the board will have to evaluate this issue when we get there.
But certainly, the impact of the first 50 basis points increase, as I mentioned before, would represent an impact of around 30 basis points when we have an MDA buffer of around 440. So I don't think there's much hype around this at this point in time.
Thank you. Operator let's, please move on to the next question.
Next question is coming from Borja Ramirez from Citi. Please go ahead, pressing star six.
Hello. Good morning. Can you hear me?
Yes.
Perfect. Thank you for taking my questions. I have to. Firstly, the NII details in slide 18, that's very helpful. Thank you for that. Just to confirm, if you could please provide details on your NII guidance for Sabadell and TSB, if you could provide some quantitative details on the evolution in 2024 and 2025. And then also, I would like to ask, what is your rate sensitivity? I think it was 3% NII for 100 basis points lower rates, of which 1% of NII for 100 basis points lower euro rates. And lastly, if you could please provide details on deposit beta ex-TSB expectations for 2024 and 2025? Thank you.
Okay. So on the first one, basically, I'm going to come back to what I tried to explain while doing the presentation. So we see that NII ex-TSB, it's going to grow certainly in 2024, driven by the levers that I mentioned at the beginning of the year and also repeated here. So we have a portfolio of floating loans, which is still repricing positively, and will probably do so for the best part of the second quarter. On top of that, we are containing very much the cost of deposits. Despite they will grow, they are growing at a much lower pace than last year. When rates start to come down, they will start to go down too.
Third, we had around EUR 8 billion of SME and corporate loans, which were fixed and had not yet been repriced this cycle, of which around 2.5 have already been repriced in Q1, and we still have 5.5 to go through the course of 2024. In other words, we believe that this part of this packet of the NII will certainly have a positive evolution in 2024. From the guidance that we gave in February, perhaps rates are slightly better than what we thought at that stage or what we budgeted. Volumes are, again, slightly better than what we budgeted. Within these numbers, we thought that volumes were going to go down this year slightly. This may not be the case anymore, and perhaps we can see some growth. As per 2025, well, sorry, not again. It's going to be the opposite.
So basically, we see that the pressure on the loan books because of the interest rate decrease will not be offset by the decrease of deposits, despite it will be reduced significantly. We are taking into account the forward curve. So as I said before, four cuts this year, three cuts next year. We are not taking into account a big change in volumes. I think we were thinking about 1% increase. This may be slightly better. We will see how 2024 goes because, as you can imagine, the volumes that we produce in 2024 will be much more impactful in 2025. But nevertheless, what we are aiming, what we're thinking, is that the contribution from these packets of the NII in 2025 should be negative to 2024. In other words, it should be smaller than the one that we are producing in 2024.
But it will be more than or at least compensated, if not more than compensated, by the other two packets. This is the capital markets, ALCO, wholesale funding, excess liquidity, and certainly by TSB's NII. As per sensitivity, so in the previous quarter, we were talking about a 1% in euros for a parallel shift of 100 basis points. That has been reduced now to around 0.6% because of the management actions that we're taking on the ALCO book and the wholesale funding that I explained before. And in total currencies, it was 3%, and now it's 2.7%. So yes, we're still decreasing the sensitivities. And as per I think your last question was on deposit beta. Deposit beta in Spain in Q1 was around 22% coming from around I think it was 20% in Q4, so fairly stable.
Thank you. Operator, let's please move on to the next question.
Next question is coming from Hugo Cruz from KBW. Please go ahead by pressing star six.
Hi. Hello. Thanks for the time. I wanted to ask a few follow-ups on your loan growth comments. Could you clarify if you're looking to take share from the other banks or just growing in line with the market? And also, do you set formal growth targets to the commercial network? And if the growth doesn't materialize, what would be the plan B? And then a follow-up on the disclosure on the deposits. There was a big increase in deposits of EUR 7 billion from repos Q-on-Q. What is that, and what's the cost of those repos, please? Then a final question on the buybacks. Realistically, do you have any intention of starting a new buyback this year once the current buyback finalizes? That's it. Thank you.
Let me take one and three. It's difficult to know if we are growing market share or not. We think that probably there's some growth in market share in corporates and SMEs and probably not so much in the first quarter in mortgages. But the numbers of market shares and of the market always come with a delay. It's very difficult on such a short notice to know if we are gaining market share or not. What we said and what we will try is if the market grows, we lost a bit of market share last year in mortgages. We did not gain market share in other areas except in consumer lending.
What we said, because the pricings were depressed, there was no demand. It would have been a war on pricing. We see demand more healthy. And therefore, we said from the beginning that we will try to grow. Of course, the network has challenges in terms of growth. And at the same time, it has very clear guidance's on risk and very clear restrictions on that. So that should be, I mean, the end result. I think it's hopefully that we will grow at least marginally our market share this year in Spain. In terms of your specific question on share buyback, which is your third question for this year, I don't think I can say anything more than I have said up to now.
I mean, it's very clear that it will depend reaching that 13.5 after Basel IV will depend on the rate of growth of our business. And when that happens, that there are some regulatory uncertainties that need to be clarified. It's very difficult to answer that question. But what is important to say is that as we stand, nothing has changed from what we declared in Q1 in relationship to capital.
And as per the repos that you were mentioning, basically, these are operations that we're doing with the Spanish Treasury. They're doing auctions to place their excess of liquidity. And we are doing these repos for which we make a small pickup versus the repo rate.
Thank you. We are starting to run a bit short of time. We're going to try to squeeze two more questions. I will ask you if you don't mind to be brief, please. Thank you. Let's move on to the next question.
Next question is coming from Pablo de la Torre from RBC Capital Markets. Please go ahead by pressing star six.
Hi. Thanks for taking my question. Hopefully, you can hear me. [crosstalk] Great. I had two questions on TSB, please. First, it would be useful to understand what assumptions are included in your current NII guidance regarding the early repayment of TFSME given the liquidity coverage ratio at TSB was above 200% at the year-end. And then secondly, on the banks on TSB's cost of risk, if you could provide your views for this year's and next year's cost of risk given that the outlook for house prices in the U.K. continues to improve and the fact that also TSB continues to hold quite sizable post-model adjustments on the balance sheet, is it reasonable to expect cost of risk in the U.K. that is substantially below through the cycle level this year? Thank you.
On the second one, I would say that no. What we expect is more or less stable. The cost of risk is low at TSB. And we haven't embedded in our forecasts any major delta there, correct, Leo?
No, no, that's right. Nothing. We're not considering anything very significant in that regard. And as per the assumptions regarding TFSME, our TSB was able to repay GBP 0.9 billion this quarter. GBP 3.1 billion remaining. Basically, another GBP 1 billion will probably be repaid through the course of the coming quarters in 2024 and a reminder, GBP 1.5 billion in 2025. This is what we have included in our budget.
Thank you. Operator let's, please move on to what will be the last question of the morning.
Last question is coming from Sofie Peterzens from JP Morgan. Please go ahead by pressing star six.
Thank you for taking my question. Here is Sofie from JP Morgan. So I just wanted to ask if you could comment on kind of how you view M&A now that your capital position is quite strong. Profit outlook is pretty good. So how do you think about M&A both in Spain and outside of Spain? And also maybe what do you think about potential divestments? Would you consider selling TSB? What are your thoughts here? But also on Mexico, Miami, and the international business that is almost 10% of your loan book, what are your thoughts about these businesses and what growth opportunities do you see here? Or would you consider selling these operations if the price is right? That's my question. Thank you.
Yeah. I have to start with bad news for your colleagues from investment banking because we don't see much M&A activity. To start with Spain, I think our peers present very healthy capital, liquidity, profitability situation. So they don't have any incentive to look for M&A activity. And I think I've mentioned a few times that we respect them. We are focused on increasing profitability organically. I think that has been one of the, if you allow me, some of the successes of the evolution of Sabadell because we have been able not to be distracted and to focus on our current perimeter. As a matter of fact, we quite like our current perimeter. We like Spain. We think there's a lot of potential still. I think the guidance in which we believe that we are giving you today.
It's healthy and shows a trend that is very positive. As per TSB, we have mentioned that we feel very satisfied with the franchise, that 2024 is a transition year. But it has a very clear path. It has a very clear path both in terms of cost and the evolution of income and so forth. Mexico, as you know, we are launching there. It's profitable. It has now, because of the very good actions of management over there, the franchise of corporate is very good, and it's profitable. But we think that the funding is a little bit expensive and volatile. And as you know, we are engaging in gathering some retail liabilities that should be more stable and at the same time provide a better return on tangible equity for Mexico. And Miami is a very good franchise.
We have been there for, I think, 35 years or something like that. We know the business. Our bankers are very effective. The return on tangible equity there has been very high for a very long time. So it's a great franchise. Overall, no business for investment bankers in the near term. Don't tell them because they might not like it. But that's all for all. So thank you very much.
Tha nk you. Thank you all for your questions. Thank you, César and Leo, for the answers. To those of you who we have left out, sincere apologies, but we have run out of time. Let us in any case remind you that you've got the whole IR team available, and we can engage after this call. Once again, thank you all for your participation and for joining us today.
Thank you.
Thank you. Thank you very much. Bye.