Good morning, everybody, and welcome to 2023 Santander's Investor Day. I am Begoña Morenés, Global Head of Investor Relations for Santander. I want to thank first all of you who have come to London to be here with us. Welcome. Of course, all of you who are following this event online. It's been four years since we had the last Investor Day, and a lot has happened since then. The world is definitely a different place. I am honored to introduce to you our top management who will be leading today's Investor Day. Ms. Ana Botín, our Executive Chair. Mr. Héctor Grisi, our new Group CEO, who took over José Antonio's place on January 1st. Mr. José García Cantera, our CFO.
Above all, I'm terribly excited with the strategy, our plan, and the financial targets for the next three years that we are about to detail in the next coming hours. A couple of things on logistics, as always. We're gonna have a presentation by our Executive Chair, followed by a presentation by our CEO. We will then have a 30-minute break. I'll let you know when. When we come back, we'll have the presentation by our CFO, and we will open the floor for an extended Q&A session for all the questions you may have. We will end the day with a standing lunch downstairs. All three presentations will be sent to the CNMV and published some minutes before they start.
To make everybody's life easy, you already have a press release, which I've seen some analysts refer to on their morning notes, in the form of a relevant fact at the Spanish CNMV. It contains all the key highlights and the key targets of today's event. A recording of today's event will be available in our corporate website at the end of the day. Without further ado, let me leave you with Ms. Ana Botín. Ana, the floor is yours.
Thank you, Begoña. Welcome everybody. It's a huge pleasure to see everybody in person again. Indeed, thank you for joining us in this Investor Day. As Begoña said, indeed, it's a very, very different world to when we last met. I think what's important to start saying is that we delivered on our commitments made in 2019. We again in 2022 delivered on our guidance for the year, delivering record profitability at the same time that we further expanded our commercial reach. Today marks a new beginning for Santander. We set new ambitions. We're entering a new phase of sustainable and higher shareholder value creation. For the first time ever, we're aiming to deliver double-digit TNAV per share and dividend per share on average through the cycle.
To deliver on this three-year plan, here's how we think about our capital allocation and value creation, which of course starts on the left, aiming to maintain a 12% CET1 or above on a fully loaded basis for the next 3 years. We will maintain and even increase our disciplined capital allocation, would allow us to meet our profitability targets. As you can see, our aim is to be at 85% of our RWAs to return more than the cost of equity, and we'll continue to invest for the 15%, again, with discipline. Finally, we'll continue, and thanks to this rigorous capital allocation, to deliver higher profitability, and we're targeting a 15%-17% ROTE for the next three years. As you know, already for 2023, above 15%. This will result in us being able to return more of our profits to you, our shareholders.
We will continue with the half cash, half buybacks. We will increase our payout ratio to 50% already in 2023. Very importantly, I want to stress that at current levels, the board and we all consider buybacks a highly accretive way to generate shareholder value. How are we gonna do this? This is really the question why you're all here today. We're gonna do it as we've done it for the last few years, but doubling down on what is a unique combination that few others can replicate, which is our local leadership and scale with our global scale and network. It's a key competitive advantage globally. It's a virtuous circle of mutually reinforcing value creation between our end market scale and our global scale.
Of course, we've shown already in the last few years, and we gave some numbers on our results, how this is already happening, how the global and network businesses already account for 30% of our total revenues and 50% of group profits. In the years ahead, it is again the scale of Santander, the network of Santander, that will help accelerate the profitability of our local banks. These global businesses will add more to profitability, proportionately, helping us achieve our aim of being the most profitable at the local level. The CEO will cover in more detail our plans. This is going back eight years, but I think it's important as many of you who invest for others show your track record. Well, this is our track record. I always say look at the numbers. The numbers are clear.
Why are we confident we can deliver? Because we have delivered in the past. Our unique business model works. We have delivered consistent growth, consistent improving profitability, increasing capital and shareholder remuneration. Yes, including in cash dividends. 2014, we paid about EUR 1 billion to shareholders, to return to shareholders. This year we're gonna return close to EUR 4 billion, EUR 3.8 billion. I'm not gonna go through the numbers, but please take some time to look at this and especially the consistency, the step-by-step. Just as an example, we had CET1 at 8.3%, we're above 12%. I'd like to make two additional points. One is that as we deliver these numbers, we have continued to build strong foundations. That's why we can tell you today we'll continue to grow profitably, not just in the next three years, but into the future.
Again, the change in the operating model in these global businesses has changed, but it has not changed throughout the bank, and the CEO will cover where we see the biggest opportunity. Again, we have invested to make this happen in the last few years. Second, of course, is that on top of what's behind these numbers is negative rates. COVID. Remember, we are a retail commercial bank. We give loans disproportionately compared to our peers, and we were more affected than others. Again, if we did this in those five years, just imagine what we can do in the next, in the next period. I'm not gonna go over this, but I wanted to keep it here for the record. This is our Investor Day in 2019. We said medium term, we have delivered on our targets, again, whilst investing for the future.
Again, 2022, we covered this already, but I wanna say that we also received approval and will be. Actually we announced today that we will do our second buyback. I wanna stress that since November 21, and by the time we finish this buyback, we will have bought back somewhere, depends on the share price, of course, 6%-7% of our shares. We're here today to talk about the future, and I just wanna make sure that I show what doesn't change. We still aim to be a bank that helps people and businesses prosper. We wanna be different from other banks by being simple and personal and fair in all we do for all our stakeholders. We've made a lot of progress, but believe me, there is much more we can do.
We will continue our journey to be the best open financial services platform, delivering in a responsible way, earning the lasting loyalty of our people, customers, shareholders and communities. As I've said before, our results prove our business model works, and this is the basics of or the foundations from which we will build also to the future. This business model, these competitive advantages give us both a cost advantage and a revenue advantage on a sustainable basis. In terms of customer focus, we have increased our customer base. We've deepened relationships. In terms of scale, we will further rely on the power of the scale of the Santander Group, our network businesses, but also, and very importantly, this is part of what will allow our local banks to deliver higher profitability. Last but not least, our diversification by type of business.
This is something that sometimes gets overlooked. It's not just geography, it's types of businesses which gives us that performance over eight years and actually more than that you have seen before. It's proven to be a key competitive advantage in the 2008 financial crisis, in Covid, in 2012 with the euro crisis. We believe that this is one of the key reasons why we sustainably or currently come out as one of the best, if not the best under stress by ECB. How are we gonna deliver this? The new phase of profitability and growth will be underpinned by three clear action lines. You can see here how we think about the future. This is about a digital bank with branches powered by the Santander network.
The CEO will give more details on what is behind this. I just wanna say there's specific concrete plans to deliver on these numbers. I just want to sum this up in three big ideas, which is first, we have about 160 million retail customers where we have a lot of upside. We're making 100% of our products and services available to our customers on our websites, on our apps, in our branches and throughout the bank. We will think about the branches as a powerful combinational complement to our fully automated offering, which is what we call a digital bank. We'll see the impact of this on both revenues and in cost. Second, leveraging the group network to accelerate the growth of our local businesses.
Linked to this, and third and very important, we are going global with our single software and best practices as I describe for individual customers. We have developed software solutions to automate front and back office of our retail banks. I'll comment that later. We're deploying the same software which is proprietary, which powers Openbank, serves more than 2 million customers in five country and works. It works in terms of cost and revenues. Of course, together with the front end, we also have our own back end called Gravity, our new core banking software. It operates on both private and public cloud. It is already, same as Openbank, implemented and serving customers in our U.K. bank. The Santander banks in Mexico, U.S. and Spain will be the first wave, again, the focus of the One Transformation that the CEO will get into later.
This approach together with a disciplined approach to capital, as you can see in the slide and I covered earlier on more financial terms, is what will allow us to create and accelerate value for you, our shareholders. These are the cornerstones of our value creation model. Our product offering and services will meet the evolving needs and expectations of our customers, which increasingly want us, and it is right thing to do, to focus, but very importantly, to embed ESG practices into our day-to-day. That is exactly what we're doing, we have done, and continue to do. It is very importantly not just the right thing, but it's a very important and significant growth opportunity. We'll continue to deliver on our green finance targets. We will remain, and we aim to remain a global leader in renewables. We're number two worldwide.
In wealth management, we'll deliver, and we aim to deliver, sorry, on the EUR 100 billion in socially responsible investments. We'll continue to look to ways to financially empower people. Just want to remind you that in 2019, we set a goal of empowering 10 million people. We reached that goal in 2022. We're increasing that to 15 million people across our group. Of course, we are going to continue to support higher education. As you know, we have a leading Santander Universidades program which helps us in many different ways across our group. We're working with 1,300 universities and gave 266,000 scholarships last year. To be leaders in profitability, again, we're going to focus on how can we leverage both our in-market and global scale. We aspire to be the best in-market bank in terms of profitability.
This is where our scale comes in. We have one of the largest customer bases in the world. We aim to reach 200 million by the end of the period. That's a big acceleration. Importantly, we're also focusing on active customers, where we are around to a 99, let's say 100-125. There's a direct correlation, of course, between this number and transactionality. As you can see, in number of cards, we also have global scale. We're aiming to go to 115-120. This is a huge, huge increase, and this is what's gonna drive the top line revenue growth also. Let me just briefly cover our two global businesses and what we call our two network businesses, which are in a, let's say, less developed stage.
In this new phase, as I said, our global and network businesses will continue contributing to revenues in a different way. SCIB and wealth management will contribute more to profitability than revenues. We're still aiming in SCIB, as you can see, to grow. This is network collaboration, this is the part of revenues that is actually only possible because we are a group. That 10% is on top of a 33% increase last year. What's important is that our SCIB model is very unique. It's unique because we have actually the combination of the in-market and the global scale. Our global factories or centers of expertise allow us to deliver transactional cash management supply finance products. Our global platform exists already. It is working. This is one of the big achievements.
It's an 80% global platform built once across all our markets. This is one of the reasons that we have an efficiency level way ahead of our peers. Our SCIB has a 39% cost income in 2022 compared to 59% for our peers. We have plans to further capitalize on this model, both on coverage and product factories, and we will focus only on those things where we're very good at, energy transition, infrastructure, project finance or trade finance, for example. If you look at wealth management, again, this is an area we structured in this way, I think it's five years ago. We've made a lot of progress. There's a lot more upside here in the next few years. We're leaders in the corridors of LATAM, North America and Europe.
EUR 51 billion of our AUMs in private banking, that's 21% of the total, were due again to our global network. You can see in the bottom of the slide, 10% growth is what we expect in the, what we call network AUMs, i.e., those revenues that are only possible because we're a group. In asset management, we also specialize in our core strengths, we centrally manage already, and we'll do more of this, 60% of the European countries' AUM. Again, insurance is a very important contributor in terms of our on our individuals. Our regional joint ventures have the scale of 21 million customers, which again gives us a cost advantage. We have a combined ratio of 70% compared to 90% for our peers. Again, 10% CAGR in the network AUMs in private banking.
One of the big upsides for the next three years and beyond is payments. As you know, two years ago, we created PagoNxt. We're talking here about payments, PagoNxt plus global cards. By concentrating our assets and our talent, we're benefiting, again, as we've done for CIB and private banking and wealth, from the efficiency, but also from the talent attraction. It's really important. It's more efficient investment models. What we've done is actually begun, and it's not a PowerPoint. This is already happening. It's cloud-native platforms. We're building them once rather to build standalone platforms. Again, Héctor will give you details of where this is already a reality. It's a very strong base. We manage, as I said, 97 million cards globally, generate EUR 4 billion in revenue in 2022, and they're both growing double digits.
We continue to deploy these global payment platforms, for example, PagoNxt. In acquiring, where we're already top three in LATAM. Ebury grew revenues by 76% and is already profitable in December. By 2025, we expect to process more than 47 billion transactions. That is up from 30 billion in 2022 and growing faster than the market. Very important, by deploying an account-to-account platform, we are aiming, and this is one of our KPIs, to decrease cost per transaction by 20% in the next three years. We're also working on value-added services. Again, this adds to revenue and profitability. Importantly, our PagoNxt EBITDA margin, which is at 9% today. You can see there the number, it aims to be at 30% by 2025. This is aligned with the best payment platforms and our peers, actually, I think better.
Last but not least, auto. Just to remind you, auto is DCB, it's the U.S. auto business, and it's also auto in Latam. This vertical is less advanced in terms of working together to build together, but it is already providing significant benefits from sharing best practices. This is really important. I just want to mention because we're not just a global leader in financing, but also in digital mobility services. Really important, we are not just where the market is today, but we are already present where the market is going to in the next few years. One of our key strengths is our strong relationships with OEMs. They know us, they know we know the business in the good and the not so good times. This has allowed us to build one of the, I think, the leading.
actually number one leading automobile financing business in Latam, but very importantly also to support our growth in the U.S. We have built proprietary platforms. This is still work in progress, but some of them are already built, providing leasing sub-subscription and digital tools for partners. Importantly, today of our business, in our business in Americas, 40% is already due to our relationships and with our global OEM partners. This is a business of course that with higher rates and in the environment we are, will not grow as fast as it has maybe in other years, but still we're planning for 7%-8% business to be generated from the OEMs, global OEM relationships. If we sum all of this up, I mentioned this already, our aim, we're at 30%.
We aim that these businesses, these four businesses will contribute 40% by 2025. As I said, with fees being a much bigger slice, 50% of our fees at the group level in 2025 will come from these four businesses. Where is it that we see the biggest opportunity? It's in individuals. It's in the retail commercial banks. Roughly, and don't take the exact number. If not, my colleagues here will give you more details or maybe Héctor. This is about half the bank in cost. There is a lot of efficiency and a lot of revenue upside from us building global platforms. This is our greatest opportunity. This is an opportunity that few of any banks in the world have. This is most of our 160 million customers.
What we're doing is we're bringing those businesses, those customers together into a common business and operating model, and converging to a common tech. Built once and for all. This is not, again, an experiment. This is something that on the left you can see, and we give the example of Portugal. Portugal has taken most of the operational activities out of the branches. The branches have basically a commercial customer service focus, value-added service. On the left, you see the average for the group. We don't wanna show more, but not just Portugal, many of our banks have done a lot of this. The two very different things, but they work together. It's a business and operating model change, and that goes back to the digital bank with branches.
We wanna be a digital bank, obviously offering an omni-channel product offering, but with a branch model that is absolutely different. This is again, what Portugal and some other countries have advanced a lot. You can see in terms of how this all comes together by building once. There is a lot of efficiencies, but a lot of revenue upside on profitability by having a common tech, which I already described, the 80/20 in the front end with ODS Openbank on the back end with Gravity. This is what the CEO will get into a lot more detail. The countries we're focusing on are Mexico, U.S., no surprise. You will get specific numbers on the U.S. because we have them for the others, but that's where we are more advanced, and very importantly, Spain. Why is this important?
What we're gonna bring to these banks is a data layer that is common. Common data layer built by us. We're not gonna outsource to the software companies. It's our data layer. It's also our core banking. Very importantly, the front end is what will bring huge revenue and efficiency opportunities. Single source of truth, native cloud data layer, real-time AI-driven customer interactions. Again, this is a reality. We have delivered this for 2 million customers. This will bring lower cost of deposits, which of course is a very interesting and quite fast result. Again, Héctor will talk to this because this is already very advanced in the U.S., Mexico, and increasingly in Spain. Just very briefly, and I really wanna emphasize this, we're not, you know...
Again, we're gonna give specific numbers on the U.S., but this is how we think about our efficiency. Many of these projects, and this is really the interesting and exciting part, are not just about cost. I wanna reiterate that. We've seen that in CIB. My friend Ignacio is here, we'll continue seeing it, but they're most advanced down the road. Thank you for sitting in the front row. He's being very conservative. We grew 33% last year. This is network revenues, only gonna grow 10% in the next three years. I'm sure he'll continue to surprise us on the upside. It's a very important proof point because when you build once for the group, you get efficiency and you get growth. This is exactly what, led by Héctor, with our support, we're gonna do for individuals, okay?
This is where the cost income, how we think about the cost income ladder. The One Transformation is, number one, the global network businesses that I just described. Second, and very important, and we have Dirk here, our Head of Technology, and Cristina Álvarez. Here, we'll continue to doing more of converging our tech platforms. This is really important. This will also continue to deliver efficiency in the next few years. Okay. Last but not least, we're a bank. I have said this many times, it's the holistic management of the balance sheet that matters. This is where I believe we stand out, and the numbers show that. Diversification is a big part of what allows us to do this, but it's not the only thing. We have a low and predictable credit risk, a proven approach to risk management.
We have a simple balance sheet. This is not intuitive, but it is the case. You can understand our balance sheet. Our customer loans are 56% of our total assets compared to our peers of 30%. 80% of our loans are funded by high-quality retail deposits, incredibly valuable in the next few years. In markets where we have scale, in many cases, if not all, we're the go-to bank. 96% of our portfolio is low risk. Our CFO will give plenty of details on that. Through the cycle cost of risk of 1%. Yes, this ratio will be higher in 2023. We said that. Very importantly, it's a normalization of the cost of risk in some of our portfolios, U.S. and Brazil.
As the CFO will explain, that is 4% of our loans, those two portfolios, it will revert to the mean. Very importantly, last but not least, a strong balance sheet relies a lot. If not, the first line of defense is always the pre-provision profit. As you can see, we have a business model that continues to deliver, and you can see that in the track record. It is more than 2x higher, our uncovered non-performing loans, which, by the way, kept trending down in 2022 and stand at 3.1x. That's almost half the level they were 10 years ago. Last, and this is really important, we have already for the last year, you can see that in some of the growth rates in some of our markets.
We'll continue to grow, we're taking within the range that we operate a more conservative approach to risk management. This is really important. Some of this approach is actually structural. Some of those higher risk portfolios, we either acted ahead of others or we have continuously de-risked, as is the case of the U.S. Again, Héctor will give you numbers. We already did that partially at our annual results. I'm not gonna go through all these KPIs. I've mentioned many of them, I just wanna point out again on how we will reach our financial targets based on what I just explained and what you'll hear from my colleagues. I think what's important is that, first, our customer-centric approach is both growth and profitability. Total net new customers, 200 million.
Active customers from 99-125. That is a very ambitious target. Again, I am certain you'll come out of today believing these numbers because we're gonna tell you how we're gonna do them in more detail. Simplification and automation will be measured by efficiency ratio, but we're also measuring at the regional level, actually at the group two, but we're giving targets in terms of cost to serve a cost per customer. We're going the next level in terms of measuring efficiency. Our global network businesses, again, 40% of revenues, but over 50% of fees. The customer activity, we're gonna measure transactions per active customers. When you take a look at how we grow our revenues, and I will end by saying this, and I said it at the beginning, yes, we do have tailwinds for the first time in eight years.
You know, we're running a business in Europe where we're not charging for deposits and giving loans close to zero. A lot of the upside we have and what's behind these numbers is much more than that. It's a change in the model that is driving revenues. It's a change in how we operate, and it's a change in the biggest opportunity we have, which is individuals, which is, as I said, half the revenues, but a lot more, of the, of the total number of customers. Again, capital, finally, as I said, above 12%, including on a fully loaded, Basel, in 2025, which is coming on. We wanna be ahead of others. Of course, our capital allocation focusing on the most profitable opportunities is gonna be key on that.
Yes, ESG goals are absolutely essential for us, and we see that as a big opportunity. I wanna close again where I started, and this is really important. I believe that just as other sectors, the financial sector is in a process of accelerated change. It's a profound change. It's one we welcome. We're ready to embrace that change. We have dealt with change successfully many times. We've been around for 165 years. I'm not gonna say we're gonna be around for the next 165, but we again embrace change, and we are ready to tackle that. We have a clear strategy. We have a plan. We have the team to execute it. We will do that focusing on our strengths, our customer focus, our scale, and our diversification. We've laid the foundations.
We have invested as we have delivered the numbers you just saw. Our new three-year plan will deliver an ROTE within the range of 15%-17%. Again, already above 15% this year, with a CET1 of 12% or above. We believe that the best way to achieve this is to continue to improve on our best-in-class operational performance. We're very focused on that. This will allow us to deliver on our financial targets today and in the future. We will remain very focused on allocating capital wisely. To deliver this double-digit growth in TNAV% dividend per share on average through the cycle. We will devote more of our profits to rewarding you, our shareholders, through cash dividends and share buybacks.
This is a new phase, it's an exciting new phase for Santander, I have great confidence that again, as we've done in the past eight years, we will deliver on the 2023- 2025 targets that we are presenting to you today. Thank you, I will now let our CEO, Héctor, to tell you how he's gonna do it. Just as an introduction, again, past performance is in no way a guarantee of the future, believe me, it helps. Héctor, the floor is yours.
Good morning, everybody, and thank you for joining us today. I'm very happy to be here. I know that some of you believe that we are complicated, but the truth is we're not that complex. We are really going back to basics, to the ABC of banking, as we call it. That's it. Doing what you already do well, but doing it much better. How? Basically, working and building together through One Transformation with our competitive advantages and using the best things that the group has to offer. As Ana mentioned during her presentation, we will continue focusing on maximizing value creation and doing things the right way. For the first time in Santander history, we are setting a target of growing on average through the cycle, our TNAPs plus cash dividend per share at a double digit.
This is supported by a number of targets explained by Ana in terms of capital, profitability, and shareholder remuneration. Our ultimate aim is to be the most profitable bank in each of our geographies. Let me walk you through how are we gonna make this. Let me be crystal clear. I know that our aim is ambitious, but with the measures we will put in place, we will improve the operation of each and every one of our local banks. Making use of best practices we already have in the group, and also with the contribution from our global network base businesses, which we already provide around half of our profits, we should be able to be best in class. Maybe not everywhere by 2025, but it is our end game. We will get there.
As Ana said, we do a lot of things the right way. We need to do it better. There is much to do. We are quite ready. The way to value creation implies becoming a digital bank with branches. This implies several elements. First of all, we need to be customer centric and focused on active customer growth. This is not only about the number of customers, this is about being the number one bank for our clients and providing better and more efficient service, improving DSL capabilities and evolving traditional branches. All of this is still not enough. We need simplification and automation. There is One Transformation. It's exactly when it steps in. We're talking about new technologies, fully automating our front and back-end operations. By One also, we mean working as one, taking advantage of the best practices in our different geographies.
We expect that the network contribution for global businesses and being customer centric will lead to higher revenue, lower cost, and also higher profitability. We can always not forget about the capital discipline. Please take a close look at this slide. It was not created for the investor day. It was created by our country CEOs, our global businesses, and the whole leadership team in a workshop back in January in Madrid. This is exactly our playbook. Let me walk you through it. Each of the steps towards value creation has specific initiatives and plans. Like customer centric, this is where One Transformation, of course, is coming from products to clients. We are transforming the individual segment with a tailor-made digital proposition, a new branch model to increase the commercial focus of our network. What we call a digital bank with branches.
Change our operating model to a new front and back end to improve the user experience and benefit from advanced data analytics. Second, simplification and automation. It is streamlining products and processes, avoiding mistakes, improving services, and simplifying the user experience. It's reducing unitary cost and reusing IT and proprietary software, which will increase efficiency across all our banks. We will implement that analytics and artificial intelligence in the design of products and processes and centralize analytics and cost reduction processes. The result, higher efficiency and productivity. We're talking of about a 42% cost to income, one of the best in the industry. Network contribution. This is the base of our value added formula. Our mature global businesses bring more than EUR 10 billion revenues to our local banks with products and services that local competitors have difficulty to match.
We will grow network revenue at around 10% annually until 2025. Higher customer activity will come from higher deposits, pricing strategies, product simplification, and innovation. For corporates and SMEs, we will base transformation on a multi-regional coverage to increase network collaboration and now result in around 8% growth in transaction per customer. All the above must be combined with a strong capital allocation discipline. We need to be actively manage assets and liabilities, especially on the performing portfolios, to be the cost of equity in 85% of our deployed capital. One Transformation, as our Chairman was saying, is a dynamic process. We have been doing this for years in countries like Portugal, Chile, Poland, and we are now accelerating it in the U.S., Spain, and Mexico. What does it mean? It means common operating business model for all.
Common operating business model for all. Leveraging on the best-in-class that we already have in the banks and the high-level automation on front and back-end operations with our proprietary-based platform that our chairman explained. It's also more efficient, lower operating cost, 100% real-time data, plus a great customer experience. Let me use the U.S. as an example. First of all, we're gonna reduce the number of products from 314 to 20. This means simpler processes, more commercial activity, and better customer experience. We're gonna redesign all our processes. They need to be automated. They will be reduced from 500 to 100 by 2025. We're basically reducing our complexity, expecting savings and cost to serve to fall around 20%.
We're focusing on increasing deposits, which is quite essential to the franchise. The result, just simplification, will reduce cost by 33% alone. One Transformation is not just a plan on paper, it's a reality. We already did the first step in Mexico. What did we do? First, we did a diagnosis. Use the group best-in-class capabilities. I basically copy-paste them. We're really strong in CIB, in corporates, and SMEs. The problem was we lacked individual deposits. First of all, we upgraded CIB. We grew it from 60% of total revenue to 25% in two years. We offered CIB products to corporates, mid-corps, and SMEs. We became a top player in trade finance, in FX, in DCM, et cetera. Corporates also brought us individual customer through the payroll.
We increased about 30% the client base, improving our deposit mix and reducing the cost of funds. We had infrastructure for the new customers, but we lacked the systems. We upgraded our systems and worked on the front to have a better customer experience. We decided also to bring the best practices from some of parts of the group. For example, our Brazil product factory is probably the best in the market. We changed the process on the credit cards, and we got 1 million credit cards in one year with the best cost of risk ever combined with the subprime risk models that we copied from the U.S.
Using the OEM relationships of the DCB, of the Digital Consumer Bank, we started auto loans, practically from scratch in 2019. We are on top three today with more than 15% market share in just three years. We also started working with PagoNxt and Getnet, which is our acquiring business. We came and we installed it in 2020, and we came from top five to top two in acquiring in two years.
Today, we're the second in volume in the market and close to the number one. In sum, in short period of time and using the best-in-class, we got extraordinary results using CIB, Brazil, Auto, PagoNxt, and we were able to double the size of Santander Mexico in just six years. As I've been telling you, the process is simple.
There is a puzzle we need to complete in every single country. We already have the very high-quality best practices that have been developed in different countries and at different times. We need to export these best practices to the geographies that need them and leverage our global and network contribution to accelerate profitability.
As I said at the beginning, doing what we already do well, but doing it much better. Europe is the region with the highest potential. First, a great chance of profitability increase, especially Spain, and on capital contribution to the group because of the hard currency. We pretend to achieve around 15% of ROTE by 2025, and with a very simple plan. First of all, redefine the branch models and the standard customer journeys. Number two, we're gonna reuse technical advances, technological advances.
We're gonna simplify and automate the processes. We're gonna focus on profitability, and we're gonna be very disciplined in capital allocation. Also, you reap benefits from network contribution through CIB. We have a pan-European platform, multi-Europeans, Getnet, and increasing penetration of insurance. Today, it's about 25% of revenues. Let me tell you something quite important. There is growth in mature markets if you have the right products and the right services. Let me talk about Spain. It's where we see the most opportunities to improve profitability and efficiency, not only because rates are improving, but also because we're improving ourselves and we're accelerating our One Transformation. One very important piece of data, we're growing customers. 700,000 customers just in 2022, 300,000 of them active.
In corporates, three out of every four companies are is Santander client, which have market share in large corporate of around 35%. We are becoming customer centric, we still have a lot of work to do. One Transformation should also, through new operating model increase cost savings, leading to a 10% reduction in cost per customer. Let's go to North America. Mexico and the U.S., as all of you know, have very different realities, One Transformation applies to both. I will go into more detail in the U.S. in the coming slides. For Mexico, as I explained before, we expect a strong mix of strong growth in customers. We're gonna continue innovation and a better deposit mix, which will reduce the cost of deposits. Network revenues to grow at a compound average growth of around 15% together with the U.S.
I want you to understand that regional corporations brings value to both markets. First of all, we have consolidated technology and operations in the two countries. We call it Nexus, it has been a great initiative. This will accelerate the transformation of our IT capabilities and support business growth. We have faster time to market and more efficient software development that also has generated savings of around EUR 157 million in the last two years alone, there is also a lot more to come. For example, our call center in Mexico gives service to U.S. operations at a lower cost. We already have 200 FTEs dedicated, we're gonna continue to do more. These are just some examples of what we're able to achieve within the two countries. Now let me talk about the U.S., which is quite interesting.
The U.S. is a different animal from the rest of the group. We are not, I repeat, we are not and do not wish to be a universal bank in the U.S. We target only segments when we have enough scale and can leverage a contribution from the rest of the group. For example, last year we decided that we were not a player and we couldn't do mortgages on the home lending business. We focus on four main pillars: consumer, commercial, CIB, and wealth management. Consumer, the first pillar, is our auto business, which, as you know, is a crown jewel. Has a strong performance. Now what we need is our bank deposits to fund growth profitability in prime and near prime. We need to leverage our global relationships with the OEMs, leading to growth and also to lower risk.
In commercial, we need to be top 10 in CRE, and we need to focus on multifamily, which we are very strong. In CIB, we are the global hub for U.S.-based clients to multinational and to institutional investors, and a strong in trade finance and energy project finance. The acquisition and integration of APS will transform our capabilities and for sure will drive revenue growth. In wealth management, we are leaders with the LatAm high-net-worth individuals in the offshore business by leveraging the group network that we have. Our goals for 2025 within the U.S. reflect One Transformation. We are reducing the number of products from 314 to 20. Digital capabilities will build more efficient structures. We're reducing by 20% our retail cost to serve and reduce by 25% our branch count. The group's network continues improving scale synergies.
We have strong increase in CIB revenue already this year and over 18% increase in wealth management client assets. We also deliver profitable growth through an increase in up to 40%-50% versus the 30% we have in 2022 in auto, funded by our own deposits and a dividend payout above 100%. We're talking about $3 billion of expected dividends in 2023 alone from the U.S. Let's go to South America. In the region, our global and network businesses contribute about 20%-35% of revenue, which have already evolved from a multi-country to a per regional player. We are the clear leaders in the region. We are very well positioned to capture structural growth in the region as we are very well structured. There will be ups and downs. It is what it is.
We will continue to achieve a ROTE of around 19%. We're executing the same operational transformation that we expect to achieve by 2025, which is we're increasing loyal customers and transactional business with over 8% revenue per customer growth, improving cost management and reducing the efficiency ratio to around 36%. As you know, we're already best in class in the region. Capital allocation being directed to collateralized products to keep risk level and cost of risk at a 3.2%-3.4% level. We will continue network revenue increase with a compound average growth of around 15%, and we're gonna leverage in CIB Wealth Management and our platforms in PagoNxt. Let's go to Brazil. We have gone through clear headwinds in the country. Interest rates are going up, double-digit inflation, and higher cost of risk.
Let's not forget, even with this, Brazil has been able to reach strong profitability levels. Brazil has been extremely successful at being product-centered, we're gonna change a little bit, we need to start being a more customer-centric and starting to be the number one bank for our clients. We need also to grow our deposit base, increase transactionality and grow fees, grow retail investments with open product offerings, distribution, and high tech. We're building the best open cards platform for individuals and businesses with the most convenient, easy, and secure payment experience. Increase active customers around 15% by 2025 through network contribution. To improve efficiency from the cloud technology and a centralized data processing, we're gonna allocate capital to collateralized loan products. Today, 65% of consumer products with selected volume growth and credit risk management capabilities.
In our Digital Consumer Bank, we are leaders in auto and in POS. We are anchored on a strong relationship with auto OEMs and retail partners with proprietary platforms at scale that differentiates us in products and services. It's a one-stop shop for OEMs and partners with a full suite of products and services, financing, leasing, insurance, and digital solutions. It's the most efficient entity versus European peers with higher profitability. A strong focus on increasing the funding deposits of our balance sheet. We're going through initiatives along with Openbank, and our aim is to capture EUR 20 billion of retail deposits in three years to reduce the average cost of funding and increase our margin. To sum up, in line with our ambition to be the best bank in each geography, we will continue leveraging on our execution plans to deliver increased profitability across all the regions.
Now, I want to spend some time going through the global businesses. CIB is one of the pillars of our strategy. We have relationships in large mid-corps and SMEs, which have become the trusted advisor of our clients. This help us offer them additional services. The business is steadily improving profitability and its contribution to the group, but there is also much more to come. CIB is among the most profitable and efficient players in the industry, and we still have a lot of room to do more. We aim to grow revenue 10% in a compound average growth in 2022-2025, and we're gonna leverage in basically in Europe in advisory and market capabilities. In North America, with the APS integration, we will increase competitiveness, and we're gonna expand our ability to source and distribute assets.
In Latam, we aim to become the top CIB players and a pan-regional player. We have a strong, truly global presence and see strong potential ahead. On wealth management and insurance, our competitive advantage and uniqueness comes from our global platforms. We have a network effect others cannot provide. We are leaders in private banking on the Latam, North America, Europe corridors. Having a EUR 200 billion asset manager globally consolidated is also a differential. In insurance, we have regional factories and 21 million customers. We have been growing our profit contribution of wealth management at double digit every year since 2017, and wealth management is 31% of the fees of the group and has a ROTE of around 60%. All of this gives us a cost advantage and a significant revenue growth potential of 10% until the year 2025.
Let's discuss PagoNxt. PagoNxt is a critical component of our strategy, as payments are at the heart of customers' banking relationships. The common tech backbone that will unite the payments of all Santander customers will integrate our payment business in all the global platforms. We expect to process more than 47 billion transaction a year and a cost per transaction to decrease by 20%. We expect revenues up by over with our banks and in the open market. PagoNXT will deliver around 50% compound average growth in transactions until 2025. Let me give you some examples of network contribution. In Mexico, we replaced a third-party provider with a new internally built global cloud-native acquiring platform. We grew market share from 14% in 2020 to 18% in 2022.
As I said, we're now number two in the country by volume and will continue to grow much more. Cards is an overlooked segment in Santander. We manage 97 million cards today. A common cards platform for the group is being developed in Brazil, as I said, and will go live in all our markets by 2025. It's already being installed in some of the first countries. The new platform will deliver savings of 25% yearly and allow us to tap into new revenue pools from 2025 and on. Finally, in auto, we are number one in Europe and Latam and the number five in the U.S. Our strong relationship with OEMs in Europe has allowed us to build the leading automobile financing business in Latam and to support the growth of our business in the US.
It has allowed us to build a business from scratch in Chile and also in Mexico, where we went from no presence to about 15% market share in just three years. More than 40% of the overall activity in these countries is related to our partnered OEMs relationships in Europe, and we expect to reach levels of around 40%-45% in 2025. Also, we expect to continue growing market share in auto loans and see them increase by 20% by 2025. We will use outstanding digital capabilities to reinforce mobility solutions also with a special focus on leasing and subscription levels. We have a clear view ahead, and we have set specific, ambitious but achievable group targets for the next three years. If I have to summarize everything, I would probably use the following words.
First of all, working and building together. Second, using the best-in-class we already have throughout the company. Becoming fully customer-centric. Accelerating the reality of One Transformation. Improving profitability and leading to strong value creation on our shareholders. All in all, Santander is an outstanding institution, and this new phase of growth will be powered by our unique, formidable combination of leadership in local markets and global network while we continue with our disciplined approach to capital allocation. We have the right strategy and a vision of where we want to go. We have a clear path and a plan we have tested and has proven to be successful. We have also the best team and talent in place to put it in motion. I am as excited as I am convinced that this is the best, and the best is yet to come.
I want for Santander to be the bank that make things happen. Thank you very much.
Thank you. Thank you, Ana and Héctor, for very interesting presentations. We are gonna take a 30-minute break, so you're all invited downstairs to have a coffee. Please don't be late coming back. If you're also kind, please go ahead.
Eu também já estive aí. Vão dizer que não vais conseguir. És tu que escolhes se queres ir. Vão dizer que vais voltar atrás. Podes escolher seguir em frente. Vão dizer que é tarde para uma mulher da tua idade. És tu quem escolhe quando é a altura certa. No fim, vão dizer que tudo valeu a pena, porque foram essas escolhas que me trouxeram até aqui.
Seja qual for a sua escolha, nós estaremos sempre aqui para seguir em frente consigo. Somos as escolhas que fazemos. Santander.
Gracias al crédito formamos un negocito. Cómo empezar a construir con ese dinero.
Tudo que tem, serve de cele, de capa de mesa, as coisas aqui foi tudo comprada através do Santander já.
Sempre esteve ali apoiando a gente nas nossas dificuldades. Tenho um plano de expandir o meu negócio. Eu vou poder contar, sim, com o Banco Santander.
Cuando uno lleva bastante tiempo en prisión, se desactualiza de las cosas. Este tipo de cursos como Finanzas para Mortales, lo que te hace estar un poquitito más al día, no perder el hilo.
Cuando necesito el dinero, entro a la aplicación de Santander y lo solicito y María del Mar al día siguiente lo tiene aquí.
Porque gracias a ellos estamos construyendo y vamos para arriba.
Change is the only constant in life. Think about it. From the time we're born, we spend our lives changing. We change jobs, cities, friends, lovers, addresses, dreams. Sometimes we chase change, and other times it chases us. Because we can accept things as they are or do something about it. Amid the threat of climate change, we choose to act. To act to reverse the change and create opportunities to make the world better. That's why at Santander, we're striving to become net zero by 2050 by aiding our customers' green transition, financing projects to curb climate change and reducing our environmental footprint, all with one purpose: to change, to build our chosen path.
Yo creo que en estos four días, he progresado más como profesional que básicamente toda mi vida.
Pude conocer otras línguas, outras culturas, outras pessoas, fazer amizades, conexões que a gente vai levar pra vida toda.
La trayectoria ideal de un emprendedor dentro de Santander Universidades y de Santander X en particular comienza con Santander Explorer.
Todo el tiempo recibes nuevas ideas, nueva información que va a ayudar muchísimo a mi proyecto.
La viaje, es increíble en el sentido de você conocer personas nuevas. Yo acho que el conocimiento de personas nuevas, de qué otros emprendedores están fazendo es inspirador.
Me llevo mucha motivación, conocimiento, que es superimportante. Me llevo experiencia de estar con chicos de otros países.
Creo que con Explorer puede haber un cambio radical de tu vida.
Hello, darling.
Hello, Victoria. It's Sally here from your bank. Something really bad has happened, and I'm going to have to ask you to make an emergency transfer immediately.
How bad?
Really, really bad.
Really, really, really bad?
Yes, Victoria. As I said, you need to make an emergency transfer into the account we've just set up for you. It's the only way we can stop these criminals stealing all your money. It's incredibly important you act quickly. Are you ready to transfer the funds?
Okay, Sally. Oh, bloody heck, I'm all in a tizzy now. Oh, hold on, love. My kettle's boiling over. Remember the golden rule: No bank will ever ask you to urgently move money into another account, ever. Hold on, Scammy Sally. Nothing really, really, really bad has happened here at all, has it? Except you calling me up, you absolute... Remember, loves, Scammy Sallys like to rush you, so just take a moment to stop, chill, and think. To remember how fabulous you are. Just give your bank a call using the number on the back of your card if you have any doubts.
El summit ha sido fantástico. Estábamos todas superilusionadas.
What an amazing experience.
It's a great opportunity to invest in yourself and actually with someone co-investing in you, with Santander co-investing in you.
Uno de los elementos más atractivos del programa es poder compartirlo con otras mujeres, todas supertalentosas, pero un grupo muy diverso.
The network is life-changing. The experience is life-changing. Eu também já estive aí. Vão dizer que não vais conseguir. Mas és tu que escolhes se queres ir. Vão dizer que vais voltar atrás. Mas podes escolher seguir em frente. Vão dizer que é tarde para uma mulher da tua idade. Mas és tu quem escolhe quando é a altura certa. E no fim, vão dizer que tudo valeu a pena, porque foram essas escolhas que me trouxeram até aqui.
Seja qual for a sua escolha, nós estaremos sempre aqui para seguir em frente consigo. Somos as escolhas que fazemos. Santander.
Gracias al crédito formamos un negocito, cómo empezar a construir con ese dinero.
Tudo que tem, cervejeira, capa de mesa, as coisas aqui foi tudo comprada através do Santander já.
Sempre esteve ali apoiando a gente nas nossas dificuldades. Tenho um plano de expandir o meu negócio. Eu vou poder contar, sim, com o Banco Santander.
Cuando uno lleva bastante tiempo en prisión, se desactualiza de las cosas. Este tipo de cursos como Finanzas para Mortales, lo que te hace es estar un poquitito más al día, no perder el hilo.
Cuando necesito el dinero, entro a la aplicación de Santander y lo solicito, y María del Mar, al día siguiente lo tiene aquí.
Porque gracias a ellos estamos construyendo y vamos para arriba.
Hello again. Let's get settled down, please. Thank you. We're starting with the second part of our Investor Day. We will have our CFO, José García Cantera, and his presentation, after which we will start with the open Q&A session. José.
Good morning, everyone here in the room and those connected through streaming. Thank you for coming to our Investor Day. I will start with this slide that you have already seen in both Ana's and José Antonio's presentation, which is our aim to create value at double-digit growth rates average through the cycle by improving our profitability to from 13.4% in 2022 to 15%-17% going forward. Maintaining a very disciplined capital allocation, bringing risk-weighted assets that don't earn the cost of capital to around 15% going forward. We will invest in new businesses going forward at around one-sixth, one-seventh of our portfolios.
Keep our capital ratio above 12% at all times, including Basel III fully loaded, that, as you know, comes into effect on January 1st, 2025, and increase the payout ratio to 50%. In the last section of my presentation, I will go in detail about the connection between this return on tangible equity that you see here and the double-digit growth target in value creation through the cycle. The estimates and projections that we are basing our strategic plan are based on macroeconomic framework which is aligned with market consensus. Obviously, any significant change to this framework might have an impact on the forward-looking figures and statements that we are making throughout the Investor Day. Just a brief comment on the main macro variables in our plan.
GDP growth is already slowing down, although less than it was initially anticipated. We believe that growth will stabilize at the end of this year, beginning of 2024. By 2025, growth will recover in most economies. Inflation is receding in most countries, but it will do so, we believe, more slowly also than anticipated. We don't think we will see inflation levels by 2025 at the levels we had before the pandemic. In terms of unemployment is relatively low. Employment is strong in most economies, and this is a key variable for our asset quality going forward. Against this backdrop, we will respond by capitalizing from higher rates. We have a highly sensitive balance sheet to interest rates, especially in euros and US dollars.
I will give details of the estimate we gave for 2024 in our year-end, 2022 year-end earnings presentation. We will very actively manage margins. We have intended to continue to be very disciplined in the pricing of deposits, which is obviously key going forward, and combined with the higher rates and higher yields on loans, should lead to increasing spreads, customer margins. We will maintain a relentless focus on improving operating efficiency on the back of One Transformation, the plan that both Ana and Héctor have analyzed. We aim at, as you've heard, simplifying processes, products, as well as automation and the creation of a common operating platform to serve our businesses through shared technology platforms and services.
We will continue optimizing risk reward in the higher-risk businesses while maintaining an overall low, low-risk business profile. As I will describe during my presentation, Santander has a low-risk balance sheet and a very conservative financial management strategy of its structural risks. Finally, we will maintain, as I have mentioned, a capital ratio above 12% fully loaded at all times. I have organized my presentation on in five sections. The first, I will analyze the balance sheet, showing that we have a low business risk profile. Second, I will also analyze the financial management, the management of our structural risks, which is, it has been and it will continue to be very conservative. I will go in depth about the different components of our profitability over the next three years.
I will look then at capital levels and capital allocation, where disciplined capital allocation is core to our strategy. Finally, I will look at shareholder value creation. Let's start with the balance sheet. We have a 1 trillion balance sheet, one of the largest credit portfolios in the world. Obviously in an environment where as interest rates were increasing, inflation was also rising, we had the war in UKraine, there were concerns about the potential deterioration of asset quality in our portfolio, and therefore, doubts about our capacity to generate future profits. We believe that we can keep our cost of risk close to 1% through the cycle because the risk profile of our balance sheet is actually low.
We have a very simple balance sheet and which is easy to analyze, mostly composed of loans and deposits with very little exposure to market risk. Our balance sheet is well-funded by high quality customer deposits in our core markets, which not only reduces the cost of risk, but also reduces the intrinsic risk of our balance sheet. We have a well-diversified commercial banking business, geographically and by segment. Mature markets represent approximately 80% of our loan book and customer deposits, and close to 85% of our credits are retail loans. We have low loan-to-value ratios in mortgages, highly collateralized consumer loans, SMEs and corporate segments with 50% guaranteed. CIB has 2/3 of clients, which are investment grade. I will go in detail about on this in the coming slides. Mortgages.
One-third of the mortgage of our total book is mortgages concentrated in Europe, 79%, mainly in U.K. and Spain, with a very low risk, as around 90% have loan-to-value ratios below 80%. Our U.K. mortgage portfolio, which represents 86% of U.K. loans, has greatly improved its risk profile in recent years. The average loan-to-value currently is 50% while exposure to loan-to-values over 80% has been reduced from 10% to 5% since 2019. Only 12% of the portfolio is at variable rates, new business loans show strong affordability rates. As for Spain, where mortgages represent nearly one quarter of the portfolio, its risk profile has also improved greatly in recent years. The average loan-to-value in Spain is 62%.
Exposure to loan-to-value over 80% is down from 25% in 2019 to 16% currently, an average affordability rate is 27%. The main sensitivity is to mortgage, is to unemployment. Again, as I said at the beginning, labor markets remain pretty strong in both the U.K. and Spain. SMEs and corporates make up another 23% of our balance sheet. Nearly half of these loans are secured. Europe represents 81% of group's SME exposure and 51% of corporates. In the U.K., currently, the average loan-to-value in commercial real estate is below 50%, with less than 1% of new business written above 60% loan-to-value and no exposure to developers. Only 0.5% of the portfolio in the U.K. is in Stage 3.
In Spain, 75% of the SME book is secured, of which more than half corresponds to ICO loans, which as you know, have a 78% on average guarantee by the government. It has performed relatively well to date. 75% of our corporate loans in Spain are also collateralized. In Brazil, for the most part, the mix has become lower risk, we changed our risk appetite in September 2021, increasing the rating of the clients we provided loans. 96% of the SME book has guarantees with a potential loss absorption of 2.4 x. Corporate loans present a very low concentration and have experienced a significant improvement in their rating. In the U.S., we have a non-performing loan coverage over 100% with stable credit indicators.
Cost of risk is just 23 basis points. Net charge-offs 22 basis points. The Digital Consumer Bank currently represents 12% of our total portfolio, of which 80% comes from auto and 20% from consumer loans. As you can see in the middle of the slide, the cost of risk through the cycle has been more or less 50 basis points, with last year at 24 basis points, half the average of the last seven years. In auto, we have a very strong focus on asset quality. We grew market share in 2022 in both new and used auto segments, up 2% and 15% respectively, versus a shrinking market in Europe. New businesses with OEMs, with captive agreements and PSA has almost doubled over the last seven years to EUR 20 billion.
This is not only good in terms of risk and performance, but it's also a strong source of network contribution to the group. CIB, which represents 14% of the total portfolio, is already a leader in Latin America. It is gradually strengthening its competitive position in Europe and the U.S. 63% of CIB exposure corresponds to large corporates with a weighted average rating of BB B +. 87% of the portfolio is investment grade. It has a very low cost of risk, 14 basis points, and a non-performing loan ratio of just 1.28%. Another important fact for risk assessment is its diversification.
With less than 1% of exposure to single names, no sector concentrates more than 10% of the exposure, and our top 20 clients, which all hold ratings better than A, comprise 13% of the exposure we have. There is one country and one portfolio where we have seen increased concerns over the past few months, which is Brazil and US consumer. Let me take a closer look at both. Starting with Brazil. The Brazilian portfolio is well-balanced between individuals and companies while focusing on customers with higher ratings and secure portfolios. Remember that in September 2021, we tightened our risk appetite as interest rate increase accelerated despite the improvement in macro expectations. In addition, we increased the weighting of secured loans.
The area that could be of higher concerns is UPLs and secured personal loans, where given the short average duration of the loans, which is below two years, risk deterioration is detected quickly. In any event, as you can see in the graph bottom left of the slide, our exposure to UPLs has been decreasing over the years. Credit cards, nearly all of which are given to our own customers, has remained stable and overall, and secured has not grown for years. Our diversification lowers the expected loss sensitivity of the book. Portfolios with higher credit loss sensitivity to macro changes are portfolios with higher profitability. Cost of risk, which through the cycle highest has stayed between 4%-4.5%, probably peaked in June 2022, and should remain stable in 2023, excluding one-offs and decrease going forward. The US consumer book.
After two years of extraordinary low credit costs due to pandemic-related stimulus, we expect credit costs to gradually normalize over the next few years. In fact, this normalization will likely take longer than we had initially anticipated, as asset quality performance in 2022 was better than we had initially estimated. Our new auto strategy has driven a drastic portfolio mix shift towards better quality credit. We are now able to increase the exposure to prime and near-prime segments, thanks to the cheaper funding provided by our bank deposit base. This, together with the sale of the riskier deep subprime Bluestem portfolio, has led to prime and near-prime comprising almost 60% of the total book, 8 percentage points more than in 2019. We expect this trend will continue in the coming years.
We increased retail deposit funding from 17% in 2019 to 30% in 2022, and it should reach between 40%-50% in the coming years. While credit metrics for like-to-like loans will revert to pre-pandemic levels, we expect that delinquency and net charge-off rates for the entire portfolio will remain below pre-pandemic levels, benefiting from the portfolio mix change. Used car prices, the other metric to watch aside from unemployment, strongly increased during 2021, dropped less than expected in 2022, and we expect a soft landing ahead. We estimate that a 1% decrease in used car prices represents a 1%-2% increase in net charge-offs.
If we take a step back after having zoomed into portfolios and these two, and Brazil and the US, we see that we have a well-structured balance sheet where 96% of the loans are low risk and only 4% has a medium-high risk profile. It's a conservative balance sheet, low risk, concentrated in mature markets, and again, with these 4% with medium-high risk. This 4% portfolio has required 23% of group provisions, with most of these coming from the U.S. consumer book, which has provided returns on risk-weighted assets of close to 4% and is more than 2x more profitable than the average of the group. Brazil consumer has represented 5% of group provisions and delivered a return on risk-weighted assets of close to 3%.
We expect our cost of risk to be at below 1.2% in 2023 and in the range of between 1%-1.1% by 2025. At the end of year-end 2022, the non-performing loan ratio was 3%, 3.08%, with high coverage considering our risk profile. Looking forward, we expect these targets for cost of risk in the different regions. Europe, between 0.3%-0.4%. We have a better starting point than in previous slowdowns. Spain should improve after being stable in 2023. We expect a gradual normalization in the U.K., which means, you know, obviously very low cost of risk in any event. North America, between 2%-2.2%, which is below pre-pandemic levels, aided by very good asset quality levels in Mexico.
U.S., as I described before, benefiting from the change in the business mix. South America, between 3.2%-3.4%. Brazil is expected to trend downward, but downwards towards normalization, while the rest of the country in South America remain at very good asset quality levels. DCB, well, it's averaged through the cycle 0.5%-0.6%, stable and predictable. My next section looks at our financial management, the management of our structural risks. We have, as I mentioned, a very stable deposit structure with 80% of retail deposits. Both the liquidity coverage ratio and the net stable funding ratio are very sound across all subsidiaries and at group level.
We have a liquidity buffer, which is 98% composed of high-quality liquid assets and diversified by currencies. We have made a significant repayment of central bank facilities, the TLTRO, which obviously minimizes refinancing risk and forces us to maintain financial discipline. We have repaid EUR 61 billion in 2022. By the end of January 2023, we have repaid 82% of all maturities of 2023. We have only EUR 5.6 billion remaining at the corporate, at the parent company level, EUR 18 billion in Santander Consumer Finance, and EUR 4 billion in Portugal, in both cases maturing between 2023 and 2024. Our ALCO position is around EUR 82 billion. 35%, this is at the end of 2022, EUR 35 billion is accounted for as held to collect.
The breakdown is roughly one-third Europe, one-third North America, one-third South America. The largest ALCO portfolios are U.S., Mexico, Brazil, Spain, and Poland. In Spain, on average last year, we had a EUR 2 billion ALCO portfolio. We aim at being around EUR 16 billion on average in 2023, which is still around one-third of we consider to be its neutral position. In terms of hedging, well, we maintain the same principles that we have kept stable for many years with a different approach to hedging capital and hedging expected results. We will continue to hedge the excess capital in subsidiaries outside the Eurozone to avoid volatility in our CET1 ratio.
The capital ratio FX exposure is expected to drop from EUR 23 billion in 2022 to around EUR 20 billion by 2025 as we continue upstreaming excess capital above CET1 requirements to the group. The decision of hedging results, which are non-euro-based, is tactical and is revisited every month. As a reference for 2023, we have fully covered the expected results in Mexico and Poland and partially covered the U.K., the U.S., Brazil, and Chile. Let me look now in detail at the different components, sorry, different components of our P&L. We will achieve our return on tangible equity target by improving the profitability of all our subsidiaries. We have the following targets for 2025, return on tangible equity by geography.
Europe, around 15%, 6 percentage points more than in 2022, from better customer experience, simplifying products and automating processes and operations, lowering cost per customer, also from the impact of higher rates. North America, around 15%, 4 percentage points more from digital transformation to enable customer growth and enhance customer experience. We will manage capital actively, delivering profitable growth and optimizing cost of funding.
South America, approximately 19%, benefiting from our global network, strong structural and active customer growth, controlled cost of risk, leading to resilient results and sustained high profitability. DCB, 15% return, 1% higher than in 2022. We expect to strengthen the leadership in auto by building a world-class digital offering in mobility and transform consumer towards a digital platform across physical and e-commerce.
We expect revenue, group revenue to grow between 7%-8% annually, from 2022-2025, with 6%-7% growth in NII and 8%-9% growth in fee income. Let's look at these by regions and each of the components in more detail. This 7%-8% growth is the consequence of good performance in each of our regions, aided by the growth of our global and network businesses. Europe's 7%-8% growth should benefit from higher rates and disciplined repricing of loans and deposits, expanding customer margins. They will have the contribution of network benefits in the form of growth in multi-Europeans, our CIB European platform, the rollout and growth of Getnet, an increase in insurance penetration.
North America, also 7%-8%, will continue executing its strategy, expanding its auto business into prime and near prime, funded through our cheaper deposit base, continue the expansion with new global OEM agreements, and benefiting from the network contribution of CIB and wealth management and insurance, as well as the synergies created in the USA-Mexico corridor. South America, higher growth at 8%-9%, should continue increasing its penetration with existing and the potential client base as the region provides structural growth. We expect to materialize synergies in terms of network contribution, for instance, the growth in auto and Multilatinas. Finally, DCB, 6%-7% growth, will continue to leverage on new business platforms and growth in OEM relationships. As for the global and network businesses, SCIB cross-border and collaboration revenue will grow around 10% through global coverage and product factories.
In wealth management and insurance, we expect private banking assets under management to grow around 10% per year. Payments, total transaction process should grow at around 15% per year over the period as we continue to integrate all payments into a single and global platform. Finally, auto business customer loans and leases is expected to see a 78% growth as we continue to leverage on our global OEM relationships. Let me now go into more detail in the first year of the plan, 2023, which is obviously the most important because we said that we will grow double digit our revenues in 2023. Our balance sheet, as I said, is highly sensitive to increasing interest rates, and this will help explain the double-digit growth that we expect for 2023.
Applying forward current rates to our December 2022 balance sheet with no margin expansion, these are the sensitivities that we expect in the different currencies. For a total, obviously, the highest sensitivity is to euros and the total is around EUR 2.4 billion. Remember that when we published 2022 results, we said between EUR 2.3 billion-EUR 2.5 billion. These are the base deposit betas that we are using for this sensitivity, 20%-30% in euros, 40%-50% in GBP in the U.K., and 50%-60% in USD. At 10% sensitivity, so a 10% increase in these betas will hit our NII by less than 2%. Obviously, the highest sensitivity also in euros.
The double-digit revenue growth expected for 2023 will be composed of NII growing at double digits, mainly driven by interest rate increases, but also by volume growth and some margin expansion. Fee income also will grow at double digits, near double digits, on strong growth in active customers and a significant increase in contribution from global and network businesses. Let's look now at fee income after having looked at revenue for 2023. For the entire three-year period, fee income is expected to grow 8%-9% per year, leveraging on our global network businesses whose contribution will reach more than 50% of total fee income by 2025. In retail, active customers are expected to increase 8% annually, with the main countries reaching 40% on average in transactional fees.
In corporate investment banking, we will leverage our areas of strength globally, climate, energy, infra, project finance, M&A, securitization, where we are top competitor in value-added services. In wealth management and insurance, we will continue bringing global expertise to our product offering and to our global offering to our retail base, and we will expand collaboration with CIB.
In PagoNxt, with OneT rade and payment hub, we are bringing all customers or customer payments into a single model platform with larger scale and a stronger competitive position. In addition, we are advising in our open market development. In Auto, we expect over 40% of activity to be related to our OEM partnerships in Europe.
As a result of all of these, global business and networks will increase their contribution to fees from 41% in 2022 to over 50% by 2025. Costs. We will continue to deliver on our cost and efficiency targets despite the current inflationary environment, which is putting pressure on all companies to manage to their cost base. Cost control, as you all know, is in the DNA of Santander. We will continue managing costs with two objectives. One, grow costs below inflation, and the other one is on in terms of efficiency. Following the benefits of our One Transformation plan, including automation and simplification of processes and products, as well as leveraging our technical infrastructure developed in-house, we are aiming to beat expected inflation by 7.5 percentage points in 2025.
We expect to increase efficiency to 42%. These are the different components of this improvement in efficiency. 7%-8% annual revenue growth with 4%-5% growth in costs. To reach this group target, we will deliver positive jaws for the group and all the regions throughout the period. In Europe, 42% cost to income. Again, through the transformation process, it is already undergoing simplification, automation, and sharing technology platforms and services. However, the higher inflation is already impacting operating and personal costs and will likely put pressure in the new agreements with the unions in 2024. North America, 42% efficiency ratio as it continues to consolidate the contact centers and operations that it has set up to service the region from Mexico. In the U.S., processes transformation and increase efficiency in corporate and commercial banking.
South America already has a very strong position in terms of efficiency. It's best in class in countries like Brazil. As inflation starts to cool down and the region benefits from synergies in network contributions for, such as Multilatinas, for instance, Getnet, cards, Wealth Management and Insurance, the cost to income should improve to 36%. Finally, GCV, 42% as it gradually lowers unit service costs. The last piece that is missing is the corporate center. Here you have the contribution of the corporate center in terms of operating areas. Underlying profit from the operating areas will continue to drop in the next few years.
In 2022, we improved our cost allocation criteria to ensure homogeneous relative profitability measure. In the coming years, we expect the corporate center weight to drop even further, as you can see here, to 7% by 2025, mainly for two reasons: the normalization of interest rates, which will benefit our highly liquid balance sheet, and the lower impact from FX hedges. Taking again once more a step back to our profitability as a group, these are the main building blocks that will lead to our expected 15%-17% return on tangible equity by in the period to 2025. NII will account for 5 percentage points on the back of more customers and higher rates. Fee income, 2 percentage points, as we leverage our global and network businesses. Expenses will only draw 2 percentage points.
The increase in provisions will put a drag of another 2 percentage points as the cost of risk gradually will revert to the mean. Finally, other components of our P&L will account for a 1% drop. Let me now look at capital level and capital allocation. We are very comfortable with our 12% capital level, and we plan to keep it above 12%, even after taking into account Basel III on a fully loaded basis that, as you know, comes into effect on January 1, 2025. During 2015-2022, we had to set aside more or less a quarter of our capital generation to increase the capital ratio. This was more than what our competitors had to do because they had a better starting point.
We also had to make a significant contribution for regulatory, supervisory, and model requirements, but generally these were not different from what other competitors also had to do. The only significant headwind we face going forward is the implementation of Basel III from a regulatory or supervisory standpoint. As we know, we will not be affected by the output floor. The ratio we will report at all times will be fully loaded. This is really important because of the transitionary period that will apply to the output floor. It's really important we look at capital from January 1st, 2025 on a fully loaded basis for the output floor. Although, the most significant impact for us will be operational risk. Although the finance legislation has not been approved, we have had some positive news, like ILM equal to one.
As the legislative process continues, we are confident that the final outcome will result in appropriate capital consumption for operational risk with a methodology based on similar principles of that of credit risk. Based on what we know today, the impact of Basel III for Santander will be between 40-60 basis points, amount that we will need to accumulate in the next two years. By the end of 2024, we will have to have a sufficient buffer to cover the impact of Basel III from January 1, 2025 and still be above 12%. This graph that you see here tries to look at the whole capital impact on a yearly basis from 2022-2025. You see 20-25 basis points, regulatory and models, most of which 80%, 90% of these is Basel III.
This, as you know, as I have mentioned, we will build between 2023 and 2024 to be above 12% on January 1st, 2025. With that in mind, as you can see here, we increase the payout to 50% and still we will accumulate capital in 2025. Going forward, capital allocation discipline will remain key to improving profitability of and value creation for shareholders. How do we look at capital allocation? Well, on the one hand, we only price new business conservatively at a minimum of 2.6% ROWA. We plan to increase the mobilization of risk-weighted assets, reaching at least 12% by 2025. It was 7% in 2021. Last year, we had a very good year. We mobilized around 10% of the portfolio.
With these actions, we expect to increase risk-weighted assets, delivering cost of capital from 80% in 2022 to 85% by 2025, leaving this 15% to invest and grow. By region, we plan to grow faster in those countries that offer superior profitability, South America, especially Brazil, DCB and North America, both Mexico and the U.S., while we expect very limited growth in our portfolios in Europe. By businesses, loans to individuals other than mortgages will be the main growth driver. We also expect material growth on loans to companies and CIB. Let me now cover the last section of my presentation, which is value creation. Looking at the 2016-2022 period, which we can consider more or less a full cycle, our value creation per share in euros was subpar.
Despite having earned a healthy return on tangible equity of 10% on average over this seven-year period, we were only able to grow to generate 5% value in EUR for our shareholders on a compound annual basis. Although our profitability was relatively high, particularly compared with other banks in Europe, it was insufficient to compensate for the negative impact that currency depreciation had on our investments outside continental Europe. Moreover, we had some share count inflation which added to this effect. Let me zoom into 2022 because it was an extraordinary year, and it's interesting to look at. Value creation was 6% last year with TNAV increasing from EUR 4.12 to EUR 4.37 with the following components. We had a very strong organic generation.
We had record profits in 2022 with a return on tangible equity of 13.4%, which we, by the way, present on this slide net of the share buybacks. Currency movements last year had actually a slight positive impact, changing the trend that we had seen in past years and helping to reverse these impacts to the mean through the cycle. The abrupt change in interest rates eroded more or less EUR 4 billion of tangible book as our available for sale portfolios and macro hedges were mark-to-market. As these positions mature, this negative impact, this negative charge, will reverse. We had a positive effect in value creation coming from shareholder remuneration, which was up 3% for EUR 0.03 in the form of buybacks and EUR 0.11 in cash.
Going forward, in contrast to the past seven years, 7 TNAV per share buildup going forward will be underpinned by a significantly higher profitability and a share count accretion via share buybacks. Even taking the conservative approach to the potential negative impact from tangible book, we expect average double-digit growth in TNAV per share in the 2023/2025 period. I say conservative because the fact that the negative interest rate related charges should reverse, we are assuming on this slide that the impacts on an annual basis will amount to EUR 4 billion per year compared to an average of EUR 3 billion per year in over the last seven years. Additionally, we expect a positive impact on per share, on a per share ratio, coming from the buybacks.
We are very well aware that we need to manage and reduce tangible book impacts. These are the initiatives that we are executing. We are reducing excess capital above the group capital ratio level to minimize hedging costs. We are working on trying to reduce capital requirements under European capital regulatory requirements in non-euro countries to reduce the depreciation of capital in the subsidiaries. We will minimize software and pension charges, and we will ensure that the reversal of interest rate related negative impacts that we had last year are materialized. Our aim is to generate double-digit value creation growth on average through the cycle. To achieve this, we will continue to improve profitability to 15%-17%. We will maintain our disciplined capital allocation, only keeping the risk-weighted assets that earn the cost of capital at 85%.
We will maintain our capital above 12% at all times over the next three years, and we will increase, the payout ratio to 50% already this year. Thanks a lot for your attention. Now, our chair, the CEO, and myself we are ready to take your questions. Thank you very much.
Does it work? Hello? Okay, good. Thank you, Costa, for that presentation. We will open the floor now for any questions you may have. Because of both the light and my poor eyesight, I am gonna just point at people. Can you please make sure you say, your name and the company that you come from before you ask the question. Shall we start around here?
Hi. Thank you very much. It's Sophie from JP Morgan. My question would be a little bit, kind of what you're thinking around kind of IT investments that you need to do, and if the plan also contains any kind of cost-cutting numbers, because growing the client base by a quarter or 40 million is very ambitious. If I look at your kind of upratings across different markets, that they are average, but they are not really kind of beyond average.
My question would be, like, in terms of kind of gaining these 40 million new customers, what are you actually doing to make them profitable and kind of what makes these customers want to go to Santander and what does it mean in terms of kind of marketing costs, IT costs, and how are you going to kind of offset these? I guess also cost inflation or inflation in Latam is quite high. My second question would be if you could just talk about U.S. capital repatriation. How do you think about that going forward and what the U.S. regulator is saying about any potential U.S. capital repatriation? Thank you.
Thank you so much. I'm gonna take the first one and maybe, Héctor, you can take the second. I don't know if you can show my slide 20, but I think there you have a lot of the answers. You know, there's one thing we want you to take away from today is that we are already and we will even more work as one Santander, and this is the key to how we're gonna improve efficiency, grow revenues, and improve profitability.
I showed a summary. The CEO showed detail. You can check back my slide 20, but this is really important. We are already investing in the numbers. We have continued to invest in the last few years. If you look at those slides, you can see there how we improve our operating performance. At the end, it's about doing more with less by building once. We have done this in CIB. We have done this in wealth management, in payments. We're increasingly doing in auto. The big change going forward is, and again, correct me, Héctor or José, but half the cost at Santander is retail commercial. We have invested already in Gravity, in Openbank. We've proven these are proven models. We're not experimenting. We've been working on this for the last five, six years. This is about execution.
This is gonna allow us to, by simplifying, automating, converging to a common tech, but very importantly, changing the business and operating model. That is 80% of the savings, and that is already happening, has happened in Portugal, but also in Brazil, in Chile, in Poland, and that's why we're putting the focus on the U.S., Mexico, and Spain. We've detailed... Now, I asked the CEO to give more numbers, but he very wisely said, "I'm only gonna give the numbers for the U.S." You can see the numbers for the U.S. in that slide 20. Believe me, we have the numbers for every single thing on that slide with timings and delivery. That is included. Those investments are included there. Again, we're very confident that we have a lot of upside.
By the way, the upside is not just in the future because as we focus on the retail commercial with very large deposit customers with higher rates, you're gonna see a lot of that. Héctor mentioned we're launching in 12 months a deposit gatherer nationally in the U.S. based on the ODS on our own software and core banking platform, and we're accelerating also deposit taking in Europe. Again, the investments have been partly made. Of course, we'll continue. They're in the numbers, and they will allow us to deliver both efficiency in a structural way, some payback sooner, and we're focusing on that because of the higher rate environment, which of course is gonna be hugely beneficial, and will allow us to... Again, this doesn't end in 25. I mean, we'll continue rolling out this across other markets.
Maybe you wanna take the U.S., question.
Yes, just to complement a little bit of what the chairman was saying. What is quite important in your question, how to make them profitable, is once you make the investment, okay, and you have the systems in place, and everything is in place, it's all about critical mass. The cost to serve with much more customers is actually quite low or goes lower, okay? In that sense, what is very important is you already have the big pipe, you just need to fill it up. Once you fill it up, you actually manage the cost accordingly, okay? Going to what you were talking about capital repatriation, okay? In 2022, we got the first big dividend back from the U.S. We're talking about $4.75 billion, okay? That was in '22. In '23, we're expecting $3 billion, okay?
That's on our capital plan, and we submitted that to the U.S. regulator.
Thank you. Can we have Álvaro as the next question, please?
Thank you. Álvaro Serrano from Morgan Stanley. Two questions, please. One on capital discipline and the other one on the capital distribution. In the U.S., you've outlined the different businesses. I'm curious on the commercial one and on CIB. I mean, if you can maybe talk us a bit through, give us some examples of how the group expertise feeds into those businesses and why you're doing those businesses in the U.S. If it doesn't work out, what would you consider doing further down the line? Because I think although these are small businesses in the overall scheme of the group, I think sort of selling underperforming businesses has gone a long way, improving capital discipline and as we've seen examples in the market. That's the first one.
The second one on share buyback mix. Are you still intending to keep that 50/50 mix? Related to that, why put the limit of 1 times tangible value on the buyback if you're expecting 15% ROTE? Thank you.
Again, let me take the second, and Héctor, you can maybe take the first. We are, and we have put in place a very disciplined capital allocation and criteria across the group. We're gonna continuously look at does it make more sense to buy back or invest organically. Even though we say, I think we've said in the press release this morning around book value, that just means we have to go back to the board and does it make sense or not. Effectively, the share buyback. You know, the share goes up very fast, well, you know, that's obviously gonna change the dynamic. We absolutely will go back and be very rigorous in terms of what are the opportunities, what is the return on buybacks, and what is the return we can get on our business? Absolutely.
Ultimately, and I'm not saying this is what the decision will be, but buybacks are a very efficient way to remunerate shareholders at many levels. We have huge confidence on the numbers we are presenting today and the 15%-17%, as we said, 13%-15%, you know, is a very ambitious goal, but one we think we can deliver, and we're gonna always put the trade-off between buybacks and what return our business gives us. Absolutely, yes. You know, book value seems to be like a first target where we have to go back and sit down, where are we, where are our businesses? We'll make that decision when it's the right time. Meanwhile, we're gonna buy back shares, and, you know, this is hugely accretive, we believe, and it's the right thing to do at the moment.
Do you wanna take the CIB?
Sure.
And commercial?
Thank you, Álvaro. Álvaro, I'm actually glad you asked the question because, CIB in the U.S. is quite an important part of the puzzle of what we're doing, okay. I will then will answer the question on commercial. CIB is very important that you understand exactly how we do CIB. We have a huge amount of mid corporates, SMEs, and different type of clients in all the different geographies, okay. All those clients have needs. We are basically the main bank to a lot of them. What we do, normally do is CIB has really good product factories that we use to serve those clients. Those are clients that, you and Morgan Stanley and some of the other place either don't know or don't really see them as with the right size to attack, okay.
This is basically a territory that we are alone, mainly in the countries that we operate, Brazil, Chile, Mexico. Spain could be an also great example. These clients need products. With the capabilities in the U.S., this allows us to be a very important player in many different things that they do. For example, in DCM, you probably haven't take a look at the league tables, but we are the number two player in the DCM dollar market for Latam, okay? We're not seen as a dollar house, but thanks to the capabilities that we have in the U.S., we have enabled, and you're gonna see UMS and Brazil and Pemex and all these Petrobras basically doing dollar transactions with us, and that's the capabilities that we have in the U.S.
There is a lot of things, the EBITDA business, FX, that equities that we do with our platform to serve those type of clients. In the U.S., we have an important CIB client base, okay. We are a really important player in those markets. We are very important in project finance, for example. In renewables, we are a leader in the U.S., even if you don't see us, we're basically very well focused on that. The CIB business is actually a business that we plan to stay. We're still gonna continue to develop, and it's a quite good revenue generator for the group, and actually done in a, in a very intelligent and smart way, okay. This business is gonna continue to thrive, okay.
On the commercial side, you're probably right in the sense that we've been analyzing each business by itself and see what the return on capital that we have. The commercial, and that's why we decided basically to get out of mortgages and to get out of home lending. Commercial, we really did an evaluation. The business is something that if we could create synergies with the mid-size companies in the U.S. together with CIB, will make a lot of sense to maintain. Also, there is a lot of business that these companies do with the Latin companies, et cetera. That's something if we believe that we can make a difference, we will maintain that business. On multi-fam and on the multi... Sorry, forgot the name.
Multifamily.
On the multifamily is a real good business. It's above the cost of capital, we are leaders in the Northeast in the U.S., okay? It's a very valuable business. We do it quite well. We have an expertise. We're, for the time being, we plan to maintain our presence on that one.
Yeah. Just to add that we look at this in a very granular basis.
Yeah.
We are reallocating capital constantly, not just within countries and segments, but globally. This has been happening, I think, as Héctor said, in the U.S. Focusing on customers where there is a connectivity where we can get higher profitability. Second, reducing the investment period per customer, not just in CIB but in commercial. We are taking all those measures at the same time. If at any point those customers don't give the returns, we'll exit. We're doing that actively and, you know, continue to do that. By the way, I think the how much capital is in commercial is actually pretty small. CIB is bigger, and CIB is actually above the cost of equity already this year or close and should be above in the next few years.
It's value accretive.
Thank you. Thank you, Ana and Héctor. Can I have the next question from Francisco Riquel there?
Thank you. Francisco Riquel from Alantra. You have 20% of the risk-weighted assets with returns below the cost of equity. That figure will still be 15% in 2025. I wonder if this is spread across the group or if you can detail if this is concentrated in any of the any businesses or countries. What actions do you expect on these assets? You mentioned mobilization of assets. What do you mean by this? If you could eventually consider selling any of these businesses or countries eventually. Second, on the other hand, you have businesses and regions with high returns, like Brazil or Chile, where you still have some minorities. If you could consider buying out any of these minorities.
You know, at the moment, as you know, we're executing Mexico minorities. We did SCUSA. We don't have plans to do any others at the moment, and we constantly, in terms of capital allocation, are looking at that, you know, at that, let's say alternative, okay? That's something we have done in the past. You know, the RWA is under the 15%. It's again, it's not the same all the time. It's been shifting. The way we do this is by, for example, not aiming to gain market share. You know, there's certain big portfolios, and you can see that in the market, where we've been losing market share the last 12 months. The other thing, of course, is that you see that over time.
We do give space, and again, that's changing all the time. CIB is a great example. You know, each country, but also by segment, they have a space to invest where we allow them to have certain under the cost of equity, and even a couple of years, that business or segment or customer is not delivering, we get out. We are very rigorous in this. There's a committee chaired by the CFO. There's committees in the countries that are weekly. The CEO is absolutely on top of that and will be even more to ensure that, you know... We do believe that for the next few years, 15% is the right number. It's gonna change. Why don't we put more in Mexico, Brazil? Risk concentration. We could have much higher RWA returns in certain businesses in auto in the U.S.
We decided to exit that because of risk, it was the right decision. Again, we look at risk return, we look at it through the cycle. We don't have, and we've reduced tremendously the time where we are asking the businesses or the customers to give us good returns. Again, this is something which is gonna. Mobilization, absolutely, yes. We have been mobilizing, and we'll continue to mobilize, and we've sold a lot of portfolios that were under the cost of equity in the last few years, or that we thought was the right thing to do in terms of how we solve risk environment. I mean, we sold a big portfolio in the U.S., which reduced a lot of margin short term, but it's gonna reduce a lot how much the normalization of the cost of risk is gonna happen.
So yes, we will continue to mobilize.
Sorry. We have the next question from Britta, and then, Ignacio Ulargui.
Yeah. Hi, it's Britta Schmidt here from Autonomous Research. Thanks for taking my questions. My first one would be on your One Transformation plan. Can you elaborate a little bit on what percentage of your front and back office will then be run on common systems? A lot of banks are telling us that operating this globally is actually quite difficult, so where do you think you might be different from these? The second question would be somewhat related to that. How does that impact how you think about your geographic mix? Are there any countries that might be better or less well-suited for rolling out this sort of strategy? The third question would just be a little bit on cost.
Could you perhaps give us a bit of an idea about the cost trajectory, how to get to the 42% cost to income ratio, and whether there are any particular investments that you envisage in the near term? Thank you.
Let me just make a brief introduction, and let's just Héctor, you take the first and second, then in more detail, and maybe José on the third. You know, two ideas before Héctor gives you more detail. One is that 80% of the savings is gonna come from a common business and operating model. 80%, roughly. 20% is gonna come from conversion to a common front and back. Savings. Growth going forward, it goes to the previous question, what it's gonna mean is that as we scale, we're not adding one-for-one cost as is happening in many countries now. This is really important. Again, the front and the back is gonna be the common tech architecture, means that it is our own proprietary software. We think it gives us an advantage. It's a single source of truth.
It allows us to be real-time offering a better service or a different product to our customers. Eighty-20. Now, again, Héctor Grisi can give you a bit more detail, but the reason why we think we can do that is because we are actually doing it already, and we know that the common front works in the U.S. with 70%-80% of what we've built is reusable. Okay. It means we're not paying fees to a third-party provider, who by the way, many banks are outsourcing. I'm not gonna give the names, but I will. Salesforce, for example, where they go to a common Salesforce or Microsoft Windows, it's a different product globally. This can be done.
This is being done by us as we speak in the U.S., that's why, the CEO has given you precise numbers of what this means for our bank. So it is difficult? Yes, it is difficult, that's why Santander can do it and others can't. That is why we spent five years building this core banking transition to the cloud, where we have Google who's coming with us to prove that this time we can actually keep up to date, not like years past when we built it and became obsolete. On the front end, exactly the same. Difficult, yes. Possible? Absolutely. Is it a future? No. It's a today as we speak. That's on the one.
The geographic and mix with the rollout, that's up to my friend Héctor that, and Dirk and Ezequiel, to make sure this happens as soon as possible. Again, 80% of the savings is gonna come from the business operating model, making sure that we are streamlining and going to lean operations, making sure that we simplify the products from hundreds of thousands to literally 10 or five. It is possible. It works. We've proven it with Openbank. Gravity has been proven. I don't know if you know, we have said, Héctor has said we're gonna do this in Mexico, in the U.S. because he started this two years ago in Spain because it's a big market where we need to do it, I don't know if you wanna be more brave and say others, so.
No, I think, look, I mean, in terms of the geographic mix, I think the whole group has to go through it, okay? Right now we're working in these countries because it was really necessary to do this transformation in order to compete head-to-head against our biggest competitors and to close the gap to them, okay? It's quite important to do that. We have examples of these deployments that have been done in the past by the group, which are very successful. One of the one is the one that PagoNxt did in acquiring. We actually did the whole platform of Getnet. We deployed it in Mexico. Is 80%, I could say, was deployed universally. It was 20% what we call tropicalization. I don't know if it's a word in English or not, but it's basically.
Tropicalization
Tropicalized it into Mexico, okay? This basically tells you that can be done, and it's very successful. Once we did that, we were able to increase our market share in 18 months. That basically tells you this is a reality. If we do the same thing of what we're doing in the front and the back, what we're doing with Rabbit and Openbank, and we're able to deploy it as we are doing today in the different countries, then you're gonna see first of all the savings, and also it's gonna be a lot easier. To do that, you have to do simplification, okay? It's not the same thing to run a bank with 500 different products than to run it with 20 or 30, okay? That's basically where the most difficult part comes in.
Because if you have products that are common, it's a lot easier for the IT teams and for the developers to do it in a much simpler way, okay. This is actually what we're working on, and that's why when I presented the idea, simplification comes first than the other one due to the fact that we need to do that to do it in a simpler way. I don't want to spend myself. The geographic mix, I would love to basically come in, I mean, the next BankIT is the U.K. probably, okay. We need to do that. We will enter into South America because at the end, it changes completely the way we used to do things because the market has changed. We used to be very product-oriented.
We were very successful in that, but the market is changing and we need to be customer-centric in order to be able to capture the most out of our clients, okay? This is the main reason.
Very briefly, costs, I said 4% -5 % on average per year, Britta, in constant terms. We don't expect to have any extraordinary charges to execute the plan at the moment. This is the BAU, 4%- 5% per year.
Thank you. Nacho, do you wanna go ahead?
Thanks very much for taking my questions. Ignacio Ulargui from BNP Paribas. Just have two questions, one linking a bit on the simplification process. I mean, what has really changed for the simplification to take place now and what has not been kind of a constant that the bank has had in the past trying to leverage on that kind of global platforms or multi-regional platforms? So what is changing now that makes your bank ready to do that? Whether that would be more revenues or costs, what we will see going forward. The other one, on the fee income side, I mean, you at, I mean fees are gonna grow faster than any other revenue.
I just wanted to get a bit of your views on all the other basic banking fees, whatever is not value-added product that banks have been using over the last, say, five years as a way to offset headwinds from interest rates. How do you plan that to move on, I mean, going forward? Thank you.
That's a great question. The answer is very simple, but I'll give you some more color. Is now is the right time. Okay. Timing is everything. If you look at the chart and where we're coming from eight years ago, what we've done is incredible change across the bank. This is a big business. We're a bank. We have to be prudent. We could not do everything at the same time. We focused first on the customers that are easier to bring into a global platform to the question before. We CIB, it's a global platform, 80% the same in every single country. Before, my friend José Linares got up conveniently, but they've done a great job working with T&O and with all the teams. Wealth management, payments. Two years ago, we told you PagoNxt, it's a reality. Cards, it's becoming a reality.
It is happening. It is in execution. If you look at the fees, a lot of the growth in fees is gonna come there. Auto is something we're working on, it's still best practices. Why is it now for individuals? First, because, you know, it's very difficult to build a common platform if you don't know where you're going to, if you don't know that customers actually like it, if it works. What we did is we built a prototype. Think about an EV that you actually built a prototype, and that is Openbank, where we built our own software and we know customers like it. It has achieved a cost of deposits that is very much aligned with the big banks in Spain, very important. It has achieved what Héctor has repeated many times today, which is a customer centric.
We don't invest in launching the new sexy credit card. We have one I'm exaggerating a bit, but roughly one account, one card, one process to open an account that benchmarks against the best in class in the market. A single process behind that. It's not a digital, a branch. We need to prove it work with customers. We cannot go and launch this in the U.S. or Mexico if we don't know customers actually like it grows, it's efficient. Now we know what we are building towards. This is incredibly important. Now is the right time. Because of different reasons, Héctor was running a country in Mexico where the best in class was way ahead, still is, and a country where we had lots of questions.
He went around and said, "What do I do?" He came to the conclusion that we had it in-house. We had, by that time, built our own core banking transition to the cloud, Gravity, which is by the way, already working in the U.K. and I think a few other countries. We had built Openbank. They could go and see how it worked and said, "I want this." Right? By the way, it happens we built it ourselves. That is the answer. It's the right time. Now, all the other countries. Yeah, most of the other countries are very advanced. In the key thing before you can do this, which by the way, Openbank did, because we had a telephone bank, so we actually took those customers in that journey, simplifying, automating at a much smaller scale.
What Brazil, Chile, Portugal, we showed it, Poland have done is a lot of that groundwork that. We cannot execute everything because at the end, this has to happen, and it's a lot of internal work. Not just coding, which, yes, it's also changing the way the business and operating model works. Sorry for the long explanation, that's why now is the right time. We were not ready before to show that this is a model that works with customers. I just wanna repeat what Héctor said. It's really important. How is this product customer mix, why is it so important? As I say, we're gonna have to deliver real-time, cheap, efficient, and by the way, profitable for you, retail banking. You know, people either don't want or cannot pay fees.
Inflation ain't gonna make that better, so we better change the operating model. We need to be better than the best-in-class digital banks with a service in branches that obviously but we believe will add a lot of value and will make us different. Okay, I think I went on. Are you satisfied or? It's really important because it's a great question. Why now? We were not ready. I don't want to overemphasize the work that has happened on fixing the basics at many levels. You know, capital allocation is the other one. We didn't have the tools to manage regulatory capital. Today, we believe we have some of the best. By the way, it's not just the tools, it's actually the organization, the incentives, and aligning the whole bank.
It's actually a common system across all the banks. We have a lot more in common, and we're actually building. When we talk about the businesses, there's a lot happening on risk, on capital management, on cost, and so on and so forth, okay? Sorry, fees, maybe fees growth. Different type of fees?
Traditional fees.
Traditional fees.
Yeah. What is important on the fee income is, if you heard what I said is we're trying to become the number one bank to our clients, okay? Which, what does it means? It means basically that you probably have a mortgage with us, and you will have, and you open a current account, and you will deposit the amount of the mortgage because we have the best product, and that's it. Eight years, nine years after that, you will close the account, you will pay us off, and that's it. The number of the game is completely different. We want you to do everything with us. We want you to have your mortgage, but also to have your payroll, to do your payments with us, to have your credit card with us, to do insurance, to do a whole bunch of different things, okay?
That's the moment that you start increasing the amount of fees, when you really are loyalizing the client base to the bank. We have done so in many countries, and it's been quite successful, okay? You see the number of fee income coming right up when you start basically working into that. If you see, insurance is a great opportunity, for example, where we can do a lot of things. The penetration, for example, that we have in insurance in Latam is great. There are some markets that are still a lot to do. That's the reasoning that why we see fee income coming up.
Thank you. We'll have Carlos Cobo as the next question, please.
Thank you. Carlos from SocGen. Three very quick questions. First one is Mexico. I mean, your numbers are very strong, you are still being outperformed by the market leaders. Question is it that you need more scale? You know, as a side question, would you be open to, I mean, is there a possibility to reopen the deal on Banamex? If it's not about size and scale, is it that you've been too conservative and you're happy to risk up? Same question in Brazil. One, are you gonna normalize the risk appetite? What's the upside potential in NII because you've been too conservative over the previous years? Lastly, on capital generation, historically, you generated something around 50 basis points organic capital generation. Now you're probably gonna grow faster, profitability is also higher.
From your slides, I get something like 20 basis points per year, organic capital generation. That sounds a bit too shy. Could you elaborate on that? Thank you.
Yeah. Well, I mean, this one's for Héctor, I want to make an introduction by saying that, you know. We're a bank, don't look at one year, okay? Mexico has been absolutely. Well, I don't want to overstate this and put, like, more pressure, actually it's not a bad thing on Héctor Grisi. Yeah, if you look at two years, you have to look at what happens. Especially in emerging markets or. It's two years later when you pay the price or not, right? We, actually, if you look at Mexico for two years, one year they underperformed because of margins. The next year, we had a much lower cost of risk. To me, that is incredibly important to understand.
Don't look at us in these countries or these portfolios, like the higher risk in Brazil or the other in the US, for one year. We need to look at through the cycle. We do that all the time. We look at it inside and out and sideways to make sure that it's through the cycle above the cost of equity, okay? The specific, are we being too conservative in Mexico? I will let Héctor answer that one. I asked him that question too, by the way, and the board. We have to say, so far they've been right. There's a lot of work to do, and I'll let him Normalize Brazil. Again, we took action a year before, but I'm sure you can get that. On the Cap Gen and the 20 basis points, that's for José.
I would say one thing from the board point of view and us as a team. We have delivered on the two plans we showed you, in spite of it being probably the most adverse possible scenario for us, not just for bank, but for us relative to other banks, especially the last four years, okay. We, you know, we wanna deliver, and we will deliver the plan we're showing you today. Will we do it at the higher end or the mid-range? Well, we're ready for things to get difficult again. You know, it's not gonna be an easy three years. We're not counting on an easy three years. Let me leave that very clear.
Now, nobody can tell you what's gonna happen in the world even in the next weeks, but if you talk to economists, they will tell you to predict more than 12-18 months, and I'm talking of the Larry Summers, not the, you know, the best. They will tell you any model more than 18 months, I'm sure there's some of you that do this, is like. Okay. When we give you a range, because we are confident on our execution, on our strategy, et cetera, you know, we will deliver. If you're seeing some co-conservatism and, you know, they all look at does it all add up, you know, we need to make sure that three years from now we come back and we say we delivered. Will it be at the 15% or 17%? Well, we've already said above 15 this year.
Well, Mexico, is it too conservative, and when is Brazil gonna normalize?
Okay. Mexico, first of all, that's the reason for One Transformation, okay? If you see our numbers, we outperform our competitors for five years in a row, then on the last year, basically in 2022, our competitor basically outperformed us. The reason is basically that we needed to transform our systems. Our competitors transformed before us, and they basically we have a gap to them, and we are running behind probably a year and a half to two years behind. That's what exactly we started with One Transformation because this actually came from the business. It was not from me.
It was the business told us, "I mean, we don't have the tools in order to compete head to head against these guys, so we need to transform ourselves." That's why One Transformation occurred because we needed to do that in order to be able to have the same tools in order to be able to match them, okay? We wanna be able to do it. We're working on that as fast as we can, and we're gonna be able to do that. When we do things right, for example, we imported the whole credit card system from Brazil, and we were able to outrun our competition. We placed 1 million cards in 2022 with the best cost to risk ever in the country, okay? That's basically penetrating our own client base, okay?
That's exactly what I'm talking about when you loyalize the client base and you sell them the right product and the right structure. We have the right scale. We have a 14% market share. We can be able to compete and grow the business. We have grown it systematically for the past few years in a row. Yes, we need scale, we need more clients. And to be able to do that, we need the systems in place in order to do that. That's the reason for One Transformation.
Can I just add, because, I mean, you're being very modest. If you think about what we've done in Mexico, we've gone CIB, we were behind, we're probably number one. Wealth management, working with our bank in the U.S., we're probably number one. Acquiring, first country to roll this out on a global platform. Auto, we built from scratch to 14% market share. When it comes to individuals, and by the way, not so much as in Mexico, but a bit across the group, that's where either you make a big change in the model or you're never gonna catch up with the leaders. That is exactly the reason why Héctor went and said, "How do I change this?" Pushed by the business. That's the timing is it was now because we have proven the model works.
We have the tech, we have the teams, and we have the need. We have the urgency to go. We have gone one by one. Now, these of course will continue to grow, but the biggest upside for many reasons is that which is 50% of the, of the bank and a lot of the upside. Sorry. Normalize Brazil.
No, no. If on the question of conservatism, I just, I mean, to be very quick about it, we're very opportunistic in the way we manage things, and we're very quick to react, okay? The question is, when we went to open market with credit cards, we got killed. We decided to tap our own client base. We have the data. We know exactly what these guys are transacting, and that's why the cost of risk has come down so much. These are the type of things that we're doing in a much smart, intelligent way without going crazy to the market. The same thing in Brazil, okay? Going to your question on NII.
In Brazil, we actually, when we saw that the situation was getting complicated, we went ahead of the competition and closed a little bit, I mean, the, the grifo, how do you call it? The, the tap. We closed it a little bit because we knew that it was gonna get much more complicated, okay? What we're gonna see is that NII recovery would basically come to the second part of the year. When do we see Brazil? Brazil is already normalizing. Maybe José can comment a little bit on the cost of risk, but it's getting much better. He already commented on it on the presentation, and we see that it's gonna normalize over the next 12 months or so. It's already much better than it was. I think it has more, I mean, much more upside towards the end of the year, yes.
Do you wanna take that?
Yeah. I can pick up. No, you're right. By the end of 2025, the year where Basel III is implemented, according to our plan, yes, we would have accumulated
15-20 basis points of excess capital per year, which will give us at the end of 2025 with over EUR 3 billion of excess capital and capital allocation flexibility. Yes. Above the 12%, yes, as I said, above the 12%, 50 basis points of excess capital is equivalent to EUR 3.5 billion of capital, of excess capital above the 12% target. Yes.
Thank you. Thank you very much. Can we have Fernando as the next question?
Thank you very much. Fernando Gil de Santivañes from Bestinver Securities. Just a clarification on the capital guidance that you have provided. If you could just go through again the Basel III impacts in January 1st, 2025. That will be one. The second one is on Spain, what is the NII forecast that you are considering for these, specifically 2023 and yeah, basically this is it. Thank you.
40 to 60 basis points Basel III. Operational risk mostly, a little bit from other, basically CIB related changes, not significant. It will with ILM equal to one, which obviously is a very important step forward. NII in Spain, double-digit growth in 2023. Comfortably above 10%. With interest rate sensitivity I just mentioned, if you add that to our 2022 NII, you go into, you know, high double digits.
Thank you. Can we have both Martha and Ignacio Cerezo as the next questions?
Good afternoon. Thank you. The first question is on bolt-on acquisitions. Do you have a budget over the life of the plan for bolt-on acquisitions to strengthen your CIB, your wealth management business? We've seen some headlines recently, so it would be wonderful to understand if you're committing to allocate more capital to that. The second question is could we just touch base on your key geographies and sorry, I know you're trying to make us look at the group as a whole, but at the end of the day, you're still a sum of a number of relevant countries and big balance sheets. Could you please elaborate a bit on your risk appetite in the U.K. because it looks like it's drifting, so you're not very interested in here.
Your risk appetite in Brazil. Is it risk on now? Is the worst over and you are willing to grow and take on more risk? Spain perhaps. Just a final question on deposit gathering. Can you give us a split of the EUR 20 billion you're trying to raise? Is that gonna be in Spain? You're gonna be raising cheap deposits in Spain, or is it more scattered around the whole of Europe? Thank you. Sorry, on the risk appetite, it was more like, do you want to compete on prices? Do you feel like you need to pay up for deposits and pay down for or charge less for loans? That was more. Thank you.
Okay. Let me just go take the first one. on bolt-on acquisitions we will continue nothing significant, nothing that's gonna change these numbers. Hundreds of millions of sales and maybe some hundreds of millions of things here and there are teams or you know, smallish things. I mean, if they come up, we look at them. That is absolutely the guidance. We still have bits and pieces here and there and portfolios we can sell. We will try to compensate them, maybe not all at the same time, but very minor, not affecting the capital in what is the context of the year. Nothing that will change any of the numbers that you're seeing here. Nothing. I don't think we specifically said that before.
I think Héctor on purpose forgot, but we're not looking at Banamex, and we will not look at it. Okay, key geographies. You know, it's not that we're trying to tell you, it's that we're showing you amongst other things with the people that are here. It's because we have built global platforms that are driving the country's growth and profitability. In businesses already, it's absolutely there, and payments is gonna be more, but it's already delivering benefits in auto and now with the One Transformation. It's not like, you know, we want you to see this our way. No. Is this is the way we are running the bank. Is that something that everybody understands? I don't know how much more we need to do it.
You're right that we still have a big part, half the bank, which is retail, which is what Héctor has been explaining. As he said, the U.K. could be probably the next candidate for the One Transformation. You know, if you can go over the key geographies, Héctor, and the risk appetite in Brazil and Spain, you or José, let me just take the last one. In terms of deposit gathering, it is gonna be all across Europe. The EUR 20 billion, it's basically outside of Spain and Openbank in Spain, where we have a different brand, so we don't need to make, you know, this gives us a huge optionality. It's a digital bank.
It's grown 350,000 customers last year, net new customers without any marketing, with a very low acquisition cost. They can pay a bit more. You know, on a standalone basis, this is a very profitable bank now with the rates where they are. That's not the point. The point is that it's funding a big business in consumer across Europe. That's why we put it together. It's being rolled out in Germany, for example, so we'll be able to do more of that down the road. The EUR 20 billion is... And it's Openbank and some other admittedly higher than Openbank cost of funding has been in general. This is really the thing, because in Openbank you have current accounts and three, four, actually more than four products per customer. It's not just a deposit gatherer where you pay up.
It's actually a customer-focused bank, much as we want the rest without branches. Yes, it's all across Europe. Do you wanna take the key geographies?
Yeah.
Risk appetite, Brazil, Santander, I think, I'm sorry, Brazil and Spain.
I mean, you talk about risk appetite in U.K. Yes, we do have risk appetite in the U.K. I mean, we're growing the portfolio. What we need to do is rotate a little bit more the balance sheet in the U.K., which is something that we are working on to do. We have the systems and everything put in place, okay? We're also gonna take a look at maybe open a new revenue streams and coming into new areas, no? There are opportunities in the U.K. In terms of risk appetite in Brazil, what we're doing and what I told you is that we're changing the mix a little bit, okay? We're changing, we're going much more from unsecured to collateralized type of loans, okay? The mix is changing in Brazil.
I mean, maybe the revenue and the spreads are not going to be that hefty, they are going to be much more secure. Remember that the rates in Brazil went through from two to 14 in very little time. What kills you is not the bullet, but the speed, okay? These are the type of things that you need to keep on looking at, okay? You need to be very smart and intelligent about how do you manage that risk. If we see that the market stabilizes, we foresee that rates are not going to come down until probably second half of the year. When we see that, we'll start touching a little bit the water and coming back into that market, okay? We are still at very active and in collateralized part of the portfolio. The portfolio is going to grow.
In Spain, we are actually completely open. We are placing loans. The thing is we are very much focused on profitability, okay? We much rather be profitable than grow the quota. That's exactly what we're gonna do in those markets and the other key markets we have already discussed. Thank you. I don't know if you wanted to.
Thank you. Ignacio, do you want to go ahead?
Sorry. Hi, it's Ignacio from UBS. Thank you for taking my questions. I have two on the U.S. The first one is on revenues. I don't think you have a specific target. I mean, you put it within North America. Let's assume for a second that the 7%-8% CAGR is the same for Mexico and the U.S. Can you give a little color in terms of the breakdown between lending growth and margins in the context of the comments you have been making around increasing the weight of deposits within the funding mix? If you can quantify actually those funding synergies in the U.S. The second one is probably asking again if you can give us a little bit of comfort around the cost of risk in the next 12 - 18 months.
Obviously, we're navigating probably difficult part of the cycle in the U.S. You have been sticking to the view that the cost of risk will not go above pre-pandemic levels. If you can give us actually the underlying assumptions you have behind that type of assessment and what is the sensitivity if macro ends up being worse than your base case. Thank you.
They're both on the U.S. sector. Please.
Okay. All right. Let me start with the question of the cost of risk in the U.S., okay? First of all, the cost of risk in the U.S. is not gonna go to pre-pandemic levels because we have changed completely the mix that we have in the portfolio, okay? Thanks to the deposit base that we have, we have changed, and we have our portfolio much more into prime and near prime, which is much more secure, and we have not seen the portfolio deteriorate on that level, okay? Prime and near prime are doing quite well, and 60% we're upgrading, well, in the portfolio is going to 60% of the portfolio into prime and near prime, okay? That's gonna help a lot in the mix.
Also we have eliminated some of the, I wouldn't say bad businesses, but the riskier businesses, like GloSTEM, that was really affecting us in terms of the cost of risk, okay? What we have seen, and this is our reality, is some of the vintages in the portfolio from 2022 have higher delinquency than we expected. The interesting part on the equation is that the recovery, what happens is maybe that, I mean, maybe the delinquencies are going for a little bit less than 90 days delinquent, okay? They basically are correcting themselves. Just to give you a number, repossessions, after 90 days in the U.S., it was about 98%. Today, it's at little below 70%.
It's 28 points much better than it used to be, and that's because of the price of cars and the difficulty to get new cars on the market, okay? We're mitigating the delinquency on the portfolio because of that. I don't know if you understood the, I mean, but that's exactly what's happening. We don't see the cost of risk deteriorating because of that mitigation, okay? On the revenue, what you're gonna see is we're not gonna grow as much, okay? Because there are basically no cars. That's I'm talking about 2023.
Also you have seen a lot of the spreads being compressed because of that, all right? That's what you're gonna see in terms of revenue in the U.S. That's why we were talking about 5%-7% revenue growth.
revenue growth in the U.S.
No, revenue growth is what I said is.
Okay. We're giving specifics for regions, no? I don't think. No.
Okay, can we have the next question over the front here, please? Can I have a show of hands of how many questions are still pending? One on this side. Two. We have two more questions after this. Okay. Thank you.
Morning, it's Benjamin Toms from RBC. If I take a step back and I look at your valuation, it obviously screams as too low for a bank that's delivering a 15%-17% ROT on a sustainable basis, I'm sure you wouldn't disagree with that. Is your ROT guidance sustainable, can you achieve similar levels as you've guided to today in a lower interest rate environment? Do you expect your ROT to grind up higher during the plan, or could there be ups and downs? I'm just interested in the cadence of the exit rate. Secondly, on U.K., the banks reported over the last month, and there was some bearishness on NIM for various reasons like competition, deposit betas, deposit migration. The one bank that was relatively more optimistic had a relatively large structural hedge.
I guess my question is, can you give some color on the outlook for U.K. NIM, given we've had a bit of time since you last reported, and can you quantify the size of any structural hedge that you have? Thank you.
Yes, we're trading cheap. That's why we're buying back shares, and we'll continue to do that until the market doesn't see it. I mean, markets tend to look backwards. If you look the last three, four years, we underperformed, as, our CFO has explained, in terms of value creation. For whatever reason, but we underperformed. Part of that is because we're improving the model. We're growing capital when others were growing less capital. Part of it is because, you know, three years ago, four years ago, we were 30%, 30% above. Now we are probably around 20 below. Because again, back then also the track record was worse. It was in terms of value creation.
You know, again, what we need to prove is that we are creating increasing value, that we are actually catching up, and we have in terms of some of the issues we had to do. Yes, we believe it's sustainable, and we believe that our balance sheet suffers more than others. We had just bought Banco Popular in 2017. Two years later, we get a COVID crisis, which was an SME crisis, mostly in Spain. We had higher cost of risk for one, two years. There was fears last year about, again, recession cost of risk, which I think exaggerated the impact on us, and we delivered on everything we said at the beginning of 2022. We had actually recovered quite a lot by April, May. There were fears about recession. We delivered the cost of risk we said.
Yes, I think it is sustainable in the 15%-17%. Will it go to 20%? We're not saying that. 15%-17% is sustainable with rates that are around where they are now, not much higher. You know, if you think rates are gonna go to negative, oh, fine, we have a problem. If rates stay in terms of the consensus, and as the CFO said at the beginning, we're giving this guidance with the consensus on the macro for the next few years. Correct?
But we do think our model is gonna get increasingly better, okay? This is really important because we've done a huge amount of work on half of our customer revenues. In terms of number of customers is the retail is where we have more work to do, especially in the three countries we're focusing on. I do think, yes, I believe the sustainability, and therefore we continue to be very cheap. I mean, I shouldn't say this because it's my own shares, but I think we are, we continue to be undervalued, and I believe that is gonna catch up. If it doesn't, we'll continue to buy back shares and remunerate shareholders. As you've seen, we've gone from EUR 1 billion eight y ears ago in cash return to shareholders to EUR 3.8 in cash on buybacks.
That is almost four times in eight years, in spite of everything that's happened, in spite of investing for the future, in spite of negative rates, COVID. That's where you can see how much we are, we're improving the model and how much we're improving shareholder remuneration. We are absolutely focused on that. In terms of outlook for the U.K.
Yeah.
Net interest margin.
Okay. The NIM, basically, we see it much better because we're very much focused on profitability, okay? We're concentrated on that more than in volume growth. You're gonna see NIM get better. The structural hedge is EUR 100 billion today, we will decrease it by. It's difficult to know. The way interest rates are expected to behave probably means we should reduce it gradually to around EUR 80 billion, something like that, to benefit from, you know, the slowdown in the increase and the flattening that will happen after that. EUR 100 billion today, probably gradually reducing it to around EUR 80 billion.
Thank you. We'll have the next last question here. Pamela will be last. Thank you.
Yeah. Hi, thanks for taking the question. It's Benji at Jefferies. My first question was just on the auto business. You're targeting a loan CAGR of 7%-8%. I just wondered what that was assuming in terms of the relationship with Chrysler or the other OEM relationships, whether you're planning to expand those or not. The second question was just a quick one on the return on Risk-Weighted Assets, the 85% above cost of equity. I was just wondering what you consider to be the group blended cost of equity at the moment. The final question, I mean, you've touched on it already, but I was just wondering if you could talk a little bit more about, you know, what you think sets you apart competitively
In terms of your deposit gathering franchise in a higher rate environment, you know, is the proposition more on the cost side? Do you think you're more efficient, therefore you can basically pay clients more for deposits? Or is it more about what you can do on the monetizing side and the revenue side, i.e., you can monetize those deposits, more effectively? Thank you.
I'm gonna take three, Héctor, maybe you can take one and two. José also on the cost of equity. This is exactly what One Transformation is the goal of the One Transformation. We need to be the most efficient. We're already the most efficient in quite a few markets. We need to be the most efficient retail commercial bank in each one of our countries, because we have not just the local scale, but the global capacity to help those banks that are, you know, still not at the best. It's not just the U.S., it's also Spain, it's Mexico, et cetera. There's a big opportunity for us to be the most efficient. We're not there yet. There's the brand, of course.
We have a strong brand, and trust is important and, you know, we believe that is gonna help us. Again, the whole of the One Transformation is about how do we become the best in each geography, leveraging the group platforms, the group investments in technology, the group proven business models, in digital banking or business operating models like some of the countries in the group that are best in class within the group, but also in their own markets. You know, that is what will set us apart and reduce the cost of funding, but also help us to grow in more deposits. Simplification, automation, common platforms is what will drive us to be best in class in cost and also in growing customers. You've seen we have guided to both of those.
Growing customers, continuing to invest, but also delivering efficiencies in the next three years. I think that is really where. You know, Héctor has explained it, I think, quite well in his presentation, which is this is about customer focus. We're gonna put all our energy, all our investment to offer you if the best in Mexico, U.K., U.S., Spain, if you can open an account online with the best in that market in four minutes, we wanna be at 3.9 minutes. That's one of the things customers value. That's the way you acquire customers. Of course, that same current account, card, et cetera, is gonna be offered to you not just through your web or your app, but also in branches and so on.
These are the kind of things that we will focus on to deliver the best customer experience so we can grow customers efficiently and then be very competitive in deposits, but also profitable. It's very much related to the strategy of the One Transformation. The auto 7%, 8% Chrysler and RWAs and cost of equity. What is the blended? What are you saying?
Okay. In terms of, I mean, the relationship with Chrysler, I don't have these exact details, okay? I just have them in my mind, but I have, I mean, we did actually with Stellantis. What we did is we renewed the operation in Europe in very good terms for us. I can give you the details later because I don't have them on hand. In the U.S., what happened is, as you know, they bought a small financial company to help them out. That company doesn't have the size and the capabilities in order to absorb the amount of business that basically bring to these guys generate. We have extended it, I believe it's to 20225. It was extended until 205.
Let's see how we if they're gonna be able to have the capacity to absorb a little bit more after that. If not, I think they will renew with us for a little more time. What we have seen today and with the current conditions, rates going up, et cetera, I think it's not gonna be as easy for them to be able to absorb the amount of the volume that they generate. I believe that we are gonna be able to maintain that business for a little bit more time than we expected at the beginning. In terms of, José, the cost of capital.
The cost of capital. We use 11% for the group and all subsidiaries in hard currency. For Brazil and Mexico, for instance, we use 15%. When we look at percentage of portfolios that earn cost of capital, we use a different reference for each country, but basically 11% for the group and hard currencies, 15% for weak currencies.
Thank you. Pamela, do you wanna go ahead?
Thank you. The first question is, sorry, again, on Brazil. Thinking about the targets on return risk-weighted assets, you're talking about 2.8% more or less in 2025. If we look at 2022, we're not that far from the level already in a year when we've seen headwinds in terms of NII, costs, cost of risk. My question is there a reason why you're not targeting any improvement in that profitability metric? A follow-up on your aim to increase your deposits in Brazil. One of the reasons why we've been seeing that delayed recovery in NII in Brazil is precisely an unfavorable shift in the mix of deposits now that there is more appetite for return deposits.
If we're looking at that cost of funding headwind from that, how are you thinking about your appetite to continue growing your deposit base? Is that a potential risk when you're thinking about your cost of funding? Moving a little bit further away from emerging markets into Europe, you've already said Europe is not the target for growth. You're mostly targeting profitability improvements. If we're thinking about optimizing capital allocation, would you consider potential divestitures across Europe in those geographies where profitability is just not quite there? If we're thinking about that, would you be willing to maybe reallocate capital in geographies that could be improved? Thinking about, for example, the U.K.. You haven't really set a specific strategy yet for improvements in the U.K..
You've talked about maybe finding alternative revenue streams, but could we also see maybe appetite for inorganic growth in the U.K.? We're looking for scale improvements. Thank you.
Okay. Let me just take just briefly the last one, not on the U.K., which, I'm sure Héctor can answer that. In terms of capital and upside in terms of growth Europe, Americas, you know, we think about it first every country can always do better. If a country is at a high level, doesn't mean all the segments are doing well, and this is a huge difference from before. If you think about customer segments, where the biggest upside is, this is true for Europe, and it's true for the Americas, that's why One Transformation, by the way, is Europe, Spain, but it's also Mexico and the U.S., as I said before to the lady, gentleman here.
Mexico has done a fabulous job in terms of competing and being super profitable in all the higher end segments. We can do much better on the bottom part. Where are you gonna see? Because of the combination of what we are doing and the tailwinds, the biggest upside in the next few years is gonna be on the retail commercial banks. DCB or U.S. Auto for that matter, you know, these are businesses that do better with lower rates. Yes, they're gonna be above the cost of equity profitable, but not gonna grow as much. CIB has done incredibly well, and even though we'd like that to continue growing at 30% every year, that ain't possible. Okay? Wealth management, the same. We would like to do more very high ROTEs.
Where you're gonna see the biggest upside, forget about regions, is individuals, retail commercial banking, which is what Héctor has explained in detail. That is about half the bank. You're gonna see a combination of a better model and tailwinds and interest rates, because the deposit side is gonna make a lot more money, so it's gonna be much more profitable. And by the way, we'll not forget about remuneration. We're gonna grow our active customers, we're saying by 25 million, and that, as Héctor, I believe, has said already, is also happening in Spain and Europe. More customers, more deposits, higher. This is really important. And that is how we think about, and that's where we're gonna continue to price and aim to gain or not gain market share, including in Europe.
It's a very dynamic thing, and it's one of the great, you know, we can allocate capital, not just within countries, but within segments. You're gonna get the biggest upside on retail and commercial, and the delta is gonna be Europe vis-à-vis Americas. If you look at the ROTEs that I think Héctor showed, you know, I think Europe is at nine or 10, it's gonna go to 15. North America stays at 15, and South America stays at 19. There you have the answer in terms of... Yes, in the last few years, where we were below the cost of equity was Europe. Clearly so. You know, for the first time, you're gonna see every single one of our businesses and regions and countries at very good returns going to the sustainability. Why?
Because we're changing the model, and because what has changed is that, especially in Europe, but not only, we have positive rates. I mean, we don't need much higher rates. It's, you know, we now have very important change. In terms of the other questions on the U.K..
Brazil.
Brazil.
Just to be precise, Pamela.
Cost of funds.
The question is, you were asking me exactly the RWAs. You're asking RORWA, right?
Right.
On 2.8. Okay.
It's for la grupo.
As for the group.
It's for Brazil. What she's saying is.
No, I'm talking about for Brazil.
that the return on tangible equity we expect in 2025 is more or less flat compared with 2023. 2022, 2023. For Brazil.
No, here.
The RORWA, which is the same as ROTA. It's the same. You can transform one to the other. What you're saying is the profitability that we expect in Brazil in 2025 is fairly flat compared with 2022. That's the question.
Yeah.
If I interpret it correctly. Thank you.
We have given the ROTE for the regions, right?
Yeah.
Not for the country. Sorry.
Yeah, and just quickly on the question of deposits, we would love to have much more deposits in Brazil. Actually, we're gearing towards that. One of the big changes that we're doing in Brazil is exactly to get much more deposits actually from our clients. We're growing our deposit base, and that's one of the big challenges that we have in the country.
If you look at the numbers in terms of active customers that we're presenting, that's where you have the answer in terms of deposits and margins and growth. Going from 99 to 125 million customers, just think about it for one minute. It's huge. Of course, the net new customers also, because we're in countries where just in financial inclusion, we're going from 10 to 15, and that is just very much the bottom of the pyramid. That's where you're gonna see the deposits growth and again, That tells you the story, no? It's very much linked to the transformation in individuals. I think Héctor described it as going back to basics. It's not different from what we've been doing.
It's just taking it to the next level in terms of working together and sharing best practices and building together. A lot of those customers, in the case of Brazil, are in the bank.
Thank you. Thank you all for your questions. The last part of today's Investor Day, we will have our Executive Chair do the closing. Thank you very much.
Thank you very much for all those questions. I guess just to finish this, I wanna just reiterate that we have a strategy which we believe is the right one. We have shown this executing over the last few years and delivering on our commitments at the 2019 Investor Day. Very importantly, we have a team who believes in the strategy and who has huge confidence that we will execute on it in the next few years. Second, let me just review that we have some attributes and as, you know, differences with our competitors that position us very well, and very importantly, very well relative to our peers for the next three years. I'm gonna go back to what we have been saying the whole morning, which is first, our customer focus.
We have one of the largest, most diverse, and also engaged customer bases in the world, and we have significant growth ahead. This is incredibly important. This is reflected by the growth we're seeing across our global businesses and in the countries. We have individuals, we have merchants, we have SMEs, we have affluent, high-net-worth corporate customers. We believe that delivering for those customers is absolutely our top priority. Second, we have begun, and we are well on our way to delivering on a new plan business operating model for our retail and commercial investor base. This is really important. To converge all of our countries, starting with Mexico, U.S., and Spain. This is driven by tech investments. Some of them have been done already.
We'll continue to do it and improve them, which will reduce the way we run our branch network, which will reduce the way we run our business. It is about something we have done already, which is reinvent and execute on how we manage our operations, how we manage our controls, how we manage all the way through to the customer relationships. Last, and this is an important point, which maybe we haven't made enough during the day, but the growth opportunities are very much aligned in the next few years, and this is for all our customer segments on the energy transition. We're a company that happens to be a leader in the world. This is something which we're doing not just in our footprint, but very profitably and successfully outside our footprint.
The biggest opportunity, again, lies within our own retail, commercial, merchant, and corporate business. I have to say, we have an army, literally, of customers that are pushing us and everybody else in that direction. My second point is on scale. Our scale allows us to operate highly competitive, successful, profitable growth businesses, which are relevant to our customers. We have said it, but let me repeat it. This is a proven model in CIB. It's a proven model in wealth management, also in payments, and increasingly in auto. We have the scale and we have the competitive advantage to continue growing profitably and sustainably, there's tremendous opportunities over the next three years. My second point is that, there's always been a lot of questions, not just to us, but to others, where is the technology payback?
Where are the investments that you're making apparent? I have to say, they are paying off already and they will more in the next few years. This is incredibly important in terms of the sustainability of our earnings. You cannot be caught in the middle. Either you have the scale to invest across the group, or you have to be very specialized. In the middle, there ain't any space, and we are already seeing the payback of those investments, as I said, in CIB, in wealth, in payments. Increasingly, you will see that in the retail commercial side of the business. I have to say that along the way, as we've made these investments, we have continued to deliver increasing profits, increasing capital, and increasing our returns to shareholders. My third point on scale is One Transformation, and One Transformation is also one team.
It's a big change, but it's a big change that the reason we're only telling you about this and really rolling it out to three big countries is because it's a proven model. It's a proven business and operating model. Simplification, automation works. We've proven it in some countries. It's a proven tech back and front model. We've proven it also, and that's why we're rolling it out today. As I said, One Transformation is really about one team. This has always been the most difficult thing, right? I don't know who it was who famously said that execution eats strategy for lunch every day. Well, that is true. That is the other reason why we have not gone faster until now on the retail commercial. It's all about execution. One Transformation is one team.
I have to say our team has adjusted to the new realities. We had 120,000 people working from home just two weeks after COVID was announced. 120,000 people. We have reskilled our workforce. We are changing the type of profiles. We've, you know, brought to the bank 5,000 new tech profiles over the last few years. We've made a seamless CEO transition. We've become one of the best places in the world to work, we are attracting very high-level candidates and people to all our businesses across the bank. I wanna say that, very important, our team is battle-tested and is ready to what lies ahead. I also wanna point out that some of the people that are here around the room, my team, I'm very proud.
Just look at who has come to this investor day. It's the head of CIB, Rosalia. It's wealth management, Héctor and Samantha. Payments, Javier, and Felix. Auto, we have José Luis de Mora. We have Mahesh, who's also CRO. He's not double-hatting, don't worry. He's fully focused on risk. We have our CTO, Dirk, and Cristina Álvarez. We have One Transformation, Ezequiel. Sorry I don't mention everybody, but it's really important. This is a message we're giving you. We are organizing the bank increasingly to deliver as one team. Last but not least, diversification. We absolutely believe in this model. We believe that the strength of the group is the sum of the parts, and that this is what will drive a new phase of value creation. We are not anticipating easy times ahead, okay?
That is why we're giving you a range of 15-17, as actually we did back in 2019. Hopefully this time, we don't see as many surprises. I have to say that the new environment is actually much more favorable to banks with a profile like Santander. Again, our global businesses are critical to the success of our local businesses. Already 50%. Sorry, 30% of our total group revenues are in our global businesses. We have all the proof points of this positive flywheel, and expect many more global wins, and we're giving you some indication of that in the KPIs.
We have proven and we believe going forward it will again be the case that our footprint across Europe and the Americas and our business diversification by different types of customers will make us stronger than our peers, and our track record has shown this. Finally, our capital ratio above 12%, puts us also in a strong environment, in a strong position to deal with this uncertain environment. I have just one slide, which is hopefully coming up. Is the my first one, please? The one you've seen. Well, you've seen it so many times, but please can we put it up? Basically we're entering a new Esta. Muy bien. Thank you. We're entering a new phase of shareholder value creation. This is really important.
We are for the first time committing to a TNAV per share and dividend per share on average through the cycle of double-digit. We are targeting delivery of 15%-17% ROTE by 2025, which should outperform our peers. We do have interest rate tailwinds, but we also have customer growth. We have a change in our model. We will continue to be absolutely focused on portfolio management and capital allocation, and we believe everything that we've done until now and the plans we have make our targets very achievable. We wanna end here by saying that Héctor, myself, all the teams here today are not just very excited about this new phase of value creation, we have high confidence we will again deliver. Thank you again for being with us.
Any other questions, you know, our team is here. We do have some time for lunch, which Begoña is gonna tell us about. Thank you very much.