Good morning, everyone. Thank you for joining us for our full year 2022 earnings presentation. I'm here today with Juan Pablo López, our Head of Investor Relations, and Pablo González, our Chief Financial Officer. They will guide us through the presentation. Please remember that we will have a live Q&A session after the presentation. Now Pablo.
Good morning. Before we get into the details, I would like to remind you the big changes the bank underwent this year, such as the branch network restructuring, large number of early retirees, and IT migration, to name the most important. Despite all these major changes, we have been able to deliver a strong set of core results in the year, which is very encouraging for the future. Getting into the details, as we had anticipated the previous quarter, we are focused on growing consumer lending and residential mortgages, while on corporates, the main focus is to improve the profitability of the book and volumes is a second priority. We can see both retail books growing in the year at 1.7% in the case of mortgages and 3.5% the consumer loan book.
Deposits from individuals were also up in the quarter, which shows that our consumer are not using their savings. I believe this shows the resilience of our franchise. All three lines of our core banking margin have posted fantastic results in the year. Net interest income is 11% up quarter-on-quarter and 3% in the year on the back of the improved new lending yields and repricing of the loan book, ALCO portfolio, and wholesale funding, while maintaining retail funding cost at a very low levels. In fee income, we have delivered a very strong result with a growth over 7% despite volatile equities and fixed income markets during the year. A strong banking activity and the integration have allowed for this result. Operating expenses are 8% down versus last year.
All cost line show yearly decreases, which additionally to the restructuring that is taking place, shows our cost discipline, which is even more remarkable in such an inflationary environment. Adding these three together, our core banking margin improved by 24% in the year, which will keep improving going forward, and again, it is very encouraging for the future. At the same time, we keep reducing our stock of NPAs, which as you know, is a key target for the bank. The stock of foreclosed assets went down by EUR 54 million in the quarter and EUR 375 million in the year, helped by the sale of a wholesale portfolio. NPAs coverage levels increased by 141 basis points in the quarter, which reflects some additional efforts on our side to accelerate disposals going forward.
NPLs are slightly down in the quarter, with the limited NPL entries in the quarter and coverage ratio up nearly 2 percentage points. Recurrent cost of risk for the year was 24 basis points. On top of that, we have booked extraordinary prudential provisions based on updated conservative macro scenarios. This effort makes us comfortable going forward in this area. About capital and value generation for our shareholders. CET1 fully loaded ratio stands at 13%, which is flat quarter-on-quarter, as we have generated little capital organically in the quarter with the deposit guarantee fund charge this quarter. This is very comfortable capital position for us, and we expect to keep generating capital organically going forward.
The total shareholder return in 2022 was over 22%. As you know, we are committed to distribute 50% of 2022 net income as our recurrent dividend payout policy. Finally, a brief note that I think is worth mentioning is that we have been included in the IBEX 35 index at the end of 2022 for the first time in Unicaja Banco history. This is important for us, and for our shareholders, as it makes our stock more liquid and more attractive for investors of different types. We're very happy as this is something that we thought was achievable with the merger, but it has happened before we were expecting. Now, I give the floor to Juan Pablo, who is going to cover the business activity of the quarter in more detail.
Thank you, Pablo, and good morning, everyone. Let's start right now with customer funds, which, as you know, they have a very high value again. We think we have here a competitive edge. As you can see on the right, more than 75% of total deposits come from households with a very granular balance, less than EUR 20,000 on average per customer. They perform quite well in the quarter, with positive growth and offsetting the exit of more volatile corporate deposits. In terms of pricing, we are paying basically nothing for these household deposits. For us, this is probably the best proof of the value of our franchise, and also this is also a very good read across for asset quality.
Our customers are not tapping their savings in an inflationary environment, quite the opposite. In terms of balance sheet products, the evolution is clearly influenced by market volatility in the year, but you can already see stabilization in the last quarter, with market valuations improving. In Slide seven, we take a closer look at our mutual fund business, one of our main fee income growth engines. AUMs have decreased in the year on the back of market volatility, but we remain positive as we keep working to increase penetration within our customers. The beginning of the year has been good for the markets, and this is very important in order to pick up the pace on customer inflows, as they are quite sensitive to short-term valuations.
On the right side of the slide, you can see the increased profitability of the mutual fund portfolio, more than 33% year-on-year. Our strategy here is to offer more value-added products that generate return to our customers. In Slide eight, we take a look at the insurance business, which is actually very significant as the ongoing operations revenues represent almost 10% of the gross revenues of the bank. On the right side of the slide, you can see a summary of the life insurance business restructuring, where Santalucía is now our sole partner under a 50/50 JV structure. This was a complex transaction, as there are many parties involved, and we have achieved a good result.
We are also encouraged, not only because of this result, by what is ahead under the new structure. As we anticipated in June, we released EUR 24 million that were provisioned in the PPA. This quarter, we have a positive impact of EUR 17 million in the PNL. Going forward, we have three more items pending to be accounted for, all of them positive. First one is a EUR 19 million capital gain in the sale, and then we have EUR 23 million gain related to the extension of the agreement. These two impacts makes EUR 42 million, and we will get it for sure. What we are discussing with the regulator is the accounting period for these EUR 42 million. Finally, we have EUR 40 million earn-out depending on the achievement of a 10-year business plan target.
All in all, you can see the transaction was very successful for the bank. Moving now to lending on Slide nine. Retail lending book is up year-over-year by almost 2%, which compares to a flattish book at sector level. As you know, Pablo commented, retail lending is our main focus, both residential mortgages and consumer, which are growing its market share despite intense competition in the year. On a quarterly basis, mortgages are slightly up and consumer are 2% up, supported by strong marketing campaign in November. Corporate loan book deleveraging continues this quarter, as we have seen some large ticket early amortization is still coming from extra liquidity granted to companies during COVID and TLTRO era.
Our main focus here in corporates is to target the right clients and improve our product offering and profitability. We are starting to see signs of much better pricing for this portfolio over the last couple of months. Next slide on new lending. Strong activity on individuals. corporate new lending still being quiet, as I just mentioned in the previous slide. On the retail, mortgages are 16% up. consumer is 29% up in new lending. As we anticipated, once the new systems have settled across the organization, we have been able to accelerate activity levels again. you can see new lending for the year is significant in residential mortgages at EUR 4.3 billion.
Consumer is starting to pick up, and as we have been discussing, we have room for growth here just by working with our existing customers, and we are positive for the next quarters with the development of digital and risk tools that will enable us to grow further. In Slide 11, looking at our two biggest portfolios. On the left, you can see the main KPIs of the residential mortgage book, very stable through the year. Mainly first resident mortgages, defensive LTVs in the portfolio, and also at an origination level. In terms of geographic exposure, Andalusia and Madrid have the highest weight of new lending, and this is very important for us as both of them are the top housing market in Spain and with a very high percentage of first residents.
This also shows our dual strategy of strength in home regions and leverage alternative channels for growth in province like Madrid or Barcelona. On the bottom left, the average loan has increased quarter- after- quarter as we keep attracting a more affluent customer, and mortgages help us to expand our relationship with clients through cross-selling. It's important to say that we have acquired almost 20,000 new clients through our mortgage business in 2022, and it's also very important to keep in mind that these customers are profitable since day one. On the corporate portfolio, a quick note on the ICO loans. During the year, more than 15% of the portfolio has matured or early amortized, leaving an outstanding balance of EUR 2.1 billion, and this explains part of the decrease of the corporate loan book.
On Slide 12, we keep advancing our digital business. Since we completed the IT integration in Q2, we keep posting good figures in some of the key metrics. Number of digital customers keep growing, reaching 61%. Customer acquisition keeps going well. One-third of the new customers come from the digital channel, nearly half of those through our strategic partners, such as PlayStation and Real Madrid. We continue to reinforce this alliance and looking for new ones, especially in the home segment, like IKEA or Tyco for home alarms. On the right, we can see improving figures in terms of sales conversion on digital, 34% of consumer loans and 24% of mutual funds have been sold through digital channels. Moving to Slide 13, a quick summary of the recent developments in ESG.
On the environmental front, we have made good progress. We continue to expand our portfolio of sustainable products. We continue to transform our mutual funds into Articles eight and nine. As you know, we have already issued EUR 1 billion of green bonds. On the social front, this is something that we have in our DNA historically, and we are proud of the educational work we do, and we have joined the Code of Good Practice. Finally, on the governance side, we have taken a very important step with the creation of the sustainable committee within the board of directors, which will ensure that the planned environmental and social actions are implemented. A lot of work done and a lot to do, but great progress in ESG. Moving now to the quarterly P&L.
We will comment more in detail the different lines, let me highlight just a few things. NII is up 11% in the quarter and 3% in the year. Higher deals on new lending and back book and ALCO repricing are partially compensated by a very moderate increase in retail funding costs and wholesale funding costs. Fee income is stable quarter- on- quarter and grows more than 7% in the year. Associates show a strong quarter in insurance business. The Q4 is always seasonally strong, thanks to the agro business. Other revenues includes EUR 20 million of extraordinary impairment losses for real estate assets in the quarter and the deposit guarantee fund of almost EUR 90 million. OpEx, very strong delivery this year in all lines.
General expenses, as it usually happens in the last quarter of the year, is lower than the previous quarters as we adjust the budget at year-end. Loan loss provision higher than normal in the quarter, explained by the backstop provision and update, macro assumptions, mainly inflation to very high levels. We increased the Post-Model Adjustment provision by EUR 50 million in the quarter. Other provisions include a EUR 15 million release from defined benefit pension plan, and then we got the run rate of legal provisions that we have seen in previous quarters.
Other profits or losses, here we include the EUR 17 million already commented from the insurance restructuring, EUR 14 million of capital gains from real estate disposals, and a big effort of EUR 60 million impairments on real estate that will again support NPA disposals going forward. All in all, as Pablo said at the beginning, we have delivered a strong result of the core lines of the business, net interest income, fee, and OpEx. Now going into a bit more detail, customer spread increased 14 basis points in the quarter as loan yields increased 18 basis points and customer deposits just 4 basis points. We are just starting to see the repricing effect, as we have explained before.
We have a large weight of our repricing coming from the mortgage book, and this is a bit slower as it reprice once a year. On the corporate book, probably we have a longer duration, and also it takes a bit longer than other peers, the repricing. In the right-hand side, we expect the loan yield to keep improving, not only because from book yields are much higher, but you can already see the loan yield at the end of the quarter was 1.90%, 1.9%. This is 30 basis points more than the average yield on the quarter. That was 1.6%. This means a lot of repricing coming next quarter. Next slide.
Loan book repricing contributes EUR 25 million quarter- on- quarter, mainly coming from the mortgage book. Our mortgage book, this is interesting, is currently repriced at around 50 basis point Euribor, so there is a lot of room to grow here. Euribor right now is at 3.3%, 3.4%, so we have almost 300 basis points still to reprice the floating mortgage book. The fixed income portfolio adds EUR 27 million. We have a short duration as we do some interest rate hedging on the ALCO portfolio instead of the loan book, and this has an impact on NII much quicker than the mortgage loan book.
On funding, we have a small impact on retail funding, which comes mainly from the corporate and public sector deposit. As individuals, funding cost remains very low, even at the beginning of this year. Average term deposits cost for individuals stand at 7 basis points in December. Finally, wholesale funding costs increase as we swap around 2/3 of the debt, and this part reprice very fast. For the next year, we expect positive evolution of NII in the high teens territory. In terms of fee incomes, in the next slide, total fees are slightly up in the quarter and 7% up in the year, which is very remarkable, given the market volatility we have seen in 2022. Banking fees that are mainly cards and payments and current accounts are up quarter-on-quarter, flattish during the year.
Non-banking fees are down in the quarter, mainly explained by some seasonality in securities in the Q3 . The yearly evolution, as you can see, is remarkable at 17% on the back of mutual funds and insurance business. All in all, very sound fee income delivery in the year, and we expect this to continue in 2023 with 5% growth guidance. Moving now to OpEx. Total OpEx are 4% down in the quarter and 8% down in the year. As we commented, more than 80% of the employees under the agreed restructuring plan have already left the bank. This is a bit quicker than what we initially expected.
It's also worth noting that since the merger, the branch network has gone down by 37% and is already below 1,000 branches, the initial target size. We have done this at again, faster speed and with no impact on the business momentum. Despite inflationary pressures, we expect OpEx to keep going down next year at low single digit. Next slide, regarding cost of risk, I will explain with a bit more detail this one. You can see the recurrent cost of risk stands at low levels, around 25 basis points in the quarter and the year. On top of these recurrent provisions, we booked in the quarter extraordinary provisions of EUR 49 million and EUR 80 million during the year.
Here we acknowledge that we are probably over-conservative, and we justify these generic provisions due to two reasons. First reason behind this additional cost of risk is the Post-Model Adjustment. Basically here our models give us a certain level of provisions, and on top of that, we stress the models, mainly the inflation, to a very high level. Basically, we assume here inflation average of 10% in 2022 and 8% in 2023. Accordingly, we book a EUR 49 million provision in the Q4 because of this stress. Second one, we book a EUR 60 million backstop provision, and we think this is important. This is differential compared to other banks, to other options.
As you know, there are other options to cover these provisions via higher capital requirements or capital deductions, but we prefer to do it basically through P&L because the underlying cost of risk was low. To be honest, we didn't expect to reinforce the PMA Post-Model Adjustment provisions as much as we did in the Q4. We could have done it better in terms of cost of risk if we have done through a different route for this backstop provision, a different option to book this one. The positive news is that we maintain high coverage ratios with our conservative loan book and risk appetite make us believe that we are in a comfortable position to tackle any downside risk in the economic activity.
We expect the cost of risk to stand between 30 to 35 basis points in 2023. On Slide 21, on the left, I guess this is the best recap of the year. You can see a significant improvement in all three major P&L lines, where we are optimistic for next year, and we expect them to grow even more than this year, more than 30% for 2023. On the right side of the slide, you can see the return on tangible equity. The evolution is positive, and we are in our path to reach our strategic plan target. Now, I pass the word back to Pablo.
Thank you, Juan . Let's move now to asset quality. On the top left-hand side, you can see we maintain the same trend seen in previous quarters. We reduced NPL while maintaining a prudent recognition of NPLs with a 66% of NPL entries being subjective in the Q1 . These are NPLs that are performing or past due below 90 days. Coverage ratio rose 2 percentage points to 67% after the provisioning effort in the quarter. If we include the guarantee from ICO loans on NPLs, coverage ratio stands at almost 76%, and corporate NPL coverage level is over 100%. On the bottom left, you can see the disclosure by portfolio. NPL ratio remains stable in all segments, and coverage ratio remain very comfortable, especially if we look at our main business mortgages, which also has a strong collateral and low LGD.
A few message from the right side of the slide. We have a very defensive loan book, with 75% being individuals and public sector. More than 50% of NPLs are residential mortgages, and 78% of NPLs have a real collateral. We have a prudent recognition approach, where over 50% of NPL entries were subjective in 2022, and 66% in the Q4 . We have best-in-class coverage levels that, if you include ICO guarantee, as I have just mentioned, goes up to 76%. Next slide. Foreclosed assets are down by EUR 375 million in the year to EUR 1.8 billion after reclassifying over EUR 100 million from investment property to foreclosed assets this quarter. The trend in the year has been very positive.
Total sales amount to EUR 584 million, while the level of entries in the same period are EUR 112 million. In Q4, total sales amount to EUR 208 million, including the sale of a wholesale portfolio that will have some additional impact next year. We keep combining the granular selling of assets with portfolios to accelerate the pace of reduction. Coverage ratio of foreclosed assets was reinforced to 65% this quarter, which will help us to maintain the speed of sales. Finally, looking at NPAs altogether, the NPA ratio, net of coverage, improves to 2.4%, which is already a very low exposure. Having said that, you know we have some ambitious targets to keep decreasing our NPAs. Moving now to solvency. Let me explain the main changes for the bridge.
Well, the CET1 fully loaded in the quarter has been quite flattish, and the main changes, as I said, for the bridge are the AT1 coupon explain around 3 basis point reduction, while net income contribution was null this quarter after the payment of the DGF and the extraordinary provisions booked. Lower risk-weighted assets coming from a smaller corporate loan book and mortgages with the new lending on mortgages under IRB model, as well as lower NPAs, adds 5 basis points and more than offset the increase in risk-weighted assets on some equity stakes where we took a prudent approach and increased the risk weighting to the highest possible level, the 370%. Finally, we had some negative impact from valuation adjustment.
The good performance of EDP is more than offset by the write-down of our stake in CECA to zero. CET1 fully loaded stands at 13%, well above our 12.5% management target. This, together with our expectation that the bank will accelerate its ability to generate capital organically, leaves us in a very comfortable solvency position. Very quickly, in the next slide, capital levels remain well above capital requirements. We have a very significant CET1 fully loaded buffer of EUR 1.6 billion and an MDA buffer of more than 430 basis points. MREL stands at 21.9% as of December, well above their interim requirement. Moving to the next slide, the fixed income portfolio. Not a lot of news here on the composition of the portfolio.
The size also remains quite flat, quarter- on- quarter at around EUR 27 billion. The average duration decreased slightly from 2.69 to 2.6 years this quarter, while the yield continues improving to 1.9% at the end of the period. We expect this will continue improving in the coming quarters due to the weight of the portfolio, that we have at variable rates. It is also important to highlight that almost the entire portfolio is accounted at amortized cost with no impact on capital. On the next slide on liquidity. As you can see, and even after the early amortization of EUR 5 billion from the TLTRO in November, we maintain a very strong liquidity position with a 79 loan to deposit ratio and a very sound LCR and NSFR levels.
In November, despite market volatility, we successfully issued EUR 500 million of our inaugural senior non-preferred. You can see the details in the slide of the maturities that are well spread over the next years. Coupons are relatively high for the 2023 and 2024 maturities, especially. Last quarter, we had maturities of nearly EUR 300 million of covered bonds, which had a relatively low cost. Last slide, let me recap the main guidance for 2023. First, NII. We expect to grow close to in the high teens in 2023. Our main assumptions, which I think is key for the NII guidance, is an interest rate curve at around 3% on average, and our average beta in the high teens as well, between 15% and 20%. Second, on fees.
We expect a mid-single digit growth on the back of best practice sharing and larger contribution from insurance and transactional services. Third, on cost. We think should decrease between 2% or 3%, thanks to the synergies that will more than offset inflation and higher salaries. All in all, our core margin should increase around 30% year-on-year. Lastly, cost of risk, and assuming, we will deploy part of the provision, book during this year, we expect cost of risk to stand between 30 and 35 basis point.
Okay. Thank you, Pablo and Juan Pablo for the presentation. We are now ready for the Q&A. Operator, if you could get the first question, please.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star five on your telephone keypad. To cancel your request, please press star five again. Our first question comes from the line of Maksym Mishyn from JB Capital. Please go ahead, your line is open.
Hi, good morning. Thank you for the presentation and taking our questions. I have a couple. The first one is on your NII guidance. I was wondering if you could tell us what are your assumptions for the cost of deposits, and especially the deposit beta, and how you expect it to evolve in 2023 and maybe 2024. The second question is on the cost of risk. I was wondering if in the PMA adjustments, you only changed the inflation expectations or also touched on other macro variables. If so, could you tell us what you expect for GDP and the unemployment? The last one is on capital.
The RWA density increase in equity space, could you shed a little bit more color on this change and how much would be the RWA evolution if you hadn't changed the ratio of RWA density for equity space? Thanks.
Okay. I'll take the NII guidance on the cost of deposit. I think that we are confident that we have proven guidance on NII, as I said, in the high teens. I think the major driver, as I said, is the Euribor, the implied 12-month Euribor that we have used in the forecast for the guidance, which is around 3% for 2023. At the moment, it's higher, as you know. Also, a larger contribution from lending due to a more visible repricing on corporate and mortgage book. We also consider a negative impact from customer deposits, and I go here from your question on the beta on deposits. I think the...
We know we have a very spread and transactional base deposit base. Our beta, we think should be lower than most of our peers. Even with that, we, you know, we want to be prudent here and we understand that some repricing of the deposits is going to happen. Although we think this time will be different from other periods because of the liquidity position of the system. The loan to deposit ratio of the system is a lot better than in the past, and the ample liquidity in the system is still very high. So that's the major reasons. Most of the banks in Spain now are mainly funded through a strong deposit base.
We don't see any weak link in the deposit competition, we consider the high teens a prudent approach. Obviously, this process on deposit will be, it will take some time. It will be gradual and will keep increasing. In 2024, we think this will be closer, this beta, to the 35%. I think this process from, on average, in the high teens in 2023, is a growing beta, it will be gradually spreading through our customer base. Also, I think in the NII guidance, the other moving parts is the ALCO contribution, which will be, as you can imagine, with the new level of rates of the ALCO portfolio, it will be significantly higher than the contribution from 2022.
We have the negative from the TLTRO contribution that we won't have anymore in 2023. Also, some changes in the interbank, but slightly smaller. All in all, we think we will be in the high teens, and we're confident this has been done, this guidance, with very prudent assumptions.
Okay. Thank you, Pablo. I will take probably the next question regarding the macro assumptions. First of all, the assumptions that we are applying to our models in terms of GDP growth, for instance, for 2023, is 1.1% growth year-over-year. For 2024, 1.5% growth. If we compare this, for instance, to the Bank of Spain projections in 2024, we are assuming almost half GDP growth. On top of this, well, before that, unemployment rate is around 13%, our assumption, so slightly above the Bank of Spain assumptions again. This is what we apply to our models. We get the provisions with these assumptions.
On top of this, what we are doing with the Post-Model Adjustment is to stress further a variable that is inflation, that probably the models do not get the potential impact that inflation could have. What we are doing with this Post-Model Adjustment is to stress inflation to an average level of around 10% in 2022, and 8% in 2023. Probably above the forecast, the consensus for 2023, and actually for this year as well. Due to this stress on inflation is why we book this additional Post-Model Adjustment provision that is almost EUR 150 million stock at the end of the year.
Let me develop a little bit on the Post-Model Adjustment. I think the inflation, why we have done this analysis, I think all the internal models for the expected losses on our loan book has been made with information and data that never had an inflation pickup that the one that we had in this year. We consider that the model have worked quite well in the past on estimating potential losses on the loan book, but that we need to review the loss on real disposable income from our individuals customers and the position on our corporate customer as well.
This inflation has also pushed interest rate higher at a very speed pace that we haven't had in the past as well. The position for corporates and individuals coming from high inflation and high interest rates wasn't in the dataset that we used to build the models. That why we consider that we have to introduce an stress analysis on inflation. Probably this is too prudent, but we consider that the right thing to do is taking into account all the variables. Although this always is very hard to forecast, as you are in this business as well, we have done our best maintaining our prudent approach.
Maybe I would take very quickly the question regarding risk-weighted assets that you were asking, Maksym. We increase the weighting to the maximum level, 370%. This implies around EUR 300 million risk-weighted assets impact almost. This is around 10 basis points on capital. The good news is that this is already at maximum level that with in the next years with Basel IV this risk-weighting will come down. We will probably comment later, but what we see in the next quarters is regulatory tailwinds and with the IRB models migration. We can comment later. That's all. Yeah.
Thanks. Thank you, Maksym. Operator, we're ready for the next question.
Our next question comes from the line of Ignacio Ulargui from BNP Paribas. Please go ahead. Your line is open.
Hi. Good morning. Thanks for taking my questions. Just have couple of questions. One on loan growth. If you could share with us a bit of what are your expectations of loan growth in 2023 to support that high teens NII growth that you have guided for. Also on fees, what are they gonna be the main moving parts in terms of fee income growth for 2023? You think it's gonna be banking fees or or it's gonna be mutual fund fees or insurance? What, what will be the driver behind? Just a bit of a follow-up on what you wanted to comment Juan Pablo, about what would be the kind of regulatory tailwinds that we might expect?
What will be the order of magnitude from the migration of the IRB models in Liberbank's mortgage book? Thank you.
Okay. Thank you, Ignacio. I will take the two first questions, and Pablo, if you want the last one. Regarding loan growth, really doesn't have much impact in 2023 NII guidance. The guidance is on the lending part is basically repricing. In terms of loan growth, what we see for 2023 is mortgages slight growth in terms of stock. Consumer, again, slight growth year-over-year. We have seen at the end of 2022 very strong in terms of new production during the months of October, November. It's true December, January was a bit more quiet in terms of new production for mortgages. We think this is something across the sector.
What our target here is basically to continue to get market share, but probably, we do not see a big growth in terms of volumes. Slight growth in mortgages and consumer. Corporates, what we expect, probably similar trend as in the last quarters. We probably should expect the delivery to continue. We commented the eco-loans are amortizing. Some of the TLTRO loans are also amortizing. This is putting some pressure on stock there. The new production is doing well in terms of deals. The corporates, both for mortgages and corporates, but corporates were much faster. There we are a bit more selective in terms of corporate growth.
In mortgages, in terms of new deals, again, probably the competition eased significantly during the last months and we are seeing much more attractive deals. In terms. Again, for our guidance is mainly the repricing of the back book, the main driver for NII. The question regarding fees, here, the main drivers for next year, first one is the insurance business. We expect insurance after the restructuring has been closed. There is always some distraction until we get the final partners. We think we have right now the right partners. We got the focus both for life and insurance and non-life insurance.
we think this will be one of the drivers for 2023. The second driver will be mutual funds, but here we are not being, let's say, optimistic in our guidance. We are not including, for instance, the market valuation. The market is up around 10% during the first month of the year. We are not including that, but we are expecting net subscriptions to get on track again. Lastly, the third driver will be more transactional activity from our customers. I guess this is also a good news in terms of asset quality. We continue to see transaction good, at good level. we expect this to continue in 2023. It will be these three drivers. Maybe Pablo, if you want to comment on IRB.
Yes. Thank you, Ignacio for your question. On IRB, I think that the process is evolving with a couple of months of delay. The process is evolving, which is the important point. Let me give you more color on the latest steps. We presented the application package in the Q2 . After that, the supervisor started their on-site inspection in June. We have already had the exit meeting, closing the on-site inspection. With all these developments, now they start a review process. This review process and approval process will take some months.
Without being too confident on the date, because this always depends on the third party. As you can imagine, we cannot be too firm on the expectation. We think by the formal, we expect to receive the formal approval around the Q2 result presentation. That's our when we think it will be the formal approval, but always is subject to variation. Regarding the quantification, as we have always have done, we are, and we have to be very careful with the because then we don't have the final approval from the ECB.
The only thing I can say, it's, we still have around 14 billion by the standard model coming from the former Liberbank back book. This has on average around 36% risk-weighted assets. You can run the numbers if we go to the low 20s, which is more than some level after IRB. Just consider that the final impact will be slightly lower than this initial number. The reason is the back book is reducing month after month, so after six months it will be slightly lower than that
Thank you, Nacho. Operator, we are ready for the next question.
Our next question comes from the line of Francisco Riquel from Alantra. Please go ahead. Your line is open.
Yes, thank you for the presentation. A few questions from me. First off, a bit more color on the top-up provisions that you have booked in this Q4 . The Post-Model Adjustments, if you can comment on what type of increase in NPLs are you expecting in 2023, and also in what loan categories you think are going to be more sensitive, and where will you allocate these provisions or not? The backstop provisions, whether they are regulatory requirements or not, whether they are included in the coverage ratios. The cost of risk guidance, I understand reading up the slides that this is a net cost of risk because you're planning to release some of the top-up provisions.
If you can comment on how much, and what would be the gross and the net impact. Follow up on this NII guidance. You mentioned the deposit beta, but also mention on a slow repricing of the loan book, slower in corporates than the average in mortgages. If you can comment how much of the loan book will reprice in 2023, what type of loan yield as-assumption, a bit more color on the loan repricing. Lastly, a follow-up on the IRB models. If you can comment on what uses of for that capital that could come, what would you be considering? Thank you.
Thank you, Paco. Let me try to give you a bit more color on the top-up provisions that we have had from the PMA, from the Post-Model Adjustment. I think the Post-Model Adjustment, what it does, it include for the whole portfolio, not only the mortgages, also the consumer and the self-employed and corporate and SMEs portfolio. We look at every single portfolio with the impact from lower disposable income in the case of individuals, because of higher interest rates, and also because of higher inflation. This goes through the whole portfolio, and the impact varies on the sensitivity that the model comes up.
These are very complex number to go into detail, but if you want later on, we could try to give you more color on the details. I think the idea we consider the implication of higher inflation and higher rates on the financial position of the different customers of the asset side of the bank. Obviously, as you said, these provisions in our guidance has been considered because these provisions are to taking into account the impact of higher inflation and higher inflation for this year, 2022, 2023, and 2024. Probably we have been prudent in the use of this extra or top-up provision, but we have also considered the numbers.
Obviously we have considered in our guidance of cost of risk, this potential deterioration of the asset quality. Give me clarity on this. So far, so good. We haven't seen this deterioration. This is what we think in a normal evolution, this credit quality should deteriorate because the lower disposable income from household. Obviously, the people are evolving their consumer behavior, their consumption behavior, and this will have an impact on the final outcome. Let me be very clear. These are very tough time for forecasting and the assumptions and the variability of the assumptions on rates, inflation, GDP growth. You just have to look today to the IMF changing their, just one month ago, forecast in a significant way to an improved level.
When we ran this model, we had a higher inflation expected for the year. As Juan Pablo mentioned, we were expecting to peak at 10%, and it hasn't peaked at 10%, as we all know. Probably will stop no more than 6%. This is very tough. Consider that we wanted to be prudent, and our model team defined this process. You know, it's up to you to believe what the end number will be. We have come with our best forecast for this. On repricing on loans?
Maybe before going to the repricing of loans, regarding the backstop provision that you were asking, Paco, backstop provision at the end is the difference between the accounting provision and the prudential provision using the prudential calendars. The difference, and this is important for us, the difference is how you book that difference. We decide to book that EUR 60 million difference through P&L. There are other options. There are other banks that they do through P&L. Others, they deduct from capital. Others, they increase the capital requirements. Probably we did it because we thought that the underlying cost of risk was low so far, and we didn't expect Post-Model Adjustment as stressed as the one Pablo just commented.
These are included in the coverage, these provisions. Regarding coverage, here I guess this is also very important in terms of asset quality. Pablo was mentioning that we are not seeing anything so far. Early NPLs are low, NPL entries are low, and two-thirds are subjective in the quarter. If we look to the coverage ratio and we look to the different portfolios, mortgage coverage is more than 50%. Corporate mortgage coverage is more than 100% if we include the co-guarantees. Consumer lending coverage is almost 80%. 80% of the NPLs have collateral. What we think, the portfolio is very well covered. As Pablo said, probably we were over-conservative this quarter.
I think you ask also, Paco, on repricing of loans. I think this is relevant, the repricing of our loan book. We have around 55% of the performing loan book at variable rate. This will evolve in... If you consider the maturities on the year for the fixed, this number will be closer to the 60%. We have a significant repricing effect for next year. Final, in IRB, because we're taking too long on the questions. We maintain our message.
This is a decision that will have to be made by the board and the shareholders on the uses of the excess capital that we will generate. Let me maintain our usual comment. Obviously, I think next year will be with a, you know, a strong capital, with a better capital generation, and also with the IRB in place, a good time to decide. The use of this could be in to increase the shareholders' remuneration. It could be in the form of share buybacks. That make a lot of sense. As you know, both banks, Unicaja, former banks, Unicaja and Liberbank, have done in the past.
Shareholders understand the usefulness of this tool, but also on investing in our business to make it more profitable if we find the right places. We stick to our message on our excess capital use.
Maybe, if I may, Pablo, regarding the loan yield, something that I think it's interesting on the mortgage book, we commented that the floating part right now, the benchmark Euribor is 50 basis points, 50, so it has to go up to almost 3.4%. If we take a bit more deep look to the mortgage book, we can see that half of the book, for half of the book, the Euribor benchmark is still at negative rate. Euribor, the yield of this half of the book is with a reference at negative rates. 25% of the book, of the mortgage book, the Euribor benchmark is around 70 basis points.
The other 25%, that is the one that started really to reprice in this last Q4, that one, the average Euribor is around 2%. Even, the mortgages that reprice in the Q4, they still have to reprice up significantly. To give a bit more detail, in the Q4, for instance, the mortgage book contribution to lending was around EUR 25 million. We expect this to go up to almost EUR 45 million, just the mortgage book in the Q1. You, you can see really the impact of the repricing will be much more visible in the next three quarters.