Good morning. Miguel Maya speaking. Welcome to BCP Earnings Conference call. As usual, I will mention the highlights of our performance, and then Miguel Bragança and Bernardo Colaço will follow, providing additional detail. The economic activity in the first quarter continued to be significantly marked and conditioned by an unstable and adverse environment to the confidence of economic agents. Despite that environment, our net income in the first quarter went up 3.9% year-on-year to EUR 243.5 million, confirming once again the quality of Millennium's franchise in our core markets. In Portugal, the net income was EUR 208.9 million, an increase of 7.6%, demonstrating the robustness of the balance sheet and the profitability of the bank's business model, despite the slowdown in the economic activity and the downward trajectory of interest rates, which conditioned the evolution of the financial margin.
This performance in Portugal was largely contributed by the consistent work carried out over several years in improving the quality of the balance sheet, confirmed by year-on-year decrease of 14 basis points in the cost of risk. A healthy balance sheet, combined with intense commercial activity, allows us to continue the necessary investments to ensure the future of strengthening talent and operational capacity while preserving a solid capital position and without compromising profitability. Therefore, operating costs in Portugal increased above 9%, significantly influenced by the inflationary context over the last years, with BCP remaining a reference in terms of operational efficiency, with a cost-to-income ratio of 34%.
In Poland, Bank Millennium achieved a net income of almost EUR 43 million, an increase of nearly 40% year-on-year, despite still being affected by relevant charges related to FX legal risks, which had a negative impact of EUR 131 million, out of which EUR 98 million in provisions, and by the payment this quarter of banking tax, which was not applicable on the first quarter last year since the bank was implementing the recovery plan, which was successfully completed in June 2024. The adjusted net profit in Poland, excluding extraordinary items, increased 7%, supported in a positive evolution of the business volumes and growing customer acquisition that once again confirms the capacity of Bank Millennium to grow and generate profitability and capital.
In Mozambique, the net profit was strongly affected by the impacts arising from the country's context in the last quarter 2024 and first quarter this year, namely the downgrades of the sovereign debt rating that resulted from the instability following the elections in October and until the inauguration in January this year of President Daniel Chapo. Net income in Mozambique decreased 84% due to impairments and provisions that have increased almost EUR 22 million, mainly due to the impacts of the downgrade of the sovereign debt ratings. It should be noted that the commercial activity of Millennium, being before impairments and provisions, showed a positive year-on-year evolution of around 10%.
We continue to operate with very robust capital ratios, with the CTR1 at 15.9% and total capital at 20%, which already considers the estimated impact of CRR3 around 50 basis points and only includes 25% of the profit generated in the quarter, in accordance with the shareholders' remuneration policy that we presented to the market. The quality of our retail banking business model, supported by strong relationships with our customers, is driving the growth in business volumes. At a consolidated level, customer funds went up more than 6%, and loans to customers increased 2.2%. This quarter, the performing loans to companies in Portugal already showed an inversion from last year's downward trajectory, with an increase of 1.1% quarter- on- quarter. We kept the trajectory of improvement of the quality of the balance sheet, having managed to cut non-productive assets by an additional EUR 340 million over the last 12 months.
The rigorous management of the balance sheet risks enables us to keep a controlled cost of risk. At group level, the cost of risk also decreased 14 basis points since March 2024, reaching 38 basis points. At a group level, our customer base expanded almost 4% in the last 12 months, surpassing the 7 million customer mark, out of which nearly 2.8 million in Portugal. Most notably, mobile customers continue to grow at around 10% per year, accounting for 72% of the group's customer base and 64% in Portugal. Individual and corporate clients continue to choose Millennium as their preferred bank, and our service was again awarded this year with several relevant distinctions. Customer recognition of our digital capabilities continues to be reflected in the use they make of the app, which leads the NPS among the largest banks in Portugal.
This quarter, customers carried out 15% more transactions through the app than in the same period last year, with a significant growth in the number of transfers and payments. The number of sales through the mobile app has increased 13% in the same period, with emphasis to the sale of personal loans, which increased 34%, and to the sale of investment funds, which increased 75%. The investment and priorities we give to mobile solutions, with a clear focus on customer-centric innovation, mean that our app continues to lead the rankings and deserves top reviews on the most relevant platforms. The results achieved and the progress of the bank in the first quarter, despite the challenging context for economic activity, allow us to remain very confident in our ability to implement the strategic plan presented to the market, as we have always done. Miguel, the floor is yours.
Good morning, ladies and gentlemen. Going now to page eight, as you see in our income statement. In spite of the reduction of interest rates, a very resilient core income, growing 3.6% in terms of NII and 2.1% in terms of commissions. Costs also growing to a large extent, influenced by the accelerating inflation in Poland and the normalization of variable remuneration across the group as we hit our profitability targets. Other income also with a positive evolution vis-à-vis last year. In terms of loan impairment, we are seeing a positive evolution in several markets in which we are present, with a reduction of 24% in terms of loan impairment, which shows some convergence in terms of cost of risk with one of our competitors. In terms of legal risk in Poland, a further reduction.
I would like here to highlight that the guidance that we gave already many quarters ago was that 2023 would be the year with the highest value of legal risk provisions, with a strong reduction for 2024, which happened, around 30% reduction in 2024. What we are expecting is another very strong reduction now in 2025. I would say, a much more normalized path from 2025 onwards. In terms of profit before tax and minorities here, a growth of 13%. We had, in the first quarter of last year, some extraordinary tax elements in our income statement related to the Swiss franc mortgages, which we do not have as much this year. The net income grows 3.9% in spite of the more challenging interest rate environment.
I would like here to highlight the focus that we have in terms of remuneration, in terms of shareholder value creation, clearly above our cost of equity, with an ROE of 13.9%, ROT of 14.5%, but very importantly, with growth in terms of book value per share plus dividend per share, which at the end of the day is a very important benchmark for the value creation for shareholders of 15.8%. The dividend yield year-on-year, i.e., making the calculation with the price of 12 years ago and only considering the dividend that was distributed until March of this year, i.e., the dividend of the year before, not considering the dividend that will be approved, of course, in the AGM, was 5.4%. In terms of group profitability, very, very resilient margin, as we see here, with, in Portugal, the margin decreasing 3.9%.
I would like to highlight that in Portugal, there was a decrease in the margin of less than 2%, which is less than the impact of the day count. Adjusted for the day count, what you have is a constant margin already in the last three quarters, which clearly confirms our guidance that due to our hedging of the NII, we will be able to deliver a very resilient and stable margin in Portugal. In the international operations, both in Mozambique, due to lower reserve deposit requirements, but also in Poland , due to still high level of interest rates, and to the volume growth in SMEs, we are here also showing a NIM above 4.5%, and that also translated in a growth of two digits in terms of NII. Fees and commissions are very resilient.
I would here like to highlight that in Portugal, there is sometimes some seasonality and some ad hoc fees, sometimes that in one year may come more in one quarter, in the year more in another quarter. Still, we are quite confident in terms of the growth of this line, mainly as the market, or when and if the market stabilizes and customers show more interest in more investments and in asset management products. Up until now, as you know, we are having a strong contribution from bank assurance products, which is an area that is also strategic for us. Other net operating income, positive evolution in Portugal, with explained to some extent by some rotation, some adjustment of our hedges.
In terms of the mandatory contributions, what we see here is the normalization of our bank in Poland, of course, made us have to pay when we compare with the first quarter of last year the bank tax, which we did not in the last year in the first quarter. In terms of operating costs, a normalization of the level. I would like here to highlight the cost-to-income, of course, as time goes by, and with such high profitability and a good cost-to-income, we have to balance this also with the cost growth of several stakeholders. Variable remuneration is here an important element. In terms of IT and systems, some of the investment that we are committed to in terms of the development of the bank more and more flow into the income statement through the OpEx line and not through the CapEx line.
The business model of several of the large international IT companies more and more is directed towards having yearly licensing fees and ad hoc purchases of licenses. This is a crucial part of the bank transformation. Still, I would like here to highlight a cost-to-income clearly below 40% in Portugal and slightly above 40% in the international operations in which we are investing. Cost of risk. Cost of risk already below 40 basis points. We are seeing a very strong resilience of our cost of risk at low levels in Portugal. This is the other side of the coin of the prudence that we have shown in terms of the growth of our credit portfolio. As you have seen in the last quarters, we have been quite selective in terms of growth of the credit.
The other side of the coin is, of course, a much more normalized and low cost of risk when you compare with our competitors. Still, loan loss reserves in Portugal that almost achieve EUR 800 million, s o we are quite comfortable in this area. In the international operation, contrary to what was usual in the past, a higher cost of risk than in Portugal, but this is to a large extent explained by the different business mix. Mainly in Poland, because Mozambique has a much lower credit portfolio, does not influence this too much. In terms of Poland, as you know, our bank in terms of credit has a much higher percentage in terms of cash loans, which is a very, I would say, a very interesting business in Poland, but of course, has a higher cost of risk, of course, with a much higher spread.
Continued decrease of NPEs. I think this is very, very important. We are already in Portugal, which used to be, I would say, the bank with the most challenges in this area, already with an NPE loans ratio of 2.2%. Decreasing, very much aligned with the banks in Europe. This is not, I would say, an issue today anymore. At 2.2%, we generally believe this is not an issue. If we include off-balance sheet and securities, we are already below 2% at 1.5%. In the international operations, the value is higher, but also to some extent also linked to the business of cash loans in Poland, which I would like here to also stress is a very interesting business because the margin much more than compensates for the additional cost of risk that this business implies.
We have been able to do this, maintaining a coverage both with collaterals and without considering collaterals. That is very comfortable with a level of above 80% without considering collaterals and significantly above 100% considering collaterals. In terms of main volumes of the group, very resilient business, as you see here. In terms of customer funds, we have been able to grow, and this is very important, profitably, very profitably in terms of customer funds at 6% at group level, which is balanced by a 4% growth in Portugal and a 10% growth in our international operations. The loan portfolio, showing here an inflection. I think this is very important.
In Portugal, already growing 1.3% year- on- year, which to a large extent is also explained by the growth that we already had in this first quarter, which clearly is a leading indicator in terms of what we have to deliver, in terms of what we have to deliver according to our business plan. Around 1% growth quarter -on -quarter, as you see. As we have showed to you, our business plan, and I would like here to highlight, is a business plan over four year periods. Of course, we are in the beginning, but it's a business plan based on growth. This growth is a growth in terms of customers, a growth in terms of customer funds, but also a growth in terms of loan portfolio as time goes by. In the international operations, of course, also growth of 4.2%.
As we all know, Poland is a market still with a loan-to-GDP ratio that is significantly below the loan-to-GDP ratio in Europe. Strategically, we view this as an important opportunity. In terms of capital, as we have commented to you in our last presentations, we would have here an impact in terms of fully loaded of around 50 basis points linked to CRRT, basically explained by operational risk. This is an impact that will fade away as the provisions over the next years, as the provisions for CHF fade in Poland. As you know, for operational risk, what is relevant is the last three years. As the moving average of the last three years, as we provide less and less, this impact also will gradually fade.
Still, a ratio of 15.9%, which shows very clearly that we have generated capital in spite of these 50 basis points impact of the CRRT. Very comfortably above the minimum. As you know, we have here a plan of a four-year plan whereby we expect, as time goes by, to grow RWAs and credit somewhat faster due to credit growth and due to the change in the business mix with more investment in corporate loans, both in Poland and in Portugal. Leverage ratio, very high leverage ratio, which shows also the resilience of our models. The other side of it is also, or the contribution of it is also to our quite conservative RWA density that also shows in the fact that the impact of CRRT was quite limited in the credit area. The main impact was on the operational risk, as we always said.
MREL requirements, clearly also above the MREL requirements. We are executing our funding plan. As you know, in March of this year, we launched T ier 2 notes, which, and we also issued in March 2020 with the maturity of 12 years. I'm sorry. We have recalled the Tier 2 notes, and we have also issued in March of this year EUR 500 million. So plain vanilla tier two notes with a maturity of 12 years and a call after year seven. A very robust liquidity position, as you know, as you see, with a part of it also committed to investing in an NLM portfolio that really assures, so to say, the hedge of our NII. And then a net loan-to-deposit ratio that is also, I would say, almost too comfortable and that we expect gradually to normalize over the year. I'll pass now the floor here to Bernardo. Okay.
Thank you, Miguel. Good afternoon. Good morning, ladies and gentlemen. I will start on page 26. That is the Portuguese operation, which it should be highlighted. The net income that reached EUR 290 million in the first quarter of 2025. That corresponds to an increase of 7.6% compared with the same period of last year and has been the best quarter over last years. For this favorable evolution, the reduction of 39.7% of credit impairments and other provisions provided a significant contribution for net income. Operating revenues compared with the same period of last year went up 1%, but it should be noticed that on a quarter-on-quarter basis, revenues went up 4%. Regarding operating costs, there was an increase of 9% compared with the previous year, but it should also be highlighted that cost decreased 11% if we compared on a quarter-on-quarter basis.
On page 27, net interest income stood at EUR 325.8 million in the first quarter of 2025. That means 3.9% below what was recorded in the first quarter. Let me also highlight, as Miguel clearly stated before, on a quarter-on-quarter analysis, NII decrease was lower than 2%, and it's mainly explained by the calendar effect. This quarterly evolution allows us to reinforce what we have been commenting about the resilience of NII in the Portuguese operation. Regarding the year-on-year evolution, as presented in the graph, NII decrease reflects the lower income generated by the loan portfolio that was partially offset by the reduction in funding cost, which includes the reduction of interest paid on deposits and costs associated with the wholesale funding.
NIM stood at 2.12% at the end of March 2025. That compares with 2.34% at the end of March 2024, but it's just three basis points below the NIM that it was registered in the fourth quarter of last year. Moving to page 28, commissions amounted to EUR 148 million at the end of the first quarter 2025, increasing almost 4% compared with the amounts recorded in the first quarter of last year. Banking fees and commissions went up 5.5%, supported by higher bank insurance fees, and market-related fees went down 4.2%, mainly reflecting the lower contribution from securities. Trading results evolved from minus EUR 4.3 million to plus EUR 13.3 million, and equity accounted earnings from EUR 9.1 million to EUR 13.3 million. Other operating income registered also an improvement year-on-year, evolving from EUR 5.8 million to EUR 12 million in the first quarter of 2025.
Going to page 29, operating costs totaled EUR 168 million in the first quarter of 2025, which is 9.3% higher than the EUR 154 million recorded in the first quarter of 2024. Evolution of operating costs in the Portuguese activity reflects mainly the increase in staff costs and admin costs. As Miguel clearly explained, I mean, there is already a decrease on a quarterly basis of around 11%, where staff costs went down 15% and admin costs almost 9%. Number of branches were broadly stable year-on-year, and there was a small reduction of around 40 employees over last year. Moving to page 30, which refers to asset quality, and as highlighted before by Miguel, there was a sizable reduction of NPEs. NPEs reduced 22.6%, meaning more than EUR 246 million. It should be referred that in the first quarter of 2025, there was a reduction of EUR 131 million. This clearly shows that the bank is still committed with the NPE reduction.
NPEs in the first quarter 2025 stood at EUR 841 million. That compares with more than EUR 1 billion a year ago. Cost of risk below 40 basis points. The first quarter of 2025 stood at 34 basis points. That compares with 48 basis points in March 2024. Now, let's move to page 31, which looks at the NPE coverage breakdown. As you can see, total coverage of NPEs stood at 137%. NPE coverage by loan loss reserves at 92%. Total coverage for individuals, which with a high level of real estate collateral stood at 100%, and for companies at a higher level. On page 32, which shows the evolution of foreclosed assets and corporate restructuring funds, net value of foreclosed assets stood at EUR 50 million. That compares with EUR 93 million one year ago, meaning a reduction of more than 46%, or if you want a decrease of EUR 43 million.
Regarding property sales, there was an increase in the number of transactions compared with Q1 of 2024. Regarding corporate restructuring funds, exposure at the end of March 2025 stood at EUR 334 million. That compares with EUR 373 million at the end of March 2024. Now, moving to page 33, regarding total customer funds and loans to customers. Total customer funds reached almost EUR 71 billion, an increase of 4.3% compared with the same period of last year. On-balance sheet funds stood at EUR 55.6 billion, reflecting the increase of savings from households and companies. Off-balance sheet funds went up 7% year-on-year, meaning an increase of EUR 1 billion compared with the same period of last year.
Gross loan book stood at EUR 38.9 billion as of March 2025, a slight increase of 1.3% from previous year. This increase reflects the strong performance on loans to individuals, where mortgages registered an increase of 6.4% and personal loans of 2.4%. On a quarter-on-quarter basis, it is possible to see that the positive trend on loans to individuals, where mortgages increased by 2.6% and personal loans by 4%, compared with December 2024. Regarding companies, there was a decrease of 5% year-on-year. However, it is important to highlight that we are facing an inversion and the corporate loan book increased compared with the last quarter of 2024. Now, moving to page 34, regarding the performing book in Portugal, it is possible to see that new loans origination by segment and the recognition of BCP as the main bank for Portuguese companies.
Performing loans in Portugal went up 2% compared with March 2024, and it was also registered an increase of 2% on a quarter-on-quarter basis. Loans to individuals grew 6.2% year-on-year, or 6.3%, with a relevant contribution from mortgages loans that increased 6.5%. Loans to companies, there's, as I mentioned before, a slight decrease of 3.6% year-on-year. As I said before, we are facing an inversion point, and loans to companies registered already an increase of 1.3% compared with the end of the year. Now, moving to international operations on page 36, net profit in the first three months of 2025 amounted to EUR 24.5 million. That means 20% less than the first three months of last year. This evolution reflects the reduction of the contribution from Millennium bim in Mozambique, that offset the improvement on results from Bank Millennium in Poland.
Bank Millennium net profit stood at almost EUR 43 million in the first quarter. That means a growth of 40% from previous year, while Millennium bim in Mozambique recorded a net profit of almost EUR 4 million at the end of March 2025. This is significantly lower than what was recorded the year before. The main reason, as it was already mentioned, was related with the downgrade of the sovereign debt, leading to an increase on financial asset impairments. Moving to page 37, which refers to Bank Millennium, net income, as I said before, increased almost 40%, and profitability continued to be impacted by costs related with CHF mortgage loans. If we exclude most of these specific impacts, net income grew 7.5% compared with the same period of last year, and it stood above EUR 170 million.
Regarding costs, if we exclude mandatory contributions, which, as Miguel said, includes the contribution for the resolution fund, and this year also the deposit guarantee fund, went up just 7.1%. CET1 and total capital at 15.2% and 17.3%, respectively, and comfortable above the minimum requirements of 8.1% and 12.2%. On page 38, some additional detailed information about Bank Millennium. NII increased 5.1% to EUR 340 million. That compares with EUR 323 million one year ago. NIM stood at 4.23%. That compares with 4.36% in the first quarter 2024. Fees and commissions were down 8.4%, and the reduction is mostly related with bank assurance commissions that are expected to recover over the year.
Trading contribution for the P&L was different than what happened in the first quarter of 2024 and was influenced by the reduction on the impact related with amicable settlements in CHF mortgage loans due to the use of part of the provisions established to cover this type of agreements. Mandatory contributions went up EUR 31 million compared with the first quarter of 2024, as Bank Millennium started to pay the banking tax since June 2024 and after exit the recovery plan. Moving to page 39, related with asset quality, cost of risk stood at 45 basis points. That compares with 64 basis points in March 2024. Non-performing loans more than 90 days past due stood at 2.2%, and coverage by loan loss reserves stood at 150%. On page 40, customer funds in Bank Millennium grew 7.6% year-on-year. Off-balance sheet grew more than 33%, and total deposits by 5.5%.
The evolution since December 2024, customer funds grew more than EUR 1.3 billion. In terms of loans to customers, the gross books stood at slightly above EUR 18 billion. Loans to individuals were broadly stable compared to last year, and loans to companies grew more than 4%. On page 41, still on the FX topic, it's worth mentioning the continued reduction of the CHF mortgage portfolio, which reduced 29% since March 2024 and by 9% since the end of last year. The CHF loan book at the end of March represented only 1.4% of the loan portfolio, which compares to 2.9% one year ago. Cumulative provisions for legal risk amounted to EUR 1.75 billion, representing 132% of the total mortgage loan portfolio in Poland.
Reduction over last year was driven by natural redemptions and amicable settlements with clients. On the first quarter of 2025, again, the number of amicable settlements were above the new court claims. It is also important to mention that, I mean, we still continue to see a downward trend in terms of new claims flowing into courts. Turning to page 42, which regards now to Mozambique operation, performance in Millennium BIM was this quarter impacted again by the downgrade of the sovereign debt rating, leading to additional impairments on financial assets in the first quarter of 2025. As a consequence, net income decreased from more than EUR 23 million to almost EUR 4 million in March 2025. Net operating revenues went up 8.6%, and costs registered an increase of almost 11% compared with previous year. Capital, I mean, at very high levels and stood at 39.2%.
Moving to page 43, NII in Mozambique went up almost 10%. For this evolution, Bank Millennium, as Miguel said, there's a contribution from the reduction in the local requirement. Millennium bim, sorry, there was a reduction in the local requirements in terms of cash reserves that was applied since January 2025. NIM increased from 8.1% to 8.4%. Commissions went up 11% to more than EUR 10 million, and the operating income was broadly aligned with last year. On page 44, regarding asset quality, non-performing loans 90 days past due stood at 3.7%, and coverage clearly above 100%. It stood at 120%. Regarding volumes on page 45, as you can see, customer funds registered an increase of almost 7%, and loans to customers an increase of 2% supported by the growth on personal loans. Before we move to Q&A, I would like to thank you, and I will pass to Mr. Miguel de Bragança for some final remarks.
Thank you very much. As we always do, we like to present to you how we are performing vis-à-vis the plan that we have presented to you. We are clearly on track in terms of the plan. As you see, in terms of business volume, we have grown materially, and we are already at EUR 110 billion of business volumes in Portugal and EUR 163 billion at group level. Clearly on track for achieving the more than EUR 190 billion by 2028. We are already above 7 million customers, clearly on track to achieving a value above 8 million by 2028. We are serving these clients more and more in a customer-friendly and simultaneously customer-friendly and efficient way, namely through mobile, where we already have more than 75% of our customer base, regular mobile users. The cost-to-income, in spite of the reduction of interest rate, has been quite resilient.
The cost of risk, I would say, is performing better than what we even had presented in the business plan. In terms of the ESG commitment, we are clearly top quartile in terms of the independent S&P Global CSA. CTR1 ratio, we are better, but I would like here to recall the issue that we have a growth business plan, and as I commented at the time, the growth would be somewhat backward loaded. The first year, we would grow less than the years after. You are already seeing that we are growing in terms of, if you analyze the growth of Q1, we are growing at already at mid-single digits if you analyze the growth rate of Q1. We are on track for it also.
Presenting, I would say, an ROE almost of 14%, and much more important than this, a book value per share, the sum of book value per share and dividend per share that really is clearly above our cost of capital. We are delivering on the shareholder distribution, and we expect that by delivering on these targets to continue with our plan of distributing up to 75% of the cumulative net income, which will be equivalent to a value between EUR 4 billion-EUR 4.5 billion to our shareholders. Thank you very much. I'll open now the floor to Q&A.
Thank you, sir. As a reminder, to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one and wait for your name to be announced. To withdraw your question, please press star one and one again. Thank you. We are now going to proceed with our first question. The questions come from the line of Maksym Mishyn from JB Capital. Please ask your question.
Hello. Good morning. Thank you very much for the presentation and taking our questions. I have three, if I may. The first one is on the NII. Do you think that you have already reached the bottom in the first quarter, and shall we expect recovery in the coming quarters with the numbers you are seeing so far in Portugal? The second one is on loan book growth in Portugal. It has accelerated, as you highlighted. We even see slight growth in the non-financial corporation loans. Do you think you can grow faster than your low single digit guidance for Portugal in 2025? What kind of trends are you observing in April and May? Finally, on the cost of risk in Portugal, asset quality did really well, and I was just wondering, is there any reason to not improve guidance for the 40 basis points in Portugal for 2025? Thank you.
Thank you very much for your questions. I mean, when we compute NII, we have to adjust it, of course, for the day count. As you know, February, we all know this, February has less days than other quarters, than other months. If you adjust for the day count, this quarter was already better than the last quarter because the reduction was a very slight reduction, and of course, we have to adjust for it. The message that I would like here to give is of a resilient NII. I will not discuss because it's always hard to predict EUR 1 million more or EUR 1 million less. An NII broadly aligned with last year, which was a year with a much higher level of your IBAR. If I comment that the NII of this year will be broadly aligned with last year, this means that over the full year, we will have to have, I would say, an average quarterly NII above the one of this quarter. Exactly midway through Q2 or Q3 or Q4, I will not enter into this because this is much more difficult to be totally accurate, but I feel very comfortable that we will close the year with an NII broadly aligned with the NII of last year.
In terms of the loan in Portugal, and of course, in Poland, in spite of the reduction of the interest rates, we are seeing still positive evolution of the NII. In terms of the loan book growth, we are seeing some green shoots, yes, we are seeing some green shoots in terms of the corporate loan book growth. As you've seen, the total loan book growth is around 1%. If you analyze it, we are already on the mid-single digit. On the corporate, we are seeing some, but a large part of it is linked to investments, and with so much uncertainty in the world, we don't know yet whether the corporates are, so to say, really with fixed and committed investment projects, or whether they are preparing to invest if there is more predictability in the world, so to say.
Everybody's a little bit in the wait-and-see mode in terms of what will be the new post-tariff world before deciding where to invest. All in all, as you recall, we presented a plan with a cumulative average growth rate of credit around mid-single digit, around 5%, give or take. We feel committed with this over the plan. Of course, again, on a quarter-by-quarter, we will have some quarters that are better, some quarters that are worse, but clearly some green shoots in this area. By the same token, in terms of cost of risk, we feel comfortable with the cost of risk. We don't like to review guidance every quarter. We typically do not do it, but we feel quite comfortable that absent a major crisis in the world, these values between 30 and 40 basis points in Portugal are, I would say, a new normal, absent, I would say, a major recession in Europe. We feel very comfortable with the resilience of our book. Yes.
Thank you very much.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Álvaro Fernandez-Garayzabal from UBS. Please ask your question.
Yeah, hi, good morning, and thanks for taking my questions. I have one and a follow-up on the guidance for Portugal. The first one on capital, you absorbed the 50 basis points of Basel IV headwinds in the quarter, but you are still sitting on a 15.9% CTR1. What's the plan to use that excess capital and your thoughts around the timing on this? Related to that, on Novo Banco, what's your stance here? Could you be interested? Is it a feasible deal for BCP given the size? Basically, your thoughts around this. The second one is a follow-up on the guidance for Portugal. If you could give a bit more color on the different moving parts behind the flat NII guidance, so average interest rates, the evolution of deposit costs and mix, volume growth, and so on. Also, you suggested in the past that your earnings in Portugal could remain flat in 2025. I just wanted to see if you confirm that guidance or if it needs to be revised after Q1. Thanks.
I'm sorry, starting with the last two questions. Yes, so up until now, we think that in spite of this movement of decreased interest rates, we still feel comfortable with giving the guidance that our income statement will be resilient in Portugal and we will be flattish, both at the NII level and at the earnings after-tax level. We think very, very comfortable with this. As we are seeing in Q1, even some increase, but a part of it is in trading gains by its own nature, are not so recurrent, so we cannot count on them for all the year, for all the quarters. We feel very comfortable with this guidance, both at the NII level and at earnings after-tax level. In terms of the capital plan at Novo Banco, there are moments to plan and to develop a strategy, t here are moments to act.
We cannot be always in a planning mode, so to say, because the plans have its own governance, have to involve people, have to involve our different stakeholders, and so on. We have presented a plan that starts in 2025 and goes until 2028. This plan was a consensual plan of the different stakeholders and approved by the board of the plan. We are, I mean, in the first three months of the plan, we are presenting here the first three months of a four-year plan. It is clearly too soon to review the plan. Our plan, as I commented, was a plan that was based on growth of the growth of credit and of growth of other ways, and on a distribution of 75% of our earnings.
As to achieve at the end of the plan, because of the higher risk-weighted asset density of the new business, of the corporate loan book, and the growth of the corporate loan book, always a CT1 ratio materially above 13.5% with the normal buffers that you would expect that. This is the plan that we have right now, and it's a plan also of organic growth. Distribution of 75% and growth of RWAs. If further down the road, of course, if within two years, for whatever reason, we think that this plan is not adding value to the bank, we'll have to go back to the drawing board and see what alternative plan we'll have to develop. Up until now, we are three months down a four-year plan. It's too soon really to replan and to, I mean, to come up with different guidelines.
Regarding Novo Banco, we have several times commented. Our base plan is a plan of organic capital generation and of organic growth. That is what we are totally focused on. Okay? We do not need Novo Banco. We see the IPO of Novo Banco as a positive development in the market, if not because it allows more attention, more focus of international investors and novel analysts in the Portuguese market. That is what we see. We are not seeing right now, I would say, a deal that would be clearly accretive for our shareholders in terms of value and in terms of EPS because of the growth that we expect in the bank. Right now, it is not on our to-do list to do everything.
As with any opportunity, if there comes a moment where we think that this is clearly a cruise value to our shareholders, we will have to analyze and to take the appropriate measures. Right now, we are not in this with this objective, and we are clearly focused on the plan that we have presented to the market. I mean, the moving parts of the NII in a decreasing interest rate, of course, there will be some margin compression on the term deposits because we typically have a beta of around 50%. As the interest rate goes down, we will find some negative impact on the term deposit spread. I think it is important. We will have, on the other hand, volume growth both in terms of deposit and in terms of credit aligned with what we have been commenting until now. We are projecting, I would say, relatively stable spreads. We will have a positive impact in terms of the mix because we will have, as time goes by, towards the end of the year, more corporate loans. Of course, a positive contribution from our hedges. These are the different moving parts.
Thanks.
We are now going to move to our next question. The next questions come from the line of Francisco Riquel from Alantra. Please ask your question.
Yes, hello. Thank you for the presentation and for taking my questions. I have two on NII. The first one is on the customer spread. When I look at the NII bridge in slide 27 for the NII in Portugal, I see that the fall in deposit costs, translate that into basis points, is barely 1/3 of the fall in the loan yield. This seems to me a worse customer spread evolution compared to some local peers which have reported to date. The cost of deposits in particular seems to be falling by just 20 basis points year- on- year when your IBAR rates have fallen 120 basis points. If you can explain what type of beta shall we expect on the assets and on the liabilities and what is the repricing velocity that we should expect in the coming quarters. My second question is on the NIM. I see that the deposits in Portugal are more or less stable quarter- on- quarter, but the bond portfolios are nearly EUR 2 billion. If you can update on the ALCO strategy in terms of size and duration, and also if you can explain the NII sensitivity to the steepening of the yield curve compared to the parallel shift that you have been commenting to date. Thank you.
The NII sensitivity, starting with the last one to the steepening, the 12-month NII is not very material. It is not very material because over the year, over the next 12 months, the steepening does not influence too much. The EVE sensitivity, I mean the value, the impact in terms of the NPV, so to say, of our interest rate risk that is a standard metric is quite positive towards the steepening of the yield curve because most of our demand deposits are assumed to have a five-year or more repricing, and a large part of our hedges have two and a half to three years so that when the curve steepens, we tend to benefit in terms of NII, in terms of EVE sensitivity. In terms of, I mean, the bit of the deposits, as I commented, is a beta of around 50% in our case, of the term deposits, 50% of the total deposits because the term deposits and the demand deposits are broadly the same magnitude, and the demand deposits, we are not remunerating them, is around 25%.
As interest rate goes down, typically we are able to reflect over, I would say, three and a half to four months, a part of these decreases, broadly half of these decreases in terms of the term deposit rate. That is where we are. In terms of the beta of the credit, in terms of the beta of the credit, we have a very high beta because most of our credit is floating rate. On the other hand, what we see is that we have hedges. At the end of the day, what we have been commenting to you is that we have a very, very low NII sensitivity. That is what I can tell you. We are not sensitive to these NII movements, both in Portugal and in Poland. Right now, our NII sensitivity in Poland is almost zero, and our NII, and our, I'm sorry, in Portugal is around 2.5%. So it's 100 basis points movement. If you take a 25 basis points movement, you would have a minor impact in terms of NII. Okay?
Yes. Sorry, just about the ALCO strategy, the bond portfolio increase versus the deposits.
The ALCO strategy, let me comment here a little bit. We have here the ALCO strategy is a strategy that is a strategy with a means or with two means, I would say. One is to invest the liquidity of the bank, and the other is to hedge the interest rate risk. Whether we do it with more swaps or with more government debt is sometimes something that we evaluate at each moment what makes more sense at each moment. It is not an independent strategy. It's not as if we want to position suddenly in terms of interest rate risk. The objective, so to say, is to hedge the interest rate risk. Right now, what we want to have is a quite closed balance sheet, of course, with some positive exposure to increasing interest rates because this is what the market expects from a commercial bank, but with a value that is at minimum. As I commented right now, in terms of NII, we are almost at zero in terms of EVE sensitivity also. Our ALCO strategy is exactly to contribute to this.
To give you just some numbers, I mean, the total outstanding amount in terms of everything that we have fixed rate, that we have fixed rate by the end of the year just because it's almost EUR 40 billion with demand deposits of slightly below EUR 30 billion. We have a fixed rate well in excess, so to say, of our demand deposits, of course, also to help the hedging of the 50% of the beta of the term deposits. Just to give you an order of magnitude, this is the type of portfolio that we have that is allowing us, in spite of the reduction of interest rates, these EUR 40 billion. In EUR 40 billion, I am adding the government debt portfolio, the interest rate swaps, and the fixed rate loans that we have in our balance sheet. This is net of fixed rate liabilities. This clearly shows, I mean, where we are, and that is where we want to be. Very close to zero in terms of exposure right now.
Okay. Thank you.
We are now going to proceed with our next question. The questions come from the line of Noemi Peruch from Mediobanca. Please ask your question.
Good morning. Thank you for taking my question. My first question is on DTAs. You have more than EUR 800 million to carry forward off balance sheet, and your profitability in Portugal is set to remain high even with lower interest rates. I would like to ask about your approach to write up DTAs and also about the tax rate you expect in the coming years, which we have seen already landing around 25% in Portugal already in Q1. My second question is on other provisions. We saw a very low number in Q1, and I was just wondering what you expect for the rest of the year. If you see usual seasonality in Q4 or not this time around. My last question is on Mozambique. Here, I would like to ask about an update on your strategy, in particular how you manage liquidity there after two downgrades and after the increase in the bond portfolio we have seen in Q4. Also, if you can comment on the level of NII we have seen in Q1, which was quite strong. Thank you.
Okay. Just taking your point. In terms of DTI, you're absolutely right. We have an important amount of DTIs that are off balance sheet. We also have, as you well know, also on-balance sheet DTIs. According to the Portuguese law, the on-balance sheet DTIs have to be used before the on-balance sheet guaranteed DTIs have to be used because they are pending DTIs before we use, so to say, the off-balance sheet DTIs. This means that before we clearly can use them from a cash standpoint, from a cash standpoint, it will still take some years. Of course, we can write them up gradually, but I also would like here to highlight that as we write them up gradually, this does not necessarily have a positive impact in our capital ratios because, as you well know, the tax loss carry forwards are not deductible from a CTR1 standpoint. All in all, we have clearly an economic value there, no doubt about it. It is an economic value that will take some time to flow into cash flow. You exactly to this time that it will take, our approach to this is a gradual approach.
As you know, the tax rate in Portugal, when you sum the, I mean, the IRC, what we call the DRAMA, that are two technical words here in Portugal, but at the end of the day, both are corporate income tax, it's around 30%. We have had 25%, I would say. Of course, it depends in any quarter on the specific composition of the P&L, but I would say that going forward, we will be closer to this 25% than to the 30%. In terms of other provisions, other provisions are a little bit like trading gains. They are hard to predict. It's the contrary of depreciation. The other provisions are typically provisions for contingencies that may come up for legal issues, as we've seen with the Swiss franc and so on.
I would say right now in Portugal, we do not have any reason to expect an increase in other provisions from this quarter. Of course, I mean, we are always subject to litigation. We are always subject to the unknown. It is always difficult to forecast the unknown. Based on the information that we have right now, we think that we can live with a level of other impairments and provisions of around EUR 10 million-EUR 20 million per quarter on an average basis, so to say, as a normal operational litigation and so on risks going forward. Mozambique, Mozambique, I mean, as you know, we have a business there. I think it is very important that our risk is limited to the invested capital. From a liquidation point, there are no lines from the mother company to the local company. Everything is local. I think this is the first point that I would like here to highlight.
The second point that I would like here also to highlight is that there is absolutely no exposure to foreign currency Mozambican debt. All the exposure that exists in Mozambique is in local currency. The business model in Mozambique has a very low corporate credit exposure. Basically, everything is either deposited at the central bank or government debt in local currency. I recall that, I mean, Mozambique is totally autonomous from a currency issue standpoint. It is not like other countries. It is not part of a monetary union. It is not part of other countries. It is part of the business.
I would say I always have some difficulty in understanding why a country would, I would say, restructure necessarily its debt in local currency when it has, so to say, the ability to issue the local currency. Of course, this is always something that rating agencies appraise. As the Mozambican rating degrades, it is always, I mean, we have our model, so we have to flow this into our models. That is it. If there are additional downgrades of Mozambican debt, we may have to have additional impairments, but we are not expecting this to be material at consolidated levels. It is part of the business of being in Africa, a very profitable business. Over the years, we have been having, I mean, on a sustained basis, ROEs above 20% year after year on a capital ratio of more than 35%.
A part of being in Africa is you will have some volatility, but with not a very material impact in terms of consolidated level. Yes. The loan-to-deposit rate is so low, so low that you would not expect any type of liquidity issue there a lso. O kay.
Thank you. We are now going to proceed with our next question. The questions come from the line of Luís Manuel Grillo Pratas from Autonomous. Please ask your question.
Good morning. Thank you for taking my questions. I have two, please. The first one is on costs in Portugal. Costs are up 9% compared to last year. How do you see costs evolving for the rest of the year, especially for staff? I think your 2025 guidance in Q4 was low to mid-single-digit cost growth. Does this still make sense? Are there any management actions that you can initiate to better control these costs? Moving to capital, could you please comment on the main moving parts of the capital this quarter? Essentially, you bit on group earnings. Buzz of foreign impact of 50 basis points was in line with the guidance. The 75% payout accrual, I think, was also expected, but there was still a small missing CT1 against consensus. I was trying to understand if there were any other factors impacting capital, maybe like the DTIs, as you just mentioned. How do you expect capital build going forward, and if there are any additional regulatory headwinds? Thank you.
In terms of costs in Portugal, we have given the guidance of mid-single digits. We are maintaining the guidance of mid-single digits. I would not classify it as an issue of control, how to control the costs, because if we are clearly within the plan, it's not an issue of control. It's maybe an issue of level, but not an issue of control. I would also here like to highlight that with the cost-to-income that we have, I mean, cutting more in terms of costs may imply losing some key people and not generating the return that we want to generate. With the cost-to-income that we are presenting, I mean, if I can make sure that this cost-to-income is sustainable, I mean, we should not be very, I mean, concerned in terms of the costs in Portugal. Tell me other banks in Europe that have cost-to-incomes of 34%.
With the 34% cost-to-income, I would say we are well served, and we also have to make sure that we retain key people, that we also have the very remuneration that makes sense. Of course, mainly when we are clearly generating value for our shareholders, it is important to keep the key people committed, mainly after many years in which this was very much constrained. I think this is important. We had commented that in terms of Basel III, we would have an impact of around 50 basis points. 50 basis points of Basel III. If you do the P&L impact, including impairments and so on, you would get here a 20 basis points here of positive impact. The remaining part are minor adjustments, mainly to the minority interests in Poland and the cap of minority interests, but this is a minor impact, so I would not give it too much weight. I've read most of your pieces of research in the meantime. Effectively, some of the analysts said that there was a miss in terms of capital, but the majority of analysts said that the capital was clearly in line with their projections. I would not classify this in terms of a difference vis-à-vis what at least most of the analysts were projecting. Some of the analysts, yes, I confirm that some were projecting this. Okay .
Okay. Thank you. Can I just do a very quick follow-up? In terms of the pension fund coverage in Portugal, could you please give us a number? I think last quarter it was 105%. Thank you.
I mean, we do not give this number on a quarter-by-quarter basis and make sure, but what I can comment to you is that it has evolved positively. We do not have here, I mean, we continue to have a large buffer on this area, but this is a number that we only disclose on a half-year basis, actually, because formally, we only update the discount rate also only on a half-year basis. If we were to update it right now, it would have a positive evolution.
Thank you very much.
Okay.
We are now going to proceed with our next question. The next questions come from the line of Sophie Pietersens from JPMorgan. Please ask your question.
Yeah. Thank you for taking my question. Thanks for being so helpful on the net interest income in 2025. Just a question on 2026 net interest income. Given that margins are kind of close to troughing and volume growth should be kind of mid-single digits, is it fair to assume that we should start to see net interest income growth in Portugal in 2026? That would be my first question. The second question would be on Poland. San Andreas sold their Polish operations for a quite attractive price. What's your view on Poland, and would you consider exiting Poland? That would be my second question. Just finally, at the beginning of the call, you very helpfully kind of gave details around the Polish Swiss franc provisions that they should continue to come down. In which year should we expect the Polish provisions to be immaterial? Is it already in 2026 or 2027 or further out? Thank you.
Okay. So Sophie, just one. Were you, I mean, concerned that the ADI in 2026 would go down or that it should increase more? I did not understand exactly what you said.
Sorry. I was wondering if net interest income in Portugal in 2026 should be growing in line with volume. So if volume growth is kind of mid-single digits, is it fair to assume that we can already see that kind of AI growth in 2026?
Yes. I mean, as you know, we do not have a monopoly, so we live in a competitive market, so to say. And of course, net interest income is very much influenced by the competitiveness and by rivalry in terms of the pricing, mainly of the deposits, because this is what, I mean, influences more directly and more immediately the P&L. But what I can tell you is that our base case is exactly what you are saying.
Our base case is that the NII will grow in 2026, low to mid-single digit, i.e., growing in line with volumes. In terms of the Polish operations, starting with the Swiss franc mortgage provisions, we have been very consistent in terms of what we are saying. We will say that 2023 would be the highest number. We will show a large drop from 2023 to 2024. We were also expecting to see a material drop from 2024 to 2025. I mean, in 2026, it will be much, much lower than what we have in 2025, whether it will be material or not. I think it is too early to say, but what we expect is at a much, much lower value. It depends a lot on the methodology and in what happens next.
I mean, right now, our model, just why is it a little bit more complex to say? Because our model is basically a three-year forward-looking model. Okay? T his started in 2019. This means that the flow of cases that we have right now on 2025 in our model will be the flow of cases that we will expect until 2028. The flow of cases that we'll have in 2026 will be the flow of cases until 2029, the beginning of 2026 or the end of 2026, until the end of 2029. I mean, we would expect, so to say, that most of the cases will already have, I mean, are already projected there because it started 10 years ago. Of course, if there is a sudden new, totally unexpected, I would say, source of new flow of cases, this may change a little bit.
In any case, this is the message that I would like to give right now: a large drop this year and next year, I would say. I would not call it immaterial, but much, much lower. I would say on the normal cost of business, I would say an impairment in the very normal cost of business without major impact on the P&L. In terms of the Polish operation, I mean, as I comment very often, we do not separate strategy from value creation. This is a very important point. We think we are managing well our Polish operation. We are generating value in our Polish operation. We are, so to say, not calling the natural owners, but at least we are value equity owners of our Polish operation. This is important to say. When we see what is the possibility or the capacity, the earnings-generating capacity of our Polish operation ex Swiss franc, we are seeing values in excess of EUR 700 million. You can do the numbers of what is our P&L ex- Swiss franc. It is a very high P&L. When we look at the multiples in the market, we do not think that the valuations reflect already, I mean, this earnings-generation capacity of the bank that we have in Poland. This means that we think we can do better than what is implicit in the market.
Why we are generating value and if we really feel more comfortable that we can generate more value, as we have been doing, our bank has been a key benchmark bank in terms of quality of service, in terms of acquisition of new clients, in terms of acquisition of salary accounts. We clearly are one of the two players that have been growing in terms of current accounts, in terms of clients, and so on. We think we are the natural owners. I mean, and that the market still, I mean, has a lot of upside. If somebody wants to convince us that it is an owner that generates much more value than we do, it has to prove it to us. The asset is not for sale. We are not proactively, I mean, putting the asset for sale because we think we can generate still a lot of value.
That's very clear. Thank you.
We are now going to proceed with our next question. The questions come from the line of Hugo Cruise from KBW. Please ask your question.
Hi. Thank you for the time. First, I had two clarifications. You've talked about on the loan growth in Portugal, if you could just clarify what you are expecting for this year, because I understood from the previous results call that you are targeting more low single digit this year given the uncertainty. It sounds like you're a little bit more positive now. Do you think we could actually see 3%, 4% loan growth this year in Portugal? That's the first clarification. The second is on taxes. You've talked today about tax rate being between, I think, 25% and 30%. Is there a guide just for 2025 or also for the later years? Finally, if you could talk about RW optimization. A lot of banks have been doing synthetic securitizations, for example, but also other measures. Is there anything you are planning that could improve your CT1 ratio there? Thank you.
Okay. Starting with the last question, I mean, we are always, I mean, looking at opportunities of synthetic securitization. Actually, we have several of them done. We look at this on a very practical and value-driven approach. There is an implicit cost of equity in these deals. If we reach the conclusion that the implicit cost of equity is clearly below the cost of equity so that it accrues value to our shareholders, we typically may do it. If we think that not that what the consultants or the investors want to charge us is more than the cost of equity, probably we will not do it. We are continuously analyzing this. Up until now, I can tell you that we do not have anyone in the pipeline because the proposal that we have, we did not think they were necessarily in the shareholders' interest to do them. It is part of our job to continuously analyze it. We have, I mean, already closed, considering Portugal and Poland, more than four of these deals. Just to give you an idea. We are clearly on this.
In terms of taxes, I mean, I would say that for the values that I gave, of course, this is very dependent on exactly the profile because there are some expenses that are not deductible. I t's not a totally fixed number. It's not like a depreciation schedule. When I say broadly in this interval between 2025 and 2030, it is, I would say, for the foreseeable future. I mean, for the foreseeable future, I would say, for many years to come. In terms of loan growth, there are some green shoots. I mean, it's very difficult for me to, I mean, to say whether it's low single digit or mid-single digit. I mean, it's only one quarter. There are green shoots, and we are in a period of very high uncertainty. What I can tell is the following. The relevant impact on the margin is business confidence, so to say.
If business confidence grows and these uncertainties, these geopolitical uncertainties and tariff uncertainties decline, we will clearly be, or if it declines significantly, we will clearly be on the mid-single digit. If probably these uncertainties do not decline, probably there will be less investment. We will be closer to the low single digit. Of course, we are speaking of, I mean, small values, 1% more, 1% less, that do not necessarily have a material impact on the short- term on the NII.
Okay. Thank you very much.
You tell me what Mr. Trump will decide in the next 80 days, and I will tell you how the business confidence will evolve.
We are now going to proceed with our next question. The next questions come from the line of Carlos Peixoto from CaixaBank BPI. Please ask your question.
Hi. Good morning. A few questions from my side as well. First of all, sorry if I repeat anything because I had some problems during the connection.
Carlos, the connection is quite poor. If you can speak up or closer to the mic. I'm sorry.
Is it better now?
Much better. Thank you.
Okay. Sorry about that. As I was saying, I was interrupted during the call. I had some problems with the connection. Sorry if I repeat any question that was already previously made. First, would it just be very quickly on fees outlook, how you see that evolving throughout the rest of the year? A second bit of a follow-up on the loan growth that we were talking before or mentioning before. One of the things that we've noticed is that on the company side, loans are still declining roughly 5% year- on- year. This is a bit below what we are seeing from other competitors in Portugal. I was wondering whether you have any views on what could be driving this. Is it that competitors are being much more aggressive than BCP in pricing, or are there any trends that are worth having in mind? Just a couple of follow-ups. Sorry about that. On costs, just to have an idea, last year, were you accruing any variable remuneration throughout the year? Are you doing so this year? Should we expect the staff costs to be more stable throughout the year?
Second follow-up on other provisions. I believe you mentioned that you were not seeing any signs or any reasons for other provisions in Portugal to increase over coming quarters. You mentioned between EUR 10 million-EUR 15 million per quarter over the coming quarters. Should we take the EUR 10 million-EUR 15 million or the first quarter as a reference there? Finally, just a bit of a tease. You mentioned that Bank Millennium current market valuations do not really reflect the value that you see for the unit and the potential in earnings that it has. My question here is, could you do the opposite rather than sell, consider buying out minorities and reinforcing your position there? Thank you very much.
Thank you very much. Starting with your last question, we have more than 20% of our market cap, so to say, invested, so to say, in terms of value in Poland. The Polish market is a very interesting market, but still has some uncertainty. From a risk appetite standpoint, we are more or less where we want to be, so to say. Unless there is a strong reduction in terms of these other risks that can emerge in Poland, we are where we want to be. We are not considering any purchase of minorities for the moment in terms of Poland. I think this is an important point. In terms of cost, of course, we accrue variable remuneration, but we accrue based on the budget. If the employees, I mean, deliver much better than the budget, of course, there has to be some adjustment, so to say, for the overperformance.
At the end of the day, I mean, for the shareholders, this is good news because, of course, what we distribute as remuneration is only a small percentage of the overachievement in terms of the budget. In terms of other provisions, I had commented a little bit this already. I mean, the other provisions is a line that is for other risks, typically. Almost by definition, most of, I mean, these other risks are always difficult to anticipate. It is a little bit more almost for the unforeseen. These around EUR 15 million, give or take, that we may have on a quarter-by-quarter basis, I think it is something that is across the year or across the cycle. If there is, I would say, suddenly larger litigation that we are not expecting, it is maybe higher. If there is a large recovery of a previous litigation, we may reverse.
I think, I mean, at least over the year, this is a good guidance, except if something strange happens. I mean, in terms of loan growth, I mean, we can speak for ourselves, so to say. We are very disciplined in terms of spread. In any material loan that we originate, we typically compare it with our cost of capital, with the expected loss, with our funding. We have a model that assures that when we originate a loan, these loans pay for the cost of equity and pay for the expected loss. Effectively, as you comment, some of our competitors, because they may have different short-term priorities, at least during some time, may have a different perspective. I mean, we have seen even some loans here and there sometimes with a negative spread or something like that, which for us are difficult to understand.
Having said it, I mean, typically, this does not last a lot of time. I mean, sometimes there is a campaign, there is a moment in which a competitor that's not always the same, I mean, wants to make a point in the market. What we see is that this typically does not last a lot of time because, I mean, people cannot destroy value forever. People may have a moment of affirmation in terms of market share, but people do. That's why we feel confident that at least over the period of the plan, because the competition on average in Portugal is very rational, we will be able to deliver on this mid-single digit growth of mid-single digit of loan growth. Of course, this has the assumption that the competitors that have been typically rational over time will continue to be rational. I think this is also, I'm sorry, a rational assumption that the competitors sooner or later will be rational.
Of course, if there is no rationality, I mean, this may be different. This is different. I mean, the field, look. We have been quite successful in terms of bank issuance fees. In terms of investment fees, this will depend in terms of our asset management performance and placement. This also depends a lot on the markets. All in all, we feel that this mid-single digit guidance that we are giving in terms of fees is appropriate. Of course, what is the critical factor here? If the markets start to underperform significantly and if the retail investors divest from equity funds and riskier investments where, as you well know, we make most of the fees, this may then have a different evolution. For the same token, if there is an optimism in terms of the markets, we will overachieve. I think that's it.
Thank you.
Okay. Thank you very much for your interest in following us. We are very proud that we were able to deliver on what we have been saying. We are very satisfied with the value that our share has accrued over the last quarters. We really are totally committed in continuing this path of shareholder value creation. Thank you very much.