Good day, and thank you for standing by. Welcome to the Millennium bcp nine months 2026 earnings conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please note that today's conference is being recorded. I would now like to hand the conference over to the speaker, Mr. Miguel Maya, Chairman and CEO. Please go ahead.
Good afternoon, Miguel Maya speaking. Welcome and thank you very much for attending this conference call. I will begin with the highlights of our performance, which will be followed by Miguel Bragança, who will provide additional details. We have been witnessing a challenging global environment shaped by geopolitical tensions whose effects are visible across several domains. [audio distortion] Notwithstanding those, the Portuguese and Polish economies have continued to show good fundamentals, with economic growth being supported by domestic demand. Mozambique continues to recover from the downturn in late 2024, with growing prospects of a support program with the IMF. Resilient economic activity and higher inflation have led to changing expectations regarding the path of interest rates. Despite this volatile environment, in the first nine months of 2026, the group delivered a strong set of results.
Net income reached EUR 873.7 million, a 12.6% year-on-year increase, showing the bank's ability to generate value supported by a robust franchise. In Portugal, we achieved a net income of EUR 727.9 million, up 11.2%, further reinforcing the positive profitability trend observed in previous quarters. Core income grew 5.7%, driven by robust net interest income and commissions. Disciplined cost management continues to deliver results while enabling sustained investment in digital transformation and technology. This solid financial performance is underpinned by prudential balance sheet management and resilient asset quality in a rising interest rate environment. Net income from international operations increased by 21.8%, reaching EUR 281 million in the first nine months, compared with EUR 230.7 million in the same period of 2025. We highlight that Bank Millennium recorded a net income of EUR 259.7 million, a 29.6% increase.
This performance largely reflects the material reduction in charges associated with FX-denominated mortgage portfolio, as Swiss franc related litigation is in a clear downward path. The strategic importance of Bank Millennium for BCP is evident, with loans growing by 10.2% and customer funds by 11.9%. Capital ratios remain above regulatory requirements with a CET1 ratio of 13.7%. In Mozambique, Millennium bim results were influenced by the context. Adjusted for non-recurring items, net income rose by 16.8% to EUR 73.6 million, with customer funds up 13% and lending increasing by 12.2%. Overall, Millennium bim is well-positioned to capture the opportunities arising from the major energy-related projects, supported by a strong capital position with a capital ratio of 40.7%. The resilience of BCP business model is also reflected in the robust capital ratios, comfortably above regulatory requirements, with a Common Equity Tier 1 ratio of 15.2% and a total capital ratio of 20%.
On a pro forma basis, that is, if no distribution was considered, the Common Equity Tier 1 ratio would be 16.9%. The group continues to run a strong liquidity position. Liquidity indicator remains significantly above regulatory requirements, with the liquidity coverage ratio at 330%, net stable funding ratio at 180%, and the loan to deposits ratio is at 70%. Assets eligible for ECB funding amounted to EUR 30.4 billion. The strength of our franchise is also visible across key indicators at group level. Customer loans grew by 7.8% year-on-year to EUR 66.2 billion, while total customer funds increased by 7.1% to EUR 116.3 billion. In Portugal, customer loans rose by 7.8% and total customer funds by 5.8%. At Bank Millennium, corporate lending grew by 24.5%. Asset quality continues to improve, with group's NPEs declining by EUR 157 million and leading to an NPE ratio of 2.2%.
The cost of risk reflects this positive trend, standing at 34 basis points from the group and 32 basis points in Portugal. Active customers increased by 4% year-on-year to 7.5 million, while mobile customers grew by 8% and represent 76% of the active customers base. This performance underscores the strength of the group's business model across all its operations. Millennium bcp remains a preferred bank, and important distinctions continue to be awarded, including the Consumer Choice Award for the sixth consecutive year in Portugal, and the recognition of new corporate website as a product of the year. The expansion of our customer base also reflects the confidence placed in our teams and in our digital capabilities. A growing number of our customers acknowledge the ease of use and read of our digital proposition, with digital customers increasing by 7% and now accounting for 82% of active customers.
Our innovative mobile platforms continue to deliver an outstanding digital journey, translating into sustained growth in customer interactions and sales. The Millennium app recorded 1.7 million logins every day, a 7% increase, with customers accessing the app on average, 33 times per month. The value generation from our digital capabilities has been remarkable, with sales through the app growing by 6%, credit card sales increasing by 45%, and a 28% rise in personal loans origination. Transactions increased by 10%, with international transfers expanding by 52%. Digital penetration rates also demonstrate strong usage of the app across multiple areas. In Portugal, measured by number of operations, 98% of stock market transactions, 89% of savings product subscriptions, and 76% of both investment fund subscriptions and personal loans are now carried out through digital channels. In mortgage lending, we continue to simplify and digitize the entire journey, turning it even more seamless.
Digital adoption is progressing steadily, with 89% of approval letters being digitally signed and 37% of these appointments booked online. Overall, BCP continues to deliver strong results, adding confidence to the performance trajectory envisaged under our strategic plan. Subject to the usual disclaimers, namely the uncertain macroeconomic and financial environment we may face, we are updating the estimate for our strategic targets for 2028, which Miguel Bragança will detail later in the presentation. I would like to highlight the important revision of the cumulative net income to a range of EUR 4.75 billion- EUR 5.25 billion, and under the shareholder remuneration policy and subject to the defined conditions, we estimate a cumulative distribution in the range of EUR 4 billion - EUR 4.5 billion, which has an underlying ROE equal to or above 70.5%. We remain confident BCP is well-placed to deliver value to all its stakeholders. Miguel, floor is yours.
Thank you very much. As you see here in page eight, a very healthy evolution of the income statement with core income growing 5.7% in consolidated terms. The operating cost 5.3%, so positive jaws, which generate a core operating profit of 5.9% in terms of growth. The profit before impairment and provisions grows 6.3%, and the profit before tax more than 20% to a large extent, with the contribution of the decrease in the legal risk provisions in Poland as anticipated. In terms of the numbers which we are proud to present, we are here presenting a book value per share plus dividend per share growth of 15.4%, an ROE around 14.9%. Of course, the ROTE is around 50 basis points higher, as you see here in the graph.
In terms of the NII, an acceleration of the NII in Portugal to some extent due to the lagging effects of the interest rate increase. As you know, the average interest rate in terms of our stock last year, was still suffering, so to say, from a much lower interest rate. There has also been some discipline in terms of the pricing of the deposits in Portugal. So we are here presenting a growth in terms of NII of 13.9%. What we are expecting is for this year to have here a growth in the mid-teens area as we are now, but also for next year, absent a major disruption, we are also expecting a mid-teens growth in terms of the NII in Portugal. In terms of the international operations, as you see, the evolution of the interest rate in Poland is helping us.
After some decrease, there is a stability, and as you know, even the forward rates are upward sloping. This quarter already with a substantial increase vis-à-vis the past quarter. What we do expect, as referred in previous presentations, is to end the year with a positive evolution in terms of the NII in Poland. Fees and commission stability, a 5% growth with the contribution of both the market-related fees and banking fees in the several geographies, growing at somewhat higher rate in Poland, where we still are punching below our weight in terms of fees and commission. So there is still some upside there when we compare ourselves with our competitors, but also a very healthy evolution in Portugal, mainly when you compare with our competitors of around 4%. I would highlight here the contribution both of transactional fees and of fees of investment and bancassurance.
Other operating income. An important evolution in year-on-year. It is important also to state that we have had here some extraordinary gains. Last year, we had here a recovery of an additional tax that was judged unconstitutional. This year, we also have been benefiting from some capital gains on some legacy assets that we had recovered. Because they were well provided, once we sold them, we made here more than EUR 30 million of capital gains in the full year. So we are having here a positive evolution in spite of the extraordinaries of last year because of the extraordinaries of this year. In terms of operating costs, a cost- to- income of 36%.
A very, I would say, disciplined cost growth on the mid-single digits as we had anticipated with a 5.8% cost growth in Portugal, which leads to cost- to- income of 33%, which is an important benchmark cost-to-income when you compare ourselves with other European competitors. In international operations, a 4.8% growth and a cost-to- income around 40% or 41% in the international operations. Cost of risk, very contained. A slight increase in consolidated terms. In Portugal, a decrease of one basis point. In consolidated terms, a slight increase. Both linked to the sovereign debt in Mozambique and also more in the quarter, we have not had any loan sales. Typically in Poland, when we have loan sales, the cost of risk benefits from it because our prudent provisioning policy leads to capital gains once we sell the portfolio. This quarter, we have not had it.
There is, here, some variability in terms of cost of risk, but I would say very contained all in all. The NPE is continuing to decrease. It is important to state here that we are reaching a level where we will have some volatility in terms of these NPEs according to the cycle. We are already with a low NPE ratio. Considering the EBA ratio, for instance, in Portugal, we already have an NPE ratio of 1.2%. It is already so low that if there is a credit that defaults or if there is a credit that gets recovered, of course, when the value of the NPE ratio is low, one has to anticipate that it will be more volatile than in the past where there was only a downward trend.
We are not expecting here any trend increase, but we are expecting as time goes by, just because of the sheer size of the number, some volatility around those numbers. In terms of the international operations, I would here like to highlight the decrease in terms of the NPE loans ratio. The EBA ratio has gone down from 1.9% to 1.6%. In terms of the business activity, importantly, very healthy, both in terms of clients and in terms of customer funds. Year-on-year, a 7.1% increase. In Portugal, a growth of 5.8%. I would like to highlight that this growth is a healthy growth, but it is affected by two factors. The off-balance sheet products and off-balance sheet funds, of course, are affected by the mark- to- markets.
We have some demand deposits that are, so to say, hedged, and once they are hedged, there is also a mark- to- market in terms of the demand deposit hedges. These are on one hand. On the other hand, Q3 is typically a not-so-good quarter in terms of customer funding increase. Q2 and Q4 are typically, there is some seasonality in terms of customer funds because of the holiday season and so on. Once you compare it quarter-on-quarter, one has to adjust also for seasonality. In terms of the international operations, also a healthy growth. I would here also like to highlight that in Poland, and this also explains the margin improvement in Poland, we are making here an effort to increase somewhat the savings and deposit market.
In Q3, the volumes in Poland in terms of customer funds were less, I would say, the volume growth was less exciting than in previous quarters because we are rebalancing, so to say, our objectives in terms of margin and customer funds growth. All in all, in the international operations, almost growing 10%, which is very positive year-on-year. The quarter, as I was commenting, affected by these factors. Loan portfolio. Healthy loan portfolio with almost 8% growth, 7.5% in mortgages, 8.4% in terms of companies. This 7.8% more or less reflecting the same rate in Portugal in international operations, in one case, 7.8%, in another case, 7.9%. With more growth in Portugal in terms of companies than we had in previous quarters, which is good. The quarter-on-quarter growth of companies in Portugal that is much higher than in previous quarters.
In Poland, still a year-on-year growth that is above 20%. All in all, there were some large deals that matured in Q3. The growth in the quarter, the quarter-on-quarter growth in Poland was not so large than in previous quarters. Still, we feel comfortable with this growth slightly above 30% that we are presenting now also in Poland. In terms of capital, 15.2% Common Equity Tier 1 ratio with an evolution that is very much aligned with the factors that I have here presented in the past, and I will elaborate a little bit on it. The leverage ratio also at around 6.1%, so comfortably above the minimum. In page 22, here, the waterfall of capital. It is important to see exactly what is going on.
You see that in terms of the capital generation before distribution of 68 basis points, broadly aligns with the guidance that we have been giving of between 55 basis points and 65 basis points, 70 basis points per quarter. So to say in terms of P&L. Of course, then a part of it gets distributed to shareholders. Here we have also included in these 64 basis points, the AT1 coupons as dividends. Basically, because of our very ambitious distribution policy, of course, the P&L, as it gets distributed, does not contribute to an increase in the capital ratio. On the contrary, because the whole logic of the plan that we have presented and that was approved to you was a smooth landing of the capital ratio to a ratio that is closer to what we deem as our comparables.
Some small impact , considering mainly the magnitude of the changes in the market of the AFS reserves. As you know, we have a sovereign debt portfolio. Most of our sovereign debt is in our hold- to- collect portfolio. There is a small part, or a smaller part that is in the fair value through OCI. Of course, this has an impact in terms of capital. Please consider the small impact that it has had considering the magnitudes of the price changes in the market. This clearly shows the prudence of our policy. As I had told before, we were not sure whether we would be able to implement and approve the securitization that we were doing in Portugal of around 30 basis points. We were able to do it, and inclusive, we were able to enlarge somewhat the size of the portfolio.
This has contributed with a 31 basis points increase. There is another transaction that has already been announced to the market in Poland that has already been implemented, but it is in the process of approval that will contribute, if approved as it surely will be, with 15 basis points more. Of course, there is then the RWA evolution, the healthy credit growth that typically has here an impact of around 20 basis points - 25 basis points, in this quarter, 18 basis points. This is the normal evolution. What we have to expect going forward is exactly this evolution in terms of P&L and distribution of this between, I would say, 55 basis points and 65 basis points capital generation. In terms of RWA, I would say between 18 basis points and 20 basis points of RWA increase due to the business evolution.
The AFS reserves are particularly hard to predict, but they can vary in this order of magnitude depending on the evolution of the market. Our MREL position, as you see in page 23, very comfortable with a 33.4% ratio, comparing with MREL requirement plus CBR of 29.5%. Nothing to write home about. Our funding plan being executed and with everything according to plan. Also no worries here. As you may see, we have had access to the market in very reasonable conditions as we also continue to have. The liquidity ratios at very high levels with eligible assets above EUR 30 billion and with net- loans- to- deposit of around 70%. A slight increase aligned with what we want to be.
As we have done when we presented the strategic plan, in order to allow more time for questions I will not go into the detail of Portugal and the international operations. You have here the data, and most of the information has been handed to you. Of course, we are always available to discuss and to provide further information if you so ask. But I will go directly here to the update of our estimations here in page 46. As you know, in the end of October 2024, we have presented a plan called Deliver More Value. That was a four-year plan from 2025 until 2028. We are in the middle of the plan. In terms of the plan that I am presenting here on page 47, the main levers of the plan are absolutely valid. The main priorities of the plan are absolutely valid.
We are in implementation mode. We are not changing the plan. What we want to be, just to remind you, is we already are and want to maintain to be the best relationship bank with the best experience with human- and digital- enabled for families and companies in Portugal. It is easy to say, more difficult to execute, but our difference is in exactly these capabilities of executing. We have a digital bank that leads in terms of customer acquisition of affluent and affluents to be customers in Portugal. This bank has already almost more than a fourth of our clients in Portugal, so it is very important. In Poland, we are a challenger bank, and we want to be the reference bank for primary relationships, not only individuals but also in the SME market.
This is the clear change that we are implementing, and that is a product of the plan. In Mozambique, we also want to be perceived by families, companies, and international companies as the bank with the strongest controls, as the most reliable bank, the most controlled bank. that's the way we want to differentiate ourselves in Mozambique. On page 48, you see here the targets which we have committed in the market, four-year targets, EUR 4 billion in terms of capital companies, EUR 2 billion in terms of company stock. These are the targets for Portugal. Even before, there was so much emphasis in AI and data. We were already focusing in terms of data, AI. Even before all these sensitivity to the cyber risk, we were clearly strengthening all the resilience and the cyber resilience of the bank.
Of course, this is only possible to do with talent management and with a clear focus in having and developing the best people. In Poland, we have also presented a lot of initiatives, keeping the leadership in customer acquisition, very important. We are clearly one of the leading banks in terms of customer acquisition, but also being a benchmark bank in terms of privacy, and with the development, not only for companies but also for the first bank entrepreneurs and micro business and all of these with a very differentiated customer experience. We do believe that mainly in this AI age, what will make us different in all the geographies in which we are, including, of course, Portugal and Poland, is customer experience. This seems a little bit abstract, but it is not.
We clearly want to be, and we are already the best bank in terms of daily banking, in terms of all the needs that the customers have on their daily operations, in terms of daily banking, be it digital in the Millennium app or in the branch. that's where we want to distinguish ourselves. We expect that the customer will reward us for this transparency and for this no nuisance experience going forward. In Mozambique, we also have an ambition of preparing our bank for the future. On page 51, on the left-hand side, we recall what were the values that we have presented to you at the end of 2024, and what are our estimations right now. What we said at the time was that between 2025 and 2028, we were expecting a cumulative net income generation of EUR 4 billion -EUR 4.5 billion.
Now what we are saying is that already with, of course, two years passed, that in this period, what we are expecting is a cumulative net income between EUR 4.75 billion and EUR 5.75 billion. So, around EUR 750 million more cumulative net income in the period. At the time, we had presented to you, and I want to remind that we were coming from periods of almost no distribution to shareholders of up to 75% of payout to shareholders. In the meantime, and we have done this last year, as you may recall, we have changed our dividend and distribution policy so as to have here a smooth landing, a convergence to optimal capital ratios. We have been quite innovative in terms of giving you the transparency of saying that depending on the CET1 ratio before distributions, we will have a maximum distribution to shareholders.
Depending exactly on where we stand at year-end, we will distribute 90%, 80%, 75%. You know clearly, in principle, what are the maximum that we are targeting. If we multiply these values with the cumulative net income, what we are saying is that this will mean a EUR 4 billion -EUR 4.5 billion distribution, which means, if you do the numbers, that we are increasing the distribution by EUR 1 billion. What we are saying here is that in principle, of course, there are still two years missing, but in principle, what we are saying here is that we will distribute EUR 1 billion more to our shareholders than what we were saying in 2024. In page 52, we have here exactly where we stand in the nine months of 2026. What were the targets for 2028? Where do we expect to land? Okay.
I want to say very clearly that mainly when we speak here about the CET1 ratio, about the other values, or about the cost of risk, these are not targets. These are best estimations on where we expect to land. We are not changing, just for the sake of example, our target capital ratio. We think that the banks such as us may operate above 13.5% in terms of CET1 ratio. What we are saying is that considering our dividend policy and considering the way that we think the bank will evolve by 2028, our best estimation of CET1 ratio will be at or slightly above the 14.25%. In terms here of business volumes, clearly larger business volumes. We are speaking here about more than EUR 10 billion of business volumes than what we were expecting in 2028.
In terms of customers and mobile customers, we already had a very ambitious plan. What we are targeting probably are more value-added customers. We are not reviewing upwards our expectations because they were already very ambitious at the time. In terms of cost-to-income, we were, based on our projections, expecting to get to cost- to- income slightly below 40% and slightly below 37% in Portugal. What we are now targeting is our cost-to-incomes at or below 37% in international terms, and broadly maintenance of the cost- to- income at or below 34% where we are at 33%. Very aligned.
In terms of cost of risk, in spite of the challenges in the world and in spite of the fact that there are some seeds of, I would say, risk or additional seeds of risk in the world, because when we were doing the plan, I want to remind you, all of us were concerned with also the possible tariff war disruption in value chains and so on. We are seeing that the economies in which we are in have been proving much more resilient than we were expecting when we did the plan. This better resilience allows us to review the estimations in terms of cost of risk, so that in Portugal, we are expecting a cost of risk at or below 35 basis points. Of course, this is an expectation, it is not a commitment.
We all know that we are in a very uncertain world, but as of today, our best expectation for Portugal is around 35 basis points, slightly below 35 basis points in terms of cost of risk. CET1 ratio. There are different policies in terms of CET1 ratios. There are some banks that basically distribute everything that they have above a certain threshold, that they distribute all what they expect to be the excess capital at once, then to have a very stable, I would say, payout ratio. It is not the policy that we have presented to you. The policy that we have presented to you is the policy of a smooth landing, of a prudence in terms of distributing, converging to a ratio that will be above 13.5%, so that the half is above 13.5%, but it will not be immediate, so to say.
As of today, by the end of 2028, i.e., within two years, what we expect is to be at or slightly above the 14.25%. So clearly above our target. But we are not changing our target because we think that our business model is totally consistent with this target. In terms of ROE, we are also reviewing upwards our target. A part of this, of course, is a consequence of the cost-to-income, of the cost of risk, of management. A part of it is also based on the interest rate environment. Of course, what we typically do is that we use in our estimations the forward rates in terms of interest rate environment and interest rates projections. So when we say that these are our applied to 2028 estimates, it is based on the forward rates.
Based on the current forward rates, we expect our ROE to be at or above 17.5% and our ROTE around 50 basis points higher than that. So of course, if tomorrow there is a large recession that, for whatever reason, makes the interest rates go down dramatically, of course the values will change. I would say this is not the target. This is a projection. This is an estimation, as we have told you. In terms of shareholder distribution, we are maintaining exactly what we have told you before, that based on the CET1 ratio before distributions, we will be able to distribute up to 90%, but we will be very transparently making these in terms of a formula. As you know, Miguel Maya just told you that our CET1 before distributions right now is around 16.9%.
You can model yourself what is the evolution in terms of RWAs and in terms of P&L until year-end. What you can see is that if the risk environment stays more or less as it is right now, if you reach a ratio that is above 17.5%, the maximum that you will distribute is 90%. If it is below 17.5%, but close to it will be 80%. But all in all, a very, I would say, generous distribution policy so as to converge to the best practices in the market. I hope this gives you the view that you were expecting. Of course, as a bank, we are committed to developing people and to the society and recognition. In the appendix also, you have much more, very rich information that we can then elaborate on. Thank you very much for your time.
We are now available for the Q&A session.
Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Once again, please press star one one and wait for your name to be announced. To withdraw your question, please press star one one again. Thank you. We are now going to proceed with our first question. The question comes from the line of Ignacio Ulargui from BNP Paribas. Please ask your question.
Good afternoon. Thanks very much for the presentation and for updating the plan targets. I just have two questions, if I may. The first one is, looking to the progression of the profitability that you are guiding in the plan to 2028 from the current levels of 15% to the above 17.5%, just wanted to see, Miguel, how do you think that is going to be? If it is a progressive performance or if there is any back end loaded, given the balance sheet structure? So whether we should expect a bit of progressive improvement or we should expect it more towards 2028.
The second one is on the NII target that you mentioned or the guidance that you were mentioning about the NII in Portugal in 2027, whether you could provide some more color on that mid-teens NII growth, if you could provide some color on the deposit growth, the mix between time and sight deposits, and how do you think deposit beta will evolve? Thank you.
Thank you very much for your question, Ignacio. Very pertinent as always. In terms of the growth, we have to separate here what are the, I would say, the non-recurrent items from the recurrent items. Sometimes in our income statement, as you see in 2025, when we have received some taxes that were judged unconstitutional, or when we sell legacy assets with a capital gain, of course, this generates some volatility in terms of the income statement. But adjusting for this volatility, it will be clearly progressive. We are expecting a 2028 better than the 2027. Here I would highlight two dimensions. The NII growth, the NII growth in Portugal will be very material in this year, as you are seeing, and in 2027. In 2028, in absolute terms, it will be similar to 2027.
In relative terms, of course, the percentage is different when the base is different. In Poland, what we are seeing is that it is recovering very fast. It is growing aligned. We were suffering a lot from the 150 basis points average reduction in interest income, in the interest rate. As this effect fades away, the NII in Poland will tend to grow aligned with volumes. In Portugal, it will grow more than with volumes, because the volumes that we are expecting are on the mid- to high- single digits, and the NII is growing somewhat higher than that. What are the headwinds and what are the tailwinds? The interest rate, mainly the average interest rate is clearly still a tailwind for Portugal.
Clearly a tailwind, and that's what the repricing, so to say, of the balance sheet hedges that we have presented here in the annexes and so on, as we reconfigure the balance sheet hedges at higher rates as they mature, and we contract new hedges. Of course, this has also a positive impact. In terms of the relationship between term deposits and demand deposits in Portugal, we are not expecting bigger changes. Maybe one percentage point difference, but not much. The market is not so sensitive to it because the average balances are quite small, and we are also already factoring in, because of this higher interest rate, somewhat higher beta. The market, in terms of deposits, is becoming somewhat very competitive and it is normal because as interest have increased, the size of the price is higher also for customers.
A customer is less sensitive to an interest rate when the interest rate is 1% than when the interest rate is at 3%. It is part of our business. Our beta in Portugal for retail customers is around 50%. We are expecting this beta to grow somewhat to 55%, 56%. But of course, this depends more on the competitive landscape than on the competitive evolution. All in all, considering all these effects, we feel very comfortable for 2027 with this evolution of the NII that I was commenting.
Thank you very much.
We are now going to proceed with our next question. The question comes from the line of Maks Mishyn from JB Capital. Please ask your question.
Good afternoon. Thank you very much for the presentation, and taking our questions too from my side. One follow-up on deposits. There has been a quarter-on-quarter decline in Portugal, and I was wondering if it was seasonal or are you being more conservative with pricing? The second question is on the cost-to-income target in 2028. I just wanted to confirm whether the new target includes any cost efficiency measures? Thank you.
The new estimation includes everything. We typically have a longer term plan and then annual budgets. I think it's important to say. We are seeing, of course, some areas of cost efficiency improvement also linked to AI, but we are also seeing some challenges, a lot of them linked also to AI, but to cyber, to IT and so on. With this cost-to-income that we are seeing right now, what we are trying is to invest somehow our overachievement in terms of cost-to-income, in terms of making our bank very much ready for the future and making sure that we don't miss anything, and making sure that we are the most resilient bank among our comparables, also in terms of cyber. This has costs.
This has costs, and as you know, every day, even with the frontier AI models and so on, there are new vulnerabilities that all the banking system in the world has to address. This has costs. We are not factoring in massive, I would say, changes in terms of efficiency measures, in terms of net efficiency measures, because what we are seeing is that most probably there will be also some areas of investment. But we are not expecting our cost-to-income to go much below the values that we have right now because they are already very good.
Looking at the future, I also have to tell you that if we want to remain competitive and if we want to be really the best bank in terms of value for money for the customers, we will have, of course, to make sure that we have the best cost structure, the best cost to service the customer and to having the best also service also for the customers in terms of value banking. But as time goes by, a part of the benefit of this cost will also translate in price, of course. Because what we will be looking five, six, seven years from now, what will happen also is that in banking, as in other industries, if you look at it strategically, a part of the value added of these efficiencies will be translated also in best value for the customers.
We are preparing ourselves for this, making sure that our customers also have the best value. So we don't see as very, I would say, reasonable to expect that the cost-to-incomes will continue to go down without a limit, because what will happen is that we will make sure that our customers will get also the best value and the best service. And this also has an impact in terms of cost-to-income through the income flow. What we have to be prepared, and we will be, and we are, we will be, is to continuously to guarantee that we have a resilient business model and that our customers, from a price to value perspective, have the best offer in the market. And I think this is very important. As I commented in the presentation, there's always some seasonality.
First, all the information that we have, we have not lost market share in terms of deposits. I think this is important. So we have not lost market share of deposits, at least nothing relevant in terms of the individual business. So our offer is very strong. Secondly, this quarter, because it's the holiday season, because where people spend more and so on, is typically a quarter where the deposits suffer more. In Portugal, for instance, maybe some of you know, it's also typical for people to have an additional salary before holidays, so before the summer. So this translates into somewhat higher balances before the summer. So June and July are typically good months, or June is typically a good month, and then August and September are typically not so good months. So it is more seasonal.
Then there are also these small effect, but on the quarter it is noticeable of accounting. When we have a demand deposit, and when we have a demand deposit that is hedged, one has to put the demand deposit at fair value. As our demand deposits are measured to a large extent based on a behavioral curve of which a lot of them mature in five years, which is something rather theoretical, but that's the way the models work. When we do the mark- to- market of the demand deposits, there is here a small negative effect of a couple of hundred of million euros, which is nothing in the context of the full portfolio, but once you compare the quarter-on-quarter is noticeable. In summary, nothing to worry about. We are maintaining our market share.
There are some seasonal elements here and there are some market elements here, but nothing that has to do with the strength of our franchise.
Thank you very much. Super clear.
We are now going to proceed with our next question. The question comes from the line of Álvaro Fernández from UBS. Please ask a question.
Hey. Hi, good afternoon. Thanks for taking my questions. I have two. First, on capital, if there are any non-organic moving parts coming Q4, so regulation, SRTs, or any other non-ordinary item. Also the likelihood of maintaining the 90% payout by year-end. Second, the effective tax rate in Portugal is around 26% so far in 2026, up from 25% last year, despite the decrease in the statutory income tax rate. So why is this, and what can we expect in terms of effective tax rate in Portugal for the next couple of years? Thanks.
The non-organic movement. As I've commented, we had a securitization in Portugal this quarter that was responsible for 31 basis points. Our Polish subsidiary has already announced, including with communication to the market, another securitization that in principle will be responsible for 15 basis points. That's what is available in the market. We are also expecting other effects, but these other effects more or less will compensate each other. Based on the best information that we have right now, the other effects will compensate each other. This is something that's important. Second, the tax rate. As you may know, in Portugal, the nominal tax rate, if you sum the surcharges, is around 31%. If you include the tax rate plus what we call the derrama, basically it's the same, but our tax surcharges is around 31%. They may change 1% more.
When we are speaking about 25% or 26%, of course, this has to do with parts of our management in terms of taxes and in terms of business model that may be either not taxed or there may be timing differences. This volatility in terms of tax rate depends a lot on what we receive, whether we receive more dividends. For instance, when we receive more from our insurance subsidiary, this has already been taxed, and this enters our income statement through equivalence. It has to do with the structure of the P&L. But it's always possible to have 1% more or 1% less. These type of tax rates between 24% and 26%, I would say, I cannot be much more precise because the reality is what it is.
There are also some parts that are not deductible, as you may know, some contributions that are not deductible. What I can tell you at this moment is that expect some variability between these 24% and 25%, 26%, but that's the variability that we are expecting going forward. In terms of the probability of the payout. When we presented our distribution policy, as I told at the time, we had here several choices in terms of how to frame it. One possibility to frame it is to create a focal point around a certain payout, and then to explain in any given year why we were doing this payout or not doing this payout. That was not the decision that we took. The decision that we took was the following.
We realized that we have excess capital for our business model, but realized that the world is complicated and complex. We realized that it is important for us not to take very drastic measures at once and to have here, I would say, a smooth decline towards what we deem as a normal capital ratio comparing with our competitors. Everything is relative, that is somewhat higher than the 13.5%. We presented the formula. The formula is, if at the year-end we are above the 17.5%, we will be having a 90% payout. There are some intervals that we have here, but if we are between 16% and 17.5%, if I am not mistaken, we would have 80% and so on. There is a scale on that. Right now, what we see is that we are at 16.9%.
As I commented to you, the normal generation of capital, maybe 55 basis points - 60 basis points. If we distribute 90% of this, we get here between five basis points and 10 basis points. So 15.9%, we get between, I would say, five basis points and 10 basis points. We will have a securitization in Poland that will give us 15 basis points. We are growing in a way in Poland in a very healthy way and in Portugal that may consume 20 basis points - 25 basis points. So if we do the numbers before distributions, you will see that we are close to the 17.5%, maybe a little bit above, maybe a little bit below. It also depends on the fair value through OCI portfolio, which is not much, but five basis points may make a difference.
It is not, I would say, responsible for me right now to tell exactly where we will land, if it is slightly above or slightly below 17.5%. In any case, if we do not distribute this year, we will have more money to distribute next year. It is not an issue, and this should not be too much of a concern for you. What should be more of a concern is if we are not being able to grow in a healthy way, which we are, and if this capital consumption is not driven by a healthy credit growth in Poland and in Portugal than anything else. To make a long story short, at this point in time, it is still possible to have the 90% distribution, but it is not sure that we will get there.
In any case, much more important for us than the distribution is to make sure that we generate value and that we grow in a healthy way in the several geographies in which we are present.
Okay, thanks.
We are now going to proceed with our next question. The question comes from the line of Carlos Peixoto from CaixaBank BPI. Please ask your question.
Hi, good afternoon. Carlos Peixoto from CaixaBank here. First question would actually be a follow-up on capital. First, I take it that you do not have any expectations for any additional meaningful SRTs in the fourth quarter. Just to confirm that. Also on capital, I was just wondering if you could elaborate a bit on the rationale or the causes for the 75 basis points increase in the CET1 target or guidance for 2028. What drove the option to retain that capital rather than further boosting shareholder remuneration or flagging an excess capital distribution at the end of this period? Just to understand a bit here the rationale on capital allocation, or whether you now feel comfortable with operating with a management buffer, which is 75 basis points higher.
On a separate theme, if you could give us some color as well on your expectations on cost evolution for this year in 2027? Thank you very much.
Carlos, thank you for your questions, but I am not sure that you were listening to everything I said. Do not take me wrong. For the third time, we are expecting an SRT in Poland that has already been announced to the market in a communication to the market that will have an impact of 15 basis points. Okay? I think it is important. Just to make it clear, I think it is clear, and that is what we are expecting from-
Miguel, my doubt was whether there was anything beyond that being planned.
I know. Okay. It is clear. Do not take me wrong. Okay. No, there is nothing beyond this. Second issue. As I clearly pointed out, we have tactical decisions that tend to be reversed in time and that we can take today and reverse tomorrow, and we have some decisions that tend to endure over time. Okay. We think there is a benefit in being able for people to understand where we are going and not having surprises. Okay? We have not communicated a distribution policy based on a capital ratio. We have not said that we will distribute everything above a certain capital ratio. This was not our option. Our option was to say, over the long term, across the cycle, we think we should have a capital ratio above 13.5%.
The way that we are going to reach it, and depending on it, maybe it is faster or it may be slower. The way that we are going to reach it is through a formula based on the CET1 before distributions. Okay. As I had commented, the value that we are presented here for the CET1 is not, and I would rather say, is not a new capital target. We think that our bank can work and will work based on a capital ratio that is somewhat above 13.5%. That is what we said. What we say is that the mathematical calculations of the projections and of the formula that we have presented to you, and that is part of our strategic plan, leads us to a ratio at the end of 2028 that is around or slightly above 14.25%. This is not a target, this is an estimation.
It's something that's different. The second question is, why don't you change your distribution policy? We don't change it because we like to have some parts of our communication, some parts of our strategy that are broadly constant in time and that you can count on this. When we present the new plan in 2028, we will address and also based on our share price performance and so on, whether this distribution policy that we are following is the best one or not. What we can tell to you is that we are not changing our target. What we are saying is that by 2028, we will not be in our final target yet. We are not changing our target. I think this is very, very important. In terms of operating cost evolution in Portugal.
What we are saying is that, for 2026 and 2027, we are seeing a very healthy evolution of the gross income, mainly of the NII, as I've commented, in the mid-teens. It's a very healthy evolution for 2026 and 2027. For 2028, some deceleration, but still in absolute terms, a very good evolution also. We are seeing the need to adjust to this new world, and this has costs. We will not try to, I'm sorry here to use the expression, but it's a BCG matrix expression, to milk the last milk of the cow right now and to put into question the long-term value generation of the bank. We have here to guarantee that we generate value both in 2026, 2027, but also 2029, 2030, 2031.
This means that we will use the savings that AI also allows us to have to keep on investing, and a part of this investment is through costs into investing in people and so on. This means that we are expecting to grow costs around the mid-single digits in Portugal and in consolidated terms, somewhat more, but not much more.
Okay.
We are now going to proceed with our next question. The question comes from the line of Francisco Riquel from Alantra. Please ask your question.
Yes. Thank you for taking my question. I want to focus on the strategic plan, the revision of the strategic plan. First, business volumes in Portugal, you are aiming at volumes of north of EUR 130 billion by 2028. But to get there, you just need 3% growth per annum in 2027, 2028. You mentioned before that you expect mid- to- high single- digit loan growth in 2027. I wonder if you expect quite a slowdown in the following years or in customer funds? I just want to assess whether your targets are conservative or if you really expect such a slowdown. My second question is, the cumulative net profit target, from the initial strategic plan, included a EUR 500 million range for a four-year period. We are now halfway the plan, and you still maintain a EUR 500 million range, but just for two years left.
I wonder, what is the main P&L that you think you can deviate for good and for what to maintain such a wide range? What is your view in terms of upside or downside risk for that line? Thank you.
Two good questions. I think if we see what we are presenting, there are some metrics. Just to help you, there are some metrics where we say larger, there are some metrics where we say larger or equal to. Okay? The way to interpret this is when it is larger, it is north of, clearly north of. When it is larger or equal to, it is modification. I think this addresses your question regarding Portugal. In terms of the uncertainty, of course, it is true that two years have gone by, and we could probably have been a little bit more precise in terms of guidance. I will send you an article from McKinsey about the disadvantages of having very small intervals in terms of guidance. Basically, the reality is very complex right now.
Probably it has become even more complex than what it was before, as you know well. We have also here to give you some leeway in terms of you doing your own calculations and you have your own views in terms of what will be the impact going forward. I would say that one important impact is if, contrary to what is implicit in the forward curve, suddenly we go back to a scenario, which is not our base case, of course, but we go back to a scenario where we have a major recession in Europe and where interest rates, instead of going up, go down materially.
I would say this is a scenario that is not the most likely scenario, but as the reason for the situation which we are in has both supply shocks and demand shocks, I think that this is always something that we have to consider. I think a major recession in Europe, I would say is driven by the situation that we are seeing in the world is probably, I would say, the largest risk that we can have here. Of course, we don't have a monopoly, so we are in a competitive market, so we don't know exactly how the margins and how the competition will evolve in the next quarters. If suddenly there is much more tension in terms of margins, if there is a price war in some dimensions, these are always dimensions that we have to be careful.
Considering these situation and mainly what's going on, we don't know. The fact of the matter is that we don't know exactly how the world will evolve. We decided to maintain the intervals. You can call us too prudent, but we decided to maintain the intervals.
Clear. Thank you.
We are now going to proceed with our next question. The question comes from the line of Sofie Peterzens from Goldman Sachs. Please ask your question.
Yeah. Hi, here is Sofie from Goldman Sachs. Thanks a lot for taking my question. I am very sorry to go back to this EUR 4.75 billion, the EUR 5.25 billion net income guidance, but if I got to just assume the current Q3 net income going forward, I already get to above EUR 4.75 billion cumulative net income. If I look at the consensus numbers, they have a EUR 5.1 billion, and that assumes 4.5% NII growth. You are talking about mid-teens NII growth in Portugal next year and in Poland, NII growing in line with volumes. What the Polish banks are saying is that volumes are going to grow high- single digits. I was just going to ask if you could square the calculations. I understand that if you have a huge recession in Europe, that could change everything, but I do not think anyone is expecting that in the next 24 months.
If you could maybe just talk about, is EUR 5.25 billion just a conservative estimate? Or do you really realistically think that you are going to only get to EUR 5.25 or EUR 5 billion? If so, how do you square it with the high- teen NII growth in Portugal and high- single digits in Poland? My second question would be on the Mozambique provisions. How should we think about these provisions going forward, and when will they drop off? Thank you.
Starting with your last question. In terms of Mozambique, the way we are seeing the situation in Mozambique is that is a country with a good long-term viability. We do think that the importance of the gas reserves in Mozambique has become even more crucial for the West after what happened with Russia and now with Hormuz Strait. We are confident on the long-term viability of the bank. We do think that next year, as I have said in the last presentation, next year will not yet be the year of the full stabilization of Mozambique. We think that probably we expect between probably around 2028, 2029 to get to the steady state. Next year we do think that we will still be a transitional year.
Of course, we are not expecting to have a negative P&L in Mozambique, but we do expect to continue to have some provisions and to have some caution in Mozambique. In terms of going forward, what to do. I do not know exactly your spreadsheets, but of course what we have here also always to consider is the amounts in Portugal and not only that are not necessarily recurrent. For instance, this year, we have had important capital gains, EUR 40 million, EUR 50 million that are non-recurrent. Last year we also had some non-recurrent gains. Going forward, there are some points here that are non-recurrent. If you ask me, in this interval between EU R 4.75 billion and EUR 5.25 billion, where do I expect to land? Of course, in principle, we expect to land closer to the higher part than to the lower part, of course.
The lower part is more a stressed scenario, so to say. The higher part is more a part linked to where we expect to land. Then if we go more in detail, probably you can check here with our IR, the exact parts of it. Okay?
Okay. That's very clear. But I guess the bottom line is that your guidance is quite conservative, given the guidance you have given on the various P&L lines.
Next question, Sol.
We are now going to proceed with our next question. The question comes from the line of Miruna Chirea from Jefferies. Please ask your question.
Hello. Good afternoon. Thank you very much for taking my questions. The first one was on your Portuguese NIM, which expanded eight basis points in the quarter. I was wondering if you could break that down for us. How much did the loan yields expand in the quarter? How much was the cost of deposits up, and what was the ALCO contribution as well? Then just coming back on your new strategic targets or the update to the targets. Is it fair to assume that the 17.5% return on equity in 2028 would be congruent to the lower bound of the guided cumulative profits range? Basically, if you do EUR 4.75 billion of profits, which again is very conservative, you would be doing 17.5% return on equity in 2028.
However, if you are closer to the upper end of the range, you should be more in the 20% region, I guess. Thank you very much.
There are several parts of the growth. I think there is, in terms of the Portuguese NII, as I was commenting, there is a part of it linked to the volume growth, as I was commenting. That is important. There is also a part linked to the average rate of the portfolio. For instance, in the beginning of 2025, there were still some parts of the portfolio that had not fully repriced yet. So when we compare the average rate this year with the average rate of last year, we have here a positive effect. There is also another important effect that is, as we reconfigure the hedges, we are, as you know, the five-year rates at higher rates. So as we change them, there is an additional value added. So I think, in general, these are the main effects.
There is also another effect from which we are benefiting, until now, that is the fact that as interest rates go up, you do not only make money, so to say, on the current accounts, on the non-remunerated current accounts, but of course, when your beta is around 50%, as the interest rates go up, you also make more money on the term deposit. So I think it is the addition of all these effects that allows us to present this margin. What has been particularly interesting here is that up until now, in spite of these higher interest rates, the beta has been constant. Looking forward, and based on previous experience that from long time ago, when the interest rates were higher, there is here the risk that there is a margin contraction in deposits.
Because what we see is that as time goes by, when the interest rate level in the market is higher, there is, as time goes by, some contraction in the margin of deposits. That is one of the reasons that we are here saying. In terms of the ROE in the values, I think the numbers speak for themselves. There is a reason why, in some cases, we say larger. Then, of course, the ROE has the capital and has the earnings. You are right, that if we are closer to the larger part of the interval, our ROE for 2028 will also be above 17.5%.
But at this point in time, what we think is for us to say is what has been here said, that is an ROE above or equal 17.5% and a margin between EUR 25 million and EUR 28 million. I am sorry, a net income of between EUR 25 million and EUR 28 million in this interval that we are here sharing with you.
We are now going to proceed to our next question. The question comes from the line of Luís Pratas from Autonomous Research. Please ask the question.
Good afternoon, everyone. Thank you for taking my questions. I have a follow-up on the NII in Portugal. Of course, there was a strong Q1 QoQ move, 7%, and I see that the volumes, of course, they helped a bit. But again, there was this noticeable margin expansion. Could you please talk about the main drivers of this expansion QoQ in Portugal? Whether, for instance, there was already some balance sheet repricing from higher rates, any one-offs, or for instance, the hedging position. Looking at how do you expect NII to evolve over the coming quarters, particularly as assets and liabilities reprice? Then finally, also on your NII sensitivity to interest rates in Portugal, what is your latest guidance there? How quickly shall we expect the loan book to reprice? Also on your deposit beta assumption, I think you mentioned 50% so far.
I wanted to confirm whether it's 50% on term deposits and 25% on your total deposit base, or is it something different? Thank you.
I don't want to convert this session into a detailed review of a spreadsheet projection, so to say. If you want then to go into the details or more details, I suggest, in the interest of everybody, to have a discussion with our IR. In any case, what I can tell you is the following. When we do the analysis, basically, the main effect, when we go even from one quarter to another quarter, is that the impact in terms of the credit rate of the repricing of our assets has been much larger than the deposits. This is to a large extent linked to the fact that we have a very large base of non-remunerated current accounts, and also because there are some lags in terms of our deposit repricing and deposit pass-through.
It's basically this difference, after hedges, that explains the evolution from Q2 to Q3. Going forward, what I can tell you is that our best projections is that in the absence of a dramatic change in terms of the pricing dynamics of the competition in Portugal, we expect this growth in our margin to be sustainable. We expect this growth in our margin to continue for 2026 and 2027. For next quarter and for next year. That's why I have commented that we expect, of course, subject to the maintenance of the current trends, and this is always an if, because I recall we don't own a monopoly, so we are in a competitive market. Subject to this, we do expect to have here a mid-teens growth in terms of margin, and we feel very comfortable for this for 2026 and 2027.
This will evolve as time goes by in the different quarters in a quite smooth way. There have been no extraordinaries, so to say, or non-recurrent items in the margin in Portugal of this quarter. There was a slight negative extraordinary in Poland linked to the cash loans, but nothing material in the context of the consolidated margin evolution.
We are now going to proceed with our next question. The question comes from the line of Hugo Cruz from KBW. Please ask your question.
Hi, thank you for the time. I have two questions. One, on loan growth, or mortgage growth dynamics in Portugal. When you hear some of your Spanish competitors and they talk about Spain, they talk about pricing is very tough, the demand is slowing down. I was wondering if you could give us a bit of color what you are seeing in Portuguese market, given that you are more geared to mortgages than corporates there, both pricing and volumes. Then, a second question on cost of risk in Portugal. Overall, it sounds like you are quite conservative in some of the estimates you are giving. But when you look at the cost of risk, it basically assumes it is not going to deteriorate. It actually could improve compared to where we are now. But, it is probably, I feel like it is almost as good as it gets at the moment.
You talked about the uncertainty in the macro. I was wondering if you are still seeing a sort of a benefit from dealing with legacy NPLs. Is there anything, sort of a buffer that gives you comfort that even if the macro deteriorates a bit, you can still meet your cost of risk estimates for 2028? That is it. Thank you.
Starting with your second question. It is true that the world is becoming more complex, but there are here two issues that I would like to highlight. First, the economy, both the Portuguese and European economy, we are seeing it as more resilient than we would have envisaged for the complexity and for the challenges that we are seeing. I think it is important. Second, we have here, transformed the bank, in terms of risk, in terms of risk appetite, in terms of risk processes and so on, but our cost of risk in Portugal is still above the one of our competitors. So there is still a room for convergence because there are some lagging effects in all of this, because the relationships with clients, some of them take decades, so to say.
There is here an element of convergence with competitors that allows us to feel confident that we will broadly maintain our cost of risk in Portugal, in spite of the fact that probably, the cost of risk in the market will go up. But still, what will happen is that some of our competitors that for several reasons have had in the last years very low cost of risks, probably will converge towards the cost of risk more in line with ours. That's the way I look at it. We still have some catching up here to do. This is the impact of these lagging effects and of this cost of risk. In terms of the competitive dynamic, as you know, in Portugal, we have a very low loan-to-deposits.
By having a very low loan-to-deposits, what happens is that we have, I would say, an ultra-competitive market on the asset side, and I would say, less pressure on the liability side because the banks don't need so much deposits because they are flooded with liquidity. That's basically the situation. It is true that there is some margin compression on the asset side. The other side of the coin is that there is some, I would say, some comfort in the margins of the liability side, and both go together. It's impossible to separate one from the other. Both go together. It has to do with the structure of the market. All in all, we have been able to show a very positive NIM. We are having a NIM above 2.3% whereas in Europe, the NIM is between 1.75% and 2%.
But we expect this pressure to continue on the asset side as we reach a moment probably where the credits start growing more than the deposits. But this will take some years. If these cash surplus in the system reduces, these dynamics on the assets liabilities may also change. But for the foreseeable future, I think that we can expect margins on the deposits in Portugal that are higher than in Europe, and margins on the credit that are more tense, I would say, mainly on a risk-adjusted basis. Both go together.
We are now going to proceed with the next question. The question come from the line of Borja Ramirez from Citi. Please ask your question.
Good afternoon. Thank you very much for taking my questions. I have two, please. Firstly, on the capital target, I would like to ask which could provide the RWA growth that we should expect until 2028? My second question would be on capital allocation. The BCP share price has been relatively quite favorable compared to Southern European peers. Given its premium valuation, also given the fact that BCP is generating strong capital organically, I would like to ask how do you think about M&A opportunities versus returning excess capital to shareholders?
Thank you very much. In terms of RWA growth, we are not providing RWA growth as a separate guidance. What we can tell you is that, in principle, we are expecting credit RWA growth somewhat above the credit growth that will be in the mid- to- high single- digits because we are focusing more on SMEs and corporates, both in Poland, mainly in Poland, but also in Portugal. This year, the composition of our growth portfolio was particularly high in Portugal in mortgages. As time goes by, we will be changing our mix more towards the SMEs and corporate. So we are expecting an RWA growth somewhat higher than the one in our credit growth, and we are not giving more guidance on this issue.
In terms of capital, excess capital, and so on, our decision has been to distribute up to 90% of the capital based on the capital ratio which we are. As we distribute up to 90%, and if we continue to have a decent RWA growth based on the credit growth, our capital ratio will naturally converge to values that are more aligned, for instance, with our Spanish peers. The only difference is that this does not occur overnight. In terms of merger opportunities, we have a plan. We have presented the plan. In our plan, we said that we are focusing on the geographies that we are. In the plan that we have presented to the market, we have not said that we should diversify away to other geographies.
At this moment in time, we don't see any target that would really add value to our strategy in the geographies in which we are. So there are none. That's why we are distributing up to 90% of the results. That's why this, together with organic growth, will allow us to get to the profitability levels that we expect. So we are not seeing any major opportunities, and there are none right now.
We are now going to take the last question. The question comes from the line of Dmitriy Kurgan from Mediobanca . Please ask your question.
Yeah, thank you. Just a very quick question on the loan growth in Portugal. I remember previously you guided that you expect the mortgage growth to decelerate, which would be partially compensated by corporate growth. Is this still the case or no? Thank you.
It is broadly the case. Of course, it is not necessarily the case, I would say, on every quarter, but as a longer-term trend, what we have seen here is that the corporate, in terms of year-on-year in Portugal, the growth of the mortgage portfolio has been around 10%, broadly. Approximate numbers. The growth of the corporate and SME portfolio has been 5%. Okay? I think this gives you an idea. But if you go to the last quarter, what we see is that on a quarter-on-quarter basis, the mortgage growth has grown 2%. So 2% on a quarter is approximately 8% on a year. So it is already decelerating somewhat. The SME and corporate growth is growing 1.6%. So 1.6% in a year is already above 6%. So it is happening.
It is normal that it happens because growth rates above 10%, at least in a sustainable way, are not so usual in mature markets. Of course, it is not every quarter like that. But as a long-term trend, we do think that this will happen.
Thank you.
There are no further questions at this time. I will now hand back to Mr. Miguel Bragança for closing remarks.
Ladies and gentlemen, thank you very much for staying with us for this long presentation. We think it is important. We are really committed to shareholder value generation. We have presented the plan two years ago. We are now clearly updating the estimation where we will be landing, and we are very satisfied here to tell you that we will be over-delivering this plan. Thank you very much.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.