Bankinter SA

MAD:BKT

Earnings Call Analysis

Bankinter shows strong growth with improved margins and focused risk management.

Bankinter reported solid third-quarter results, with a 5% growth in loans and retail deposits, while off-balance sheet products surged by 23%. The bank achieved a 7% increase in total operating income to €2,151 million, driven by a 5.5% rise in net interest income and a remarkable 14% boost in fees. Profit before taxes rose 8% year-on-year to €1,083 million. Furthermore, the bank maintained a comfortable NPL ratio of 2.2% and a strong CET1 ratio of 12.56%. Looking ahead, expectations for 2025 include continued revenue growth despite potential interest rate declines, with a net interest income target of mid-single digits.

Strong Performance Amidst Market Changes

Bankinter has reported a solid quarter, showcasing its resilience amidst volatile market conditions. Driven by a 5% growth in its loan book and a 4% increase in retail deposits, the bank’s total business volume reached EUR 215 billion. The exceptional growth in off-balance sheet products also stood out, with a remarkable 23% increase year-on-year, reflecting strong operational activity across their business segments.

Diverse Revenue Streams Fuel Growth

The bank's revenue is benefitting from a diversification strategy. Net interest income (NII) grew by 5.5%, while fees saw an impressive 13.5% rise, contributing to the bank's total operating income, which climbed to EUR 2,151 million—a 7% increase year-on-year. Notably, fees now account for 24% of total revenue, a significant shift reflecting Bankinter's commitment to wealth management and other service fees.

Maintaining Efficiency and Quality

Bankinter's management remains focused on efficiency as exhibited by a cost-to-income ratio of just 35%, significantly below industry benchmarks. The bank reported an 8% profit increase before taxes, totaling EUR 1,083 million, alongside a solid net profit of EUR 731 million, affirming its capability to deliver shareholder value in the form of dividends and retained earnings.

Risk Management and Asset Quality

The bank showcases a healthy asset quality with a non-performing loan (NPL) ratio of only 2.2%, substantially lower than the industry average of 3.4%. Furthermore, Bankinter has reinforced its coverage ratio to 69%, illustrating a prudent risk management strategy. Loan loss provisions were reported at EUR 262 million, aligning with the upper end of their annual guidance of 35–40 basis points.

Guidance on Future Performance

For the upcoming years, Bankinter projects continued growth, especially in the fee segment, citing an optimistic outlook for low to mid-teens revenue growth in fees while maintaining a solid stance in NII growth. The management anticipates a potential slowdown in NII growth due to declining interest rates but reassures that efficient cost management and robust loan growth will mitigate this risk. Specifically, they expect a close to mid-single-digit growth for NII in 2025, despite the pressure from lower rates.

Expansion Goals and Strategic Initiatives

The bank is strategically expanding its offerings in Portugal and Ireland, with expectations to start gathering deposits in Ireland by mid-2025. This growth is positioned well against a backdrop of increasing loan volumes and strong commercial activities, underscoring Bankinter's aim to capture market share while enhancing its service capabilities across geographies.

Conclusion: A Strong Investment Proposition

Bankinter's robust performance, strategic diversification, and prudent risk management make it an appealing choice for investors. With a healthy return on equity at 17% and a tangible book value per share of EUR 6.24—an increase of 10% year-over-year—the bank is well-positioned to provide sustainable returns to its shareholders. Overall, Bankinter stands out as a well-managed institution capable of navigating through changing financial landscapes while delivering shareholder value.

Earnings Call Transcript 2024-Q3

[Laurie Shepard Goodroe, executive]

Good morning. This is Laurie Shepard. On behalf of Investor Relations at Bankinter, it is our pleasure to welcome you all to the Bankinter's Earnings Call for the Third Quarter of 2024.

Please note that our related financial statements were posted with market authorities earlier this morning. All materials are also available on our corporate website.

On today's call, we are joined by Bankinter's Chief Executive Officer, Gloria Ortiz; and Chief Financial Officer, Jacobo Diaz. At the end of the presentation, we will respond to analyst questions in a live Q&A.

Also, please refer to disclaimer in the presentation and note that this call is being recorded.

I will now turn over to Gloria Ortiz to review the highlights, after which Jacobo will review in detail the financial results and the performance of our business segments across the group.

[Gloria Portero, executive]

Thank you, Laurie, and good morning to everyone in the call.

To start on Page 5, I would like to highlight that Bankinter has continued to deliver another quarter of strong results. The key pillars that underpin the sustainable results continue to be the same. First, our strategic commitment to growing organically our business across the board. As you can see, we have grown our loan book by 5%, increased retail deposits by 4% and continue to deliver exceptional growth in our off-balance sheet products that are up 23% year-on-year. Second, we continue to diversify our sources of income, both geographically and also by type, delivering increases of 5.5% in net interest income as well as a strong 13.5% in fees. This is a clear reflection of our successful commercial activity. Third, results are supported by solid management of efficiency and asset quality ratios. By maintaining our consistent strategy with a clear focus on delivery, we achieved solid results each quarter, resulting in a 17% return on equity, exceptional results for our shareholders that stand well above the cost of capital.

Moving on to the next page, you can see how our consistent commercial activity delivers volume growth year-on-year, and this translates into strong increases in fee income, supporting the continued diversification of our revenue lines. On the left-hand side of the page, business volumes have grown by 44% since the end of 2019. And on the right-hand side of the page, fees have also grown by 45% in the same period. This is a clear correlation, as you can see between business volumes and fee income growth, resulting in a solid annual compounded growth rate close to 8% for both.

On the next page, you can see that business volumes, both on and off-balance sheet continue to grow. When summing up customer lending, retail deposits and off-balance sheet funds, total business volumes increased EUR 17 billion year-on-year, representing 9% increase, reaching total business volume of EUR 2,015 (sic) billion [EUR 215 billion] at the end of the quarter. Lending has grown EUR 3 billion or 5%, retail funds amount to EUR 81 billion, EUR 3 billion more than in the first 9 months of 2023, and we have added EUR 10 billion off-balance sheet, which stands at EUR 55 billion, an impressive 23% growth rate in the last 12 months.

On Page 8, as you can see, we continue to grow our operating income in a sustained and diversified manner. In the graph on the left, you can see how fees now contribute to 24% of total revenue, a direct result of our focus on wealth management activities. On the right-hand side, our businesses outside Spain now represent 16% of total revenues and both geographies, Portugal and Ireland, are performing exceptionally well with double-digit growth in their loan books.

Moving on the last page of this section, I would like to mention that our continued success is based on the strong foundation of diversified organic growth in markets where we continue to expect resilient macro trends all above Eurozone averages.

Before I hand over to Jacobo, I would like to emphasize that despite the slope of Euribor declines this quarter, Bankinter is well positioned to continue to grow organically with excellent efficiency and asset quality ratios and to provide high returns to our shareholders on a sustainable basis regardless of interest rate movements.

Jacobo, I pass it now over to you.

[Jacobo Díaz, executive]

Thank you, Gloria. Good morning, everybody.

Let's start on Page 11. On a year-to-date basis, all lines continue to perform with increased optimism for coming quarters in terms of fee growth. With a 5.5% increase in NII and close to 14% increase in net fees, we reached total gross operating income of EUR 2,151 million, an increase of 7%. Operating expenses remained at 6%, maintaining our positive operating jaws this year. Profit before taxes reaches EUR 1,407 million and net profit EUR 731 million, a strong increase of 7% year-on-year.

On Slide 12, we have included an additional table with a comparison between quarters. In Q3, we have seen steep 12-month Euribor decrease of 47 basis points, considerably quarterly average or 82 basis points on a point-to-point basis, impacting temporarily our quarterly net interest margin, where we have seen a 2% decrease on a quarter-on-quarter basis, partially offset by another consecutive quarter of fee increases, growing of 2%, where we continue to deliver exceptional results, consolidating a 15% increase versus third quarter of 2023. Typically, in this third quarter, we see a decrease in fees due to summer seasonality. However, with our strong buildup of wealth management and customer activity, we have been able to achieve good growth this quarter again. On the coming pages, I will go into additional detail for each category.

On Page 13, NII has shown the initial signs of softening due to the deep rate movements and customer margin reflects higher volatility as we enter a transition period until we reach rate normalization. To support NII impacts in anticipation rate movements from the end of last year, we have been gradually increasing the relative size of the ALCO portfolio. This size continue to be well within our risk appetite. In terms of our NII margin, this year, we continue to be above the 2% level, one of the highest in the Spanish market when comparing against peers. Our customer margin this year remains high at 2.96% and this quarter ended at 2.86%. On the asset side, customer credit yields softened to 433 basis points in the quarter as we have seen the steepness in Euribor movements impacting our book in especially our corporate banking book where credit positions reprice almost immediately by 8 basis points. Deposit costs have experienced an increase of 7 bps, rising to 147 basis points in the quarter. I would like to spend a few minutes to talk through some of the moving parts impacting the compression in margins. As the asset side of our balance sheet reprices faster than the liability side, we will see margin compression and volatility on a quarterly basis until reaching a normalized interest rate environment between 2% and 2.5%. Over this quarter and coming quarters, our asset yields will continue to adapt to interest rates levels. However, this impact in NII trajectory will be supported over-time by increased loan volumes as well as lower cost of deposits.

In this quarter, we have experienced higher average deposit cost of 7 bps due to the following reasons. Firstly, there is an impact as a result of the implementation of our strategic priority to expand our digital offering and diversify our deposit gathering channels in Spain. We completed a very successful digital account commercial campaign in September by combining our talent and technology across Bankinter and EVO. The campaign, which lasted for 1 month has proven that we can increase retail deposits digitally with literally no marketing expense and acquire a significant amount of new customers and new money from our client target universe with a unique product offering in areas of Spain where we have no physical presence. Secondly, Portugal has also increased their deposit gathering capacity, reducing their commercial gap this year with retail deposits. This supports our strategic goals in Portugal in strengthening their mass affluent customer base and product set as they continue to build-up and grow a wealth management strategy and produce similar results seen in Spain to-date. And lastly, there is an impact due to our successful commercial strategy for deposit gathering activity that is our source to support lending growth and to drive inflows into our wealth management business and drive higher off-balance volumes and fees. Towards the end of June, particularly in Spain, we achieved strong sight deposit remunerated activity. This had minimal impact to cost of deposit in the second quarter, however, did impact average balances and cost over these past 3 months. All these 3 impacts are the result of our continued commercial activities, very much in line with our strategic goals and priorities. In this current quarter, we have already resumed the digital banking commercial campaign, and we adapted our pricing policy since October 1, driving down new production prices of deposit by the similar movement of Euribor 12 months and shortening even more term deposit duration. Our room for client margin resilience is quite above our peers since our starting point is around 50 bps higher compared to them.

If we move into Page 14, we want to share some additional detail regarding the structure of our customer deposits. On the left-hand side of the page, we outlined the quarterly evolution of the distribution between sight and term deposits on a 100% state bar chart basis with a quarterly average of the Euribor 12 months on the blue line. Two main points regarding this chart. First one, as you can see, the mix shift has reached a maximum level, much lower than was achieved in the past where rates were at similar level. It has been quite stable since the fourth quarter of last year with term deposits currently representing 28% of total customer retail deposits. Second, the gradual initiation of the mix shift movement began when Euribor approached 3%. When rates were below 3%, term deposits represented around 8% of total customer retail deposits. As rates decreased, we should also expect to see this gradual movement in customer deposits away from time deposits and back to sight or into another conservative bank products offered off balance sheet. On the right-hand side of the page, we look to give higher visibility into the maturity profile of our customer retail deposits with a fixed term. 65% of these deposits with a fixed term mature in this fourth quarter and will be repriced in line with current rates. We have already reduced our front book pricing for term deposits by over 50 basis points. And over coming quarters, we'll continue to manage our deposit pricing downwards in line with market dynamics. In summary, the impact on the net interest income from the reduction in rates will be supported by a gradual reduction in cost of deposit, a feasible reversal in the mix shift of deposit as well as increased loan volumes to recover client margin levels.

Regarding fees on Page 15, fee growth will continue to support future revenue growth. The results of our strong and unique commercial activity drive significant increases in fee revenue quarter-on-quarter with a high degree of diversified and recurring fees within asset management, brokerage and custody as key business lines. Each category is growing to reach an exceptional increase of 14% in net fees year-to-date, contributing 24% of our total income. We have continued optimism in future fee growth, given our unique business model that drives strong fee generation in both a diversified and recurring manner under a strategic objective of keeping growth as main target.

On Page 16, our core revenues have been growing year-on-year even in different rate environment. The sum of net fees and net interest income reached EUR 2,250 million year-to-date, a 75% increase since 2020. Bankinter has and can grow core revenues under volatile interest rate environments. During the 2020 to '22 period, interest rates range between minus 50 bps up to 220 bps and core revenues increased by 18%. We will manage and drive revenue growth going forward as we have delivered in the past.

On Page 17, moving on to the other income and expenses line, we report EUR 5 million less this year than last year-to-date, even with an increase in the banking tax of EUR 18 million this year.

On Page 18, total operating income increased to EUR 2,151 million, a 7% increase year-on-year. With our strategic focus on geographical diversification, Portugal and Ireland now contribute 16% of total group income year-to-date.

Moving on to expenses on Page 19. We continue to deliver positive operating jaws quarter-on-quarter with operating expense growth at plus 6% this year, below operating income growth. We continue to lead the sector with an exceptional cost-to-income ratio of 35% year-to-date.

On Page 20, loan loss provisions totaled EUR 262 million with cost of risk at the high end of our annual guidance at 40 basis points. In other provision, slightly below last year's level at EUR 62 million.

Total profit in summary on Page 21, profit before taxes reached EUR 1,083 million, an 8% increase year-on-year, and total group net income totaled EUR 731 million, up 7%.

On Page 22, moving into credit quality. NPL ratio remains at comfortable levels at 2.2% with Spain at 2.6%, well below industry levels of 3.4%. We also continue to reinforce our coverage ratio at 69% currently. These figures reflect the excellent asset quality of our book and prudent risk management across the group.

On Page 23, loan-to-deposit ratio in the quarter ended close to 95%, similar levels to a year ago. Wholesale funding below EUR 7 billion, the lowest level of many years accompanied by a comfortable long-term maturity schedule and a strong LCR ratio at 196%.

On Page 24, moving to solvency. Our fully loaded CET1 ratio ended the quarter at 12.56%, well above the minimum requirement of 7.86%, leaving an ample capital buffer of 470 bps as well as adequate MREL and leverage ratios.

Moving on to the review of our franchises across the group. I will first start with Spain on Page 26. In Spain, loan growth continues, reaching EUR 65 billion book with higher growth rates in the corporate business versus the retail book. Customer deposits increased 5% year-on-year, reaching EUR 75 billion. We also continue to see strong savings reallocation to off-balance sheet funds with excellent growth rates of 25% year-on-year. In the income statement, still growing both NII and fees to reach EUR 1,909 million in gross operating income, an increase of 7% year-on-year. Positive operating jaws delivered a controlled cost-to-income ratio at 33%. Profit before taxes, up 8% at almost EUR 1 billion, another solid quarter of growth and income contribution from our core business in Spain.

Moving into Portugal. Portugal team continues to deliver exceptional double-digit business volume growth and solid financial results across the board. Loan book increasing 11%, retail banking up 7% and corporate and SME banking increasing 22%. Given the growth trajectory, the NPL ratio is well contained at 130 basis points, half the current industry levels of 260 basis points. As I mentioned earlier, Portugal has a strengthened deposit gathering this year, seeking commercial gap equilibrium under a rate reduction scenario, reaching now EUR 9 billion, a substantial 25% increase from a year ago. With a focus to close their commercial gap, they have reduced their loan-to-deposit ratio to 107% from 119% a year ago. Our balance sheet funds also continued to grow double digit, 11%. As for the P&L, total income grew by 14%, supported by double-digit growth, both in NII and fees, efficiency levels at 30%, profit before taxes above EUR 150 million, 13% increase.

Page 28, Ireland. We continue to work towards the expansion of our products and services in Ireland through the opening of a branch of Bankinter. This will not only reinforce Avant Money's product offering and expand services to clients, but will also allow for local financing to support their asset growth, diversifying the deposit franchise across the group to a third country with favorable market dynamics and macro environment. We expect to start gathering deposit by mid-'25. We continue to see solid loan growth in mortgages, up 41% and consumer credit up 18%. Asset quality indicators remain very low and stable. Total operating income up 6% and profit before taxes close to EUR 30 million, a very successful growth year for the business and contribution to the group.

In Page 29, the corporate and SME loan book in the group continues to grow year-on-year by 5% with double-digit growth in Portugal of 22% versus industry growth of 3%. In Spain, we are also growing by 4% against the backdrop of a contracting market supported by our International Banking segment. This international activity, together with Portugal and the increased financing and pipeline from next-generation EU funds will continue to drive relevant sources of growth in our corporate and SME banking business line in the future.

Moving into the Wealth Management on Page 30. Net new money from our customer of EUR 5 billion in 9 months contributes to driving a 15% increase in total customer wealth under management in the group year-on-year. We are well on the way to reach near record levels in net new money inflows and to increase the recurring fee stream from assets under management, brokerage and custody.

On Slide 31, we have added this quarter in gray the volumes related to equity stocks under custody in Bankinter Spain. Total off-balance sheet volumes reached EUR 85 billion with a highly diversified mix of proprietary and third-party off-balance sheet products, a result of our open architecture environment. In total, an increase of 27% year-on-year with double-digit growth across each category.

Turning to Page 32. Salary accounts continue to grow plus 4%. New mortgage production, we continue to benefit from our strong new origination market shares in Portugal, Spain and Ireland between 7% and 8%. Total group mortgage back book continues to grow, surpassing EUR 36 billion in September, 5% more than a year ago in markets where the sector is relatively stable or slightly contracting. In summary, solid commercial activity and growth in customer volumes across all geographies and businesses.

So finally, and before handing back to Gloria, I would like to review our expectations for the year. Related to loan volumes, we expect continued growth in all geographies and businesses. Portugal, in all 3 businesses, mortgage, corporate and consumer loan books; Ireland, continued focus on mortgages and growth in consumer credit. And Spain, we continue to see pickup in mortgage lending and shorter-term financing in the corporate loan book. We maintain our aim to reach single-digit for lending growth this year. Given recent movements in interest rates, we temporarily expect some volatility in terms of NII over the coming quarters. We maintain our aim to reach close to mid-single digit for the year in NII growth, so the same target that we shared last quarter. But we may land close to the lower end of this target if rates keep sliding down as fast as they have done in the past days and weeks. Fee income results are going extremely well, as you have seen, consistently above our target. So we are optimistic and upgrade our view to low to mid-teens this year. So group cost guidance remains around mid-single digit, probably in the higher end of the range. And finally, cost of risk, we expect to remain within our annual guidance between 35% and 40%, similarly probably in the upper part of the range.

I will now hand back to Gloria for any closing comments or remarks. Thank you.

[Gloria Portero, executive]

Thank you, Jacobo. Well, I would like to provide a few thoughts prior to the closing of the presentation.

We talked through our strategic aim to diversify both our businesses and income lines. And despite of the recent downward rebasing of Euribor, we will continue to grow and manage our balance sheet through this transition period until reaching the rate normalization. Here, I think we are prepared to do so, we know how to do it, and we have done it before. So no doubt about it.

On Page 35, our results for the first 9 months of the year are very solid, 7% higher than last year, reaching EUR 731 million. We continue to increase value to shareholders, both in terms of dividend yield, which stands at 6.2% and in retained value in the business with a tangible book value of EUR 6.24 per share, leading to an increase of 10% versus last year. In the short term, customer margins and net interest income this fourth quarter will depend on interest rate volatility. However, we are well situated in terms of our balance sheet structure, strong organic asset growth and increasing recurring fee income flows to continue to grow our bottom line year-on-year and to provide sustainable returns to our shareholders well above the cost of capital. Volume growth, interest rate margin management, a consistent and prudent approach to risk management and continued focus on operational efficiency and productivity will allow us to continue to report high returns on equity on a consistent basis; this last 12 months, 17% with RoTE above 18%.

As we close the presentation, I leave you with our key KPIs for the first 9 months of the year, where we are proud to deliver consistent and diversified business volume growth across the board with extremely positive results in our Wealth Management off-balance sheet business. Solid recurring income and financial results as shown in the upper right-hand corner with growing fee income lines, a robust set of management ratios and delivering again a solid shareholder returns.

This was all from my part, and now it's on to you, Laurie.

[Laurie Shepard Goodroe, executive]

Thank you, Gloria. Thank you, Jacobo. We'll now move into the live Q&A. [Operator Instructions] The first caller we have is Borja Ramirez from Citibank.

[Borja Ramirez Segura, analyst]

I have 2 questions. The first is, it seems you still have room to increase the ALCO portfolio further. I would like to ask what are your plans in this regard going forward?

And then my second question is, in the last call, if I remember well, you mentioned growing total revenues year-over-year in 2025. This is not in consensus. So I would like to ask if you could maybe confirm and provide any indications on 2025.

[Jacobo Díaz, executive]

Regarding your first question regarding the ALCO portfolio, as you know, we have -- the size of our ALCO portfolio is always within our risk appetite framework, which is a range between 2 times and 2.5 times the size of our equity. So there is still some room to increase the ALCO portfolio, although, I mean, the sizes shouldn't be too large. So there is an opportunity, but not a very large figure.

Regarding your second question, we still believe that in 2025, we are able to achieve increase in income, in total income, basically because the combination of the NII and the fees make us think that we will increase our income for the next year. Basically, the expectations on rates and the NII sensitivity that we've mentioned in the past allow us to compensate it with our growth estimations. And at the same time, as you have seen, fees are behaving extremely positively, and we think this is something that we should achieve again in 2025. So the combination, even if we do expect a reduction in rates, the average rates should go down comparing '25 versus '24 no more than 100 basis points in average for the whole year. And that means that we have plenty of room to compensate it with a reduction in the cost of deposits, the NII sensitivity and then the expectation of growth. So growth plus the reduction in cost of deposits plus the increase in fees is something that we strongly believe that we can repeat in 2025 and even more over in coming years.

[Laurie Shepard Goodroe, executive]

Our next question comes from Maksym Mishyn from JB Capital.

[Maksym Mishyn, analyst]

I have 2 questions on the NII. First of all, thank you for the details on deposit maturities. And I was wondering if you could share some light on the average cost for the 65% of term deposits that mature in the fourth quarter. And apologies, I may have missed it, how does your front book rate compared to that?

And then the second question is on your sustainable view on the customer spreads. Now that the interest rate expectations have adjusted towards 2%, 2.5%, I was wondering if you still believe you can defend the 300 basis point customer spread over the long term?

[Jacobo Díaz, executive]

I'm not sure if I got your questions, but I'm trying to answer them. In terms of our sustainable view, we think that the current levels are sustainable. As you can imagine, we don't know exactly what would be the exact ECB normalized rate at the end of 2025. Our expectation is that the ECB rate should be above 2%, somewhere between 2% and 2.5%. And we see that our customer margin should be somewhere around the current levels where we are today. So this is our sustainable view of NII in that environment, our ECB rates. Euribor has already repriced. Today, I think, or yesterday, it is very close to 2.70%. So we do expect additional reduction until December '25, but levels always above 2%. So in terms of average comparison, we think we are in perfect shape to compensate that reduction through reduction of customer deposits.

Regarding your question, I think, in terms of the amortization of our term deposits, we mentioned that 65% of our current term deposits will be repriced in the fourth quarter of this year and the current repricing is above 60 basis points lower, and that means the current repricing. That means that there still we are in October. So there's more in November, more in December. So this is something that will accelerate in the coming weeks, quarters, et cetera, months. And that's why we are actively managing this issue because the reality is that the market has changed very quickly, and we are adapting very quickly. And this is how we are currently managing the situation. You can imagine the front book is much lower than the back book these days.

[Laurie Shepard Goodroe, executive]

Our next question comes from Ignacio Ulargui from BNP Paribas.

[Ignacio Ulargui, analyst]

I just have 2 questions. I mean 1 is coming to the cost growth outlook for the year. And I mean, if I remember correctly, in your 2Q presentation, you said that you aim to have positive operating jaws in '25. I just wanted to see a bit how you think about that in the context of lower rates and how capable the bank is to adjust investments in a declining or in a more pressured revenue scenario?

And the second one, you said in the presentation that you are targeting to start gathering deposits in Ireland. I wanted just to see a bit more -- what is the ambition that you have in the country in terms of gathering deposits. You are aiming to close quickly the funding gap that you have, the EUR 2.7 billion of mortgages. I mean that's kind of the idea to do it quickly. That would imply any pressure on deposit costs or how should we think about it?

[Gloria Portero, executive]

I will be taking your questions and then pass over to Jacobo if he wants to make any comments. Regarding Ireland, I mean, in Ireland, we are not aiming only to have a franchise that gathers deposits to close the gap. Actually, we have enough excess liquidity in Spain up to EUR 10 billion. So that is not the problem here. What we want to have is a franchise that replicates what we already have in Portugal so that we can cross-sell more products to our clients and we can engage more with them. We think there is an opportunity. We have seen that in the mortgage market, where, as you have seen, we have grown very quickly, and we have taken a significant market share there, and we basically want to expand the span of business there. So our ambition, just to answer your question is broader, and we don't have any pressure to gather more deposits in Ireland. So we will go slowly, but surely, and it is more a question of client acquisition and engagement.

Regarding costs, here, as you have seen, we already have an excellent cost-to-income ratio, which has been in the first 9 months, 36%, which is really, really excellent. Our aim is to maintain our cost-to-income ratio within that range between 35% and 40%, more into the 35%, 37% than higher. So we think today that we can have positive jaws in 2025. And that definitely, we will have a cost-to-income ratio in the range that I've given you. But obviously, this will depend on interest rates. This is more or less my view. I don't want -- Jaco, no, it's okay. You're right with my answer?

[Jacobo Díaz, executive]

Perfectly aligned with your answer.

[Laurie Shepard Goodroe, executive]

Our next question now comes from Francisco Riquel from Alantra.

[Francisco Riquel Correa, analyst]

2 on deposits, which I think is the hot topic of the quarter. So the first one, you are anticipating a large repricing of time deposits in the fourth quarter, 65% of the total. But I wonder what was the percentage of time deposits repricing in Q3 and why the cost of deposits did not come down already in Q3 because interest rates have been falling for a few quarters now. You also mentioned in the past that a large component of current accounts were indexed to short-term rates, but this has not been apparent, so you can split the cost of deposits between the time deposits and the rest and update, please, the front book, back book pricing dynamics between time deposits and current accounts.

And then my second question is regarding the guidance of customer spread 2.8%, which is not far from where we are today. So I wonder how do you see the mix of time deposits in that guidance? You are 28% today. You mentioned that when interest rates were below 3%, it was just 8%. So what mix are you embedding in this guidance? You can comment on the deposit beta or cost of deposits in absolute terms that we should expect for this 2.8% customer spread?

[Jacobo Díaz, executive]

So basically, we demonstrated in the past that we can reach cost of deposits of 0 for a very long period. Today, we are 150 more or less basis points cost of deposits, and we are entering a sharp decline in rates. So even if the endpoint is different or hopefully quite different, even if we expect that rates will end up at some level above 2%, we expect that the level of -- I don't know if the word is better, but the level of percentage of deposit mix versus current or total resources should be half of the situations that we have today. So we should expect some 10% to 15% total resources dedicated to the term deposits versus the current 28%, 30%. And this is basically because the reduction in rates make term deposits less and less attractive since we are declining the pricing. And that's one of the base that makes client margin resilient in our expectations.

Coming back to your first question, I think, on deposits and percentage and what happened in Q3, et cetera, and current accounts, probably I did mention that we had a digital account commercial campaign, this affects sight deposits. We have captured a quite large amount of net new money, and of course, with under the concept of commercial campaign. So this is something that will not be repeated in the future, but at least we have experienced an excellent approach to digital banking in the bank similar to what we are doing in EVO Banco and the experience has been extremely positive. And as you know, any net new money that we bring to the bank, we manage in order to transform it into other different types of value-added products.

I also mentioned that we have Portugal and that we are increasing capacity taking into account deposit gathering. And this is a target that we want to achieve in the coming quarters is to have equilibrium in Portugal in terms of assets and loan and deposits. And this might have increased a little bit the cost of deposits in this period. But again, this is some strategic decisions, and we will be able to have an equilibrium. And I think this is the type of decisions that is good to make in an environment where rates are going down. And this is something that we will continue to do. We have much room to reduce our cost of deposits than others. You know that our higher starting point provides more room to reduce. So we have the opportunity to reprice much lower these deposits in the coming quarters. And even if you have treasury accounts that you mentioned that are repriced very fast, this is quite a strong reality. They reprice very fast, but you also need to take into consideration that we are managing the duration of the term deposits. So duration, we are trying to make them as short as possible and the pricing of a very short-term deposits is higher than a long-term deposits. So that's another reason why in this quarter, we have an increase in the cost of deposits. It's just the management of the duration of these term deposits that will allow us to reprice everything or at least 2/4 of the term deposits portfolio in Q4.

[Laurie Shepard Goodroe, executive]

Our next question comes from Ignacio Cerezo from UBS.

[Ignacio Cerezo Olmos, analyst]

Can I ask you on the lending yield side? I mean, we've seen an 8 basis points reduction of lending yield in the quarter, which is not a particularly high pass-through versus the Euribor decline. So if you can give us a bit of a sense actually on cumulative pass-through levels on the lending yield side as rates start compounding in the cuts?

And then second, in terms of volumes, can you give us a little bit of a view basically on corporate lending? I mean it's clear that mortgages seem to be accelerating across the sector. You're participating from that. Corporates is probably where there's a bit more uncertainty. So if you can give us a feel basically what you're seeing on the ground and how confident can you be on corporate lending in Spain, in particular, accelerating?

[Jacobo Díaz, executive]

I think regarding the lending level, I have understood that you mentioned that 8 basis points reduction seems to be low compared to what rates have done. I think it's important to mention that from one side, we have a corporate banking book that reprice extremely fast. So we have a corporate banking book with credits, credit facility, working capital facilities that reprice in a maximum of 90 days, but basically other credit reprice every week. So from that perspective, the credits are repricing much faster. In the other hand, we have mortgages and mortgages reprice quite slowly. So in fact, mortgages more or less have the same similar yield this quarter than a quarter ago. So one compensate the other, more or less. So we have an 8 basis points reduction while the mortgage book has very similar yield than the previous quarter. So that's basically the reason. As you can imagine, the corporate banking book might reprice downwards a little bit more, but they have repriced quite strongly already. And in the other hand, mortgages will start to reprice down slowly as you know that they reprice 1/12 every month of the entire book. So it will take longer to see a full repricing of the mortgage book.

And regarding the volumes in corporate lending, I think basically, it's the same argumentation that in previous quarters. We are performing very well in Portugal and very well in Spain. We are seeking opportunities in the international banking activity. We are seeking opportunity with the next-generation EU funds. We have investment banking opportunities with tailored project finance or structured finance. We still see plenty of opportunities in working capital facilities, and this is exactly what we're doing. We are pursuing opportunities all over the place. And once again, we have a new quarter where our market share increases, while the global industry is shrinking. So this is basically the trend. No differences from quarters before.

[Gloria Portero, executive]

I would like to add that we are seeing more dynamism in corporate, also SME and medium-sized enterprises lending than we saw quarters ago and also in mortgage lending. So just to answer you, yes, we are optimistic about growth in the system, and we have demonstrated that we are able to grow above system levels, and we don't think this will change.

[Laurie Shepard Goodroe, executive]

Our next question comes from Carlos Peixoto from CaixaBank BPI.

[Carlos Peixoto, analyst]

So a couple of questions from my side as well. The first one will actually be a detailed one on capital. You have roughly 8 basis points negative impact from intangibles and others in the third Q. If you could give us some color on what was behind that, I would appreciate it.

Second question would actually be following up a bit on the positive jaws for next year. You expect costs to grow at mid-single digit or at the upper end of mid-single digit this year. Into next year, do you see any leeways for costs to go down or putting it in another way, considering the expansion that you're making in Ireland, what type of cost growth should we see into 2025?

[Gloria Portero, executive]

Well, I think we have answered regarding cost. But anyway, I insist growth will be in line with operating income growth. We will contain cost growth up to that level. So our aim, as I've mentioned, is to maintain the exceptional levels of cost-to-income ratio So growth will be, I would say, in the low single digit for next year. This is my view for the moment.

And with regard to capital, I don't know, Jacobo, if you want to answer?

[Jacobo Díaz, executive]

Yes. I mean, regarding to capital, it is related to, in fact, the comments you've made. We are investing in IT in those strategic initiatives in Portugal, in Ireland and in Spain with the integration in EVO, and that's basically the increase in intangibles. It's not just IT investments.

[Laurie Shepard Goodroe, executive]

Our next question comes from Britta Schmidt from Autonomous Research.

[Britta Schmidt, analyst]

Just to come back to the revenue growth and the rate discussion. Where do you see your net interest income sensitivity with your strategy of volume growth on the deposit side? Or otherwise said, would you still be able to grow revenues, total revenues at a Euribor below 2%? And the other one, I think you kind of mentioned it, but if we assume that loan growth in the system in Spain was to pick-up, especially on the corporate side, should we also then assume that you could accelerate your loan growth from the current 5% level for the group into 2025 and beyond?

[Jacobo Díaz, executive]

I'll probably start answering the last one. I think a single-digit growth for 2025, I think it's already what we should expect. I think it's probably too early to say that it could be even accelerated. I think we feel comfortable with the current assumptions that around single digit is a good figure for expectations in growth level for 2025, although I remind you that we are not providing full guidance until our presentation in January.

Regarding your first question, I think you were mentioning a potential scenario of Euribor below 2%. This is something that we are not considering at the moment. In fact, we don't even believe it could happen. Of course, you know that estimating rates is a risky business lately, so you never manage to have a good figure for the future. But what we see in the current forward curves is that it is at 2% more or less level. And in our personal opinion, we think this is probably excessive reduction due to potential inflation rebound in the coming quarters. So we know that our NII sensitivity is around minus 3% for 100 basis points reduction. This is quite a scenario that we are managing for the coming quarters, and that's the reason why we think there is plenty of room to keep resilient our client margin in the normalized situation. As I mentioned during the presentation, there is some volatile moments today until our asset side is repriced, until our deposit side is repriced, but our expectation in that rate scenario is that current levels of client margin are sustainable.

[Laurie Shepard Goodroe, executive]

[Operator Instructions] And our next question comes from Alvaro Serrano at Morgan Stanley.

[Alvaro de Tejada, analyst]

I apologize for insisting on the NII sensitivity. Again, just a follow-up from Britta's question. And Jaco, I think your 3% NII sensitivity is well anchored as you've explained, the mix in term deposits should improve as rates come down. And I suspect what explains your relatively low sensitivity. But at what point does that sensitivity increase? Because obviously, the lower the mix in term deposits when rates go down, the less room you have to reduce deposit remuneration. So I guess what I'm trying to say is if rates don't stop at 2%, the PMIs in France were particularly weak today, and there is a debate out there if they can go to 1.5% or 1% if ECB needs to stimulate. If we go 50 basis points below 2%, for example, what would the sensitivity look like at 2% level of rates, not at the current level of rates? I'm trying to get a sense of that 3%, what that 3% rate sensitivity could look like for 100 basis points cut from 2% to 1%, let's say, for example?

[Gloria Portero, executive]

But really, we are not expecting that scenario to occur. So we really haven't made those simulations. I mean if inflation is going to be in the order of 2% and probably more because there are tensions, there is no way that monetary policy can go to 1% because that would be a very big mistake. So this is something we are not discounting and we have not simulated because we would have to simulate other things like volume, and we would have to simulate many other things that would affect the results. So I understand that you need to make those simulations, but I'm afraid you will have to make them with your own engines because we don't believe that, that is going to happen, and we haven't simulated the scenario.

[Laurie Shepard Goodroe, executive]

Our next question comes from Hugo Cruz at KBW.

[Hugo Moniz Marques Da Cruz, analyst]

2 questions. One on, I hear you on the loan growth that is good, but the fact is that you didn't grow in 3Q, where normally you grow in 3Q Q-on-Q. So any particular reason why the loan growth has been a little bit weaker and where?

And second question on the provisions, the EUR 24 million in 3Q, that line, is that a good run rate that we should assume for Q4 and for next year or should we assume something else?

[Jacobo Díaz, executive]

If I understood, regarding your question on the loan growth, I mean, basically, the first and the third quarters every year has a very weak seasonality, and that's probably why you see a different level of growth in the loan book. And then the second and the fourth quarters are really tend to be like the largest seasonality, and that's why we will see much more increase quarter-on-quarter. I'm not sure if this is what you were asking, but this is basically the reason why on a quarter-to-quarter basis, the growth is really, really stable. Probably that seasonality is probably more skewed in Spain. For example, we don't see that strong seasonality in other markets like Ireland. In Portugal, there is seasonality, but probably not as skewed as in Spain.

Regarding the provisions, there's nothing special in provisions. Probably, again, it's a matter of seasonality, but we don't perceive any changes in our overall view of any provisions.

[Laurie Shepard Goodroe, executive]

And our next question comes from Cecilia Romero from Barclays.

[Cecilia Romero Reyes, analyst]

I wanted to ask, many of your peers give us the NII sensitivity to rates after 24 months. I understand minus 3% is for the first 12 months. Could you give us what it is in the second year?

[Jacobo Díaz, executive]

Yes, it should be even lower than in the next following period. But this is basically because the rates will be even lower, and then we will have sensitivity even lower.

[Gloria Portero, executive]

Just to give you a range, obviously, projecting more than 12 months. Already 12 months is difficult. So more than 12 months, there are a lot of hypothesis there. But anyway, it is around 1%.

[Laurie Shepard Goodroe, executive]

Okay. We have 1 additional question from Alberto Nigro from Mediobanca.

[Alberto Nigro, analyst]

Sorry for asking again on cost of deposits. I think I missed your answer. But can you repeat the current absolute cost of term deposits and the difference between the back book and the front book?

[Jacobo Díaz, executive]

I think we haven't said that figure. What I've said is that the new -- the front book is today around 50, 60 basis points lower than the front book of last quarter. These are the figures that I've mentioned. And this is something that combined with 65% of repricing that we're expecting in the term deposits book, that means that we should expect a quick reduction in the cost of deposit in the following quarters. That's what we mentioned in the speech.

[Laurie Shepard Goodroe, executive]

Okay. Thank you. And I just want to thank everyone on behalf of the entire Bankinter team. We thank you all for your interest and your participation today in this webcast. And as a reminder, the Investor Relations team here at Bankinter is available after the webcast to attend to any questions you have. Thank you very much, and have a wonderful day.

[Jacobo Díaz, executive]

Thank you very much. Bye-bye.