Caixabank SA

MAD:CABK

Earnings Call Analysis

Continued Strong Performance and Upgraded Guidance for 2024

CaixaBank reported a strong first quarter with net income up 17.5% to over €1 billion, driven by a 27.4% increase in net interest income (NII). Wealth Management revenues surged 12% year-on-year, while protection insurance revenues climbed 7%. Asset quality remained solid with a 2.8% non-performing loan ratio. The bank upgraded its 2024 NII growth guidance to mid-single digits and forecasted a return on tangible equity above 16%. CaixaBank plans significant capital distributions, contributing to an upward revision of Spain's GDP growth estimate to nearly 2.5%.

Strong Financial Performance

CaixaBank's first quarter of 2024 saw a significant increase in net income, which rose by close to 18% year-on-year, reaching EUR 1 billion. This boost in profitability was primarily driven by strong revenue growth, particularly from net interest income (NII) and wealth management. Wealth management revenues surged by approximately 16% from the previous year, showing a robust performance. The protection and insurance segment also demonstrated solid commercial activity, with revenues up by 7% year-on-year【4:0†source】【4:1†source】.

Performance of Core Segments

Wealth Management showed a noteworthy increase, benefiting from strong inflows and positive market effects on assets under management (AUMs). The segment experienced a 16% year-on-year growth in addition to a positive quarter-on-quarter progression, excluding the impact of success fees from the last quarter. Protection insurance improved by nearly 7% year-on-year due to high activity levels, though it faced some nonrecurring impacts on insurance distribution fees. Banking fees, on the other hand, faced headwinds due to lower account maintenance fees, yet showed a less negative evolution quarter-on-quarter【4:2†source】.

Revenue and Cost Efficiency

CaixaBank reiterated its guidance for revenues from services to grow at a low single-digit rate, attributing this growth mainly to wealth and protection insurance revenues, which offset declining banking fees. The bank's cost-to-income ratio improved to 40.3% from 40.9% the previous quarter, showcasing increased efficiency despite impacts from a new banking tax and a recently closed collective agreement for staff compensation. Operating expenses are expected to grow by less than 5% this year【4:5†source】.

Asset Quality and Risk Management

The bank maintained a strong asset quality with a non-performing loan (NPL) ratio of 2.1%, significantly below the sector average. Although there was a slight increase in NPLs due to a new definition of default alignment, the coverage ratio remained high at 71%. Loan loss charges were in line with expectations, with an annualized cost of risk for the quarter at 28 basis points. CaixaBank reaffirmed its guidance for an annual cost of risk at around 30 basis points【4:3†source】【4:12†source】.

Capital and Liquidity Position

CaixaBank ended the quarter with a robust liquidity position of over EUR 200 billion and a liquidity coverage ratio of 197%. The bank comfortably met its 2024 MREL requirement, bolstered by recent successful issuances totaling EUR 4.2 billion. The CET1 ratio was at 12%, incorporating the impact of a EUR 500 million share buyback. The return on tangible equity saw slight growth to 15.8%, and the bank expects it to exceed 16% by year-end due to the upgraded guidance for NII growth【4:6†source】【4:8†source】.

Economic Outlook and Strategic Initiatives

Spain's GDP growth figures for the first quarter exceeded expectations, which bodes well for CaixaBank's future performance. The bank upgraded its NII guidance to mid-single-digit growth for 2024, driven by higher volumes and better loan book performance. The bank is also planning an Investor Day in November to present its new strategic plan for 2025-2027, with an emphasis on organic growth and capital generation initiatives【4:11†source】【4:9†source】.

Sustainability and ESG Initiatives

CaixaBank continued to make significant strides in its sustainability strategy, having published decarbonization targets for five additional sectors, aligning with its commitments under the net zero banking alliance. The bank emphasized its efforts in financial inclusion, microcredit activities, and social impact solutions as part of its ESG framework, which remains a unique and integral part of its corporate strategy【4:1†source】【4:4†source】.

Earnings Call Transcript 2024-Q1

[Marta Noguer, executive]

Good morning, and welcome to CaixaBank's results presentation for the first quarter of 2024. We are joined today by our CEO, Gonzalo Gortazar; and the CFO, Javier Pano. Just a brief reminder in terms of logistics for first-time viewers. We plan to spend about 30 minutes with a presentation in about 1 hour with a Q&A. The Q&A is live, and you should have received instructions by e-mail on how to participate. My team and I will be at your full disposal after the call as always. Without further ado, Gonzalo, the floor is yours.

[Gonzalo Gortázar Rotaeche, executive]

Thank you, Marta, and good morning, everybody. I get into the highlights of the quarter directly. -- good in terms of activity. Obviously, we've seen also now the GDP figures for Spain for the first quarter, which have also priced to the upside. And good figures from the Eurozone with respect to our expectations indeed as well. In that context, we had a pretty good quarter in terms of activity. You see in terms of new lending up 3.5% year-on-year, particularly you'll see later on in mortgages and consumer lending, doing very well. Wealth Management, up 4.4% in the 3 months year-to-date, good level of net inflows. So a nice feeling in terms of commercial activity to start with. In terms of profitability, just above EUR1 billion, 17.5% growth in net income. Obviously, if you look at this year-on-year, it's NII that is driving the improvement with that 27.4%. But when you look at the detail, particularly of our fees and insurance revenues, you see wealth and protection growing 12% year-on-year, even quarter-on-quarter, if you adjust for the seasonality of the fourth quarter. There's also a good level of growth. So again, a good sense and short-term NII is the driver. -- mid-long term, obviously, the rest of the revenues are going to be a key driver as well. Asset quality under control, 2.8% NPLs, we'll get in some more detail on [ convergent ] new definition of the fund later on. And most importantly, we keep a very high level of coverage of nonperforming loans. And then capital according to plan. Obviously, it's been a quarter we've paid dividend and the -- well, not in the quarter, but in April and also the share buyback is well underway. So in good course to meet our commitment, our EUR 12 billion that we updated recently up from EUR 9 billion in terms of generation of excess capital. Return on tangible equity, slight growth to 15.8%. We're upgrading our expectations for the year for this return on tangible equity to be above 16%. And that's mostly a consequence of the upgrade in our guidance of NII, where we're moving from basically in line to mid-single-digit growth. And obviously, the strength of NII in the first quarter is a good reason that justifies that move. Economy, I said we just have numbers for GDP this morning, 0.7%. It was way above what we were expecting for this first quarter. So our GDP estimate of 1.9% is likely to be revised upwards. Just I think, mechanically, the point -- the provision of first quarter to current levels if other things remain equal, would mean that closer to 2.5% than to 2%. But we'll see, but we have certainly good news there, and we had already upgraded our projections, but the reality is turning out to be better than expected. And it's also lifting levels in the Eurozone, which is obviously very good for us as well, but there's not so much gap between Spain and Eurozone, and we had 0.3% growth in the Eurozone. So that sounds also a good start for the year. You see some of the indicators, composite PMIs of Spain and clearly indicating expansion of recession, Eurozone about dividing line employment continues to do very well, close to 3% job creation last year. And then we are having a spectacular boom in tourism, not just in the number of visitors, but also in the pay payments or expenditure from tourists as you see on the [ page ]. So good environment, much better than the Eurozone and no indication that is slowing down quite the opposite, I have to say. So let's see how things go, but a good framework indeed. New lending, as I said, is the 3.5% growth over last year, 11.6% over the fourth quarter. And then when we look at residential mortgages, 24% in the first quarter, which was a weaker quarter for us, but this quarter has been very good, even better than the fourth quarter of last year. Consumer lending best quarter in the last [ 8 or 9 ], a 15% growth versus last year, 12.5% versus previous year. Obviously, consistent of what we saw in terms of the economy, both in mortgages where we have also seen an increase in the number of transactions here for the market and initial leading indicators of good price performance as well. And then on the new business lending, you see is obviously more volatility because it sometimes depends on large ticket items. So when you compare it to the last year, it's actually decreased 3.5%, but is 13.8% increase over the fourth quarter. And as you will see later on, actually balances is going up. So again, picture is -- obviously is one of modest growth, but it is certainly better than what we expected. Here, you have the loan book. We see the growth in businesses. Large part of that relates to our international exposure. Consumer lending, again, doing well on mortgages coming down. But if you look at the right-hand side, it's actually half the level which we had a year ago in terms of deleveraging. So looking forward with that change in trend and an inflection point in the mortgage portfolio that may actually come much earlier than what we had anticipated initially some small, but some growth in business loans and market share, which is obviously also a positive. Customer funds good quarter in terms of market impact. You see EUR 6.8 billion also in terms of net inflows, another EUR 3.4 billion of net inflows. So that has more than offset the outflow in deposits. That's been mostly transferred from deposits into mutual funds in these monetary mutual funds in this quarter but with some net growth and then there's some other volatile transitory seasonal items that this quarter was something minus 1.6%. So all in all, 1% growth, again, highlight, obviously, is wealth management. Worth saying we always discuss about [indiscernible], and I'm sure we'll have some discussions about [indiscernible] we move into market in which rates are likely to come down. We are increasingly trying to just give you the information of how much are we paying for deposits. And that means how -- what portion of our deposit base is remunerated, you have it there, 21%. And obviously, what is relevant is what's the increase quarter-on-quarter, and you've seen a substantial slowdown in this first quarter, just from 20% to 21% in round numbers, a little bit more than 1%, which is much less than what we had seen in previous quarters. So obviously, we need at least to [ wane ] until later in the year. But certainly, the trends are pretty good on that front. Javier will obviously elaborate on that. In terms of Wealth Management, EUR 246 billion at the end of the quarter. Again, a pretty good level of increase, savings insurance, 1/3, 2/3, I would say, mostly monetary mutual funds of balance sheet. And just giving some information on synergies or revenue synergies convergence of penetration of former Bankia and CaixaBank clients. We'll do that on this page and on the next one for protection. And you can see how clients from former Bankia are growing in terms of the number of them that have wealth management products gradually converging to the rest of our client base, still some room to go, but clearly, the good direction. And obviously, in any case, plenty of growth given the levels of penetration of Spain vis-a-vis the Eurozone -- similar story in terms of protection insurance, you have a growth of 8.6% in premium. And again, with a balanced distribution between life risk and other nonlife where health, auto and household are the key drivers of premia. MyBox continues to be a great success. And again, the same story in terms of synergy potential, how the penetration of non-life insurance products have grown for former banking clients vis-a-vis the levels that we have at CaixaBank and obviously, the fact that there's further room to continue growing so that eventually, we get those levels to converge and certainly, in any case, for the whole of our client base, given where it's Spain versus the Eurozone we're gaining market share, and we expect to continue to do so in this important part of the business. BPI, [ has presented their ] results today, I'll be very brief, but obviously, things continue going in the right direction in terms of deposit competition and rates that the market is tougher there, and Javier will comment on that later on. But all in all, we see very significant increase in profitability with return on tangible equity, having improved very sharply over the last 12 months, cost/income in the 40% region and asset quality at very good levels, generally gaining market share. So again, very happy with the way things are developing at BPI. In terms of our results, obviously, mostly a result of increasing revenues, in turn, mostly as a result of higher NII. You see that waterfall of net income. And the reality is that we're seeing increasing costs as expected. We're confirming guidance there as well and cost of risk remains in line with what we guided for. So contain hence, this improvement of return on tangible equity and profitability. And finally, just a comment on our sustainable strategy. You know about social as part of the ESG for us and some of the numbers that we wanted you to be reminded of on this page in terms of financial inclusion, microcredit activity, all the solutions we social impact and the volunteering program and the partnership with Foundation that makes us very unique. On the [ E ] side, this quarter, it's been particularly relevant because we have published now decarbonization targets for 5 additional sectors, completing what was our commitment on the net zero banking alliance. You see some of the figures there. We continue to be recognized for our very large and good progress on sustainability. So that is all for me for now. And Javier? Your turn.

[Javier Pano Riera, executive]

Okay. Thank you, and good morning. Well, from my side, as always, further details on the P&L and the balance sheet, starting with the P&L. Here, you have the consolidated income statement. Net income of EUR 1 billion, you know it well already up by close to 18% year-on-year. Strong revenues continue to support profitability, underpinned by NII, but also our key business engines, Wealth Management and protection insurance. NII positive quarter-on-quarter and Wealth Management up by close to 16% year-on-year, quarter-on-quarter, impacted by the success fees on the fourth quarter. Protection & Insurance with very good levels of commercial activity, up by 7% year-on-year. And then on banking fees, the well-known headwind from the lower account maintenance fees. But as you may see, also quarter-on-quarter a less negative evolution. So we think that as a quarter's progress, we are going to do better on that front. On other revenues, I would only remark here that the dividend from Telefonica this year is not paid in the first quarter. And that on other operating income and expenses, we have an additional negative impact from the banking tax of EUR 120 million. On operating expenses and loan loss charges, not much to say. Everything is doing according to our expectations. We are reconfirming guidance as you know. And finally, on other provisions. Here, we have higher provisioning levels for legal contingencies. With that, let's move to the details on NII, let's focus on the quarterly evolution, this NII bridge on the center, as usual, on the first quarter, a negative contribution from the account. Then as you may see, a negative -- slightly negative client NII, but this is basically due to lower average loan balances during the quarter. On the other hand, we have had larger cash balances. And this is why you see this last year contribution from ALCO. Below bottom left, you may see the evolution of the customer spread progressing up by 6 basis points, 364 basis points. And then on the center, the evolution of yields, the [ back ] book yield of the loan book progressing at 462 basis points. And then the cost of our client funds 75 basis points, up 10 basis points in a quarter. Remember, this is the cost [ ex-structural ] hedges and foreign exchange. On the right, you may see the evolution of deposit EBITDA. But as you know, I think that for better clarity going forward, we'll be more specific about the cost of our deposits and the percentage of deposits at a cost. But in any case, it's evolving in line of even better compared to our initial expectations. And this, together with good activity levels Gonzalo has already commented a higher yield curve than the one used for our initial estimates. We are upgrading our fiscal year '24 NII guidance to mid-single-digit growth. Let's continue with revenues from services. This is -- remember, this new P&L presentation that we think it's better to understand the different dynamics of our commercial activity. And here, clearly, you see a much better performance from wealth and protection revenues, up by 12% year-on-year compared to banking fees down by close to 11%. In any case, on the bridge on the right, in euro terms, you may see that Wealth Management and protection insurance revenues are more than compensating that headwind from banking fees. And on that front, we are reiterating the guidance we provided 3 months ago for revenues from services to grow by low single digits. Here, you have all the details on the left, Wealth Management revenues, as I say, with a growth close to 16% year-on-year on AUMs, strong inflows, also the positive mark-to-market effects are clearly helping on life savings insurance, very positive evolution with strong carryover effect from high commercial activity last year. And as I said, quarter-on-quarter, the impact of the success fees on the fourth quarter, but even not considering those, we have a positive evolution quarter-on-quarter. On protection insurance, up by close to 7% year-on-year. Life risk with sustained growth driven by high activity. And on insurance distribution fees, although we have also very positive commercial activity dynamics on P&L terms, there are some nonrecurring impacts, including timing differences in revenue recognition that are affecting the P&L, but something that we expect to improve in coming quarters. And finally, banking fees, I have already very well commented the impact from the current account maintenance fees on recurring banking fees, but in any case, you see that quarter-on-quarter, we have a less negative evolution. And also, finally, on that front, Horse banking fees that this first quarter have performed really well. A brief comment on costs. On this slide, I will focus on -- basically on cost to income, that keeps trending down 40.3% compared to 40.9% in the previous quarter. On the bridge, you may see that banking tax obviously is having an impact on that negative impact and it's a quarter where we have closed a new collective agreement with unions for our staff compensation for 3 years. And after that, we are reiterating our cost guidance for the year for costs to grow by less than 5%. And the final comment on the P&L items, loan loss charges. I would say that everything is really come on that front with an annualized cost of risk for the first quarter of 28 basis points, 29 basis points on a 12-month trailing basis, we are guiding for Circa 30 for the year, something that we are reiterating a high coverage ratio, 71% -- small reduction quarter-on-quarter, but it's basically due to a denominator effect, and we keep our EUR 800 million unassigned collective provisions unchanged or pretty much stable for the quarter. Moving to the balance sheet. A comment on NPLs, precisely, that increase that I commented as a denominator effect, EUR 300 million more of NPLs, but of those, approximately EUR 200 million precisely as we continue with the ongoing alignment of the prudential definition of default, the new definition of default, a process that is expected to be finished by the second quarter in any case, the NPL ratio is really low level at 21%, well below the average of the sector. You have all the breakdown across segments, not much to comment, I would say, everything doing according to plan. And finally, we are reiterating this NPL ratio guidance for the end of the year, [indiscernible] 3%. Liquidity, very ample liquidity position, over EUR 200 billion, of which over 100 HQLAs. We have a slight reduction of the liquidity cover ratio. But in any case, at very sound levels, 197%. This is due basically as we paid the dividend early April. And by the end of March, we had already the impact -- negative impact on the equity coverage ratio. On the right, you see the mix of our funding. Our client funds, retail 79%, wholesale 21%, a really conservative funding with insured deposits 64%. A few words on MREL. We have received the 2024 MREL requirement this first quarter, and it's 24.65%. We comply with it very comfortably with an MMDA buffer at 232 basis points. We end the quarter pro forma, the AT1 call we have just announced today with MREL ratio at 26%, 97%. We comply with the MREL requirement mainly with subordinated instruments, and this has been a key driver for the rating upgrades we have had this quarter. Moody's now rating our senior preferred prefers A3 and our Tier 2 rated investment grade by all main rating agencies. It has been a quarter with quite active in terms of issuances, equivalent of EUR 4.2 billion. And I would remark that we have already made very good progress on our funding plan and remarkably, this USD 2 billion senior nonpreferred with great success. And finally, capital. We end the quarter with a CET1 ratio at 12%, 26%. Keep in mind, we fully deduct the third EUR 500 million share buyback from our solvency ratios. That is minus 22 basis points. Then we have a positive 36 basis points of organic capital generation despite, as you know, well, the banking tax is affecting our profitability. Hence, our organic capital generation this first quarter. And then dividends and 81 coupons, minus 29 basis points and plus 4 basis points from markets and other impacts. And finally, the book value per share, considering also the dividend paid this April evolving fine, up by 9.2% and the tangible value per share as a reminder, EUR 3.94. And before moving into Q&A, please save the date. We are planning to hold an Investor Day to present a new '25-‘27 strategic plan, November 19, sorry, in Madrid. So we'll be very happy to see you there. So thank you very much ready for questions.

[Operator]

On ones. The first question is from Francisco Riquel of Alantra.

[Francisco Riquel, analyst]

First one is a high-level question on NII. I wonder if you can detail the main assumptions behind your revised NII guidance for '24? And what is driving the upgrade? If it is the new assumption for you LIBOR, the cost of deposits and the related hedges or stayed non-customer NII. Also, you can update your NII sensitivity to lower interest rates. And in this context, how we at least NII shall we expect in '25, assuming the current forward yield.And my second question is if you can update on your commitment in terms of capital distributions and the timing of such distributions. And given that you are announcing an Investor Day later for later this year, just wanted to test your appetite to continue buying back your own shares despite the rising share price.

[Gonzalo Gortázar Rotaeche, executive]

And let me answer the second question, and I'll let Javier obviously provide full detail on our NII guidance. In terms of capital distributions and timing, we will be making them when we receive appropriate authorization from the ECB in the past, as you know, we have announced that we have asked for authorization. And then when we see the authorization, we have communicated those, you should expect less something changes that we will not be making any communication until we actually have approvals on any decisions, okay? And the way we see this is for this 3-year plan, which finishes at the end of 2024, our EUR 12 billion figure, we do not need to wait until November 19, to continue giving you information on how we gradually progress on that program. The November 19 Investor Day will be more focused on 2025 and onwards. What is our expectations, what would be certainly capital remuneration expected that you should expect for that 3-year period, but not for what is up to 2024. Obviously, as we have said, the EUR 12 billion are going to be generated by the end of 2024. So we are not going to be able to actually make announcements of current or real distributions all in fiscal year 2024 because by definition, some of that will happen later. But let's separate the tactical decision on the EUR12 billion when and how. I would say that is tactical, and we are fairly committed to that happening and confirming that it is our expansion today from the November '19 event, which is more strategic, looking forward, where do we go and obviously targets and implications also for capitalIn terms of appetite to buyback depending on -- or despite our rising share price, we've always said that we will buy back capital. We didn't put a cap on what is the level at which we would stop buying back. It's very difficult for management teams generally to second guess what is the right cheap value for the shares and what is not. We are actually taking the market as the market price. And the fact that it is above or below book value is not going to change our decisions from that point of view. We obviously have always said that further distributions beyond the ordinary payout can take the form of share buybacks and special dividends. That's still the case. We have so far gone through the way of share buybacks. It's not necessarily going to change because of a higher share price. But the Board keeps obviously the decision for the right timing as to which way to go.

[Javier Pano Riera, executive]

Well, what is driving the NII guidance upgrade is a little bit of everything. So it's the combination of better volumes. So clearly, we already saw on later last year that there was a more positive momentum, but we are happy to confirm that this positive momentum on the new production of loans is -- has had a carryover into 2024. So I think that this is positive also on mortgages. So something that is remarkable also with quite a significant reduction on the pace of early prepayments, which is helping on sustaining the size of the loan book. So better loan volumes. This is one thing. Deposits, so the pace of migration into deposits at a cost is abating. So we think that we are more close to the peak on that and not -- I don't say that is the peak is in the first quarter, but we have much more visibility when this may happen. We see that the environment in Spain on the liquidity situation of also the other market participants is sound. So that this imbalance between loans and deposits that we have in Spain continues to be there. So we have a much better visibility on which may be our -- the cost of our deposits for the year. So basically, it's what is behind. And then finally, rates. And you are right. So basically, we are using end of March rates to make this guidance based on that yield curve that is basically round numbers, circa 50 basis points above the levels used for our previous projections. And then as you know, during the month of April, the yield curve is even higher. So that's the situation. And well, this is what is behind. I'm happy to update you with this new guidance. And for '20, you had a question before about sensitivity. On sensitivity, we are pretty much in the same place with this circa 5% sensitivity to move sort of 1 percentage point on the yield curve. We have added some hedges. We have rolled over, and we have Slide 40 on the deck with additional information about rate sensitivity and interest rate management. We have added 2 hedges. Basically, we have rolled over a EUR 5 billion hedge maturity we had in the first quarter. And on top of that, we have added an additional EUR 2.5 billion hedge. But the sensitivity remains pretty much the same. You need to keep in mind that this is not a static balance sheet. So projections -- forward projections on the different volumes of assets and liabilities are always incorporating our latest views on that front. And the sensitivity is -- continues to be around that 5%.For 2025, and here, I would like to make a comment on that topic. So we have published our 2025 consensus, and this is on our website, on our corporate website. NII for 2025, according to the consensus is expected to be at circa 9.7 million. So well, with the current conditions and if these conditions continue, we see upside to that figure. Basically, it's what I have been just commenting. So we are more upbeat in terms of the loan book, clearly and into 2025 also. We think that we are getting closer to the trough in terms of deleveraging. So I think that probably when we start projecting our views for the loan book evolution into 2025 will be more positive. And on deposits also, we expect a continuation of the cam situation we are having with slightly lower yields. So I think that probably in terms of competition, the landscape will continue to be calm. And also, the yield curve, obviously, is going to have an impact, but I think that the market consensus is being more and more on a with a view that probably the extreme rate cuts that were priced at late last year are no longer be the case. And I think that if those conditions continue to be maintained, we see upside to that EUR 9.7 billion. That is the market consensus. Obviously, we need to work on that, and we need to reconfirm those views as we get closer to that in order to be more specific.

[Operator]

The next question is from Maksym Mishyn of JB Capital.

[Maksym Mishyn, analyst]

I have 2 follow-ups and one question, please. So the first follow-up is on loan book growth. You mentioned that new production have been better and amortizations have also been better in mortgage book. And I was wondering whether you keep the flattish loan book guidance for 2024. The second one is a follow-up on capital. Given the better outlook for loan book growth, can this change your mind on capital distribution and also the potential introduction of countercyclical buffer in Spain? And lastly, could you please share more light on what drove other provisions in the quarter? And what kind of expectations you have for the last of the year?

[Javier Pano Riera, executive]

Thank you, Max, on loan book. really, the year has started better than expected. And to be honest, March, April are showing good trends. We saw today the GDP number on this basis, and some of this is very recent, but you see upside to that flattish guidance. It's a different -- if you look at the 3 segments, you have a consumer. It's already up 2% in 3 months. So that's far away from flattish. Then you have business where we are growing, but domestic demand is still limited. We had actually pretty good figures today on investment, fixed capital formation. It bodes well, I would say. And on mortgages, we obviously are where the deleveraging is more significant for us given how seasoned our book is. But you saw that chart where we had EUR 0.9 billion of reduction this quarter versus EUR1.9 million a year ago. And if you look at the quarter, it's actually March is being better than February better than January, and April is now looking better than March. So while we should still see some deleveraging during the year. We're not that far away now from sort of breaking even on the book. And generally, I'd say some limited upside to that flattish. I do see we have some on that front. Not necessarily that's going to change completely NII this year because, obviously, where rates are for the deposit facility rate. But clearly, in terms of traction into 2025 and onwards for the next 3 years, I see -- as Javier was indicating, we see some sort of fresh positive tailwinds. In terms of capital I think your question was, again, related to price. On growth... If loan growth may change our capital distribution. I would say in the short term, no. So targets for 2024, given where we are, I think they are pretty safe in terms of material numbers, and we want to clearly sort of honor our commitments there. When you look beyond -- to be honest, we're all looking forward a situation where we have more growth organic growth opportunities. And hence, we generate, we're going to generate a lot of capital in any case, given our profitability at 16% levels. But obviously, if we have some positive growth, and we expect that to gradually build up over the next years. That's going to be a great use of our capital, particularly we're making returns of 16% as we're making now. So hopefully, we're not going to have a figure where every euro we make we distribute, but not because we spend it in a disorderly way, but because the business itself has a G on itself that is at least clearly higher than series. So no change in the short term, hopefully, some positive change, meaning more growth in the business in the mid and long term.

[Gonzalo Gortázar Rotaeche, executive]

Yes, you had a question, Max, on other provisions. Well, on that front, you may be aware that -- well, this is something related to mortgage costs, right? Basically, this is -- this is the short answer. So the prescription period is now after the recent European Cartel Justice rulings looks more open. So without a clear deadline, probably the Supreme Court will establish or will clarify better all this in coming months or weeks, who knows. But in any case, we are observing an increase of the pace of claims for this matter. And as a consequence of that, we are increasing the level of provisions for that. And for this P&L line for the whole P&L line that last year, we had other provisions by EUR 250 million, that this is a mix of things, but we are expecting this year to be closer to a circa EUR 300 million for the whole year. So that's the message and the key driver is that one.

[Operator]

The next question is from Ignacio Ulargui with BNP Paribas can.

[Ignacio Ulargui, analyst]

I have 2, if I may. The first one is, how do you see deposits evolving going from here? And what would be the implications for asset management? Has seen deposits going down in the quarter you have been mentioning there has been a bit of a shift. So how should we expect the interaction of liquidity going forward and implications for NII? And the second one as well linked to the NII, if you could update us on [indiscernible] a bit on how should we expect the [indiscernible] to over the coming quarters, 15% should step up reasonably in 2025? Or is a bit more delayed given your maturity profile?

[Javier Pano Riera, executive]

Well, on deposits, the first quarter is always a little bit seasonal. We have actually a very good seasonality on much better seasonality in the second quarter. So you will see that. I think that so far, we are striking the right balance between AUMs and deposits. And for us, it's important to both. And on deposits, basically, our focus is to more or less maintain our market share. So I think that we are happy with that. And with wealth management or AUMs in general, annuities, et cetera, we have a clear bias to grow. And what here is the fine-tuning of this balance that so far, we are happy with the evolution we are having. And we, for sure, will continue to be the case as to the previous question, the environment we feel in the industry in Spain is [indiscernible]. So I think that we will be able to do so. And you could see that this very gradual evolution of this migration into deposits at a cost that is gradually fading. And well, as I said before, we think that we are closer to the peak on that front. On the ALCO, well, basically, we have changed a little bit the tools to manage our internal rate re-sensitivity and we are keen to use more derivatives. And as you know, and precisely on that Slide 40, you have plenty of details. So the fixed income portfolio, I am not saying that we are not going to reinvest, but probably the reimbursements are not going to happen in the short term. So we are keen to use more derivatives basically because also sovereign spreads are tight in our view. So we think that probably there are other ways to manage this risk that have a risk reward that is now more positive. You may see on that slide precisely that we have EUR 7 billion maturity of fixed income next year. And I would say that the yield of those bonds is really low. It's very close to 0, in part because that was the mark-to-market impacted by the mark-to-market when the Bank integration. So you remember that we had to mark-to-market the bond portfolio. Back then, yields were negative, so that resulted into an impact on part of our portfolio. So we have a positive impact from that maturity. Even if you reinvest or not because, in any case, that cash would have a much higher -- massively higher yield than the yield that those EUR 7 billion is having now.

[Operator]

The next question is from Alvaro Serrano of Morgan Stanley.

[Alvaro de Tejada, analyst]

One on NII and one on capital. On NII, maybe it's for Javier, I noted your assumptions. But if I think about, presumably, Q2 and is not going to be hugely different from Q1. So if I take your 5% sort of guidance, it implies a pretty steep reduction in the second half, 9% run rate on my numbers, which sounds very difficult to see, and I'm missing something. Are you being conservative? Or is there something that are not sort of capturing or taking into account? And the second question is on the [indiscernible] buffer. That of course, has been on the tape saying there will be a decision taken soon. If it comes out at 100 basis points, would you absorb it within your current buffer is 12% of the capital that you're happy with? Or would you move it to 12.5%? Or how do you think about the potential implementation if it was 100 basis points.

[Gonzalo Gortázar Rotaeche, executive]

I will deal with the second one and then move on to Javier. Obviously, there's been talk about the countercyclical buffer, and we have to wait and see what happens. We continue to see limited reason, to be honest, in Spain with the deleveraging that we have and the lack of any indication of overheated market for this to be introduced. But in any case, we'll have to see. Clearly, there's noise around it. My understanding and my expectation is that if there is any movement, there will be a transition period. So we do not see any scenario in which our, let's say, EUR 12 billion target will be altered and we will have to think when we look at sort of longer-term projections and certainly, this could be something we discussed in our Investor Day in November. What are the capital generation dynamics of that mid, long term? And whether in that context, if there is a different countercyclical buffer, one, as you say, fully absorbed it because we have a generous management buffer or not do so in full. I do not want to sort of take a position in advance a terminal on because we just don't have enough information on this. I don't think it would be particularly productive if these stage banks generally say, well, we don't care if this buffer is increase, we're not going to change anything. I wouldn't suggest that's the right way to deal with it. So we have to see what happens again. This is a question for, I don't know, 2025 to 2027. In any case, given our capital generation, the timing involved here, I think that's something that will not alter certainly our sort of fundamental case. And just one final point, you mentioned 1% which is one potential figure, but these just don't assume it's 1% in our capital levels because this is only referring to the Spanish part. So approximately 1% would imply 75 basis points more in terms of the level for the MDA buffer. So we have plenty of optionality here, but we don't want to pre-commit to what we do other than saying, clearly, we do not see our EUR 12 billion capital plan in any way at risk.

[Javier Pano Riera, executive]

Well, on NII, I don't think you are missing anything. But probably to give you further details as we have not been commenting about deposit betas in any of the questions. But as I said, that shift to deposit costs. You saw that the average cost of our client deposits at 75 basis points this quarter. our internal assumption is that for the year, it's going to be circa 80%, the average of the year. So probably this helps on your internal assumptions, but this is the assumption that we are using internally. And you said that the second quarter is going to be in line with the first quarter, honestly. I think that this is going to be challenging. So I think that actually the second quarter probably will already show some level of reduction on a quarter-on-quarter basis. But well, it's low -- sorry, mid-single digits means quite an ample guidance. So let's see how the year works. And if everything that today, we feel quite a bit is obviously reconfirmed as the year progresses.

[Operator]

The next question is from Sophie Peterson with JPMorgan.

[Sofie Peterzens, analyst]

So I was wondering if you could just comment on how you view inorganic growth opportunities. Would you consider -- I mean, considering where your share price is, will you got to consider anything in Spain or in Portugal. And when you do the internal assessment, how do you compare share buyback versus in organic growth opportunities? And then my second question would be, you're already a little bit touched on it, but what should we expect from the Investor Day? Will it be ‘25 to ‘27 targets? Or lower date targets would it be revolutionary or more of the same? How should we kind of think about the Investor Day?

[Gonzalo Gortázar Rotaeche, executive]

Thank you, Sophie. In terms of organic versus inorganic growth, and I would link it to your second question as well in terms of the Investor Day, we would like to see the future -- we would like to see more growth into the future, more organic growth into the future. And we think this is probably the right time, the right environment for us to pursue that organic growth. again, world keeps changing. Obviously, digital means things need to be done in different ways, and it creates threats but also opportunities. Spain has been a sort of a long path of delevering for 15 years or so. That's going to change at some point. I have no doubt. And the sense we have it may not be that far away. So how do we have an institution now that is lean, Cefic has 25% market share at all the vigor to actually capture the maximum opportunities in Spain. And obviously, in Portugal, even if with a lower market share, we are in pretty good shape. So growth, organic growth is certainly going to be ready, but it will be even more so focused for us going forward. And hence, I would expect any revolution in November to be honest. We're happy with our business model. We just want to do more things with it. But we're not going to change dramatically our risk profile, our business profile, our attitude to profitability and capital and focus on organic growth. That's a central leading environment in which we are. And that means that acquisitions are not something we're looking for, and it's going to continue to be the case. It's obviously different to say would we never ever do an acquisition. And if something comes to us, there is good and attractive and makes sense and it's sort of on -- in line with the business, we will look at it. But my experience is that these things normally do not happen if they happen. They need to be a very clear opportunity for shareholders. And looking at the last 10 years, 2014, we did Barclays. That was a very logic bolt-on acquisition, which made a lot of sense, big synergies, low risk. Then 2016, '17, we did BPI, very special history there. It's worked out extremely well, and we had a specific angled a specific need. And it was, again, something that doesn't happen to be honest, many times in a lifetime. And then we had, obviously, Bankia, the merger with Bankia was quite unique as well. These things happen very rarely. I certainly are not -- we are not looking forward for growth on the basis of acquisition for our next 3-year plan. But again, we would assess opportunities if they come and move if they are extremely attractive to us. I guess that probably answer, sorry, or tries to answer your question.

[Operator]

The next question is from Britta Schmidt with Autonomous Research.

[Britta Schmidt, analyst]

Yes. I've got 3 questions. On the net interest income, BPI&R started coming down despite volume growth, and you mentioned some strong deposit competition there. Can you maybe provide a bit of an outlook in Portugal and break down the NOI growth guidance into Portugal and Spain. The second question will be could you foodist front book lending yield and the front book deposit costs and how they've moved from Q4 to Q1? And then lastly, was there still being pressure on the year-on-year comparison on banking fees. When do you expect that to pay -- and at what point would you expect fees to return to growth.

[Javier Pano Riera, executive]

Well, in Portugal, it's true that we have a different dynamic. And probably I can give you some figures, and you will have a better view on what is going on there. We have approximately 40% of BPI deposits at a cost. So this already makes a difference. In Portugal, basically, all those deposits at the cost are time deposits. So it's not like in Spain, where we have basically large corporates and also the public sector also with current accounts that are usually indexed and the cost of the average cost for the first quarter has been 1.40% if I'm not mistaken, that 1.4% has been the cost in BPI. So you see clearly a different dynamic. The good news is that the situation is massively much calmer than it was just after the summer. So we see that in terms of volumes, in terms of front book pricing, we are being able in Portugal to pass on the negative fuel curve to price 1 year deposits, for example. So we are very active on being, in many cases, the first ones in the Portuguese market to cut our new deposit rate offering. And in terms of adherence, things are okay. So I think that on the Portuguese more heated market, we are already in a much more calmer position. And also, this is allowing us to have a better view, and this has been one of the drivers of obviously, our better view for 2024 for the group. And as a consequence, our review of our guidance. So yes, BPI, if you look only to NII for BPI is going to be very probably negative year-on-year. So it's going to have at a group level, a negative contribution. So that's -- you are right. in terms of front book deposit and loan yields, well, the loan book yield of the front book is like 4.8%, a few basis points down compared to the previous quarter. I think that this also has to do that well, LIBOR is already negative. The encore is negative. So when you price 1 year loans, for example, you already have that negative impact. But I would say that a part on apart from the mortgage business, where in Spain, competition is really strong. On the other segments, I would say that there is absolutely a lot of competition but less. So I think that on SMEs, corporates, we are being able to pass on higher rates and with not a material margin compression. And it's the same with consumer lending. It's obviously less linked to market rates on that case. But I think that on that front, from both yields are not impacted by competition. As an example, for fixed rate mortgage, we are pricing fixed rate mortgage in Spain, slightly below 3%. The same mortgage in Portugal is priced at circa 4%. So there is a huge difference. And on the other hand, then you have the difference on deposit pricing between Spain and Portugal, but also on the asset side. And on maintenance fees on the front book on deposits is circa 3%, so that 21% at cost is having a cost of circa 3%. And the front book, although the new production, if you look on a monthly basis, is starting to come down the yield by a few basis points is also circa 3%, also import world. So the yield is the same. The difference is that in Portugal, the percentage of deposits with cost is much higher. And on maintenance fees, I think that we are getting closer to the bottom. So I think that probably what we have gone a long way on that process. And probably this will help to show on this new P&L segmentation. If you look only at banking fees, I think that this will allow us to be close to flattish, if not flattish for fees as we are closer to the bottom on that process of waiving maintenance fees.

[Operator]

The next question is from Andrea Filtri of Mediobanca.

[Andrea Filtri, analyst]

Yes. I wanted to ask if there is a requirement for the Spanish government to divest the stake in CaixaBank at some point? And on capital allocation, 2 questions. The first is with share price above tangible value per share isn't the opportunity of buying back shares actually reducing in appeal. And as a byproduct of that, do you think that the ECB in the new regime sees with hostility an increase in dividend payout ratios.

[Javier Pano Riera, executive]

In terms of requirements for the Spanish government to divest. There's nothing new. You know there is a regulation, but it's a regulation that can be changed by the government itself that has been postponing for a number of times now, the deadline for divestment, and it is now the end of 2025. But obviously, it is very simple, and it has happened a number of times before to push out further that date. And in fact, some of the public comments the government have made indicate that, that is clearly a possibility. So there is, I think, one day, but it's not really a headline in practice, and the government will decide on that front. With respect to the share price on tangible book, it is obviously, a very relevant question, Andrea, and I made some comments on this. It is generally our view that tangible book has been a reference, particularly in terms of distress of the financial sector. And when you look at tangible book, but you are making 16% return on tangible book, and you think that 16% is sustainable. I don't think the fact that tangible book is or the prices below tangible book is a good indicator of whether you should buy shares or not because actually, in my view, and I hope we go that way, we're going to need to start changing our minds and go back to what it used to be before the financial crisis where people were looking at sustainable earnings and maybe because they're looking at price to book to sustainable return on equity or directly unsustainable earnings. So we are now -- I haven't made the last number, but trading at 7x earnings. We think those earnings are sustainable, is 7x earnings, not an attractive level on which to buy shares. I wouldn't think so, no. It doesn't mean, obviously, rather than 7x, 6x, or 5x or 4x earnings, it becomes even more and more attractive. No, I completely agree with you. But I think we are going to need to move away a bit from tangible book. That's my wish, honestly. As we look at this business as a business that is recovering its basic sort of equilibrium between returns and risk. And certainly, that's how it feels now at CaixaBank. So we will see. I haven't seen any change in position from the ECB. The other part of your question with respect to higher payouts. We always kept our hands free of choosing between share buybacks, which is what we've done so far or special dividends for that extra capital distribution. And obviously, the only difference from a regulatory point of view is one needs to go through a special authorization. The share buyback [indiscernible] not, which is a bit surprising if you think of it. And I think that if we were to go or move that, it will always be with a share buyback or it's a special dividend. It's more something that is related to the current trends of capital generation rather than the ongoing profitability of the business, which we would sort of put the payout of that 50% to 60% as the main indicator. So no, in short, I haven't seen any negative indication on that from the ECB.

[Operator]

The next question is from Marta Sanchez from row with Citi.

[Marta Romero, analyst]

I've got a follow-up on capital and sorry to insist. You haven't rolled out extraordinary capital distributions for this calendar year 2024 beyond the ordinary interim dividend that you will be paying in November. I just wanted to clarify that. So we could still expect either buybacks or a special dividend before year-end? And my second question is a clarification as well on the guidance, the new guidance on other provisions. Would you be able to offset that 50 million delta with a lower cost of risk? And what is the status of your litigation with Coral Homes and MAPFRE? Do you expect any resolution this year that could have an impact on your EUR 4.6 billion commitment on capital return?

[Gonzalo Gortázar Rotaeche, executive]

And it's great you asked the question because it's not that we have not rolled out any extraordinary capital distribution this year is we expect to announce some because otherwise, it's not going to work. So yes, absolutely. We will continue on that front, and we expect not just the ordinary dividend, but some extraordinary dividend -- or sorry, not dividend extraordinary distribution announced during this year 2024 and most likely complemented by something that is post the year-end 2024 when the capital actually materializes. But certainly, because of the size amounts to EUR 4.6 billion. Even if you put a 60% payout on whatever your estimate of net income for this year, you see there's a very significant gap in order to get to the EUR 12 billion, which you should expect during this year. Some of it will be during this year, and some of it will be in 2025 that have no hesitation on that. I'll let Xavier comment on other provisions and lower cost of risk, but there's no news on litigation. And even if there were news, we do not expect that would have a meaningful impact neither on what you mentioned about Coral or MAPFRE.MAPFRE is clearly, in my view, going to be further delayed in any case. But we're not having -- we're not expecting any material impact on our capital plans from any of these two.

[Javier Pano Riera, executive]

Well, about this EUR 50 million delta, if it can be accommodated on a better cost of risk, but we have guided for circa 30 basis points. There is a chance that this may be the case. So as you know, we have been commenting that the situation on that front is doing very well. But unfortunately, I cannot commit exactly. Note also that on other gains and losses also we are having quite a decent evolution. So it's not only cost of rest below the line, there are several P&L lines that also may help to accommodate that additional impact.

[Operator]

The next question is from Ignacio Cerezo with UBS.

[Ignacio Cerezo Olmos, analyst]

I have a follow-up on the banking fee question from Britta before. If you can actually give us the breakdown of the EUR 428 million banking fees ex CIB this quarter between things like activity, payments and maintenance fees. And the second question is on the customer spread. You're now around 3.6%. Do you have any color basically to give us in terms of where you think the customer spread falls in a more normalized rate environment? Do we need to use similar [indiscernible] throughs on lending and deposits to the ones we have seen on the way up or would you expect actually behavioral difference on the way down?

[Gonzalo Gortázar Rotaeche, executive]

Okay. Well, on maintenance fees, we had last year like that specific part of our fee base. If I remember what it was like EUR 360 million. And we are expecting this year like 300 million. So this is the delta compared to last year compared to this year. Here, you see the weight of all that. We -- absolutely, we are not expecting that to lose those EUR 300 million. So there is a clear bottom on that. And this is what we are open. So I give you the figures. And on the customer spread, I have to say, to be honest, so far, the only segment where on the asset side let's say, Beta is not 1 is on mortgages. It has been the case in the past. But as long as that segment also starts doing better, and it's our expectation. Probably that be done, the asset side will rather improve. And also, let's say, that the ability of as the banks to pass on wider margins or at least to pass on movements on the yield curve more clearly is going to be higher. And I mentioned before, the difference between Portugal and Spain. In Portugal, we have been growing our mortgage book for years. And now the consequence is that the front book yield on a new mortgage in Portugal, a fixed rent mortgage, the same mortgage is 4% and is slightly below in Spain. So you see clearly the difference once the dynamics of the market change, which is our medium-term expectation and back to our previous comments into 2025 and beyond, it looks for us more and more likely to give a more positive message in terms of loan growth going forward than in the recent past. And for sure, this will help this normalization on the process of the pass-through of rates and yields of the new production of loans in general. It's as specific as I can be now Ignacio.

[Marta Noguer, executive]

Thank you, Nacho. So it seems that, that's all for today. Thank you, Gonzalo. Thank you, Javier. Thank you, all of you for joining us and enjoy the rest of the day and spring.