UNI.MCUNI.MCBME
Loading
Jaime Marcos: [Interpreted] Good morning, everyone, and thank you very much for attending Unicaja's Q4 2025 Earnings Presentation. First of all, as we usually do, let me confirm that this morning, before the market opened, we published this presentation along with the rest of the usual financial information at the CNMV website and at our corporate website. Today, we are joined by our CEO, Isidro Rubiales; and our Chief Financial Officer, Pablo González. We have divided the presentation into 3 sections. Isidro will begin with the introduction, which includes a summary of the financial year, and a brief review of the first strategic -- first year of the strategic plan. Pablo will explain the financial earnings. And after which Isidro will return to the stage 2, conclude with some final remarks before opening the floor to your questions. We expect the presentation to last just over half an hour. After the presentation, we will take questions from analysts and investors who are following us by telephone on the original Spanish line. And then we will move on to the English [ channel ] line. So without further ado, I give the floor to Isidro.
Isidro Gil: [Interpreted] Thank you very much, and good morning, everyone. It's a pleasure for me to be here again, sharing with all of you the main -- the key highlights of the 2025 earnings, which, as Jaime mentioned, is the first year of the strategic plan. And as you will see, we are making good progress, which is also a beginning to be reflected in the entity's financial performance. The strategic plan is designed for the long term. And many of the results and returns we expect to obtain will take time to be reflected. But it's true that some of these measures implemented are already allowing us to move in the right direction with some clear results in the first year of the plan. On Page 3, we show our usual summary of the highlights of the financial year. The first item that we would like to highlight is the significant recovery in business activity that we have achieved throughout 2025. Two years ago in the fiscal year 2023, performing loans fell by 9%, the following year. In fiscal year 2024, the decline was 4%. In 2025, despite not growing in the mortgage segment, which is Unicaja's largest book, we managed to reverse that trend and achieved 2% lending growth. This turning point, as we will see later, is partly as a result of the diversification strategy outlined in the strategic plan that we presented to you a year ago and which is gradually beginning to take shape. Proof of this is that loan approvals have grown by 40% compared to the previous year. Another aspect that reflects the greater commercial momentum is the evolution of mutual funds, which, as you will recall, was one of the strategic levers of the plan with balances rising by 23% during the year and a net subscription market share of 9%, which is higher than our structural share. This positive performance has also been reflected in profitability, with net profit for 2025, improving by 10% to EUR 632 million, thanks to the growth in gross margin and lower provisioning requirements. The increase in income boost the ROTE adjusted for excess capital of 12% and maintains efficiency slightly above 45%, below our target of 50%. I would also like to highlight the continuing improvement of the bank's asset quality, an aspect to which the market may be paying less and less attention, but which we have been managing exceptionally well internally. And as a result, their balances have become immaterial, but continued to improve quarter after quarter. NPAs fell by an additional 25% in 2025. And additionally, leaving the net nonperforming asset ratio at a symbolic 0.8%. Stock fell by 20% during the year, reducing NPLs ratio to 2.1% below the 2.8% reached by the sector in November 2025, the latest data available. NPL coverage also improved during the year, increasing from 68% to 77%. This positive development is also reflected in the P&L with a cost of risk below 26 basis points below initial guidance. Finally, I would also like to draw your attention to value generation. One of the most important aspects as it's the consequence of all the above. The CET1 ratio driven by earnings ended the year at 16%, 90 basis points higher above last year, which allows us to increase the percentage of the 2025 earnings, which -- that will be allocated to dividends from the initial 60% to 70%. This is a significant increase that will improve the dividend up to EUR 443 million, 29% higher than the previous year. And this is the highest dividend paid in Unicaja's history. On the following page, we show you how the year ended compared to the initial guidance we shared with you a year ago, we believe it summarizes the year's performance very well. We expected net interest income to be above EUR 1.4 billion, and it finally reached EUR 1,495 million, which is 7% above our initial guidance due to the implementation of loyalty plans with linked customers, we expected fees to remain flat, but they ultimately increased by 3%, driven by growth in investment, in mutual funds and insurance, two of the commercial pillars of our plan. Costs remain in line with expectations, rising 5% due to investments, hiring and the projects we are implementing to execute the strategic plan. The cost of risk was below our initial forecast as our provisions. Business volume also grew as expected. As a result of all the above, net income increased by 10% to EUR 632 million, no less than 26% higher than the initial target, which was EUR 500 million, which, as you know, we already exceeded in the previous quarter leaving the ROTE adjusted for excess capital at 12%, which is 200 basis points higher than the 10 initial -- 10% initially expected. As you can see, these pages summarizes very well the positive performance of the entity in the first year of the strategic plan, which we -- where we met all the guidelines we provided a year ago. And in some cases, we significantly improve on them. On the next page, as I mentioned earlier, we show how the positive evolution of the entity's financial position and results allow us to present a very important milestone. The Board of Directors has decided to update the dividend policy and increase the percentage of profits we want to distribute in the way of dividends going from 60% to 70%. This is a significant increase in the distribution of earnings to our shareholders, which together with the best earnings will mean the payment of dividends for 2025 of more than EUR 0.17 per share, well above the EUR 0.134 paid for 2024 and compared to around EUR 0.05 that we paid in 2022 or 2023. The total dividend will amount to EUR 443 million, 29% higher than the previous year. This is a significant increase, which as I said before, has been made possible by the positive performance of the results and the bank's comfortable solvency position. Now if we turn to Page 6, you will see some of the progress made on the strategic plan in the first year. Although we are in early days, we have gone -- begun to notice a significant change in the dynamics, thanks to the entire team's focus on the plan's initiatives. And we wanted to share some ones with -- that we are particularly excited about with you. In consumer lending, we aim to double arrangements by 2027. This year, we have already increased by 40%, maintaining our focus on working with existing customers and direct deposit income. With regard to new insurance premiums, we wanted to increase by 25% in 2027. In this first year, we have already increased by 17% and we continue to see room for improvement to achieve our goals. Another noteworthy aspect is the off-balance sheet weight on total customer resources, where we have increased to 27% in the year with a final target of 30%. We have launched products such as Unicaja Store and reached very important agreements with the management company that will help us to continue increasing and diversifying our income. In the corporate sector, we are very pleased with the improved performance of the business in the first year of the plan. We have turn around a business that was in decline in the book after falling 9% in 2024, has grown by almost 4% in 2025. To achieve this, we have attracted 70% more new customers with lending increased our own customer financing share by 5 percent points and increased the weight of the current assets from 11% to 14%. All of this driven by our focus on improving customer satisfaction with an NPS indicator, improving by 10 points in the corporate business since we launched the plan. Across the board, as you will see later, we are working hard to improve our commercial and operational tools using artificial intelligence. We are rolling out tools across the entire organization and loading use cases in different areas, such as sales, customer service, operations, et cetera with efficiency improvements in many cases, exceeding 50%. Finally, a very important part of our plan is to hire specialized and significant profiles for the bank in order to achieve our targets. In this first year, we have already achieved 65% of the talent acquisition that we have planned. In short, it has been an intense first year of the plan, where we're gradually beginning to reap the rewards of this implementation. As a result of these advances, on Page 8, we update our earnings expectations for the 3 years of the strategic plan a year ago, along with the annual earnings for 2024. We presented the main details of the plan in which we showed our intention to exceed EUR 500 million in net profit in each of the 3 financial years and an accumulated net profit of more than EUR 1.6 billion, which was 40% more than the [ EUR 1.17 billion ] achieved in the previous 3 financial years from 2022 to 2024. Today, following the positive performance in the first years of the plan's implementation, we're increasing this accumulated net profit earnings expectations by EUR 1 billion taken to EUR 1.9 billion, which is 70% higher than the accumulated net profit achieved during the previous 3 years. The interest margin, which we initially expected to exceed EUR 1.4 billion each year, is now expected to exceed EUR 1.5 billion. And net income, which I mentioned earlier, we initially expected to exceed EUR 500 million each year, is now expected to exceed the net income for 2025. This is EUR 632 million achieved last year. All of this will be accompanied by a cost-to-income levels that will remain below 50%. On Page 8, we provide an update on shareholder remuneration target of the plan. As you will recall, the objective is to allocate more than 85% of the earnings for the 3 financial years to shareholder remuneration. Initially, the idea was to allocate 60% through the ordinary dividend and the remaining 25% through what we call additional remuneration which could be in cash dividends or share buybacks with the intention of concentrating this additional remuneration in fiscal year 2026 and 2027. Following the updates of the dividend policy from 2025 onwards, we are increasing the structural remuneration from 60% to 70%. This reduces the percentage of additional remuneration for the period to 15% of accumulated earnings. As can be seen on the right in order to achieve the aforementioned objective, the additional remuneration will represent around 25% of the earnings for fiscal years 2026 and 2027. In other words, for the 3 years of the strategic plan, we will pay 70% of the net profit in dividends, and for 2026 and 2027, in addition to that 70%, will include an additional remuneration of 25% of the profit for those 2 years, which will be either paid in cash dividends or through share buybacks, something we will decide based on circumstances. Therefore, for 2026 financial year, if we pay part or all of the additional remuneration in dividends, we will make an additional payment in December, to which we will have to add the 2 usual dividends for 70% of the result, the first in September and the second in April of the following year once approved in the General Shareholders Meeting. As you can see, this would be the plan over the 3 years as a whole. Shareholder remuneration represents more than 85% of the accumulated net profit. Finally, and given its importance, I would like to take a moment to mention some areas in which we are making progress in the field of AI, which we show on Page 9. We are convinced that this technology will change the way we do business and banking, not in the future, but right now, that's why we consider it's an absolute priority. We are making progress in the use cases across all areas, including commercial operations, IT development with very encouraging results that drive commercial activity, improve efficiency and reduce the time required for many tasks. This is facilitated by a hybrid of modular architecture. This is adapted to both cloud on-premise environments with independent components that accelerate system and construction are ready to work with different types of models. We believe that innovation is essential to get the most of it, which is -- that's why we have created an AI hub with more than 50 multidisciplinary professionals. And we've launched joint chair with University of Granada to promote research and attract talent. In short, we are promoting the adoption of artificial intelligence throughout the organization, which is leading us to achieve efficiency improvements of over 50% in some areas. In short, as you have -- you will have seen in the 2025 financial year has been very positive. Progress in the implementation of the strategic plan has led to an improvement in commercial dynamics which, in turn, has boosted results by 26% above initial forecast, which together with our comfortable solvency position allows us, on the one hand, to increase the percentage of earnings that we'll allocate to dividends from initially 60% to 70% increasing the dividend by 29%, to EUR 443 million, the highest in our history. And on the other hand, it allows us to improve our future earnings expectations. So with that, I'll hand over to Pablo, who as usual, who will give you more details on the financial performance for 2025. Pablo, whenever you're ready.
Pablo Gonzalez Martin: [Interpreted] Thank you, Isidro. Let us now continue with the business activity on Slide 10. As you can see, total customer funds rose by 3.5% in 2025. Private sector deposits increased by EUR 662 million or 1% with a continued shift in the product mix from term to demand deposits that rose to EUR 55 billion, up 3% year-on-year, which explains the lower cost of deposits that we shall discuss later. Our balance sheet performance remains very positive, posting an annual growth of 13.8% driven by mutual funds, which after reaching the market share of 9% of net subscriptions grew by 22.6%. That is in the north of EUR 3 billion. On the following slide, we disclosed the details of assets under management and insurance. On the left-hand side, you can see that assets under management rose by 14% over the last year. Funds in turn climbed by 23%. Note worthy is the significant increase in net fund subscriptions, as shown at the bottom, these subscriptions rose from 1 point EUR 1,767 million to just over EUR 2.8 billion, accounting for a 9% market share of net subscriptions according to Inverco. On the revenue side, as you can see on the right-hand side, these 2 lines of business rose by 9% in 2025, accounting for 18% of total revenue for the year. With regard to lending, during the 2025 financial year, total performing loan book rose by 1.9%, which is a very positive trend compared with the declines reported in recent years, as Isidro mentioned earlier. Broken down by business segment, corporates posted a very positive uptick and after rising 1.7% in the quarter, they reported annual increase of 3.7%. This is one of the most positive business aspects of the year. In fact, thanks to the implementation of certain measures under our strategic plan, we have reversed the negative trend that this segment has been experiencing in recent years. In the case of individuals, growth for the year was 0.6%. Because albeit, we barely reduced the mortgage book by 0.2%. We were able to offset this with a strong increase of more than 8% in consumer lending. Again, driven by the measures set out in the strategic plan, which aims to diversify revenue streams. In short, this trend points to progressive improvement over recent quarters which can be explained by greater diversification and better sales dynamics, together with a major increase in new production as shown on the following slide. All new lending book segments grew markedly by 40% over the year as a whole from just over EUR 7 billion to almost EUR 10 billion in 2025. Growth in corporate banking is particularly noteworthy with formalized balances rising by 46% over EUR 6 billion. Mortgages rose by 30% to over EUR 3 billion. This amount leaving the book flat for the year given the pace of repayments. It should be noted that this more conservative growth in the mortgage book is mainly due to the high level of competition in this segment, where prices are very tight. Finally, although in related times, their balances are less representative, I would like to highlight the increase in new consumer lending production, which rose by 40% to EUR 822 million. In short, this positive growth is in line with the business priorities set out in our plan. On the following slide, you can see how we continue to make progress on our strategic plans, sustainability commitments. This effort is being recognized by ESG rating agencies with 6 improvements having been granted in the latest reviews. Regarding environmental matters, noteworthy is an increase in the weight of Article 8 and 9 funds, which now account for 72%. We maintain and reinforce our strategy of financing ourselves through green bonds with high eligible collateral, while also advancing in the decarbonization of the portfolio, now targeted at 6 sectors representing 81% of our lending to the private sector already. We also like to highlight, Unicaja's social commitment, one of our identity hallmarks, which can be summarized in aspects such as customer proximity, commitment to financial education and support for vulnerable groups. A portion of proceeds is returned to society through more than EUR 175 million distributed in dividends to foundations in addition to EUR 371 million in taxes paid in 2025. We're also committed to our customers by accompanying them in their own transition to this. And we are promoting new functionalities and agreements with third parties as reflected in the growth of the sustainable business where both the portfolio and new production are growing significantly. Finally, we would like to highlight our commitment to our employees with a focus on creating an environment that prioritizes people, good governance, equality and professional development. We shall now continue with a review of the income statement in the next section. Starting with the quarter, net interest income grew by 0.8% and as the effect of loan repricing was offset by lower funding costs, both in retail and wholesale. Fee income improved by 4.1% over the quarter, bringing us to gross income of 1.3% higher than last quarter. Costs are rising due to the seasonality of the quarter. Overall, the quarterly margin before provisions rose by nearly 1%. Provisions as a whole rose sharply over the period, mainly because we have included a provision for restructuring costs in the amount of EUR 27 million. Our aim is to implement a new workforce renewable plan similar to the one we announced last year. For the year as a whole, profit rose 2.6%, reaching EUR 2.095 billion. Total operating costs increased 5.4%, in line with the previous year and the guidance. Overhead costs rose as a result of ongoing investments, while personnel expenses increased by 4.2% in excess of the percentage agreed in the collective agreement due to new hires and variable remuneration. The operating margin improved by 0.5%. Provisions fell by 25% during the year, mainly due to lower provisions for legal risks. All of the above, led to a pretax profit of EUR 902 million, which after taxes and minority interests, including EUR 26 million in sector-specific tax amounted to EUR 632 million, up 10.3% compared to the 2024 financial year. Let us now take a closer look at the income statement. Starting with net interest income on Slide 18, we show the evolution of customer net interest income. As you can see, it fell by 4 basis points over the quarter as the decline in credit yields was partially offset by lower deposit costs. This is the same trend as reported in previous quarters, but increasingly moderated as the downward trend in lending is becoming more limited, albeit we expect it to continue somewhat due to the annual evolution of the 12-month Euribor, which is still slightly below what it was a year ago. We also increasingly see less room for declining the cost of deposits, which continues to improve due to the mix effect rather than the price effect. In any case, as we always say for an institution such as Unicaja with far more deposits than loans, business performance is better reflected by the net interest margin on profitable assets. And this remains stable during the quarter, as you can see. The following slide shows details of the margins performance during the quarter, which improved by EUR 3 million or 0.8%. The lower return on loans mentioned above is offset by the lower cost of deposits and wholesale funding as well as by the higher generation of liquidity. This quarterly performance is similar to that reported in other quarters this year. But as mentioned above, it is becoming increasingly moderate. Moving on to fees. We can see that they continue to perform well in the quarter, growing by 4.1%, mainly due to higher income from value-added services such as mutual funds and insurance. Over the year as a whole fees rose by 2.8%. As we have mentioned in the past, fees for collections and payments, known as banking fees fell by 7% as a result of the implementation of customer loyalty programs. Although some of these fees, such as car fees are already showing positive growth in 2025. At any rate, this impact was more than offset by the positive performance of nonbanking fees. These fees, which had greater added value rose by 12% in 2025 driven by mutual funds and insurance, which as shown on the right-hand side, now account for 49% of the total, up from 45% in 2024 and 41% in 2023. Let us move on to the P&L account to show the rest of the income captions, which also show a positive trend in the financial year due to the changes introduced in the sector-specific tax, but also due to the fall in nonperforming assets and the growing contribution of investee companies. On the cost side, as mentioned above, personnel expenses increased during the year due to wage rises agreed with employee representatives, new hires and also as a result of higher variable remuneration in view of the institution's positive performance. As for overheads, the figures are accounted for by the necessary investments we are making largely for the implementation of the strategic plan. In any case, and despite this increase in costs over the year, efficiency remains at 45.5%, below the 50% target we have set in the plan. On the following page, we continue with provisions, which show another positive aspect of the financial year as they continue to improve. Total provisions fell from EUR 319 million to EUR 239 million. That is a decrease of 25%. The quarterly cost of risk was 27 basis points and the annual cost of risk was 26 basis points lower than initially expected. Other provisions include restructuring costs for workforce renewal in both 2024 and 2025, amounting to EUR 38 million in 2024 and EUR 27 million in 2025. Excluding this effect, they are in line with expectations, showing a downward trend. On the following slide, we show a summary from a profitability standpoint. On the left-hand side, you can see different profitability metrics, all of which demonstrate the positive evolution of Unicaja's results. The reported return on tangible equity without any adjustments increased to 10%. If adjusted for excess capital above a CET1 of 12.5%, which is a level similar to that of other listed Spanish institutions, shows an improvement of 12%. At the bottom, we show the same metric calculated on regulatory capital, which shows an improvement of 70% in 2025. On the right-hand side, you can also see the evolution of the tangible book value, which when adjusted for dividends, increased by 9% during the financial year. We now turn to credit quality. Another positive of recent quarters. The balance of nonperforming loans continued to decline. The quarterly decline was 4.3% and the annual decline was 20%, bringing the nonperforming loan ratio to a new low of 2.1%. At the same time, coverage of nonperforming loans continued to rise from 68% a year ago to 77% at present. If we now consider total nonperforming assets, or NPAs, we see that in net terms, they account for 0.8% due -- both to the significant 25% drop in their balances during the year and to the increase in coverage, which rose from 71% in 2024 to 77% at the end of 2025. Finally, I would like to review the bank's solvency and liquidity position with you. On Slide 28, we show both the quarterly and annual trends. In the quarter, the ratio fell to 16% due to 2 different factors. On the one hand, we have the impact of the dividend adjustment, which is slightly higher than the quarterly result. Since until September, we accrued a dividend of 60% of the result, which now becomes 70% for the financial year. Secondly, we have the impact of the growth in risk-weighted assets, which is mainly explained by operational risk and credit growth. Even so the CET1 ratio closed the financial year 2025 at 16%. Over the year as a whole, we generated 90 basis points of CET1. On the positive side, we have the generation of earnings, which net of dividends and AT1 coupons amounted to 55 basis points despite allocating 70% of earnings to dividends. In turn, we have another 77 basis points mainly from lower deductions and market valuation, including the impact of EDP, which amounts to 21 basis points for the year. On the negative side, we have the growth in risk-weighted assets, which, as we mentioned, are rising due to the impact of the update of operational risk and credit growth. On the following slide, we show the institution's position in relation to different requirements. The minimum required eligible liabilities or MREL ratio stands at 27%, growing slightly over the year with a greater weighting of subordinated instruments. On the right, you can see the buffers we have in relation to the main requirements, which, as you can see, remain quite comfortable. And at the bottom, we show the liquidity ratios, which continue to be among the highest in Europe with the LCR standing out and in 2025, about 300%. And finally, we show you the details of the debt portfolio, as you all know, in our case, this is relatively important because the low loan-to-deposit ratio translates into a high retail liquidity position, which we invest in this structural portfolio, mainly in the amortized cost portfolio. As you can see, the portfolio has hardly changed during the quarter with the balance duration and rate remaining fairly stable. That's all from me, Isidro, whenever you're ready, I give you the floor.
Isidro Gil: [Interpreted] Thank you, Pablo. Continue on Page 32 with some information about what we expect to see in 2026, which you can imagine it will be fairly consistent with progressive improvements that we hope to see it materialize as a result of the implementation of the strategic plan. Starting off with the net interest income, we expect some growth and therefore, to end this financial year about the level reaching 2025, fees should continue to grow at a low single-digit rate, driven by value-added fees, mainly from funds and insurance costs. And we hope that the fees from the banking will contribute -- costs will continue to grow at around 5%, reflecting the investments we want to make to continue successfully executing our strategic plan. We expect the cost of risk to remain below 30 basis points. The business volume will be maintained its current pace with growth of around 3%. And finally, as a result of the above, we believe that the net income will continue to grow in 2026, exceeding the result achieved in 2025. And to conclude, allow me to share a few quick conclusions with you before opening the floor to questions. Today, we have presented excellent results for 2025, reaching a new historic high in both earnings and dividends. But as I also told you last year, we are not satisfied. We want to continue improving something we hope to do by executing our strategic plan, a plan that in its first year is already showing some of the returns we expect. From a business perspective, the 2025 financial year is a turning point as evidenced by the 2% growth in total loans with some strategic segments rising significantly, such as consumer and corporate loans. This change in trend has been supported by an incredible acceleration in the market of balance sheet resources, which grew by 40% driven by 23% growth in mutual funds, another of the strategic and priority products in our plan. All of this has led to a 3% improvement in turnover above the previous year's level. As we have mentioned, this turning point is driving results, which are up 10% to EUR 632 million, 26% above the initial guidance, representing an excellent 17% return on regulatory capital, improving by more than 100 basis points over the year. This positive performance together with our comfortable solvency position has enabled us to increase the percentage of profits allocated to dividend payments from 60% to 70% resulting in dividend for 2025 of EUR 442 million, 29% higher than the previous year. Finally, as we highlighted earlier, this excellent performance means we can improve our earnings expectations for the period 2025, 2027 by 19% from the previous EUR 1.6 billion to more than EUR 1.9 billion, of which 85% will be used to pay out our shareholders, while maintaining a comfortable financial position as we expect to meet these expectations with a CET1 ratio of over 14%. In short, 2025 is once again an excellent year that allows us to lay the foundations for further improvements in the future. Finally, I would like to thank all Unicaja employees for their unquestionable effort and performance in executing the strategic plan. Without their commitment and support as well as the shareholders and directors, these results would not have been possible. This concludes our presentation. And if you agree, we will now move on to the Q&A session.
Jaime Marcos: [Interpreted] Thank you very much, Isidro. Thank you very much, Pablo. Let's move on to the Q&A session. Let's start with the telephone line in Spanish. Please introduce yourselves. And please limit it to 2 questions so that we can answer the highest number of investors possible. So operator, thank you.
Operator: Ladies and gentlemen, we will start the Q&A session. [Operator Instructions] The first question is from Maks Mishyn from JB Capital. Go ahead.
Maksym Mishyn: Two questions. One, it's about the restructuring costs. If you can give further detail on what these costs include. And secondly, if you expect have them in 2026. And the second question is on the guidance, on volumes. Can you give more detail on what you expect in terms of loans and deposits outside balance? That would be very useful.
Isidro Gil: [Interpreted] Maks, thank you for your questions. With regards to the first question and referred to the provisions for restructuring, you know that last year, we did this exercise, these voluntary retirement plans or early retirement plans. We're not looking at saving costs, but improving capacities regarding the environments where we are. Right now, the idea is to run it this year, and we don't expect it to happen the following year in 2027. With regards to guidance and volumes apart from the 3% growth in line with what we've done in 2025, we do see a more balanced mix between the asset growth and the resources customer growth around 3% in both segments.
Jaime Marcos: [Interpreted] Thank you, Isidro. Operator, please, the next question.
Operator: The next question is from Francisco Riquel from Alantra.
Francisco Riquel: I would like to ask from NII guidance. Could you talk about the rate scenarios that you have included in the guidance because 1,500 is very flat, and the volumes are growing and interest rates is what it is. And I think it's a very conservative -- if it's conservative, I don't know whether you can talk about the sensitivity in NII in terms of interest rates for year 1 and year 2 and what you have included in the plan vis-a-vis margins. And my second question is about the use -- how you're going to use excess capital. A year ago, you asked for flexibility to consider M&A opportunities in the first part of the year. We haven't seen anything in 2025. And my question is whether you can give us an update on your ambitions for M&A for the next -- for the rest of the plan and how are you going to use the capital excess?
Isidro Gil: [Interpreted] Paco, I'm going to answer the first question with regards to the guidance as to whether it's prudent and what hypothesis we have used. With regards to the hypothesis, we've used the curve that we had at the end of November, which will had a Euribor of 2.35% at 12 months is to -- we're around 2.22% at 12 months, and the expectation is to go -- see a rise by the end of the year. The balance sensitivity and the ANI to interest rates at 12 months is quite low. And the volume growth impact is also low. It will be seen more in 2027 than in 2026. In 2023, we started to reduce the balance sensitivity and we have increased this for 2026. But I think that for 2027, the higher interest rates -- potential high interest rates will have a positive impact. And with regards to the volumes at around 3%, the deposit cost is very similar to this year's -- the deal of the credit investment is going down in the first quarter and will be flat in the second, and will start to go up in the third with the new production and with the repricing, which will have no negative impact which will make the margin behavior to follow that line. The first quarter will be a bit lower because you have the days effect and it will catch-up up until we see it above. How much above? Well, it depends on the deposit cost evolution and on the volumes evolution, if we are able to grow more in deposits. As we've seen this year in site deposits, this will improve a bit more, and it will depend on those variables. But it will be as from 2027, where you will see a more significant increase of margin.
Pablo Gonzalez Martin: [Interpreted] Good morning, Paco. As for the excess in the use of capital, I believe that today, we have explained to you how we are going to carry out that payment in excess of 85%. We also said that we are going to analyze new opportunities and if capital is required, well, we will have to analyze its efficiency in 2025. Such opportunities did not arise. We didn't see any clear opportunity of an investment with a good return for our investors. But should that happen, well, we might consider using capital more efficiently. And that's all I can say in this respect.
Jaime Marcos: [Interpreted] Thank you very much, Pablo, and Isidro. Operator, please next question.
Operator: The next question is by Ignacio Ulargui from BNP Paribas. Please go ahead with the question.
Ignacio Ulargui: I have 2 questions for you. The first question is concerned with the growth of deposits. How do you envisage this in 2026? You have shown an increase of 3% as for lending and customer funds, you have also reported some growth. Now how do you think deposits are going to behave in 2026 and in line with the excess of capital question, taking into account the increase of payouts, what capital generation do you envisage going forward and how much of that capital will come from DTAs?
Isidro Gil: [Interpreted] Thank you for your question. As for the growth in deposits, the first question was already answered. We said that growth is expected to be at around 3%, taking into account the mix between assets and liabilities reaching was striking a balance. In 2025, we draw a distinction between balance sheet items and off balance sheet items. 2025 was an exceptional financial year. And even though we believe that this will continue to grow off the balance sheet. We believe that the mix is going to be more balanced, and we will continue to post growth. And we will continue to do so on the balance sheet. As for capital generation, concerning this question, next year, we are going to distribute 95% of the results. Therefore, the capital growth lever, as I said before, is going to contribute less than this year, where it stood at 70%, but DTA capacity will also be available whereby capital might be expected to grow over the years. So we expect capital to grow. No doubt that capital growth is going to be lower compared to 2025 due to the fact that the results generation will be paid out to our shareholders, almost as a total.
Jaime Marcos: [Interpreted] Thank you very much Isidro. Next question please.
Operator: The next question is by Carlos Peixoto from CaixaBank BPI.
Carlos Peixoto: I have a question as to your forecast concerning fees and the growth of fees. Do you think that it's going to continue growing at rate of 3%, in line with the growth of volumes. I'm asking this in order to understand how these products are expected to before? And do you think that there is any room, what ever for fees to grow further in the next financial year?
Pablo Gonzalez Martin: [Interpreted] Carlos, we couldn't really understand your question 100%, especially the last part. We believe that the fee guidance is quite conservative, taking into account the performance of funds that pushed fees up in 2025. Well, as for our expectations concerning fees, this is based on our aim to continue growing both on the balance sheet and off the balance sheet customer funds, as Isidro pointed out before, we believe that mutual funds will continue to grow steadily due to customer demand, but we believe that deposits on the balance sheet will also continue to grow even more than in the current financial year. You should take into account that there's plenty of competition on the liability side, and that's why we have these customer loyalty programs in place. Concerning payments, we already see some positive signs such as growing fees and significant card activity. We continue to grow. We continue to enhance transactionality with customers, and that is going to be offset by the different customer engagement or loyalty plans that we are going to continue to deploy to target more customers. So hence, we believe that we should expect this increase in fees. But in the case of mutual funds, we believe that, that growth is going to be even greater.
Jaime Marcos: Thank you very much, Pablo. I believe that there are no further questions. So operator, we can now hand over to questions in English.
Operator: [indiscernible] Cecilia from Barclays.
Cecilia Romero Reyes: The first one is on the buyback specifically, what would be the likely timing from here and what milestones need to be met before you can execute the next program? Is there a regulatory or any other approvals needed at this point? And then the second one is on competition for both mortgage and deposit. On mortgages, how are you seeing the competitive intensity at the moment, at current pricing levels, what kind of economics are you targeting on new mortgage production? And how important is cross selling to make those returns work? Are you being pushed to accept lower margins to defend volumes? And on deposits, are you seeing any renewed pressure on deposit costs from competitors keeping attractive offers in the market for longer, to what extent are neo banks and only platforms influencing the competitive behavior on deposits?
Isidro Gil: [Interpreted] Good morning, Cecilia. I think that in -- with regards to buyback, the buyback from what we've said that the additional remuneration is dependent upon the fact that whether we're going to do it on a cash dividend payout or on a buyback, but what's true is that the decision will be made at the end of December, whether it's cash dividend or within program of payback. We haven't made a decision. But in any case, we're not talking about significant volumes if we get to do it. And it will depend on the -- whether it makes sense to do it on cash or whether to do a buyback program. But in any case, we would be talking about material amounts for those buyback programs. The second question is related to competition in mortgages. The credit growth in -- the lending growth after having seen negative rates in segments like public administration, is the only segment where we haven't grown, and we've been flat. We've been flat in the mortgage segment, which is the most representative segment. And that's why we've been applying a policy based on 2 things: one, on having a good risk profile. And that's been a standard tradition and how we've granted credits and not going above a certain level of price. And so that's -- we've kept that flat over the year. The market that has so much pressure for lack of housing, it's having a big impact on competition, on prices. Our expectation is for this to improve -- key solution to improve the housing situation is somewhat complex because the housing is not covering the social demand for new housing. So we will continue with a similar strategy. We will still have the adequate risk profile. And we will continue to generate -- continue along the lines that we've been doing. The idea is to keep the market rationale with regards to -- reasonable with regards to price. And we will be more positive in prices or we will find a balance between the credit given or the ability to link the customer. I think that in that segment, we could be able to compete with price. But if we find -- if we find ourselves in a no way back, we could end up in a scenario that we went through in 2025.
Unknown Executive: Cecilia was asking on the competition on deposits and one of the offers from other institutions.
Isidro Gil: [Interpreted] The competition in deposits and how we see the evolution in the deposit cost. As you know, the Spanish market is very competitive with regards to national banks. We've had various specialized banks in attracting liabilities. I think that will be the case even getting higher. And with regards to the strategy and the evolution of fees, we will continue with the loyalty programs. We have developed banks for our customers. We have very competitive digital solutions which are far better than our competitors. In terms of neo banks we have attractive solutions for our customers. And we consider that we keep that level or even going -- will go up in deposits despite the existing competition that we expect.
Operator: Next question is from Sofie Peterzens from Goldman Sachs.
Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So my first question would be on capital. Do you expect any regulatory headwinds in 2026 or '27 and what are your thoughts on using SRTs? And then the second question, just going back to mortgage lending, one of your peers is guiding for 6% mortgage loan growth or lending growth in '24 to '27. Why do you only see 3% volume growth? How should we think about the upside risk for volumes to perform better than expected?
Pablo Gonzalez Martin: [Interpreted] Thank you, Sofie. With regards to any regulatory impact for this year, we don't have other jurisdictions like the U.S., where they're talking about deregulation and talking about a reduction of the regulation. We don't think that we're not going to have any negative impact in the following years. I think that the period of increase of capital requirements has gone to a reasonable level and the solvency and the quality of financial institutions in Europe is strong enough to withstand the stress test -- stress scenarios that are analyzed, and we don't consider there's going to be any negative impact in that regard. And with regards to competition and the growth expectations in the mortgage world, as Isidro has said, we will continue along our lines in the way that we will conduct the most reasonable analysis possible. We will look for customers with high credit quality with linking ability, and will be adjusted in price so that the performance of the customer. I don't think that the market will grow by 6%. That's why we don't have such a higher growth in the credit. We think that the credit growth, despite that we come from significant deleverage starts to grow, it's still continuing and the nominal growth of the [ bps ] of the GDP. And we -- as Isidro said, we need more production, more new housing, which won't happen in 2026 because it should have happened in the previous years and this evolution will happen in a later stage if it happens. And we don't think that there's going to be mortgage growth -- mortgage sector growth of 6%, but for us, mortgages are fundamental products to link the product to provide global services to our customers, and we will put our stakes on it. And he was mentioning SRTs, that given the solvency position that we have is not something that we have on the desk in the short term in terms of the SRTs. We look at the different options to improve our capital position. And we also look at the SRT. But in the short term, we don't expect the conduct of any, given the capital position that we hold right now.
Operator: The next question is by Borja Ramirez from Citi.
Borja Ramirez Segura: This is Borja from Citi. I have 2. Firstly, I would like to ask on the deposit growth outlook. You mentioned about the digital channel. I would like to ask what portion of your new customers are from the digital channel? And also what percent of your deposit inflows would come from the digital channel? And then my second question would be, if you could provide any -- an update on your M&A strategy, please.
Isidro Gil: [Interpreted] Borja, well, as far as digital channels is concerned, you should know that we are a bank with a territorial footprint, a strong territorial footprint with let's say, on-site banking mainly. I don't have the exact percentages for the digital channel. However, we are starting out from a lower base. But actually, we have observed a growth in terms of deposits as well as consumer loans, most of our production comes through the digital channel. We also have plenty of competition in digital channel. However, there was significant growth in 2025, and we expect that trend to continue to grow going forward. We continue to focus on a multichannel model. All channels are interconnected, whether we talk about branch offices and the digital channels as well as the contact centers, any contact point with customers, including the web page, et cetera, everything is intertwined. So we continue to have greater weight in the our brick-and-mortar network. However, we continue to grow in the digital channel little by little.
Pablo Gonzalez Martin: [Interpreted] Let me add that we continue to grow in terms of the number of customers, the higher deposits through the digital channel, there has been a growth of 5% in 2025, and we expect that growth to continue in future years, as Isidro said, this is going to be important. In the case of deposits, again, we expect growth to be reported in the digital channel. The next question is concerned with the consolidation of the financial system. Let me reiterate what we already said in prior years, especially since we have embarked upon this new change and since we have set out a new strategic plan, we are now focused on carrying out our strategic plan. Our shareholders do not want us to lose focus over the strategic plan. And therefore, we believe that we will keep this project unchanged. The achievements over the past years, ratify our strategic vision and the fact that we want this to remain as an independent project. And this is what we have been reiterating again and again over the past years.
Operator: The last question is by Hugo Cruz from KW. Please go ahead with your question.
Hugo Moniz Marques Da Cruz: I have 2 questions. First, on the usage of excess capital. If you don't have M&A opportunities, could you do a one-off payment above 100% payout or is the 100% a limit where how far you could go with one-off distributions? And second, on loan pricing. I think you said repricing shouldn't have a negative effect on your NII, but I was wondering if you could give a little bit more detail product by product. So how does front-book pricing compared with back-book pricing for your mortgages, SMEs, corporates, consumer, if possible?
Isidro Gil: [Interpreted] Thank you for your question. As for the excess of capital related question, as we mentioned during the presentation, we are near 100% for 2026 and 2027. We undertook that commitment back in the day when we presented our strategic plan. And this, of course, means that we have to fulfill our commitment in excess of 85% of the strategic plan. Now that the payout is going to be 70% for 2025, the payout for the next 2 years with stand at around 100%, as you have mentioned. But now we are fulfilling the commitment that we undertook when present in the strategic plan. For the time being, we do not intend to carry out any other payout other than the one that we announced today during the earnings presentation, Pablo.
Pablo Gonzalez Martin: [Interpreted] Now as for the pricing impact related question across segments, as for mortgages set at a fixed rate, the value is below what we expect to attain. As for SMEs and corporates, we are already rallying in terms of the front-book compared to the back-book with some differences. However, even though there has already been some repricing, the repricing impact is to be found only in the mortgage book at a variable rate with a moderate impact during the first quarter with some tail effects in the following quarter. However, we believe that the loan yield is going to -- will remain steady as of the second quarter and will remain so also in the third quarter. We still have some long-lasting loans among corporates and the public sector set at low interest rates. As they mature, the loan yield might be expected to grow even though we expect a greater impact as of 2027 when significant improvement in margins is expected to take place.
Jaime Marcos: [Interpreted] Thank you very much Isidro and Pablo. Thank you very much for attending this earnings presentation. Should you need additional information, please do not hesitate to contact our Investor Relations team, and we look forward to having you again attending this presentation for the next quarter. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]