Caixabank SA

MAD:CABK

Q2-2025 Earnings Call

[Marta Noguer, executive]

Good morning, and welcome to CaixaBank's results presentation for the second quarter and the first half of 2025. As usual, we are joined today by our CEO, Gonzalo Gortazar, and our CFO, Javier Pano. In terms of logistics, we plan to spend about 30 minutes with a presentation and 45 minutes to one hour with the Q&A, which, as you know, is live. And after the call, my team and I will be at your full disposal.

So without further ado, Gonzalo, the floor is yours.

[Gonzalo Gortázar Rotaeche, executive]

Thank you, Marta, and good morning, everybody. Second quarter of the year, we see a strong performance. And obviously, what we are doing as a consequence is improving guidance. I think the highlight is the volume growth. You've seen the numbers. We're gaining clients, performing loans 4.8% year-on-year. Deposits 7% up. Wealth Management despite the volatility in the market is up 8%, it's quite remarkable, knowing where we're coming from and just reminding you the discussions we had at the time of presenting our plan in November about growth and whether it was feasible or not, what we're seeing is that growth is happening much faster and in a stronger form than we all expected, which is good news. And this is part a reflection of our improving market share. And obviously to a large extent, it's also a reflection of the Spanish economy and the Portuguese economy doing very well as we'll discuss later on. I think this is certainly what I highlight the most.

This volume growth is powering revenues, as we're saying, but most importantly is powering revenues not this quarter but in the future. So certainly makes us more optimistic about our performance going forward and particularly into the rest of '25 and '26, '27. We're saying -- we're calling the trough in the NII cycle. We think this is the lowest quarter. Javier will comment on our expectations going forward.

You've seen services, both fees and wealth management protection and banking fees, pretty good so far, 5.4% increase. Cost of risk and asset quality with a 2.3% NPL ratio and the cost of risk, which is 24 basis points for the last 12 months, even lower if you look at the first half of the year is also something that we're seeing at this stage quite stable, and we're not expecting a deterioration going forward. We're seeing very good, very good trends.

And from a capital point of view and liquidity will continue to be sort of evolving in line with our targets. We have a return on tangible of 18.5% this quarter, a bit closer to 20%, if not for the banking tax, which is obviously a very relevant feature. Net income is up 10%, and we are improving guidance, as you have seen by now, particularly in revenues from services from low to mid-single digits to just the upper part of the range, mid-single-digit range, reducing cost of risk guidance to around 25 basis points, an increase in return on tangible equity above 16%. Those are the highlights of a very positive quarter for us, no doubt.

The economy. And the economy is doing very well. As you know, we have seen now also the figures yesterday, which had very strong increase 0.7% quarter-on-quarter of GDP in Spain, which has also seen the numbers for the Eurozone at 1 -- sorry, 0.1% for the Eurozone quarter-on-quarter. So a big gap between Spain and the Eurozone and a gap that I think it's reasonable to think that it's going to stay in place. Certainly, that's our expectation for this year and the following years.

Remind you some of the key growth engines, immigration, the labor market helping obviously very much the economy and our business. And on the other hand, we still see growth in disposable income and very high savings rate is obviously helping a lot the liability side of the balance sheet. You've seen that 7.5% year-on-year growth is quite remarkable. I think also quite remarkable vis-a-vis our competitors of those that I have seen so far publishing suggesting that we have -- we're doing something well. And I think whatever we're doing well is likely to continue because we're now having no distractions. And back to that sort of different growth pace that we have always had.

We will have some impact from, obviously, the tariffs accord in the economy, both Spain has a very limited exposure to the U.S. and also the reality is that given that actually second quarter numbers for the economy are coming in much stronger than what we expected. We expected actually 0.5% quarter-on-quarter growth for the Spanish economy in the second quarter, and it's been 0.7%. So that different growth rate is, in my view, going to be more than enough to offset any impact, which we estimate around 0.2% on GDP of the tariff accord, which has tariffs that are unfortunately higher than what we were anticipating. We were anticipated closer to 10% rather than the 15% number that is obviously still preliminary.

Strategy, 2 pillars for our planned growth transformation. That's what we're seeing. I mentioned growth right now, so I'm not going to repeat myself on the fairly good numbers. Transformation is also very relevant. Digital sales, digital onboarding, digital clients, adoption of G&A, you have a few ideas there, and we're obviously going to keep updating you on our progress on this front and our teams are available. But we're taking advantage of these relatively good times to make sure that we make our competitive advantage sustainable going forward for the very long term.

Few transformation ideas on the business front, that we have launched either in this quarter or very recently. Facilitea Casa, the house portal. We already have 42,000 listed properties. It's obviously very early days, but it's actually delivering a very good service, both for our clients, our real estate agents and it's going to allow us to be closer to the action, one of the most important segments that we have, which is obviously mortgage but all the products around buying a new house and that includes not just mortgages but obviously insurance and some other financial and nonfinancial services. So very promising that we have launched, and we already have that level of listed properties. We'll keep growing the business and obviously improving things as we go ahead.

Similar example with cars on Facilitea Coches, we have financed 11.7000 vehicles through this portal in the first half of the year. Most importantly, obviously, this is attractive -- it's improving our relationship with car dealers, and attracting more and more associated business around not just what goes through Facilitea, but the -- generally, the vehicle financing business, it's actually up 34% for us year-on-year. It's close to EUR 2 billion. And obviously, there's a very significant potential here given the initiatives and the fact that actually, there's no other similar platform in Spain with the same characteristics of our platform.

Now say over 8,000 vehicles listed and this keeps growing. We discussed it in the past, I'm not going to go deeper into it for the benefit of time, but obviously, very promising. Tap-to-pay, which we've launched both for Android and now for Apple as first bank to offer the service. There will be further news on that front. [Foreign Language] Generacion +, if you want in English, a very special ecosystem and offering #1 financial and nonfinancial services for the senior citizens where we have obviously made some good progress historically, but particularly in this quarter with the launch of the initiative, a big, big opportunity for us.

From the senior citizens to the digital, younger citizens Imagin, I just want to give you some details on how it's going because it's relevant, and you sometimes don't see all what's happening there. Look at business volume, it's up 23% year-on-year, EUR 20 billion. And if you look at what the business volume includes, it's basically a full service bank. That includes client funds, on balance sheet, off balance sheet and lending mortgages, consumer lending. It's a real mobile bank, not just sort of a monoliner or a secondary bank to people is really, as you can see, 55% of our clients actually have their recurring income deposited into Imagin. So it's basically a primary bank for most of our clients, and it's a very significant tool for client acquisition, 50% of overall client acquisition. CaixaBank is coming through Imagin.

We already have 8.5% of payrolls market share in Imagin Bank. So that means it's actually one of the larger banks. And obviously, when you look at the mobile banking penetration, it's leading bank for the 18 to 34 years, or the 16 to 34 years old. But obviously, including the segment that is included in CaixaBank, non-Imagin it becomes, by far, leading penetration, 40% is almost double in the next year. Well, we'll keep you updating on Imagin, but I just want to make sure that we have the full picture of us doing very well also in businesses that are growing very fast and are very critical for our future.

Loan origination, very high numbers, 46% residential mortgages, 10% consumer, 26% new business lending, good front book yields. And obviously, as I said before, great news that we've seen that kind of growth. You'll see it here on the balance sheet. Sorry, we have too many numbers maybe you have the year-to-date, quarter-on-quarter and then below the graphic part is year-on-year. Obviously, the year-on-year shows 2 things. One is the absence of seasonality. There's very strong growth and also the trend, which is very impressive. I would highlight particularly mortgages and business lending, a big jump in June.

If you look at the GDP numbers for the second quarter that I mentioned before, you'll see that there's a very significant contribution from gross fixed capital formation, both residential and CapEx. CapEx actually is up 11% compared to last year. So this CapEx cycle in Spain, despite the fears we had because of the uncertainty associated with geopolitics and tariffs, et cetera, it's actually happening. And obviously, we're making it possible and lending is picking up as a consequence. We've seen it obviously already in consumer last year, still growing fast now to 8.9%.

And as you can see, the quarter-on-quarter figures, they have some seasonality included, particularly, I'd say, on the business lending front. But what you can see is there's still some degree of acceleration of growth in the numbers. Customer funds are up 4.8% year-to-date -- 4.8% year-on-year and 4.7% year-to-date. Obviously, the market effect has been limited in this first half of the year due to the volatility still is positive. It was negative at some point, but after much better June, it's positive.

I think we'll see it in the next page, important to see how net inflows have continued to be positive at all times. And when you look at the balance sheet numbers, 4.8% quarter-on-quarter, again, some seasonality in there, but numbers are quite impressive, quite good. Javier will accelerate also -- will elaborate also on the breakdown there. And that's pretty good news, I would say.

As I said, net inflows doing very well despite potential impact of market uncertainty and stability during the quarter that has not materialized. You see how even in the month of April, we had positive inflows. And obviously, then a quick recovery in May, June to levels more in line with what was the first quarter of the year. So pretty good news, keep that differential market share, again, 29% in Wealth Management compared to 25% if we add Peer 1 and Peer 2, which makes basically speaks by itself.

The protection business doing well, 12% growth year-on-year, above our target for the strategic plan, good breakdown between life risk and non-life and a good breakdown again in Non-Life, both health, auto and home insurance, gaining market share, basically continuing our cruising speed and with a huge success of the MyBox offering, which continues to be differential for our customers.

But just a few words on BPI. Just looking at the sort of long-term horizon of what has happened since 2017, which was the date when we acquired control. And today, you see those market share gains in lending in mortgages and deposits and in savings insurance in the region of 220 to 300, even close to 400 basis points. This is the trend on which BPI is. And obviously, that trend has allowed the bank to be more efficient and more profitable, stayed with a very attractive asset quality ratios. And hence, continues to be for us one of the most attractive parts of our business and one where we see continued opportunity for further growth and profitability.

Thank you and your turn.

[Javier Pano Riera, executive]

Okay. Well, thank you, Gonzalo, and good morning to all of you from my side. As always, additional details on the P&L and the balance sheet. Here, you have the consolidated income statement. As you know very well, net income this quarter, approaching EUR 1.5 billion. This is down by 4% year-on-year on a pro forma basis when considering the quarterly accrual of the banking tax paid last year. But it's already up quarter-on-quarter, better revenues, all in all, you may see NII pressures clearly awaiting. We'll discuss all that in a few slides in a minute and actually almost stable on a quarter-on-quarter basis, down by 0.4%.

Then on revenues from services. The main driver here is Wealth Management. You may see double-digit growth year-on-year. Quarter-on-quarter, slightly negative, precisely impacted by the market correction on average AUMs, but well, as you could see, the pace of inflows remains unabated and has clearly recovered from the month of April. So we can expect also a very good performance in coming quarters.

Protection insurance, really strong commercial activity although the P&L impact is a little bit masked by some positive nonrecurring factors we had during the second quarter last year. But in any case, you know that here, we have quite a strong view on future performance, and we are fully convinced we are going to deliver on that. And then banking fees with more recurring banking fees that had some pressure in the past. This is also being, I would say, better contained, but we have had a really strong quarter on CIB, as you may see, on a quarter-on-quarter basis, fees up by 6%. This is driven mainly precisely by CIB.

Then other revenues. Here, I would like to highlight that this year, we had the BFA dividend recorded on the first quarter, and you have this difference on a quarter-on-quarter basis. And that, as you know very well, the Telefonica dividend is no longer with us.

Then on expenses, no news at all. Everything is going according to plan. Remember, this guidance for costs to grow circa 5%, and we are not changing that view. And then on loan loss charges clearly -- really benign asset quality environment. So loan loss charges below initial expectations, hence, we are improving our guidance on cost of risk, as you already know well. And my final comment on the income statement will be on the tax line, where again, as forecasted, we are including a DTA write-up.

With that, let's move to NII. Here, you have the evolution quarter-on-quarter minus 0.4%. It's stabilizing earlier than anticipated. Now we are expecting that the second quarter is the trough of this cycle. So we are expecting that the next quarter's NII is going to be higher than the second quarter of 2025, not by a wide margin, but in any case, higher and then clearly improving and accelerating from the second half next year.

On the usual NII bridge, you may see all the different impacts on NII, client yields still having a negative impact. This is still some quarters -- some additional quarters having this negative impact. So here, still lower rates impacting our floating rate loan book not being fully compensated by lower costs on our customer deposits. Then volumes clearly adding quite a significant push and then the significant counterbalancing effect from ALCO basically hedging, different hedging strategies we have been deploying and also fixed income portfolio with increased yields as we are adding to the portfolio and also we are having maturities at very low rates.

Below, you have the charge for the customer spread at 309 basis points. And then you have also the back book yield of the loan book at 375 basis points, still trending down, but also a significant reduction this quarter of our deposit -- client deposit costs you may see ex hedges and foreign exchange down to 58 basis points from 68 basis points.

Additional details on deposits, clearly, one of our strengths and is offering -- increasing support for future NII evolution. You may see here the quarterly evolution of average balances for deposits. You may see that on a year-on-year basis, those are up by 7% by -- on a quarter-on-quarter basis, only 1.6%. This is because the strong seasonality of the second quarter is not impacting average balances. But in any case, the most interesting here is that our balances for noninterest-bearing deposits are increasing significantly over EUR 5 billion in a single quarter and set to continue increasing in coming quarters. At the same time, we keep the wave of interest-bearing balances almost unchanged, but actually gradually trending down now 26.9% and the peak being in the fourth quarter last year at 27.2%.

On the chart on the right-hand side, this is the yield of our interest-bearing deposits sharply down to 1.92% from 2.28%, and you know that we have approximately 50% of those interest-bearing deposits that are fully indexed. The major part to the overnight rate below, you have precisely the quarterly evolution of the overnight rate, the Euro STR. So you may see that the cost of our interest-bearing balances is tracking to a large extent precisely that evolution.

An additional slide on market rates and ALCO. On the left, you have the same chart we disclosed last quarter, obviously updated. On the upper left chart, you have the deposit facility rate yield curve. In blue, it's the current deposit facility rate and in gray, you have the -- that yield curve as of September '25, which was the base case for our strategic plan projection. So you may see that clearly, there is a steepening of the yield curve, you may see this more clearly on the chart below that one. Here, you have the yield of, as an example, at 10-year European Union bond versus 12-month Euribor, you may see that there is a steepness of over 1 percentage point.

And well, this is a very positive backdrop for the bank. So you know that we basically lend long and borrow short, and also, it offers plenty of opportunities for ALCO management, which actually is what we have done this quarter, you may see that we have added to the portfolio. We have taken advantage of the strong market volatility to add to the portfolio over EUR 5 billion in the quarter. You may see that the legacy yield is gradually improving. It's a quarter where we have not added additional deposit hedges, but that continues to be a key tool to manage NII sensitivity, so you can expect us to be active on that front also in the future.

With that, we change gear and we move to revenue from services for the first half, up by over 5%. As commented before, the main driver, Wealth Management, up by 14% for the first 6 months of the year. Also protection doing well when adjusting for those extraordinaries, we had positive extraordinaries we had on the first half last year, up by 2%. As I said before, really strong commercial activity. We're expecting the effect of that to be felt in the P&L more clearly in coming quarters, and then successfully being able to stabilize our banking fees, less pressure on recurrent banking fees in some areas, maintenance fees on current accounts, debit cards, et cetera, with a little bit less pressure. And in any case, with really strong performance from CIB and being more and more recurrent source of revenue for the bank. With all this backdrop, we are improving our guidance for revenues from services to mid-single-digit growth from low to mid-single-digit growth.

A few words on costs. Actually, no news at all. You may see that for the first half, costs are up by 5%, and this is where we are planning to be by the end of the year. So meeting our guidance. On the right-hand side, you may see the evolution of our cost-to-income ratio. You may see that we have been hovering in the 37%, 38% area since early '24. And this is clearly much better level than the average of our peers in Europe.

A few words also on asset quality. First, on NPLs, a sharp reduction of NPLs this quarter, approximately EUR 500 million. That results into an NPL ratio of 233% (sic) [ 2.33% ] in the month of June. What we have been active this quarter that NPL portfolio disposals is part of our business as usual. It has been the case this quarter successfully.

And in terms of the different segments, you may see that there is nothing to worry about at all. And you may see that the NPL ratio is really not far from the average. So really benign environment in terms of asset quality. If you combine this with high coverage at 70% and also, at the same time, keeping our unassigned provisions unchanged at EUR 341 million. So this -- well, is resulting into a clear reduction of cost of risk, so 24 basis points for the second quarter. You may see that actually, the loan-loss charges in the second quarter have been the lowest in the last 18 months. Well, in this -- with this backdrop, we are improving our guidance for cost of risk now expected to be circa 25 basis points.

Liquidity, no news, which is very good news. We continue to hold a really comfortable position, EUR 228 billion of liquidity sources, liquidity coverage ratio of 217%, net stable funding ratio, 150%, I think it's a record high. And you may see that this is -- compares extremely well with the peer average. And this is on the back of a really strong and stable deposit base with a strong wave of stable retail deposits and wholesale operational deposits.

We have the bulk of our funding plan, almost completed, still something to be done in the last part of the year, but the bulk is already done. With that, we update you on our MREL structure with an MREL ratio at 28.24% really with an ample buffer above requirements, 382 basis points actually. And we are compliant actually with this requirement with subordinated instruments.

As I said, a successful delivery in terms of funding EUR 7.2 billion issued in year-to-date across all asset classes. I would remark here a really successful USD 3 billion senior nonpreferred with really huge demand. We have -- on the right-hand side, you have the breakdown per currency and 36% of the funding this year in U.S. dollars.

Finally, capital. We have a really strong capital accretion in the quarter 69 basis points. That includes net income plus the DTA consumption. We have then minus 33 basis points from organic risk-weighted assets, it's the first time we disclosed this bridge this way on the appendix, you have the same disclosure for the first quarter, just for the record. Then we have minus 40 basis points for dividend accrual at a cash payout at 60%, as you know very well, an AT1, and then we have small other impacts. And that results into a CET1 ratio at 12.47%. This is already over EUR 500 million above the threshold for an acceleration of capital evolution.

And well, I mentioned that it has been a strong quarter in terms of lending. But in any case, profitable with return on risk weighted assets at 2.3% clearly above the average of recent times. We keep executing our 6th share buyback that was launched in June. And also, we are today announcing an interim dividend to be paid in November and finally approved by the Board in October, ahead of our third quarter results presentation, and it will be a dividend between EUR 885 million and EUR 1.181 billion.

And bottom right, well, you know that we don't have an impact from the output floor. But clearly, as everyone has been disclosing those impacts, you may see that in our case, we are approximately 12 percentage points above the level of the output floor, which is a small group of banks we have this position. It's not the case for others.

In our case, for this -- to comply with this regulatory requirement, we don't need to set aside capital in coming years or not being any kind of constraint for growth as I say, to comply with this requirement in coming years. And the final slide, which is the recap of the improved guidance on revenue from services just to recap, up to now -- expected to be up by mid-single-digit cost of risk circa 25 basis points and return on tangible equity as a consequence over 16%.

So thank you very much, and I can imagine we may face a few questions.

[Marta Noguer, executive]

So operator, we are ready for Q&A. First question, please.

[Operator]

The first question is from Maks Mishyn of JB Capital.

[Maksym Mishyn, analyst]

I have 2. The first one is on the NII. You see better quarterly trajectory. Our loan book is growing above expectations, yet you do not upgrade guidance. Is there any particular reason why? And the second one is on loan book growth. You are gaining market share across the board, new lending as well as back book. What are you doing to grow your market share? Should we expect a similar pace in the coming quarters?

[Gonzalo Gortázar Rotaeche, executive]

Thank you. Maks, I will comment on the second one, and I'll let Javier get into the NII guidance. I think we're not doing anything particularly special in terms of lending growth. First, that obviously, the market is growing faster than anticipated, and that has to do with the macro. But beyond that, we are gaining market share slight gain when we talk about gaining market share, it's probably 10 to 15 basis points in the period, in the last 12 months.

And obviously, there's also some volatility sort of -- because some of these balances can change in -- particularly on the wholesale side. But yes, we're gaining market share. I think we just have our -- all our engines working and full attention, no distraction. We made a tremendous sort of integration. And now we have really the machinery working nicely close to our clients. We have over 4,000 people in the business segment. And it's just working. We're not changing anything fundamental competing on -- mostly on service, being close to clients, being predictable and obviously, being fast and agile. We can do more, and we'll keep doing more.

I don't expect gains of market share that would be significantly higher than those that we are talking about, maybe 20, 30 basis points a year is the kind of sort of cruising speed that for an institution of our size is logical. And we're pretty optimistic, I have to say. I mentioned some of the initiatives on the retail side, Facilitea on the mortgage front, on the vehicle side, consumer lending, we're gaining market share, clearly, and we have a good transformation program on the business front, taking advantage again of our size and of the recovery and obviously, bringing new initiatives. We have specialized some segments because we have both the scale and the expertise to do so.

We remain very integrated, which is a big difference with our other competitors in my view. We have all our business, private banking business and retail in various regions under the same responsible. The synergies between these businesses, particularly the business of private banking and the business segments are very significant, and that works naturally because of our DNA, our incentives and our organizational structure, I think we're basically very well equipped to compete and to win.

And we may not have shown that over the last few years because of sort of time spent in the merger and then obviously, various special circumstances with the pandemic and sort of falling volumes. Now that we see the market growing, to me, it's kind of natural that we're going to capture more share than our competitors. And obviously, that's what we're going to keep trying. Obviously, always defending profitability because it's not worth growing if you don't have the right margin. NII.

[Javier Pano Riera, executive]

NII. That's for me. Well, as I said at the presentation, we are calling the trough for NII the second quarter. So we are expecting that next quarter will be higher than the second quarter, not by a wide margin, but higher and clearly accelerating into the second half of last year.

Basically, we are still expecting a negative contribution from, let's say, client yields on that NII bridge for some more quarters as we still face negative repricing on the loan book for some more quarters. But on the other hand, this is being expected to be compensated clearly by the positive impact from volumes and also from ALCO contribution. So basically, we are reiterating our guidance for NII to be down by mid-single digit. But our expectation is to be at the lower to midpoint of that range. So I would say that this to some extent, has upside. But we stick to the guidance for the time being. But I would say, with upside.

For 2026 on the contrary, we have a clearly better view. And now we expect NII to be clearly above '25 levels in 2026. And for 2027, remember that we have been guiding for NII to be over EUR 11.5 billion. So we see now a clear upside, very clear upside, I would say, for 2027. So the dynamics are really positive. You could see on the evolution of average balances for deposits that gradual increase of noninterest-bearing deposits, well, this is very gradually filtering into the impact on NII is not having an immediate impact, but it has a compounding effect that makes us to be more optimistic beyond a certain point next year. So that's basically my message here, Maks.

[Marta Noguer, executive]

Operator, next question please.

[Operator]

The next question is from Ignacio Ulargui of BNP Paribas Exane.

[Ignacio Ulargui, analyst]

Yes. I have 2 questions, if I may. One is on deposit growth. And I mean if you could elaborate a bit, you had [indiscernible] 4%, if I remember correctly deposit growth target for the plan. I mean how do you see that evolving given the solid performance that we are having in deposits this year? And more in the short term, how confident you are about retaining the strong growth of deposits that you had in 2Q? We saw that last year, you were a bit more cautious on that, how do you see the potential capacity to retain the deposits into the second half of the year?

And the second one is looking to the strong lending growth that you have delivered in the first half. I mean, could you just elaborate a bit more on the incremental profitability of this loan growth? I mean how confident you are that market share or lending growth that you are delivering is incremental into the profitability, if you could give us a bit of essence of that?

[Gonzalo Gortázar Rotaeche, executive]

Thank you, Ignacio. Maybe I'll give some color. I'm sure Javier will have thoughts to add to it. But starting with deposit growth, we obviously had a very strong first half of the year. Again, if you look at it, so only 6 months, there is some seasonal impact on the figures. But even if you look at the last 12 months, you continue to see a growth that is sort of north of 7% per annum.

And when we talk about our strategic plan, we said customer funds generally would be in a much lower level and just above 4%. So it's obvious that there's upside, particularly in deposits where strategic plan was lower than that 4%. It was above 3%. We see the numbers and the economy being pretty good again. We were somewhat conservative in terms of how our disposable income and the savings rate evolve because they were very high.

And so far, we're seeing only particularly on the saving rate, only a small decline. We'll have to see. There's a term trade-off between the customer funds and also the strength of the economy, i.e., if the savings rates come down, we'll probably see faster economic growth because consumption in particular will go up. But so far, clearly, we have upside on deposits for this year is obvious that we're going to be above that 3%.

And I think for the whole of the plan, it's very likely that we are going to be outperforming on that front. We're not sort of now providing alternative figures for the 3-year plan because it would be very time consuming to every 3 months update on those numbers. But it's clear that we are substantially ahead. And if nothing sort of deteriorates for an unforeseen circumstance, we are certainly going to be above our targets.

Again, bear in mind on adjusted year 2025, the seasonal impact means that you cannot just extrapolate the last 3 months because that's -- that would lead to the wrong conclusions. And on lending, maybe just sort of say, obviously, we're doing this business because -- it's got to be profitable. So we're looking to risk-adjusted returns above, in fact, above 15%. That doesn't mean every single transaction that we do needs to have a pricing that goes to that level because we look at the overall relationship, whether it's an individual or whether it's a corporate or self-employed or any of our business lines, we tend to look both at what's the profitability of any given lending transaction, but obviously, making sure that we have an overall relationship picture because clients will give us ancillary business associated to lending decisions.

So on that front, we are not relaxing our standards. We see that our growth is very profitable. And if it wouldn't be profitable and when there are occasions that it is not, we just refrain or get outbeat by others because that's the nature of the business.

With that, I don't know, Javier, do you want to add?

[Javier Pano Riera, executive]

Yes. Only -- well, Ignacio, you know that we have this strong seasonality on deposits. And for us, it's really an important quarter. So it actually sets the tone for the rest of the year. So we think that we are going to be able to retain the major part of those balances. Some of those are actually really seasonal. But at the end of the day, according to our experience in the past, we have some slowdown in the third quarter, but in the fourth quarter, again recovering.

So you can assume that current deposit levels are sustainable for -- till year-end. So that's basically the main assumption. And also importantly, that chart, we are disclosing every quarter about noninterest-bearing balances evolution, and we see really good momentum on that front. So I think that we are being successful here on 3 fronts. First thing is, we are being able to pass on lower rates to market rates to interest-bearing deposits.

Second, we are being able to grow noninterest-bearing deposits, which tells you about the strength of the franchise itself. And third, at the same time, we do that. We are being able to grow, let's say, on Wealth Management or, let's say, off balance sheet. If you look at the second quarter figures, it's EUR 5 billion plus of noninterest-bearing balances and EUR 3 billion plus of Wealth Management. So this is EUR 8 billion of really high-quality customer funds that we are being able to generate. So that's, I would say, probably the best way to summarize the dynamics -- underlying dynamics we are having.

[Marta Noguer, executive]

Operator, next question please.

[Operator]

The next question is from Alvaro Serrano of Morgan Stanley.

[Alvaro de Tejada, analyst]

This might be one for Javier. Just a follow-up on your just the comments you've just made around the mix of deposits, term being down, I think it's 8.5% quarter-on-quarter and you highlighted the growth in those noninterest-bearing. My question is, how do you see that evolving? It's ticking down in terms of the substantial reduction, is that driven by inflows of deposits just being more transactional or people not bothering to roll over the term deposits given the lower rates. Just a bit of color on the dynamics going forward.

My second question is around capital. Obviously, you haven't announced a buyback and you have room to do it. Should we interpret this as a timing issue? Or do you see with that kind of loan growth that you're seeing you think you can grow into the capital. I noted -- Gonzalo, you mentioned June was particularly strong, I think that's what you meant. So is that a factor in holding back on the buyback?

[Gonzalo Gortázar Rotaeche, executive]

Sure. Alvaro, I'll just take the second question. As you said, the first one is for Javier. On the buyback, you said, is it a timing issue? And the answer is yes, it is a timing issue. We have not changed our policy and we will continue to buy back our shares when we have excess above the target, which for 2025 is 12.25%. We have over EUR 500 million, I think it's pretty obvious that it's a question of timing. We've said that we will announce buybacks when we are -- we have them approved by the Board and by the ECB and we will not comment on that during the process and -- anyhow. After 6th share buybacks, I think everybody should be pretty confident of what we plan to do, and the reality is, we're only almost -- only halfway through the 6th share buyback program. So any announcement at this stage would just be news about the future which I would expect to take place in any case, whether we say it now or we say it later. We are going to continue to generate excess capital and hence, we'll continue to do share buybacks, when we are above the targets. And obviously, we're at that level now.

[Javier Pano Riera, executive]

Alvaro, well, on the mix, you may remember that our view was that the size of the time deposit portfolio will remain -- in terms of weight on total deposits will remain pretty much stable. We think that this is the broad message. So you could see that the peak was at the fourth quarter last year, gradually trending down but not a sharper slowdown. So our view is that a client that holds a time deposit that was yielding whatsoever, 2%, 2.5%, now at maturity is being rolled over, obviously, at a lower yield, now that front book is clearly below 2%. But still, it's interesting for clients, and we believe that the size of this overall portfolio will not change that much.

In some quarters, probably like this one, you may see some slowdown, but you should work with the assumption that the pool of time deposits will remain in terms of wave pretty much unchanged. So I think that the growth of noninterest-bearing deposits has more to do with the general activity of the bank, client acquisition. So we have over 300,000 more clients last 12 months. So we are gaining payroll. So basically is more activity in the bank, not only individuals but also I have to say, SMEs and corporates. Also, they hold part of their deposits as noninterest-bearing deposit because of basically operational balances. We are really strong in terms of cash pooling payments, all those kind of things. So we are being able to retain a large chunk of those deposits as zero cost in exchange of all the services we provide on those activities. So it's -- in our view, this will continue to grow at least for the foreseeable future. And you know that this is a key lever for NIIs in the future. Clearly, it's one of our strengths. And we think it's going to be there.

[Marta Noguer, executive]

Operator, next question please.

[Operator]

The next question is from Francisco Riquel of Alantra.

[Francisco Riquel, analyst]

Yes. I have 2 questions. The first one is, if you can please update on the guidance for cost of deposits that you gave in the last quarter. And this time, if possible, including and excluding the hedges so that we can see the underlying performance on how the hedges are also impacting your margin dynamics? And also, if possible, the front book of the interest-bearing deposits versus the 1.92% of the stock.

And my second question is, you change revenues, provisions, but you just fine-tuned the ROTE guidance to above 16% when you are printing above 18% in the first half. So what is preventing you from a bolder change in the ROTE guidance. Shall we expect any write-down or restructuring charges in the second half of the year?

[Gonzalo Gortázar Rotaeche, executive]

Thank you, Paco. I will take the second one. No, I don't expect anything extraordinary. We actually haven't put a lot of fault on the bottom line at this stage as we do not usually guide for the bottom line. But we are conscious that as we upgrade guidance on cost of risk and on revenues from services, it kind of leaving a 16% was not making this very credible. So we just said it's not fine-tuning. It's just removing a limitation of consistency in our guidance. I'd say it is not going to be 16%. It's going to be over 16%. We're not putting any focus now if that over -- 16% is going to be just over 16% or comfortably or very comfortably above 16%. We'll see as the year evolves. I wouldn't put too much weight on that number and much more on whatever your assumptions are of how well we can do. And obviously, based on the guidance we're giving for the top line and cost of risk, I would certainly not expecting anything extraordinary or negative in the second half of the year.

[Javier Pano Riera, executive]

Paco, well, in terms of guidance on the interest-bearing deposits, we are expecting that for this year, on average, for the year, it's going to be in mid-50s. That is a small upgrade because I remember well, we said mid- to high 50s, so mid-50s. But keep in mind, those are -- this is the yield ex foreign exchange and hedges, and I come back to that. But already in the fourth quarter being below 50. And so we're expecting to end the year below 50. So if you try to forecast into 2026 clearly, you have to take that as a base.

The difference between with and without hedges is going to converge very soon. You know here, the effect is that the floating rate leg of the hedges is now approaching the fixed rate level of the fixed rate leg. So you no longer have, let's say, a negative carry on the hedges. So basically, you should assume that by the end of this year, the difference will be 1 or 2 basis points up or down, but pretty much the same between each other, okay?

In terms of the front book of time deposits, we are currently in the 160%, 170% area as of the latest figures of the quarter. Keep in mind that we have approximately 50% of our interest-bearing deposits that are indexed and the major part, probably 80%, 90% to the overnight rate, so as a result, we have -- what clearly in that sense, there is like a faster repricing. It's a little bit contradictory because you have like a faster repricing on what is, let's say, corporate funds than retail funds because retail funds, you need to wait until the rollover of the time deposit that per se is no longer than 12 months. So we have an average life of our time deposits shorter than 6 months.

But the repricing of large corporate balances is done almost automatically once there is an internal rate cut because it's linked to the overnight rate. So that's basically the situation. So you can expect that interest-bearing part to keep trending down in coming quarters.

[Marta Noguer, executive]

Operator, next question, please.

[Operator]

The next question is from Andrea Filtri of Mediobanca.

[Andrea Filtri, analyst]

Could you give us an idea of what kind of cost of risk do you expect in the coming years? And should we expect other DTA breakups in coming quarters?

[Gonzalo Gortázar Rotaeche, executive]

DTA. Okay. On cost of risk, Andrea, I would say, we see very good benign scenario. And hence, the current numbers are numbers that we expect to see not just this year but beyond this year, you move sort of to the longer term. We need to see what the macro environment is. But to be honest, this stage, the 2025 cost of risk is a good indicator for future years as well.

[Javier Pano Riera, executive]

Andrea, yes, on DTAs, write-backs, we are expecting this to be almost recurrent. So I think that you can take the average of the first half as I would template for what may come for the second half. It's not exactly the same every quarter. This quarter, for example, has been a little bit higher as we have been able to incorporate some deductions. So no longer only tax losses carried forward, also some deductions.

And well, this is -- well, it's really a complex issue and you cannot forecast exactly the same amount for every quarter. But I think that taking that average is fine for projection. And beyond '25, I think that this is something that will continue to be with us. I cannot recommend now exactly by which amount, but as the profitability of the bank has clearly recovered, we are being able to write back DTAs. And this is, as I say, it's going to be with us for the future.

[Marta Noguer, executive]

Operator, next question, please.

[Operator]

The next question is from Britta Schmidt of Autonomous Research.

[Britta Schmidt, analyst]

My first one would be on the RWA growth. The organic growth was -- or the organic capital decline due to RWA was 33 basis points this quarter versus 50 basis points in the last quarter. How much of that do you put down to the seasonality in lending? And what is the outlook there for the coming quarters given loan growth is still expected to remain quite strong?

The second one will be on the pricing competition. Could you give us the front book yield of your new business in the second quarter? I know it was 376 basis points in the first half, but what was it in the second quarter? And how does that compare to the 373 basis points back book in CaixaBank ex BPI. And do I understand it correctly that you're basically saying that a greater product franchise would allow you to be more competitive on the pricing of the loan book. And then lastly, maybe just a question on whether you had any comments on that regarding any news regarding the BFA IPO?

[Gonzalo Gortázar Rotaeche, executive]

Okay, Britta. Let's -- I think Javier maybe you can take...

[Javier Pano Riera, executive]

Okay. Britta, well, it has been really a strong quarter for lending. It has not been only lending, but also we have had guarantees, have had an exceptional quarter in CIB, as I said. So some probably single large impacts that we don't think are going to be recurrent in coming quarters. So I think that the second quarter sets the tone for the rest of the year, but you should not expect that pace of growth in coming quarters.

The third quarter is, well, seasonally weaker because you have the summer break, et cetera. then you have the fourth quarter again with better traction. So we think that our loan book this year is going to move up by approximately 5%, probably 5.5% less than 6%. If you look at what we have already done so far year-to-date is quite the bulk of that growth.

So you should not expect that same pace of risk-weighted asset growth for the next few quarters. Also, we have quite a nice pipeline of risk-weighted asset management tools that will be deployed during the second half, probably more during the fourth quarter. And well, we don't think that we have an issue with that. So we plan to generate capital above what is being deployed in terms of lending. And as I say, it's a quarter with -- we can qualify to some extent, exceptional with quite a larger than expected loan growth.

In terms of pricing, you asked specifically for the front book yield in the second quarter is 364 basis points. The average for 12 months Euribor as an indication for market rates, it's slightly over 2%. I think it's 2.1% or something like that. I had my notes. So as you may see, broadly speaking, it's this kind of 150 basis points margin we have been talking about.

You have clearly some segments with a tighter margin like mortgages, but then you have segments with a wider margin like consumer lending, probably compensating a little bit each other. And then as a base case for, let's say, SME lending precisely those 150-basis points area.

And there was a final question about the IPO in BFA. Well, in this case, we had this more uncertain situation in markets in general in this second quarter. So this is what we have been told is that still ongoing. So eventually in the second half of the year is something it may happen. You know that in any case, if you consider that this transaction let's assume that it's done at book value, the impact in terms of capital is not that material. It's like 1 or 2 basis points CET1. You know that the value of this investment in our books is EUR 300 million. So that's basically with our risk weighted at 250%. So you can do the math very easily.

[Marta Noguer, executive]

Operator, the next question, please.

[Operator]

The next question is from Pablo de la Torre Cuevas of RBC Capital Markets.

[Pablo de la Torre Cuevas, analyst]

My first one was on deposit growth. You've chosen not to increase the size of the structural hedge this quarter despite really healthy growth in noninterest-bearing balances. Could you just, I guess, remind us what is the short-term and long-term assessment that you consider to decide whether to increase the size of the ALCO book or the hedges? And what are the key trade-offs here that you consider? And maybe how could this change in the second half of the year if you expect it to change?

And the second one is just a follow-up on shareholder distributions. You explained that the buyback issue is just a matter of timing. But have you may be considered committing to a more structured buyback cadence? And maybe can you just update us as well on the return on investment and how it compares with alternative uses of capital at this stage?

[Gonzalo Gortázar Rotaeche, executive]

Thank you, Pablo. On the second point, I'm not sure I understand when you say something more structured for our capital distribution. To me, is very structured from the point of view that we have pay out 50 to 60 and then certain capital target. And then once we go above those capital targets and when there is obviously enough amount of distributable to avoid doing very small share buybacks, then we make them effective. And that is what we've been doing.

And we've said that we will announce once they are formally approved, not when we submit requests so that gives you an indication of the kind of policy we follow. And obviously, the timing is not just subject to us, but also to the made -- the logical timing lag of these processes.

And given that we have a share buyback that is only not even half executed now that is ongoing. We feel we have time, but it's, I think, fairly predictable. And it's been in place for some time how we deal with these things.

In terms of the return on investment of buying back our shares with respective to other alternatives as we are now actively considering M&A is really a judgment on what is the value -- the underlying value of our shares, what are our expectations? I tend to think that management tend to be not the best predictor of future share price performance in their statements. And hence, what we do is we execute and we take the market price unless there are some very special circumstances, where we take the market price for a reflection of the appropriate price for us to execute a share buyback and just make sure that we do it over a period of time that is long enough that we do not affect the market.

And obviously, if at some point, the circumstances change for the better, would have looked at as a great investment, like, to be honest, we have spent EUR 8 billion in buying back -- sorry, we have spent -- basically bought 1 billion shares at EUR 5 per share. So we've invested that close to EUR 4 billion plus what it's still to be executed. And obviously, 1 billion shares today would be worth EUR 8 billion, so that's great, but that's great because the market has gone up in retrospective, it was one of the most sort of value creative decisions we have taken.

To be honest, when we look at our prospects and discuss them, we're upgrading guidance. We're looking at the factors that support us upgrading guidance as sort of longer term, more structural than just the sort of fashion of the quarter the trends in growth and lending and customer deposits, the stability of rates, the forward curve, the low cost of risk, all that suggests that we have actually good times ahead and hence, the return of our investment in buying back shares seems to us quite an attractive one. But it's based on the fact that we're going to need to take the market price as an indicator of what a bank is worth as much as we would like to think that is worth much more, which we may well think, but it's not that relevant for investors. So we'll continue to take action on excess capital and give it back to shareholders unless at some point, there are very special circumstances, which we certainly do not foresee.

[Javier Pano Riera, executive]

Okay. On hedging, Pablo, well, there are different factors. You mentioned deposits. That's a key factor influencing hedging, but also you need to take into account the dynamics in terms of fixed rate lending. So there are several factors, also the maturity of hedges legacy portfolio. So it's quite complex. We monitor all that constantly. And basically, it has been a quarter where instead of using derivatives, what we have done is to use fixed income securities. But economically speaking, is the same to -- in terms of NII sensitivity, it's the same to buy fixed income securities or to do derivatives receiving a fixed-rate leg. So it's the same.

We have a natural tendency that when we decide to add longer maturities. So longer duration, we have the tendency to use fixed income because then you capture the sovereign spread, and that is a sovereign spread that is last year as you purchase longer-term securities. But we are quite opportunistic on that. So I mentioned at the presentation that derivatives continue to be a key tool, and in any case, it's going to be used in the future for sure because we will need to roll over or as you suggest to increase hedging as our deposit base keeps growing. So that's basically the plan. So we have liquidity, so we can invest into fixed income. And obviously, we have the ability to add hedges, both.

[Marta Noguer, executive]

Operator, next question, please.

[Operator]

The next question is from Seamus Murphy of Carraighill.

[Seamus Murphy, analyst]

Sorry, I have 3 questions, actually, which are all kind of related. What share of your NII do you think comes from the value of your deposit franchise, including the hedge? I mean, we think it's about 70% to 80% of your NII comes from this site, which will obviously grow over time. I just want to get some idea of your own thoughts around that or whether that's a fair number?

Second thing is, given the strength of your deposit franchise growth and your ability, obviously, to redeploy that into longer-term hedges, what do you think the front book incremental return on capital is for your franchise or for that franchise? Because obviously, there's a zero cost of risk on your deposit growth? And does -- if it's really being redeployed into a bond portfolio, then the RWA intensity is obviously really low.

So I just want to try and understand how you think about that in terms of as we look forward into '26 and '27? And then the last question is back on the hedge again. Just a small number is, obviously, when you look at the hedge when I add up the ALCO book plus the swap book, basically, I get to around EUR 127 billion, but your total noninterest-bearing accounts is somewhere like around 290. So I just want to understand, is there a fixed rate mortgage portfolio as well that's kind of backing -- that's backing the hedge or is your hedge capacity really only running at 50% of total? Or is there something else that I'm not thinking about when I think about the repricing of your current accounts gradually over the next 3 to 4 years, i.e., is there a fixed rate bond portfolio -- sorry, fixed rate mortgage portfolio and also does the hedge that you have include the equity hedge? Is that a separate component?

[Gonzalo Gortázar Rotaeche, executive]

Seems you're going to be busy.

[Javier Pano Riera, executive]

Yes. I'm very busy. I'm not sure I'm going to have an answer for all your questions, but I will try. In terms of the last question about the equity, no, we are not including the equity in terms of hedging. I understand that some banks are doing so, probably in the U.K., but it's not that common in Europe, but the short answer for us is that we are not doing so.

In terms of the noninterest-bearing deposits. So basically, we have hedges being the fixed income portfolio or these swaps receiving fixed rates, so you combine everything and you're doing right. But you need to incorporate also basically more hedges which is also a long-duration asset. Here, you need to make some assumptions on prepayments, which at some point may be relevant. So there is some kind of optionality embedded on that because with lower rates, theoretically, prepayments should accelerate. So you need to work with an assumption a model on the topic in terms of which is actually the real duration of mortgages, fixed rate mortgages to maturity.

But yes, I think that actually, this is offering -- giving us a competitive advantage because we have like a natural hedge in the balance sheet for our fixed rate mortgage production.

Your first question was about which was the share of NII from deposits? Well, basically, if you think about customer spread, let's say, circa 300 basis points eventually and maybe at some point, slightly below that. But let's assume 300 basis points to make the math easier. I think that you should think that 150 are coming from the asset side and 150 are coming from the deposit side. And that those 150 on the deposit side, obviously, is the mix from interest-bearing and noninterest-bearing.

So those are the, let's say, back-of-the-envelope numbers. Then obviously, NII is not only customer, customer spread. You have ALCO, you have wholesale funding, et cetera. So it's more complex than that. But when talking about customer deposits as a share of the customer spread, I think, is approximately 50%.

And the last one, but I am afraid I am not going to be able to give you an answer, although we'll do the math, and we can come back to you in any meeting or call is about the return on capital about deposits. But in any case, it's massive, because first thing, it is not only funding ALCO, so it's not only funding the sovereign. So it's also funding mortgages, but mortgages are basically non -- with low density. But if you think about only the -- what is, let's say, the excess of our deposit base that is funding, let's say, low density assets like the sovereign fixed income portfolio or mortgages then obviously, the return on capital is really high. But honestly, I don't have an answer, although I will think about it and try to give you to review an answer in the future.

[Marta Noguer, executive]

Next question please, operator.

[Operator]

The next question is from Ignacio Cerezo of UBS.

[Ignacio Cerezo Olmos, analyst]

I've got 2. The first one is on the international lending book, EUR 31 billion, growing 10% year-to-date. I think I've seen in the presentation. So if you can give us bit of information from a kind of geographical point of view, type of client yield duration, main KPIs basically of that book. And the second one, I'm sorry, might be open ended actually but is there any way that you can explain to us actually if there is a regular pattern of customer fund flows within the different products, i.e., the deposits basically noninterest-bearing deposits you're capturing. Is there kind of a normal behavior actually by which percentage of those deposits move to time deposits and deposits move to balance sheet. Maybe I'm not making myself clear, actually. Just trying to understand a little bit, actually how the customer fund flow works between different products?

[Gonzalo Gortázar Rotaeche, executive]

Second, complex question, but give some time to think, Javier and maybe I add something. But first question on our international presence. This is mainly done through our branches. We have the largest branches in the U.K., Germany, Paris and Milan. We also have one in Warsaw, but our business in Poland because of the size of the market is relatively smaller compared to the others. This is all geared towards investment-grade clients. We have actually have a strategy of growing this slowly over the last 11 years, and we have had basically no accidents, had a very good credit quality in this portfolio.

It was originated based on 2 factors. The large corporates that operate in Spain, and we are one of the main banks and they want us to be bankers at parent company levels. And once you have that relationship and that is significant enough, we obviously have developed business with some of the large corporates in France, Germany, U.K., Italy, where we didn't necessarily have the same intense relationship.

Nothing, I think, particularly notable other than this. It's profitable. It's double-digit return on tangible equity. And at this stage, you should expect growth to slow down, certainly in percentage terms as we have, I think, even it will want to grow, we now have a decent size and what we want to keep is increasing the number of services and products that we are able to cross-sell in these situations. Again, starting from fairly attractive return on equity, which, as I said, is double-digit already, but where we think we have room to make it even more profitable. And the other point in terms of customer flows...

[Javier Pano Riera, executive]

I can try.

[Gonzalo Gortázar Rotaeche, executive]

I think it depends. It will be my answer. Javier, go ahead.

[Javier Pano Riera, executive]

Well, here, I think that we have gone through a structural change when rates started to be positive. So I think that we had on current accounts, almost 100% of our deposit balances when trades became positive. We had a large shift to time deposits from customers that were actually like, I would say, risk averse or not willing to commit for loan duration products, et cetera.

And the bulk of that process is done. And to a previous question, I answered that we are expecting that part that portfolio of time deposits will remain pretty much stable in the future. So that's our view. So from here, basically, assuming that, that remains stable and we have like a stable base of savings that are, let's say, into, let's say, risk less time deposits.

From here, we have a natural process of inflows into customer funds that what is being more operational and new clients and, let's say, operational buffer for households, et cetera, remains in a current account, and that drives that increase basically on noninterest-bearing balances.

And then what is, when those same households start thinking about savings and planning for the future, planning for retirement, we were commenting in initiatives, this Generacion +, et cetera, that tends to be done, let's say, with off-balance sheet solutions. And -- also to our previous question, I answered, well, look, this quarter, we have had EUR 5 billion more average noninterest-bearing balances while we have had EUR 3 billion of inflows into, let's say, off-balance sheet solutions.

I think that once we have this time deposit portfolio pretty much stabilized and not set to grow much. I think that we are back again to a situation where we have inflows that go to noninterest-bearing balances because are operational and then the excess or when people think about savings moves automatically to off balance sheet solutions. This is the broad picture, obviously then.

In the meantime, you have some time deposits that are being canceled and moved to off-balance sheet and new money that moves to time deposits. But we're trying to incentivize the long-term planning for savings. You know that being the financial advisers for clients, so I'm bringing down a little bit the threshold for this kind of assessment and not only for private banking clients and ultra-high net worth, et cetera. But this kind of level that is below that, which is affluent clients, we call it internally premier banking. We are really strong on that part. And -- and usually, when we try to manage that portion has a natural tendency to move off balance sheet.

[Gonzalo Gortázar Rotaeche, executive]

And if I may add, in the longer term, obviously, what you have is sort of a life cycle of our customers, combined with some higher sophistication of financial education, which we've been working on for decades. And obviously, as people are more conscious of their saving needs, this is very much in line with what Javier said. So I'm not just further clarifying it from that point of view. People have -- are more conscious of their saving needs when as they go through the way and get closer to retirement.

And if they have the appropriate advisory and education, and that's not just us, it's also the whole system. They are going to start being ready to take some credit risk or volatility, let's say, intrinsic risk and particularly also duration investment horizon, and this is something that needs to change. This is a lot of -- when people talk about the savings and investment union, you look at the situation in Europe and actually we have plenty of savings and liquidity more than in the U.S. And in fact, that's what you see real rates in Europe always lower than the same equivalent in dollar that are relatively there is more savings in Europe than investment opportunities compared to the U.S.

But there's not enough financial education for people to understand that rather than keeping the money in the bank in one form or another, they need to invest, thinking -- for me, saving insurance is a great example of the kind of investment that you need to make and what you can get much higher returns and at the same time, be protected from an actuarial point of view for by a longevity or mortality depending on the product and your moment in the life cycle.

This is a long way, and it's structurally a very attractive one for institutions like us that are very strong, both in transactional deposits, but also in long-term saving products, where we, in fact, have a higher market share. But this is a very slow process. We saw part of it when rates went negative because, obviously, that was a very big incentive both for banks and clients to look for other products.

Now we do not expect fortunately negative rates, and we're in the 2% to 3%, the incentive is lower. But clearly, you should expect to have a higher return on your investments. If you invest longer term and you move away from sort of banking deposit type of product. And there, I think we will continue to go back to a structural trend where our sort of off-balance sheet business is going to keep growing faster than our on-balance sheet business. The good thing with the current dynamics is that we are seeing basically both growing at attractive levels. But this sort of how the money flows. When you look at 10 years, people are going to hopefully have more of their investments in longer-term products, as Javier said.

[Marta Noguer, executive]

I'm told that this was the last question. So thank you, Gonzalo. Thank you, Javier. Thank you all for joining us another quarter and have a wonderful summer.

[Gonzalo Gortázar Rotaeche, executive]

Thank you very much.

[Javier Pano Riera, executive]

Bye-bye.