BBVA

Good morning, everyone, welcome to BBVA's second quarter results presentation. Joining me today are our CEO, Onur Genç, and the group CFO, Luisa Gómez Bravo. As in previous quarters, Onur and Luisa will begin by reviewing the quarter figures, after which we will open the line for the live Q&A session. With that, I turn it over to Onur.

Thank you, Patricia. Good morning to everyone. Welcome, thank you for joining BBVA's second quarter 2026 earnings webcast. Before we begin, I would like to say a few words about Luisa, as this is her last results presentation as the CFO of BBVA. In very short, few sentences, we are a 169-year-old bank. 169-year-old bank built by generations of exceptional professionals, in my view. Exceptional professionals like you, Luisa. Over the past few years, we have delivered some of the best results in our history, and I would like to recognize the fact that you have been one of the architects of that success. I'm very pleased that you will continue to be connected to the bank as a board member of some of our most important subsidiaries so that we can continue to benefit from your experience and judgment.

In short, Luisa, thank you for your leadership, your professionalism, everything you have done for this institution. It has been a true privilege to work with you. Now, let me start with the quarterly results. In short, once again, we have demonstrated, in my view, the strength of BBVA's business model. We have delivered record earnings, industry-leading profitability, strong activity growth, exceptional activity growth, and capital generation while reinforcing our competitive position across two different geographies. Let me start with slide number three, one of the most important messages for the quarter. As always, we continue to deliver outstanding value creation for our shareholders. On the left-hand side of the page, you can see the strong evolution of tangible book value per share plus dividends, which increased by 17.3% year-over-year and 5.4% in the quarter.

Very strong figures, which are even better if you exclude the impact of the share buybacks, the growth goes up to 21.8% year-over-year, an outstanding figure. This strong value creation was mainly supported by the record earnings, obviously, together with a positive contribution from the exchange rates in the quarter, particularly the appreciation of the Mexican peso. On the right-hand side of the page, our profitability ratios, they have further improved, reaching a return on tangible equity of 22.2% and the return on equity of 21.1% for the first half of the year, placing BBVA as one of the most profitable large banks in Europe. On page number four, on the left-hand side, another record quarter as we discussed in net attributable profit, reaching EUR 3.062 billion, 11.4% increase year-over-year, and 2.4% growth versus the previous quarter.

Earnings per share at the bottom, it grew even better at 15.2% year-over-year, thanks to the share buyback programs actually executed over the period. In cumulative terms, net attributable profit in the bubble, it reached EUR 6.051 billion in the first half of the year. On the right-hand side, our CET1 capital ratio, it improved seven basis points during the quarter to 1,290. Strong results, SRT transactions more than compensate for the impact of exceptional loan growth and shareholder distributions. Moving to slide number five, this slide illustrates what I believe is BBVA's truly unique profile that we talk about from time to time, but our ability to combine strong growth with best-in-class profitability consistently along the years. On the left-hand side, since December 2020, our loan book, it has grown by 62% in current euros compared with 10% for our European peers.

This reflects the strength of our leading franchises wherever we are, also I think it points to our ability to gain new customers and growing our customer franchise. Importantly, this growth, we always pay attention to this and we always talk about this, but this growth has not come at the expense of returns. As shown on the right-hand side of the slide, starting at more or less the same initial point with the peers, we have widened the profitability gap versus our peers over the same period. As mentioned before, today, our return on tangible equity stands at 22.2%, well above the 15.1% of the peers. Profitable growth is the best predictor of future value creation, and this is precisely what BBVA continues to deliver.

Moving to page number six, this page summarizes the key financial messages of the quarter, which I will cover in more detail in the following slides. Let me move directly to the next page, slide number seven. As usual, the summarized P&L for the quarter. If there is one thing to highlight, I would highlight the excellent performance of the core revenues in both annual and quarterly comparisons, serving as the main drivers behind our net attributable profit growth. Slide number eight, the summarized P&L for the first half of the year. Similar to quarterly evolution, as you can see, our solid revenue and core revenue growth, once again, are the main drivers behind the outstanding EUR 6.051 billion of net attributable profit, double-digit growth both in constant and current euros. As usual, some more light into the revenue breakdown on slide number nine.

Both components, as I mentioned, our core revenues continue to contribute very positively to our results and in a very consistent manner. We call this chimenea in Spanish, the chimneys. They have been growing very nicely, again, in a very consistent fashion. As you can see, net interest income growth remains very strong, increasing by 17.8% year-over-year and 2.1% quarter-over-quarter, supported by very robust activity growth. Net fees and commissions continued their excellent trajectory, up by 16.2% versus the same quarter last year, driven by payments, asset management, and the higher contribution from CIB. Net trading income increased by 13% year-over-year. Yet, as you can see on the page, declined quarter-over-quarter due to a more normalized contribution from the global markets following the exceptionally strong performance in the first quarter.

As you can imagine, we are benefiting in general in a major way from the currencies. You get a small hit out of this in the net trading income. There were some losses from the FX hedges, especially related to the Mexican peso appreciation. All in, gross income is increasing by 15.7% year-over-year and broadly stable versus the previous quarter. Moving to slide 10. I like these pages because they give signals about the future as well. Let me focus on activity and loan growth, which remain as the key drivers of NII. At group level, our loan portfolio grew by an impressive 17.7% year-over-year at constant EUR and around 20% in current EUR loan portfolio. On this slide, we focus only on Spain and Mexico, our two largest markets, where lending activity continues to evolve very positively.

Talking about growth, it's worth mentioning once again that from time to time, we highlight this, we have deployed micro capital planning tools to all of our geographies in the past few years. Using these tools, we maintain, as we grow, a strict profitability discipline around growth by measuring, I'm not sure whether there's any global bank to do it at this level of detail, we are measuring the return on capital metric on a loan-by-loan basis in any part of the world. When Peru originates a loan, immediately we see what the return on capital metric on that one is, and we have clear mechanisms to manage that process. Going back to the slide, in Spain, loan growth accelerated to 7.4% year-over-year, while in Mexico it remained close to 10%.

In both markets, growth is being driven by the key profitable segments, consumer and the credit cards on the retail side, and private enterprises on the wholesale segment. As shown in the center of the page, the growth for these profitable segments is clearly above the total loan growth. As a result of all of this, net interest income growth in Spain is at 4.5% year-over-year and 8.9% in the case of Mexico at constant EUR. Moving to slide 11 and continuing with the deep dive in Spain and Mexico, this page shows how our growth goes beyond the overall industry growth in a consistent manner once again and gives positive signals for the future.

On the left-hand side of the slide, in Spain, we have increased our total loan market share by 84 basis points since the end of 2020, the improvement, as you can see on the page, has been even stronger in those key segments that I mentioned, with gains of 276 basis points in consumer, 249 basis points in enterprises. On the right side of the page, BBVA México, an amazing franchise that we have, remains the clear market leader in total loans and across, again, main lending segments. Similarly, since 2020, our total loan market share has increased by 272 basis points to now 26.17% market share. Again, this is particularly noteworthy. Let me not go through the numbers, all the key segments we are gaining basically market share, and this is even more important in the context of fintech players in the market.

Despite newcomers, despite very aggressive competition, we have continued to improve our market position. Moving to slide number 12 on efficiency. On the left side of the slide, gross income grew by 16.9% year-over-year in the first half, while expenses increased by 17.9%. It is important to note that growth rate for expenses, we have discussed about this in the previous quarters, but it is impacted by two non-recurring impacts. The voluntary redundancies implemented in the first quarter, especially in Spain and the holding, the effect was mainly in those two areas. Then the extraordinary VAT regularization booked last year in the second quarter and a remaining amount this quarter also. Excluding these effects, you see it in the bubble, cost growth rate would have been 14.5%. Again, maintaining our positive jaws, which is important to us.

On the right side of the slide, our efficiency ratio, it stood at 37.8%, clearly better than our guidance for the year. Excluding the mentioned non-recurring effects, the two of them, the VAT and the redundancies, the ratio actually would have improved by 77 basis points in the first half. In short, we continue to deliver industry-leading efficiency ratio while investing on growth and transformation. Turning to slide number 13, asset quality. Asset quality metrics, they remain very sound during the quarter despite the context of macro uncertainties, strong activity growth, especially as I mentioned in the most profitable segments. Despite all that, very sound asset quality metrics. Starting with the cost of risk on the bottom left, it stood at 143 basis points for the first half of the year, improving from 154 basis points in the last quarter.

This improvement, it was supported partially by a portfolio sale that we did in Spain. Overall, underlying provisioning requirements, they remained broadly stable, even better than expectations in most geographies, except for retail portfolios in Türkiye and in Argentina. Even in those situations, we see some elevated levels, but some contained stable levels. Looking ahead, based on the underlying trends, we expect cost of risk to remain around current levels at the end of the year. On the bottom right, very quickly, our NPL ratio and the coverage ratio, they remained broadly stable year-to-date. Slide 14, the next page. On capital, we have generated seven basis points of CET1 during the quarter, driving the ratio to 1290, increasing the room for further capital remuneration. First, on the left side, following the waterfall, main impacts of the quarter, strong results, 75 basis points.

Dividend accrual and AT1 coupons, -40 basis points, then -41 basis points due to the RWAs growth. This figure also includes the result of the several risk transfer transactions, SRTs, which positively contributed six basis points to the ratio in the quarter. We have a bucket of others on the page and the waterfall of 13 basis points, which comprises, among others, the market-related impacts and the credit in OCI for the hyperinflationary countries. On shareholder remuneration, on the right-hand side, I want to highlight that we will be completing the EUR 4 billion share buyback program approved at the end of last year in December, in the next few days. We will be finalizing the whole program in the next few days. August 3rd is the final date.

Thanks to the strong results that we are presenting today and our solid capital position, we are announcing today the launch of a new EUR 2 billion extraordinary share buyback program with the first tranche amounting to EUR 1 billion, which will begin on the 5th of August. Page 15. Let me update you on the advances in the execution of our AI transformation strategy. Again, at BBVA, our DNA, it has innovation and transformation written all over it, and we are determined to lead the AI transformation in banking as we did, in our view, in digital transformation. On that path, the first step was to promote the adoption of artificial intelligence tools across the organization. Today, these tools are part of our team's daily work, with more than 100,000 teammates already actively using AI within the guidelines obviously established by the bank.

At the end of last year, you might remember, we introduced the eight, our top-down and bank-wide strategic roadmap on very specific initiatives to embed artificial intelligence across the group's key areas and functions. Now we are taking the next step with the frame to create, deploy, and manage AI agents at scale. In our view, this is important. This is a key milestone in the industrialization of AI agents across BBVA. It will provide a common framework for governance, architecture, security, and performance measurement of agents, allowing us to accelerate implementation while maintaining rigorous control over risks, over costs, and outcomes. We have also reinforced our organizational setup for AI. As you might have seen in the last few weeks, we have brought together the relevant capabilities together under an AI transformation unit represented at the highest level.

We will further provide details on all of this, on our AI strategy and progress, at the next BBVA strategic talks, which is scheduled for October the 6th. Finally, moving to page number 16, regarding the evolution of our financial goals for the 2025-2028 period that we shared with you last year. I will not go through each one of them for time, but what I can say is that after 18 months of execution of the strategic plan, which we launched in January 2025, in general, we are performing ahead of our original expectations in the key metrics. Now for the business areas update, I turn it to Luisa.

Thank you, Onur, thank you very much for your very kind words at the beginning of this presentation. Looking back at over 25 years with BBVA, I am profoundly grateful for the continued learning opportunities and the great people I have worked with. While I didn't anticipate stepping off the train at this particular station, I find myself looking forward with optimism toward the new journeys that lie ahead, including staying connected to the bank, as mentioned by you. Onur, the privilege has been mine, a word I use in its fullest sense to describe the profound respect and admiration I have for you as an exceptional leader, but more so as an amazing person, a unique combination. I also want to extend my heartfelt thanks to everyone on this call, sell-side and buy-side analysts, PMs, rating agencies. Your challenge has been a continuous source of self-improvement.

Never a dull moment. Before I get too emotional, the show must go on. Let me start with Spain on slide 18, where we delivered another strong quarter. Net profit reached EUR 1.1 billion in the second quarter, bringing first-half earnings to EUR 2.2 billion, up 2.3% year-over-year. This performance was underpinned by another solid increase in net interest income, up 4.1% year-over-year, supported by strong commercial momentum and effective pricing. Loan growth remained very robust, increasing by 7.4% year-over-year, as mentioned by Onur, and 3.3% quarter-on-quarter, with broad-based growth across all customer segments. Momentum remained particularly strong in consumer lending, as well as in mid-sized companies and corporates outpacing the overall loan growth. Customer spread improved also in the quarter by three basis points, reflecting effective price management in a context of higher rates while maintaining the cost of deposits contained.

Turning to fees, commissions increased by 2.2% year-over-year. The decrease you see in the quarter mainly reflected lower CIB-related fees after an exceptionally strong first quarter. This was partly offset by continued growth in asset management and a solid contribution from card fees this quarter. Costs remain well under control. Operating expenses increased by 10.3% in the first half of the year, mainly reflecting the one-off items already mentioned by Onur. Excluding the impact of the one-offs, underlying costs increased by 5% year-over-year and 3.8% quarter-on-quarter. Our efficiency ratio remains best in class at 33.6%. Asset quality also continued to improve. This quarter, supported by the sale of a mortgage portfolio, the NPL ratio declined further to a new historical low of 2.86%, while coverage increased to 71%.

Cost of risk stood at 31 basis points in the first half of the year, fully in line with our low 30s basis points guidance. Overall, Spain delivered another very strong quarter with strong commercial momentum, continued revenue growth, disciplined cost management, and very solid asset quality metrics. Turning to Mexico on slide 19. Once again, BBVA México delivered an excellent quarter. Net attributable profit reached EUR 3 billion in the first half of the year, increasing 8.2% year-over-year and 3.4% quarter-on-quarter in constant euros. Net interest income increased by 2.7% quarter-on-quarter, supported by solid loan growth across both retail and wholesale businesses and a higher contribution from the ALCO portfolio, which largely offset the customer spread compression in the current easing rate cycle. NIM remains broadly stable both quarter-on-quarter and year-over-year.

Fee income continued to perform well, supported by higher activity in asset management as well as solid performance in credit card and CIB-related fees. Overall, strong gross revenues performance supports an outstanding efficiency ratio of 30.8% while we continue to invest in future growth. Asset quality remained also very sound. Impairments declined during the quarter, supported by solid underlying credit trends along with a small positive one-off impact. As a result, cost of risk improved to 326 basis points. Based on this performance, we now expect the cost of risk to the end of the year below 335 basis points, ahead of our initial expectations. Overall, Mexico continues to deliver a very strong performance. Based on this performance, we are upgrading our full-year guidance.

We now expect loan growth of around 10%, net interest income growth at high single digits, and cost of risk, as I mentioned before, to end below 335 basis points. Moving now to Türkiye on slide 20. Garanti BBVA delivered resilient results in the second quarter, supported by strong fees and lower impairments. Net profit reached EUR 269 million. First half earnings reached EUR 532 million. Looking first at revenues, net interest income declined on a quarterly basis, mainly reflecting a significantly tighter TL customer spread as funding costs remain elevated. This was partly offset by strong growth in fees and commissions supported by continued business activity, particularly in payment systems. The other income line benefited from a stronger contribution from the insurance business, while the hyperinflation adjustment remained broadly stable quarter-on-quarter.

Turning to asset quality, cost of risk stood at 236 basis points year to date, reflecting still elevated provisioning needs in the retail portfolio, as Onur mentioned, in a higher for longer interest rate environment. Underlying asset quality trends remain broadly in line with our expectations. However, the normalization of the retail portfolio is taking longer than previously expected due to the current macro environment. As a result, we are updating our full-year cost of risk guidance to around 220 basis points with an expected better second half of the year, but still above our previous guidance of 200 basis points. Let's turn now to South America on slide 21. The region delivered another very strong quarter. Net attributable profit reached EUR 308 million in current EUR. First half earnings totaled EUR 556 million, up 33.6% year-on-year in current EUR.

This performance was driven by solid revenue growth across all our main franchises. Net interest income increased by 23.7% year-on-year, supported by strong lending growth across our core markets, primarily in Peru and Colombia, and higher spreads. Fee income continued to perform strongly across the region, driven by higher activity in fee-generating businesses and pricing initiatives, reflecting our strategic focus on strengthening this revenue stream. Strong revenue growth of 21.6% year-on-year continued to translate into solid positive jaws, driving the efficiency ratio down to 41.5% in the first half of the year. Turning to asset quality, cost of risk improved to 269 basis points in the first half of the year.

Looking ahead, we expect cost of risk to continue improving and converge toward full-year guidance of below 250 basis points, supported by solid underlying trends in Peru and Colombia, as well as a gradual improvement in asset quality metrics in Argentina following the tightening of our risk appetite since late 2025. Overall, the region is performing ahead of our expectations. As a result, we are upgrading our full-year guidance for gross revenues to grow at high teens. Finally, let me turn to the rest of business on slide 22. The rest of business delivered another strong quarter, with net attributable profit reaching EUR 271 million, increasing by 14.5% quarter-over-quarter. First half earnings amounted to EUR 508 million. The key drivers of revenue growth remain unchanged from last quarter.

Loan growth continued at a strong pace, mainly driven by the corporate portfolio, which accounts for around 80% of the total loan book, supporting revenue growth. Net interest income increased 17.2% quarter-on-quarter, while fees and net trading income remained at high levels, supported by the strength of our client franchise following the exceptionally strong first quarter. On costs, operating expenses continued to reflect ongoing investment to support future growth. At the same time, we continue to deliver positive jaws on a year-on-year basis. Asset quality remained very strong. The NPL ratio increased, driven by some specific clients migrating to stage 3, which had already been largely provisioned in the first quarter. Cost of risk declined to 14 basis points in the first half. Overall, rest of business continues to deliver strong profitable growth, supported by strong commercial momentum.

Taken together, our business units delivered another excellent set of results, a reflection of the strength and resilience of our franchises across all our core markets. Now back to Onur for the final remarks on the quarter.

Thank you, Luisa. Lastly, for the main takeaways on page 23, let me not take time as always by repeating all the key messages. You are already seeing them on the page written all over it, in short, excellent results in my view in the quarter, driven by the strength in activity and core revenues, which is very important to us, obviously, further improving our industry-leading growth, profitability, and efficiency ratios while executing our AI transformation plan on different fronts. Given our positive momentum at the bottom of the page, you can also see that we are upgrading our 2026 outlook for group return on tangible equity to around 21%, as well as improved our guidance for key metrics in Mexico and South America.

As Luisa mentioned, we have also slightly downgraded our cost of risk guidance for Türkiye, again, as you can see at the bottom of the page. Now back to Patricia for the questions, and as I mentioned, this is the last presentation of Luisa, so be nice and basically don't ask her challenging questions.

I'll just put the questions to you, Onur.

Perfect. Patricia.

Thank you very much, Onur and Luisa. We are ready now to move on to the Q&A session. Operator, the first question, please.

Thank you. If you'd like to ask a question today, please press star followed by one on your telephone keypad to join the queue. When preparing to ask your question, please ensure you are unmuted locally. Our first question today comes from Maksym Mishyn from JB Capital. Max, please go ahead. Your line is open.

Good morning. Thank you very much for the presentation and taking our questions. All the best to Luisa with new challenges. Two questions from me, please. The first one is on Spain. Cost of deposits was flat quarter-on-quarter despite a faster growth in term accounts. What are you doing to manage the cost of deposits and what should we expect? The second question is on the rest of the business. Even though NPLs increased, cost of risk has been virtually zero. I was wondering if you could share some more color on this, please. Thank you.

Very good. Thank you, Maksym, for the questions. On Spain, what are we doing to keep the cost of deposits at their levels as you are asking? If you also look into the Spain page, in the same page, you would see that our demand deposits in Spain has gone up by 5% in the last year-over-year. If you include that fact of we are growing in deposits with the notion that our loan-to-deposit ratio in Spain is still around 98%, which means we have a lot of liquidity still, we have the tools or we have the capacity to manage the cost of funding. The key thing here is that 5.1 number in my view, the fact that we keep growing in deposits despite all what is happening. How is that happening? There are basically, I would say, two factors.

Number one, we are growing in number of customers. You might have seen it in the last three years. Every year, we have added 1 million new customers to our franchise in Spain, and this half is not any exception. I think the number was 490,000 new customers joining BBVA as a customer in the first half, which is obviously helping. These new customers, they typically come with their products and transactionality. It is an amazing figure, actually. 70% of these customers, after six months of acquisition, they become, obviously, we manage this, we track this very closely, but they become what we call target customers. They become much more engaged with the bank, 70%. One third of them, after acquisition, they become a payroll customer for us.

The focus on new customers and making sure that those customers become target primary customers in due time is one of the reasons that I would highlight. The second topic that I would highlight is our continuous, it is not only true for Spain, for every single geography, but in Spain for sure also, our focus on transactionality. The fact that we are focusing a lot on all transactional products, cash management for companies, payrolls in retail, acquiring for SMEs and companies as well. We have basically higher market share in all of those products versus our base. We have 14.2% market share in Spain in lending, as you know, 14.2%. In payroll, we have 16.6% market share. In acquiring, similar. In cash management, we are upgrading all of our systems in the last year to be able to provide the best cash management systems to enterprises.

In short, a lot of new customers and a lot of focus on transactionality is the key reason for that 5%. In-demand deposits, that 5% is helping us to manage the cost of deposits. Rest of business cost of risk number. As you know, cost of risk number for that segment or for that business is very low in general. One customer coming in or out is basically creating a lot of difference. At the moment, it's a small number in any case. It's the fluctuation of very few anecdotal things that is creating the risk. As you might remember, in the strategic plan when we announced our targets in last year, June, we said that the expected cost of risk for that business is to be around 20 basis points. We are more or less in that range in the first quarter.

Second quarter was better. There was also some cost of the country risk adjustments. There was a new regulation on country risk, which allowed us to lower the provisions a bit. Overall, you would see the cost of risk in that segment to be around 20 basis points going forward, which is where we are.

Thank you very much, Maksym. Next question, please.

The next question comes from Marta Sanchez Romero from JPMorgan. Marta, please go ahead. Your line is open.

Hi. Good morning. Thank you for taking my question. My first question is on the management changes. Should we infer any change in financial strategy, capital return priorities, or on guidance philosophy from the CFO transition, or is the handover to Gonzalo Rodriguez purely organizational? My second question turns to the rest of business, and I'll take it in two parts, earnings and then risk. On earnings, the pace has caught us all off guard. You are now running above EUR 1 billion on an annualized basis, expanding far faster than anyone had penned in. I take the point about negative staff cost seasonality in the fourth quarter, even allowing for that, you are close to EUR 200 million ahead of consensus. How should we think about the run rate from here? On risk, look, you just keep growing like a weed.

Another EUR 11 billion of lending in the quarter. Help me out with two things. First, what's actually in there? Second, the market's getting twitchy about how AI capabilities are being underwritten. Give us some color on your exposures. How much of the book is AI related? Thank you.

Very good questions as always, Marta. Very quickly on the first one, should we expect any changes in our strategic thinking or financial management principles? Obviously, no. It's a natural transition, no changes you should expect. On the rest of business, for popular demand, we have added a page you might see in the appendix of the documentation that we have for you on the broader CIB. If you look into those two pages, page 22, which is rest of business, which is basically CIB, half of CIB is that, or a bit more than half in terms of lending. You can see the rest of the details also in that page in appendix. On the earnings, what I can tell you is that, yeah, we are growing very nicely. It's growing a bit higher than our guidance also.

Year-over-year growth in loans in the rest of business is 52%, it is happening at a very profitable level as well. You might see it in the RORWA. We are providing RORWAs now, as you can see on this page, and for CIB. The RORWA for the rest of business is 2.1%, as you can see in the CIB appendix page, if you exclude Argentina and Türkiye because they give too much of a positive boost to the number, it's going to be around 3%, the RORWA for the overall CIB business. In that appendix page, Marta, you would also see that at the bottom right, that the cross-border revenues of total client revenues for the CIB business is 40%. 40%. We discussed it many times before.

We are a global bank being present in many geographies, in Mexico, in South America, in Türkiye, many of the emerging economies. Being in those geographies with a full-fledged universal bank is a competitive advantage, and we want to focus on the fact that our clients in these geographies and beyond, when they go do business outside of their home geographies, we help them out. That is 40% of the CIB business client revenues. I'm saying client revenues because you can also deduce from this that CIB revenues that we have is practically client revenues. The non-client revenues are prop trading revenues and so on. They are very small compared to many other corporate and investment banks that you would see out there. Why I'm saying all of this is very simple.

Our CIB business is cross-border focused, mainly corporate banking-focused business, focusing on our existing clients and taking their relationship to other geographies. Given that, the growth rates that you see, because you are pointing out to the fact that the growth rates are quite healthy and there are some jitters in the market and so on, our focus is on our existing clients mainly, and the growth rates that you see are sustainable, and the profits associated with that business is also quite sustainable, as you have seen with the RORWAs. Maybe I tell you the RORC number, excluding Argentina and Türkiye, the RORC of the CIB business is 24%, clearly above cost of equity. We are very happy with the returns that we are generating there and with the growth that's coming with it. On cost of risk, you ask about a specific dimension called AI.

On that one, we have basically identified every single sub-chapter of the portfolio on how they might be affected. You might remember this for sustainability also. We had something called transition risk indicator. In the bank, we have developed this metric or the framework now on AI transition indicator. We are looking into every single client of BBVA and identifying the vulnerability that they might have with the transition that's happening, with the disruption that is happening with AI. We don't see a major risk profile for BBVA in these subchapters. For example, software and IT services, the direct lending that we have with them is around EUR 700 million-EUR 800 million, and they're all top-quality names and so on. We do already have the tools to manage that risk, and we, in general, as you know, we do have a quite conservative risk profile.

Do you want to add anything, Luisa?

Well, I would just like to add that perhaps you may recall from our strategic talks when we had Javier explaining the CIB area, also when we presented midterm goals, just to highlight a little bit the outlook, Marta, of where we were thinking that the CIB business could grow as a whole. We did say that we were aiming for a EUR 10 billion revenue at the end of our strategic period priorities. It is an area where strategically we want to continue to grow together with our commercial banking business. In that sense, we do have expectations of revenue growth ahead. Also just to give a little bit more color, remember some of the numbers that we have given in the past in terms of exposures, the exposure that we have to data centers remains very small at 0.7% of EAD.

As Onur mentioned, the technology side is 0.5%. Direct exposures to financial sponsors remains also very subdued, below 0.8%. I think everything is, as Onur mentioned, growing in a diversified manner, in an adequate manner, supporting our corporate client relationships as well.

Thank you.

Maybe one final point on this one. This is a general trend in the industry, the technology industry is triggering, not only in the core industry itself, all the adjacent industries, a demand for lending, a demand for loans. Players like us who have a lot of liquidity, you might have seen it in the different documentation that we publish, our leverage ratio is one of the best in Europe. People who have clear liquidity, we do have some advantage to benefit from this wave. With very decent margins, we can create some good loans, that is the reflection that you see in the CIB pages.

Very good. Thank you. Thank you very much, Marta. Next question, please.

The next question comes from Francisco Riquel from Alantra. Francisco, your line is open. Please go ahead.

Yes, hello. Thank you. Congratulations to Luisa. I will start with a final question for you, which is, if you can update on the ALCO strategy in Mexico. I see that you are increasing the size and duration of the ALCO bond portfolio, so I wonder if you are positioning the balance sheet to lower interest rates there, or if you are just trying to support shorting NII because you are struggling to reduce the cost of deposits in that country. In Spain, it's the other way around. You are reducing the bond portfolio, and you were guiding for low-to-mid single digit NII growth. I wonder if we should be more on the low or in the mid-single digit because of these changes in the ALCO portfolio. My second question is for Onur on capital allocation.

Your CET1 falls to 12.4% after the new share buyback, which I appreciate. I wonder if the commitment to distribute any excess above 12% is still valid, if we should expect more buybacks by the end of the year, or if the 12% is a target for 2028, if we should be done with the EUR 6 billion for 2026. Thank you.

Very good. Maybe I take the second question, Luisa, if you want to talk about it with ALCO and so on. We said it many times, multiple times before. Some of you were not expecting the share buyback announcement that we have done today, it was very clear, and we have been very consistent in our communication all along. We don't like to work with excess capital. Our target is our target, 11.5%-12%. We take the upper end of that range as the key target, 12%. We have excess capital. When we have excess capital above 12%, we will distribute it back to our shareholders. As you say, it's going to be 12.41% pro forma after the EUR 2 billion that we are announcing today. We are starting it right after because we are running as fast as we can.

We are also generating capital in the process. Despite the fact that we are growing very nicely, we are generating excess capital. As a result, it's taking time. The one that we started, the EUR 2 billion that we are going to be starting on August 5th, our expectation is it's going to take us to the end of the year. We have been running full speed, more or less full speed, since December last year. We are announcing today right after, and it's going to take us to the end of the year. We are going to continue on this process and our commitment to distribute the excess capital back to our shareholders is a clear and firm commitment. On the ALCO strategies?

Yes. On the ALCO strategies, I think both in Mexico and Spain, the strategy has been defined already for quite a while, specifically in ensuring that we can anticipate upcoming maturities, taking advantage of the rates at the point in time. Particularly in Mexico, the growth in the portfolio book, the Mexican ALCO book stands at €19.1 billion. It's grown €4.1 billion year-on-year. Part of this is obviously due to the MXN peso appreciation that you have to take into account. I would say that most of the acquisitions that we've done reflect continuous purchases in anticipation of upcoming maturities and trying to lock in our rate sensitivity.

Also, to remind you, our rate sensitivity is still at 2.4%, 1.6% to the Mexican peso. In this regard, I think this is a strategy that we have been trying to pursue, that locking that rate sensitivity. Just to also finally give you some details on the book, the duration is now 3.2. We have been extending durations as well. Remember that this, a year ago, was 2.6. That has also been part of the strategy, that extension, and the yield is at 8.8%. I think a good positive ALCO strategy definitely will support our NII going forward. With regards to Spain, here we have a book that stands at roughly €55 billion. It has decreased in the quarter primarily because of maturities. We have also been doing some acquisitions, again, as we try to anticipate maturities in the year and also in the following year.

I think it's been also a strategy of trying to manage our interest rate sensitivity adequately. In this regard, maybe giving you a little bit more color on the sensitivity, we have around a 4% NII sensitivity. I think I also want to add here that even though we state sensitivities as parallel movements to 100 basis points, move of the yield curve, really in Spain what we've seen is that we have an asymmetrical sensitivity with a more open position to the short end. This is important because as you see in the short end with the interest rates going up, we have an exposure that actually now, aside from the 12-month EURIBOR rate, is also more exposed to the one-month and three-month part of the curve as we are growing, as Onur said, on the commercial side of the business.

We have a sensitivity that is more exposed or more open in the short term, but we have those longer-term bonds that allow us to hedge the overall sensitivity to that circa 4% number. To finalize with the details on the ALCO book in Spain, you have the details I think also on the annex, but currently we've also been extending durations. Our duration stands at 3.5 with a yield of 3%.

Very good. Maybe I add a few quick things on top of this. Paco, we don't use ALCO as the alternative to what we do. We take our business as serving clients. Okay? ALCO is not like an alternative. I now reduce my lending and I do that. No. You do as much as possible with clients, and then if you have additional excess liquidity for different reasons of managing NII sensitivity, we use ALCO. ALCO is not like a competing client for the thing. We look into ALCO today, we like the slope that we see of the curve. We like the slope, but it's also a fallacy. You might remember, we have been in this for so long.

You might remember certain banks that have thought that slope was an amazing slope. They have bought so much paper with very long duration, which then hurt those businesses. You have seen examples of this in the U.S., in Europe, in many geographies. Although we like the slope, as Luisa mentioned, our effective duration is around three years, three and a half years, because we want to maintain that risk perspective even on the ALCO book. In short, I want to give you two messages. Number one, we are focused on the client business. ALCO business is a separate business or a separate thing that we do for other purposes, but not as an alternative to our client business.

Number two, we can increase the ALCO very quickly now because we like the slope, but we have to be also careful on the risk profile of those decisions, which might come and hurt us. You never know what happens in the world. In three years, the inflation and the interest rate profile might be a very different one. You have to be careful with those kinds of decisions. Finally, on the topic of Mexico, because you said your cost of deposits is not coming down, and as a result, you are doing ALCO. Again, they are not related at all. As much as possible, we want to do the client business, and we are, as you have seen in the guidance upgrade also, we are quite positive for Mexico going forward for two reasons.

Number one, the activity levels, in our view, going forward, will be much better, even better, and we are at close to 10% in any case, 9.9%. It might be even better going forward for a reason of, for the first time in Mexico, we are seeing signals of investments triggered by the public sector. You might have seen this. There were 38 licitaciones, the tenders for renewable energy that were done in the second quarter. 38. The lending needs of these projects is basically going to come towards the end of this year, or more likely 2027. These projects, they are projects worth of EUR 9.3 billion. It's a huge set of investments coming into the country finally, again, triggered by the public dimension.

The Plan Mexico, as the government calls it, has a lot of investment dimensions underneath, which gives us hope, and we are already seeing it. These 38 projects, for each one of them, we are engaging with the winners to help them in the financing because they are good projects powered by the PPAs, power purchase agreements of the state utility. You would see better activity in the short to mid-term even, which is making us relatively positive. More importantly, as you said it before, the spread situation, in our view, we have reached the bottom in the sense of the interest rates 650, 6.5. We do think it's not going to go down any further. Maybe some more, but we are at the bottom of the curve because inflation in Mexico is 4%. As a result, we are very rate sensitive.

As you know, in Mexico, if rates do not come down, you would also see spreads picking up, which was the key driver of our strategic plan numbers in any case. That's also positive. Activity positive, spread positive We are quite positive on Mexico in general. ALCO, when we have more liquidity to manage the NII sensitivity as well, we use as an alternative mechanism, not as a replacement of the client business.

Thank you. Thank you very much, Paco. Next question, please.

The next question comes from Ignacio Ulargui from BNP Paribas. Ignacio, your line is open. Please go ahead.

Thanks very much for the presentation and for taking my question, and wishing all the best to Luisa in her new roles and challenges. Just have two questions on my side. One is on capital. If you could help us see a bit, what should we expect in terms of organic capital generation in the second half? How SRT usage will perform in the second half to support that lending growth and activity growth that you were talking on during the call. The second one is on Türkiye, just trying to get a bit of a sense on how should we think about the Turkish lira spread and the evolution of NII in the coming quarters after a bit of a bumpy first half? Thank you.

Capital, do you want to talk, Luisa?

Yes. Well, as Onur mentioned, we are generating capital and continue to generate capital. We will do so over the second half as well in our capital planning. With regards to the SRT topic, we have delivered 6 basis points of SRT capital CET1 in the quarter, a total of 18 basis points in the first half, over EUR 6 billion of RWAs that have been released. For the year, as you know, our guidance in the midterm plan is to do between 30 and 40 basis points a year. I think that with the planning that we have, we are going to be at the higher end of that range and above what we did last year, which was 35 basis points. I think on track to deliver on that side as well.

On the organic level, after the growth, after everything else, after SRTs, we guided or we told that we are aiming 30 to 40 basis points a year creation of capital on top. Quarterly, it changes because the growth profile changes, and so on. That 30 to 40 is a very fair assumption to have going forward as well if we maintain the very large, very nice growth profile that we have. If growth comes down, you will have more capital, basically. One final topic on this SRT issue is, again, that SRT topic, I did raise it to you some quarters ago saying that it is an opportunity for the European banking system to leverage that for a reason.

Basically, the market thinks that the losses to be incurred from those portfolios would be much lower than what the supervisors is basically guiding us to book as a capital charge in our books. It is a bit of a supervisory arbitrage in short that the market has, and the market says it is going to be lower than what you are putting capital for. One of the things that we have been working, and this third quarter in July, actually, we executed one of them, is that that arbitrage that I talked to you about is even larger in the geographies of Mexico and Türkiye and so on. The RWA densities that we have for geographies beyond Spain, beyond the rest of business, it is basically that arbitrage is a much larger opportunity.

In July, we finally executed the first Mexican transaction on the SME portfolio, which is going to help us even more because the RWA densities for those portfolios versus the value that we create from those transactions is going to be better. The Turkish lira spread, not sure, it depends on how the situation evolves. At the moment, it is as you can see, very low, the spread, because the rates are very high. Why the rates are very high? Because of the war, the Iran situation, inflation numbers are not coming very nice, and given inflation being very high, the tight stance of the Central Bank of the Republic of Türkiye continues. Our spreads, our margins are completely dependent on the macro interest rates. If interest rates come down, you would see a better number.

If interest rates do not come down, you would see more or less very meager numbers as you see today. We have seen the bottom of the spreads in June, so we are now slightly improving. As you have seen in July, the Central Bank of the Republic of Türkiye has kept the interest rates the same, 37%, but their effective interest rate is actually 40%, so they kept the 40% number. We are expecting as of September that the effective interest rate, which is 40%, will come down to the official interest rate, which is 37%, with time, maybe September, October, and by the end of the year, we expect the official interest rate and the real effective interest rate to come down to 36% or so. Not much of a decrease, but even that increase will help us on the spreads and on the margins.

In the very short term, it's going to be very scarce, the number.

Thank you very much. Next question, please.

The next question comes from Sofie Peterzéns from Goldman Sachs. Sofie, please go ahead. Your line is open.

Hi, here is Sofie from Goldman Sachs. Thanks a lot for taking my question. My first question is on your medium-term target, the EUR 48 billion. If I take your EUR 25 net income and the first half net income, just assume the second quarter run rate going forward, I get slightly below EUR 48 billion, so not far from your target. Could you maybe just discuss how we should think about the upside risk to your EUR 48 billion target? Because that seems very easy for you to reach. That would be my first question. My second question would be on M&A. You announced the dividend share buyback, which was very good news today. How do you think about M&A opportunities, or is the focus purely on organic growth here? Thank you.

Thank you, Sofie. I'm being told that I'm being too slow or talking too much. I'm going to speed up. On the first one, the upside risk or the EUR 48, the only thing I can tell you, because we are not revising that plan at the moment, the only thing I can tell you is for the first two years that we had in the plan versus what we have already realized in the 18 months, we are doing better than in the EUR 48 number. We are doing better than what we originally planned. On the second question, M&A topic, we are completely organic-focused. You have followed the history. We are focused on organic growth, in short.

Thank you. Thank you very much, Onur. Thank you, Sofie. Next question, please.

The next question comes from Cecilia Romero from Barclays. Cecilia, your line is open. Please go ahead.

Thank you very much for taking my questions. My first one is on Spain. My second one is in Mexico. In Spain, you've continued to grow both the market in SMEs and mid-size corporates. What's driving those share gains? Are those within any particular region in Spain? Is it primarily customer acquisition, deeper penetration of existing relationships, or a change in the competitive landscape? If this level of commercial momentum persists through the second half, do you see any upside risk to your loan growth and the Spain NII guidance of low to mid-single digit growth this year? Also, follow up to what was set before in regards to rate sensitivity. Obviously, customer spread was up quarter-on-quarter. Should we continue to see any improvements throughout the rest of the year on customer spread in Spain?

My second question on Mexico. Nubank has recently received authorization to operate as a full bank in Mexico. Does that change anything on your assessment of the competitive landscape? Thank you.

Thank you, Cecilia. As always, very good questions. On Spain, it's mainly driven by two things, as I mentioned also before for other segments, new customers, customer franchise growth. In SMEs, we have been, in the last two years, the number one new account opener for that segment. We obviously measure this only through surveys and so on. Customer acquisition market share that we have is around 20%, much higher than anyone else. We are number one in new customer acquisition in SMEs. The same for enterprises, we are after new customer acquisition, and we are growing our customer franchise in a very nice way. The second thing on this is the transactionality topic. Again, I mentioned it before, acquiring the POS terminals that we have and so on, cash management platforms.

We are investing so much in all of them to make sure that we are in the transactionality. As a result, if you have all of that, if you become the primary bank of those clients, you also do the lending business with them, and that's what you see. We are expecting basically for the second half or for the near future for that trend to continue, and we maintain our strength in terms of growth in those segments. Customer spread, how is it going to evolve? It's going to be improving in the coming quarters. We do think we have reached the bottom. If the interest rate situation develops as we expect, we are going to be improving every single quarter from now on the customer spread in Spain. In Mexico, there have been newcomers. There are really relatively sizable fintechs and so on.

There are more than 60 of them now. The newcomers, we respect them all. They're amazing competitors, really. We watch them very closely, but we are not particularly worried. I showed you in the presentation today, there's a footnote on that market share presentation that, for example, in credit cards, which the fintechs are very active in Mexico, despite the fact that they are very active, and one of them now has 3.6% market share. Despite very heavy market share gains, relatively large market share gains for some of them, we have increased our market share in that same period. We will compete. We will compete really nice.

Thank you very much, Cecilia. Next question, please.

The next question comes from Miruna Chirea from Jefferies. Miruna, your line is open. Please go ahead.

Good morning. Thank you very much for taking my questions, all the best to you, Luisa, in the future. I just had one on Mexico loan growth, we've noted your upgraded guidance, I was wondering if you could give us a bit of a color in terms of your expectations by segment. I guess based on your previous comments, you would expect corporate loans to accelerate in the second half of the year, what is the dynamics that you see for retail loans? Secondly, a clarification on Türkiye. I was wondering if you could formalize a bit your expectations for net income in Türkiye this year. Previously, we're talking about a downward bias to the EUR 1 billion. Also, is it still the case that you expect to exit hyperinflation accounting by 2028, or is that more of a 2029 story now?

Thank you.

Luisa, do you want to take Mexico loan growth?

Yes. Well, I think here what we expect, first of all, is for the system to maintain a growth for the year that's similar to the one that we've seen in the first half. We do expect that the system, a slight deceleration on the retail portfolios and the consumer lending. We do expect in the system a higher growth in terms of activity on the wholesale side. In our case, I think that we've mentioned also, and Onur has mentioned it in this call, that we maintain focus in the areas of opportunity and where we see more value.

We have been actually growing market share in most of the customer segments, as you know, our specific focus is in SMEs, we will continue to build our franchise there, also in the credit card and consumer loan portfolios, where we do see the potential for continued positive growth. In general, I think also we are expecting to see the impact in the second half of the year, the Banxico. It's unclear whether the dynamics will be accelerating towards the third or fourth quarter, definitely we have strong corporate pipelines that we expect to be delivered as well. I think the dynamics are very supportive to that guidance upgrade that we gave in the call today.

Miruna, on Türkiye, first of all, on the topic of the guidance and so on, we don't have an NII guidance that we provide to the market because it's very tough to forecast, as we just discussed. Depends a lot on the rates and the micro situation. As you know, last quarter, we have given the guidance of around EUR 1 billion with a downward bias. In the first six months of the year, as you see in the presentation, we have done EUR 532 million. This implies that in the second half it might be lower than what we have delivered in the first half. Again, it depends a bit on the rate situation and whether the central bank takes down rates and how it evolves and so on. So far, in the first six months, we are doing better than what we thought we would do.

We still maintain the same guidance as we gave last quarter of EUR 1 billion with a slight downward bias. Regarding hyperinflation, the 2028, it is very much at risk in our humble view, given how inflation stickiness is in the country. Last year it was 31%, if you remember. This year, the expectation that we have is around 30% again, not too much of a change versus last year. You all know, it's a necessary condition, not a sufficient condition, but a necessary condition. One of the conditions of many, to be fair, but it's the only quantitative condition that the three-year cumulative inflation has to be less than 100% for the country to be out of hyperinflation. We might not be at that stage in 2028.

As we said to you multiple times before, what matters is not the accounting itself, but whether inflation comes down, because it's also very simple, relatively simple math. You do see it in the numbers that we provide in the presentation also in the appendix. The hyperinflationary accounting basically is inflation times net monetary position, which is a negative number directly correlated to inflation. You are compensating this with the inflation-linked bonds that you have, which is again, a direct multiplication of the inflation rate. By the way, the CPI linker revenue is taxed, but the cost of net monetary position is not taxed. You cannot deduct it from tax, basically. There is a tax component on those two items. Why I told you this, because the numbers of the hyperinflationary accounting is a direct multiplication of inflation.

Independent of the fact that Türkiye gets out or not of hyperinflationary accounting, if Türkiye reduces inflation to a lower level, the negative impact that you get from hyperinflation will disappear. Rather than whether we get out in 2028, I think the key question to ask is, would Türkiye manage to lower inflation in 2028 as we had in the plan? On that one, we are optimistic. The country, they are doing the right things to take the inflation down. Let's see how it evolves. In any case, independent of the inflation levels as we see it today, we are committed with the EUR 48 billion that Sofie was asking, independent of whether there is hyperinflation or not.

Thank you. Thank you very much, Miruna. Next question, please.

The next question comes from Hugo Cruz from KBW. Hugo, your line is open. Please go ahead.

Hi. Thank you. I just have one more question, and it's high level. You're launching agents at scale. When will you have a firm view on the impact of AI on the ideal size of the workforce, and how do you want to manage that impact? Thank you.

Thank you, Hugo, for the question. The answer is we don't know. It's a still new development. We will give some more update on this in October when we have the strategic talks, but the real impact, quantitative impact, it's too early to put on the table.

Thank you, Hugo. Next question, please.

The next question comes from Carlos Peixoto from CaixaBank. Carlos, your line is open. Please go ahead.

Yes. Hi, good morning. Just a quick one from my side to Onur on the Spanish NII. We're seeing NII up 4% year-over-year in the first half. Loans are growing around 7%. You did mention you expect customer spread to have touched bottom, if I understood correctly. Should we expect NII pace of growth in the coming quarters, the year-over-year growth on the quarter, to catch up with volumes growth? In looking into 2026-2027, should we expect NII evolution more aligned with that of loan growth? Thank you very much.

Carlos, you made that comparison, let me do very quickly. 4.1% is the growth in Net Interest Income when the loan balances, they have grown 7.4%. Why is it not at the same level as the activity growth? It goes back to the average spreads. Last year first half, this year first half, when you look into the average spreads, obviously it's much lower in this first half, and that thing will disappear over time. Still, the average spread is what we need to look into. The second half, obviously, would be much better. It might be even better in the average spread for the second half only, but year-over-year, still it's going to be lower. When next year we start, that average spread notion will disappear if rates develop as we forecast at the moment.

Thank you, Carlos. Next question, please.

Next question comes from Andrea Filtri from Mediobanca. Andrea, your line is open. Please go ahead.

I'm starting from a thank you to Luisa for the work done together. Good luck. I've got two questions. The first is on regulation. It looks like something is moving in Brussels on the regulatory framework after the recent publication from the European Commission. Are you seeing that, and are you hopeful of an improvement coming up for you? The second is on your share buyback. It is welcome news. At the same time, it is dilutive to group ROTE, which is very high. Do you consider the hurdle for external growth very high at this stage? Thank you.

Thank you, Andrea, for the questions. Are we hopeful on the improvements on the regulatory side? We are. This latest, the competitiveness report also is a step in the right direction, talking about simplification in terms of reporting requirements or the additional workload that we all have, the need for the simplification on that one. Talking about single market and the fact that the consumer compliance standards that are very different across countries, some more perspective on that one, saying that it cannot be that different if we are living in a single market. The capital buffers, there's a discussion on that one. That's the area that, to be fair, we haven't seen anything yet. In general, are we hopeful? We are hopeful. We have to see the intentions in action and in reality. That's the only thing I can tell you.

The intentions are clearly being raised, and we are quite happy about those positive intentions. About the hurdle rate for growth and also share buyback and so on. The hurdle rate for growth is cost of equity. We are in very different geographies, in very different segments, we want to make sure that we use the cost of equity as the benchmark. We call it EVA in bank, economic value added, as long as you are delivering value above your cost of equity in that respective business that you are doing, you are free to do that business, obviously. To be able to get a better return, a positive EVA, again, the focus on scale and the focus on transactionality. If you have those, you get that return.

Thank you, Onur and Andrea. Next question, please.

The next question comes from Borja Ramirez from Citi. Borja, your line is open. Please go ahead.

Hello. Good morning. Thank you very much for taking my questions. I have one on the digital banks. I can see you have a strong growth in the deposit volumes year-over-year. I guess that's a cheap funding source for the group. I would like to ask, what are your plans for deposit growth in this area, please?

Thank you, Borja. The digital banks, again, you see it in the rest of business chart. We are EUR 11.9 billion deposits in two franchises that we have, which is Italy and Germany. You ask about the growth. The growth is there also because of the fact that we started in Germany exactly June last year. It's a new franchise, and in the first year you get a lot of deposits, and then you lose some of them because they are typically promotional deposits, and some of them disappears after the period of nine months, one year, 15 months, and so on, because we reduce the rates on those deposit areas. What are our plans? I don't know in which dimension you are asking. If you're asking from a strategic dimension, these two markets are very large markets, Italy and Germany.

We would rather focus, consolidate our job there before we do anything else. We are going to be focused on those two to grow the business there. Again, unlike any other fintech and so on, our game plan, our strategy in digital banks is to be a universal bank in wherever we are. If you look into Italy, for example, if you want to buy your mortgage, you can get it from us. If you want to get a consumer loan, you can get it from us. Insurance from us. We are not focused only on deposits, but given the fact that deposits are the first entry to customer franchise, you see that the number for the deposits to be that high, EUR 12 billion, for the two franchises that we have.

Thank you very much, Borja. Next question, please.

The next question comes from Britta Schmidt from Autonomous Research. Britta, your line is open. Please go ahead.

Yeah, good morning. Thank you for taking my questions. Firstly, sad to see Luisa leave overall, but I wish her all the best. A question on spend cost, please. The underlying cost growth is now 5% slightly up versus the 4.8% in Q1 year-on-year. Is that also the year-on-year growth rate underlying that we should expect for 2026? Are there any more tax rebates to be expected either in 2026 or 2027? Please correct me if I'm wrong, but if I take the ROTE 12 months trailing, which was 22% in the first half, the 21% guidance implies around EUR 5.5 billion of profit in the second half, slightly down on the first half. If that is correct, could you just comment briefly on some of the main drivers here? I think you mentioned Türkiye. Should we expect some cost seasonality?

Any comment appreciated. Thank you.

Very good. Maybe I start with the second one and on the first one on the costs, Luisa, you help me out. On the return on tangible equity, Britta, we say around 21%. It depends on your imagination of what that means. We are expecting slightly lower in the second half, profits maybe, but it's going to be, again, 21%, around 21%. Also because of the fact that it depends a bit also on the denominator and equity, and how fast we do the share buybacks and so on. It's around 21%. It doesn't imply that the second half would be much lower than the first. It might be slightly lower because of Türkiye mainly. Overall, we expect still a very good second half. On the costs?

Yes. On the cost side, as you mentioned, that 5.3% year-on-year growth rate, excluding extraordinary items in the first half is aligned with our guidance for the year, which we maintain, which is mid to high single-digit growth in expenses. We maintain our guidance of an efficiency that is below 35%, with the current rate being at 33.6%. I think very much in line with our expectations here. Just to mention and also clarify that as with the rest of the group, we are and continue to invest in Spain as well. We think Spain is a very good, profitable growth market. We do think that investing in Spain will generate future growth for the bank.

That is implicit and embedded also as well in our mid to high single-digit growth guidance, but very much focusing on that efficiency ratio at below 35% with a midterm goal of low thirties, or check a 30 in 2028.

Thank you very much, Britta. Next question, please.

The next question comes from Ignacio Cerezo from UBS. Ignacio, your line is open. Please go ahead.

Yeah. Hi, good morning, thank you for taking my questions. The first one is on Colombia and Peru. Pretty strong results actually in the second quarter again. Just basically some color on whether you think the contribution in the first half is sustainable for the second half and what is driving basically the improvement in both countries. The second one, sorry for the small detail on the CIB business. Can I ask if you're seeing differences in terms of the growth within the three main regions, Europe, U.S., or Asia? The three of them are growing more or less at the same pace? Thank you.

On Colombia and Peru, Ignacio, thank you for the questions. On Colombia and Peru, you see it on the South America chapter, basically. There are two factors, I would say. Number one is the currency. By the way, in current EUR it helps us, especially in the Colombian case. We have seen 12%-13% appreciation of Colombian peso in the last six months. Year to date, as of June, 20%-21% year-over-year, in one year, appreciation of Colombian peso. Same in Peru. Overall, the currencies have been quite helpful, more in Colombia than Peru. More importantly, if you look into, again, page 21 of the presentation, you would see that Colombia loan growth is around 8.3%. Peru loan growth is around 9.7%. There's, again, very nice activity also in those geographies, which then translates into, and in the case of Peru, we are rate sensitive.

Rates have reached bottom also there, 4.5%. It's going to be helpful going forward, the fact that we are already at the bottom. Colombia, the rates are going up, but we have basically very little rate sensitivity. It's more about activity than anything else. In short, different drivers, but activity, I would say, as the key driver together with the currency, and the second half also looks quite good in both geographies. CIB, the three regions, the three you are asking, I guess the non-footprint regions of U.S., Asia, and Europe. As you can see again on the page of rest of business, U.S. and Asia, they are growing higher than Europe, mainly for the fact of the base. Because in Europe, we are much more penetrated. That was the first area that we have extended to in the past.

U.S. and Asia is relatively, I would say we have been there for decade now, for more than many years also. The penetration to clients and the size of the markets, it's a bit different. Because of the base effect, you see a bit more higher growth, but not because of the market, more because of our own franchise.

I would also like to add on the question of Colombia and Argentina to the two elements that Onur mentioned. I would also add to that the asset quality trends that we're seeing, which have improved significantly. As you know, we saw these trends peak already over a year ago. I think these quality trends continue to improve. The underlying asset quality is supportive as well. I think that also embeds the positivity into the guidance.

On the CIB business breakdown growth?

I mentioned it now there.

Oh, sorry. Yes.

The three of them, yes.

Thank you very much, Onur. Thank you, Luisa. It's been a real pleasure for me working close to you over the last year. Thank you, all of you, for joining today's call. As always, the IR team is at your disposal for any further question or clarifications. Thank you again, and have a wonderful summer break.