Luisa Gomez Bravo: Yes.
Onur Genc: Next quarter is the quarter. The only thing I can tell you is that we keep looking into your reports, again, on the overall bottom line that you are expecting from BBVA for 2024. The only thing I can say is that we don’t provide again a country or segment kind of guidance, yet, we will do that next quarter. But at the bottom line, at the profit level, we clearly expect better numbers than what we had in 2023 and that we don’t see in your reports. So hopefully, we will bridge the gap in the coming quarters.
Patricia Bueno: Thank you, Benjamin. Next question, please.
Operator: Thank you. The next question comes from Sofie Peterzens from JPMorgan. Please go ahead. Your line is now open.
Sofie Peterzens: Yes. Hi, this is Sofie from JPMorgan. Thanks a lot for taking my question. I was just curious on Turkey. As this is very strong, VL ratio fell 3.8% from 4.2% coverage is 100. And cost of risk is only 26 basis points. But how should we think about cost of risk in Turkey going forward, especially with more normalizing interest rates in the country. And if you could just remind us what a normalized cost of risk for Turkey should be? And then my second question would be on capital returns and kind of capital going forward. You state that the share buyback will end by end of this year. How should we think about capital return in ‘24? And how does this got off compared to any growth opportunities, both inorganic and organic growth opportunities that you see and also any capital headwinds that we should be mindful of next year? Thank you.
Onur Genc: Very good. On the Turkey Sofie. On the Turkish cost of risk, 26 basis points as you can – as you also said, it’s very low as compared to our historical standards. In Turkey, in 2018, ‘19, we have seen 288 basis points, 244 basis points, but last year, which is more or less a normalized year 2022, if you remember, the cost of risk was 94 basis points. And this year, so far, it’s 26. 26 is too low because given the very high inflation in the country, the payment capability of the customers back of the loans is very high. That’s why it’s very low. So there will be some deterioration for sure once things normalize. And as Luisa mentioned, there is some normalization happening. But you’re asking again maybe for the guidance for next year, again, allow us to do that in the next quarter.
But 26% is too low in the historical standards of Turkey. On the capital return, again, we discussed it many times before. We will continue to do what we have been doing in our view. It has been a relatively consistent story. And our – the nexus of all what we do, even the topic of shareholder return is first, delivery. We have to deliver the numbers. And we have to be doing better than competitors. That’s our clear conviction and that’s what we are focused on in the bank. Once we do that, and in our view, we are doing it, if you look into our numbers once again, 17% return on tangible equity. We are also doing 18% year-over-year growth in tangible book value per share, 18%. And still, they are trading below book. This – if you give this to a finance student in any one of the universities that you can pick, it just doesn’t fit.
How come the 17% to tangible equity with 18% tangible book value growth year-over-year leads to a less than book share price? So we do clearly believe that we are trading on the fair value of BBVA in that sense, and we also do have the capital. You see 1273 as of today, as of end of September. Given that you will continue to see us buying back some of our shares, and you will continue to see us with very handsome remuneration to our shareholders because we will continue to deliver, which is again the nexus of the whole thing. Luisa, you want to add anything on this topic?
Luisa Gomez Bravo: No.
Onur Genc: No. Okay.
Patricia Bueno: Thank you, Sofie. Next question, please.
Operator: The next question today comes from the line of Alvaro Serrano from Morgan Stanley. Please go ahead. Your line is now open.
Alvaro Serrano: Good morning. I guess there are kind of two follow-up questions. One on Spain. In terms of deposit mix, I heard your comments around the customer spread, but specifically on the deposit mix, I see your term deposits are almost flat quarter-on-quarter, which is quite impressive. I realize it’s the summer months and people spend more than save, but can you maybe give us a bit of color of what the mix could look like over the next few quarters in the context of what you’ve already said. I’m thinking, of course, there is been this CaixaBank well-advertised offer, which is low. But as a starting point, you’ve all seen Sabadell pretty aggressive sort of remunerated current accounts are just a bit of commentary of what’s happening under the hood there in that number?
And the second question is on to go in the Q3 stand-alone, the cost of risk on my numbers is 325 or so. I acknowledge your guidance for the full year is below 300 basis points. But as we look going forward, it looks like it’s going to be more consumer heavy the growth. Is that a reasonable run rate? Can it go up more than that or less than that? Just a bit of commentary around the provision standalone for Q3 in Mexico. Thank you.
Onur Genc: Okay. Luisa, do you want to take the Mexican one on cost of risk. On the first one on Spain, our – as I said, we don’t know on how the competition will evolve going forward. We have – I’ve given you some structural factors on why we think that still the better will be relatively capped as compared to other geographies that you are looking into, I’m sure. As of today, if you segment that beta that you are seeing of BBVA as of today, which is around 16%, the mix or the breakdown of that 16% is in the CIB, large enterprise customers and very large even private banking customers, the beta is around 85%. So it’s already there. Then on the what we call the midsize enterprises and so on the Banco de Empresas, the company segment, it’s around 35%.
And then the key thing is the retail, retail, which is the mass segment mainly. And as you know, one of our strengths in Spain is the fact that our deposits are very much spread to a very large customer base and so on. So it’s like 70% – close to 70% of our profits come from retail and SMEs and so on. Around 55% of our deposits are under the threshold of deposit guarantee scheme, which is €100,000. So it’s very atomized customer base that we have. Given that, the beta that we are seeing for that segment is less than 5% at the moment. Given again, the liquidity situation in the country, I really do think that the betas will be relatively capped. But again, you’re asking for the next quarters, again, allow us to do this next quarter when we give you the full picture.
But I can give you positive signals on this topic is what I would say. On cost of risk in Mexico, Luisa?
Luisa Gomez Bravo: Yes. Well, as you rightly say, the cost of risk in the quarter has increased to 308 basis points. Primarily, this has been because of what Onur was mentioning, a higher NPL entries in the retail segments precisely in those segments where we are growing the most in credit cards and consumer loans. I think this is in alignment with the strategy that we’re following of growth in these segments of gaining market share in these segments. And these are, as we mentioned, segments that yield above 26%. So still very profitable segments. But also we’ve seen higher provisioning needs coming from our early warning signals that are factored into our behavioral risk models. What this means is that when we see one of our customers that is not up to current payment of their payments.
And our competitors, we factor in that into our behavior models and that increases, it’s like an anticipatory signal of potential losses, but they are not real losses. It’s just anticipating what’s going on with that client and his other relationships with the banks. Our clients are very much engaged with the BBVA Mexico. We have a very holistic relationship with them and strong NPS. But still, we need to factor these behaviors in the system into our models, and that’s also increased the cost of risk and the impairments in this quarter. But all in all, I think this is very much in line with what we were expecting, as we said, in line with the guidance that we have for the quarter, and we expect, depending on the mix effect going into next year, the mix will drive the cost of risk going forward.
Onur Genc: And again, one of the reasons for the mix effect has been the Mexican peso appreciation, which has many more positives for us. We would like to have that at any point in time. But the growth of the Mexican lending book is 11% on average, roughly. It’s around 15% for retail, only 7% for companies. And one of the reasons for that company is 7% relatively lower growth is because of this Mexican peso appreciation. If you isolate for the currency, the growth in the company segment in Mexico would have been 11%. In that sense, the 300 guidance that we have given you and that we still stick to is because of this mix effect and because of the currency impact also on the company segment.
