Patricia Bueno: Thank you, Alvaro. Next question, please.
Operator: The next question today comes from the line of Francisco Riquel from Alantra. Please go ahead. Yor line is now open.
Francisco Riquel: Yes. Thank you for taking my questions. I want to ask about Mexico. First one is what the customer spread, which is flattish quarter-on-quarter. The deposit EBITDA is still low relative to peers and the longest is flattening out despite the improving mix. So I wonder about the expectations for the customer spread in the coming quarters. Where do you see the terminal deposit EBITDA? And how much repricing is left, if any, on the loan book, now that interest rates are peaking. And also related to this, the loan-to-deposit is still rising to 105%. And I wonder if you have a threshold in term to depot, after which you will start paying up for deposits or if you plan to fund the increasing cap with wholesale debt.
And then the second question is about – is a follow-up on capital returns. And if there is any reason why you will not return all the excess CET1 of 12% in the next buyback program? Or will you still leave a capital buffer as we have seen with the current buyback? Thank you.
Onur Genc: Very good. On the first one, the deposit EBITDA. And also, you’re asking more on the spread and it’s flattening out, as you have said. Francisco, as you know, I mean, our story, our guidance to all of you for many quarters has been the spread of Mexico is not going to go up too much in the coming quarters, as we have told you. We told you that the key story of Mexico in the NII is going to be the volume growth, not the spread improvement, further spread improvement. You’re asking specifically on the spread, I can tell you that these numbers would be the peaks. And we have been telling you that the spreads will not be increasing too much in Mexico once again. So you might see even a slight decline but not much, a slight decline going forward or a slight increase, it’s going to be around these levels.
I would remind you once again also that there is also this concern that when the rates come down, in Mexico, the Central Bank rates, there will be a big decline in this number. That’s not – that’s not true. I mean when you had 4.5% policy rate, not too long ago, some years ago, it was 4.5% policy rate versus the 11.25% of today. Even then, even at that environment where we had for 4.5%, the spread was around 10%, more than 10%. Because of the mix of our lending book in Mexico, when you look into the key, again, strength of our Mexican franchise, it is mainly these credit cards, consumer and so on, they have fixed rate in any case. So you wouldn’t assume even in a very, very aggressive scenario of rate cuts happening too fast, you wouldn’t expect too much of a decline in the spread.
One more thing. I mean when you look into our profits this quarter, you should consider two very important macro factors. The first one is Turkey. I mean in general, in Turkey, we used to post this year’s average on a quarter $150 million positive. This quarter, as you can see in the numbers, in the documentation, it’s minus €158 million. Why? Because of the high inflation, very high inflation that we have seen in July and August. So from plus €150 million to minus €150 million, it’s a €300 million difference. Despite that, we increased our overall profits. That’s the first macro factor that you have to factor in. The second macro factors, and I will tie it back to your question on Mexico, but it’s an important macro factor for us.
We have been taking some negative carry to fix some of our revenues going forward. We might be wrong, and maybe there might be more rate rises coming everywhere. We don’t know. But we have decided purposefully that we will take some negative carry in the short-term to be able to guarantee our revenues going forward at these rates. This is – if you go back to Mexico, the same is true for Spain, but if you go back to Mexico, the 100 basis points decline in the rates used to have 3.5%, 3.6% decline in NII at the beginning of the year. Today, that number is 2.3%. So we reduced the sensitivity of our revenue generation capacity to lower rates. You should also factor that in in the evaluation of our quarterly numbers and also in the context of Mexico, the fact that we are fixing some of the revenues going forward, in our view, is a safeguard for the continuity of the NIM, not maybe the customer spread but by the NIM.
Then on the loan to deposit, you are seeing 105 million you said, but it’s 100 million no, if I’m not mistaken. Loan-to-deposit is 100. We have operated with much higher loan-to-deposit ratios. We can choose to get more deposits. We are being very attentive on cost of deposits. That’s the reason why we don’t have a limit or we are far away from the limit. I can clearly tell you that Francisco. And then the second question was on why don’t we give more back on the capital if we have excess because as we told again in the last quarter or the quarters before, we are not in a rush. We have to see how also the share price evolves and where we are and so on. I repeat it once again, I repeat it maybe too many times as in the past. But we are a 17% ROTE, 18% year-on-year growth in tangible book value, and we are still trading below book.
Given this, we have to – it’s kind of an ammunition. It’s kind of a weapon that we can use, but we have to do it in a gradual way, in a consistent way rather than doing a one-off. Everything disappears in 1 minute. Now we have to see how the situation evolves. But given where we are, we will continue to do it. We just are not in a rush. We are not in a rush, and we are committed fully, as we have said many times before, the upper end of our target range is 12% on CET1. We are far away from it. There is a clear conviction and clear commitment to return the excess capital over time to our shareholders.
Patricia Bueno: Thank you, Francisco. Next question, please.
Operator: The next question comes from the line of Andrea Filtri from Mediobanca. Please go ahead. Your line is now open.
Andrea Filtri: Hey, sorry. I was on mute. First question on the composition of your CET1 capital and the second on digital euro. As you pay out capital in euros, and you cannot extract capital from several of your subsidiaries, the FX composition of your CET1 skews towards hyperinflation currencies. Is there an adjustment by the supervisor of what is distributable CET1 for the FX composition of capital? And on the digital euro, what do you see as risks and opportunities of the digital euro implementation? Have you budgeted the impact to your business model? And can you share it with us? Thank you.
Onur Genc: Okay. Andrea, thank you for the questions. On the first one, we put it on purpose very clearly at the appendix of our presentation every quarter, the book values of different enterprises, different subsidiaries of BBVA, you can find it at the end. As you can see, if you cannot repatriate some of the dividends that you have in these geographies, it will be locked in the book values. As you would see also from that quarter-over-quarter, you can see the evolution. We are repatriating profits from these geographies. Turkey, the biggest one in terms of book value, again, in the appendix, you would see that it’s the highest hyperinflationary country that we have operation. We have repatriated €350 million of dividends in 2023 already.
