Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) Q4 2023 Earnings Call Transcript

Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) Q4 2023 Earnings Call Transcript January 30, 2024

Banco Bilbao Vizcaya Argentaria, S.A. misses on earnings expectations. Reported EPS is $0.36 EPS, expectations were $0.37. Banco Bilbao Vizcaya Argentaria, S.A. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. Welcome, and thank you for joining BBVA’s Fourth Quarter Earnings Conference Call. With us today are Onur Genc, our CEO; and Luisa Gomez Bravo, the Group CFO. After the speaker’s remarks on the Group’s results and our expectations for 2024, we will open a live Q&A session. Now, I turn the call over to Onur.

Onur Genc: Thank you, Patricia. Good morning to everyone. I will start, I’ll jump into it right away, starting with page number three, by highlighting the acceleration of our profitable growth strategy in the year, as the title says. First, I want to highlight that the best way that we can contribute to our stakeholders and the society in general is through our activity of lending, our activity of banking business, and through growing our business. In that sense, we have increased our loan portfolio by 7.6% this year, and we have acquired more than 11 million new customers. Second, from the top, the financial results that we see today are the outcome of the significant progress in the execution of our strategy. In 2023, 79% obviously, a record of our unit sales were done digitally, and we also continue at the frontline of the industry in sustainability.

In 2023, we channeled EUR70 billion in sustainable business, again, an all-time high. Third, we have achieved the highest annual net attributable profit ever, over EUR8 billion, an increase of 22% versus 2022, which translates into a 27% increase in earnings per share. Fourth, we continue delivering on our commitment to value creation for our shareholders with return on tangible equity at 17% and an exceptional 20.2% increase of tangible book value per share plus dividends. All of this is allowing us to significantly increase distributions to our shareholders for a total amount of EUR4 billion, which is equivalent to EUR0.68 per share, increasing payout, while at the same time our CET1 ratio remains comfortably above our target. These highlights are what I would be expanding upon in the coming pages.

But just to reiterate, the common theme in my view of all the numbers in this page is that we continue growing, and we are growing in a profitable way. Moving to slide number four, our positive impact on society, we continue to help our customers achieve their life and financial goals. We have increased our loan book, as I mentioned by 7.6% in the last year. It’s a very high-level number at the top, but this implies, for example, that during 2023 we have helped more than 140,000 families buy their homes. We have supported more than 550,000 SMEs, self-employed individuals, and around 70,000 larger corporates in financing their growth, financing their business. And in terms of transactionality, we have more than 20 million payrolls collected by our clients on a monthly basis.

As we grow our activity, we promote employment, we promote investment and we promote welfare in the society. Moving to page number five, new customer acquisition, one of our important pages. And as we keep reiterating, expanding our customer base will allow us to continue growing our business in a healthy way, in a profitable and healthy way. And with 11 million gross new active clients in 2023, we have grown to more than 71 million active clients in 2023. And even more impressive is the share of those customers acquired through digital channels, which increased to a new record of 65% in 2023. And I do think that this is our key difference, the way that we acquire customers through digital channels is our key difference versus most of our competitors out there.

On slide number six, our leadership in digital, it has proven to be essential and differential in serving our customer base as well. On the left-hand side of the slide, we have surpassed 52 million mobile customers, a figure more than twice of that in 2018 and a record high 74% penetration rate. And at the same time, our digital sales, it has reached 79% in terms of units and 63% in terms of value, again, one of the best, if not the best in our industry. This leadership in digital, it has also translated into a higher client satisfaction. As you can see in the right-hand side of the slide, the net promoter score, it continues improving in the group with clear leadership positions across the main countries of our footprint. Slide number seven, a message that again defines 2023.

We continue growing, outperforming our peers. Our competitive advantages, like our digital strategy and our globality, it has supported our loan growth as you see on this page, and as you see in the bubbled numbers, in every single country, we have gained market share in total loans. And if you observe the trends over the last few years, because we have five years in this chart, we are gaining market share, especially in those highly profitable segments that we wanted to grow, I mean, consumer credit cards and businesses, private businesses, across our footprint. Turning to slide number eight. Sustainability, as I said many times in the past, it’s an incredible — sustainability is an incredible business opportunity, and we are trendsetters in this area.

As you can see in this page, we accelerated in mobilizing sustainable business volumes across segments, and we set a new record with more than EUR70 billion channeled in 2023, and the total of EUR206 billion since 2018. We maintain the top-ranked European bank position in the Dow Jones Sustainability Index as well for the fourth year in a row now. Moving to slide number nine, as you can see on the left-hand side of the page, we have established clear portfolio alignment targets in key CO2-intensive industries for 2030. So that we get to Net Zero by 2050. This last quarter, we have included targets in two more sectors in the list, Aviation and Shipping, as you can see. And during 2023, we have started tracking our performance against these targets and included the degree of portfolio alignment as part of the compensation of those employees who have long-term variable remuneration.

And as you can see in the chart on the right hand, starting from 2022, the baseline, we have already managed to reduce the emissions in the top six sectors by 19%. Slide number 10. From this slide on, I’m going to walk you through the financials. First, net attributable profit, as I mentioned it set a new record. In the bars at the center of the slide, you can see the upward evolution of our annual results, wonderful trend in my view. 2023 has been an outstanding year with profits at EUR8,019 million, 22% higher than the EUR6.6 billion recurring net profit of 2022, which was already an exceptional figure. These results bring our earnings per share up to EUR1.32, an increase of 27% year-over-year, higher than the growth of the net attributable profit, thanks to the share buyback programs that we have been executing.

Moving to slide 11, our tangible book value per share plus dividends, it continues to show an outstanding evolution. Beyond the excellent figure of 20.2% year-over-year growth in tangible book value per share plus dividends, we wanted to remark that in the last five years, our tangible book value per share plus dividends increased by 68%, despite COVID — despite COVID, 68%. This growth, in my view, is one of the most impressive figures in this presentation. And regarding profitability, we continue to improve our excellent profitability metrics, reaching 17% in ROTE and 16.2% in Return On Equity. Moving to slide number 12, the best measure of our performance is the one where we compare ourselves to competitors. Obviously, this is how we live with it in the bank.

We breathe this competitive success. In all the key financial metrics, we have done better than our competitors. One more year, we remain clearly one of the most value-creating, most profitable, and most efficient European banks out there. Moving to slide number 13. This is a summary of the pages to follow where I would talk to you about the P&L. I will talk to you about revenue growth, costs, asset quality and capital. So, let me jump into it on page number 14, on P&L. I would like to highlight the excellent evolution of gross and operating income, growing 19% and 20% in current euros respectively. Slide number 15, the P&L for the fourth quarter, I will not stop long here as the strong depreciation of the Argentinian peso in December has affected the comparisons for the quarter in both current and constant euros.

However, all in all, in the fourth quarter, despite the negative seasonality of the fourth quarter marked by the annual deposit guarantee scheme contributions as you know, especially in Spain, we have reported once again at the bottom line a net attributable profit above the EUR2 billion mark in current euros. Slide number 16, let me focus a bit more on the revenue growth in our two core markets of Spain and Mexico. On the left hand side of the slide, you can see the strong loan growth in the most profitable segments in both countries, especially Mexico. In the center of the slide, you can see the evolution of customer spreads. In the case of Spain, the improvement continued in the last quarter of the year with spread reaching 3.42%, and for Mexico customer spread is at 11.67%, a solid year-over-year increase, although reducing versus last quarter explained by two reasons, two very straightforward reasons.

First, lower yields on loans due to some seasonality with the impact of the holiday period campaigns at the end of the year, especially obviously in credit cards. And second, switching from expensive wholesale funding, expensive market funding to grow volumes in deposits from customers. This is financially neutral on NIM, but it obviously affects the customer spread. The result of all you can see on the right-hand side of the slide the core revenue growth year-over-year in both countries, 32% growth in Spain and 12% growth in Mexico in constant, and also the growth on a quarterly basis in both countries. In core revenues, some of you have been asking about the peak, when are we going to reach the peak? As we have been commenting in the past and as this page also shows, due to the continued spread improvement in Spain and the strong volume growth in Mexico, we believe we will continue to post healthy core revenue growth in 2024.

Slide number 17 on costs, I would highlight the fact that once again we end the year with positive jaws with gross income growing above 30%, clearly more than the costs at 19.7%, which is affected mainly by the high inflation rate in some of the countries of our footprint. Also you can see on the right side of the page our efficiency ratio, one of the best among our European peers, it further improved to 41.7%. Slide number 18, in this page you can see that the evolution of our asset quality metrics, it remains in line with our expectations in the context of the activity growth in the most profitable segments as we have been saying, and also the higher interest rates. First of all, on the left-hand side of the page at the bottom, you see the standalone cost of risk in the fourth quarter remained at the same level as the ratio in third quarter, and this derives accumulated cost of risk to 115 basis points year-to-date.

So, some stability quarter-over-quarter, and the yearly number is 115 basis points, as we have guided to you in the last quarterly call. As such, this is in line with our expectations. And there are two trends here that we anticipated to you last quarter. Once again, the mix effect as activity growth is biased to highly profitable, but higher cost of risk retail segments and emerging market geographies. And second, a gradual deterioration of the macro environment in South America. Then on the page, the NPL ratio on the right, it remains stable in the year-over-year comparison at 3.4%, and our coverage ratio slightly reduces to 77%. Slide number 19, on capital, our CET1 fully loaded ratio as of December ’23 remains at a very strong level, 12.67%.

Needless to say, this level is well above our target range of 11.5% to 12%. Following the waterfall, main impacts of the quarter are, first, our strong results generation that contributes 57 basis points. Second, the dividend accrual and the AT1 coupon payments, all in detracting 32 basis points. Third, 36 basis points for RWA growth, a figure that embeds some annual catch-up this quarter for operational risk as capital for operational risk is a function of the gross income which showed a better-than-expected performance, as you all know. And last, the bucket others of 5 basis points positively impacted by the credit in OCIs coming from the hyperinflationary countries, and the good performance of the hold-to-collect and sell bond portfolios.

The combined effect more than offsetting the negative postings to highlight the Argentinian peso devaluation this quarter, and some higher-than-usual model update impact. At this point and in a full-year view, let me stress that once again our ability to generate organic capital has allowed us to keep financing a desirable profitable growth to significantly remunerate our shareholders with an increasing momentum, and an extraordinary share buyback of 32 basis points, as you know, EUR1 billion, and still showed a year-end CET1 ratio well above the upper part of our target range. Regarding shareholder compensation, next page, slide 20, as we have again repeatedly stated, we have a clear focus, clear focus on value creation for our shareholders, which guides all of our decisions, everything in the bank.

In this regard, and in line with our payout policy, I’m very happy to announce that the proposal to be sent to the next annual general meeting, it contemplates the distribution of a total amount of EUR4 billion for 2023, equivalent to a 50% payout at the maximum end of our distribution policy, and obviously above the 47% payout of last year. This payout is equivalent to a total shareholder remuneration of EUR0.68 per share. It’s split into two, a total cash dividend of EUR0.55, which is 28% higher than last year in cash dividends, which implies EUR0.39 per share to be paid in April — to April ’24, complementing the EUR0.16 per share interim cash dividend that we already distributed last October, October ’23. In addition to the cash dividend, we will be proposing a new share buyback program of EUR781 million equivalent to 1.6% of BBVA’s market cap.

Including this new payout, in total, the shareholder distribution would be EUR13.2 billion since 2021, EUR5 billion of that from the results of 2023, including the EUR1 billion extraordinary share buyback that we did in 2023. And in terms of share buyback programs, and assuming yesterday’s market price for the execution of the EUR781 million of the share buyback, we would have reduced BBVA’s total outstanding shares since 2021 by 14%. And finally, slide 21, regarding our long-term targets announced on the Investor Day, let me not go into each one of them for time purposes, but on all the metrics, we are well on track to realize our upgraded expectations, clearly beating all of our original goals. And now for the business areas update, I turn it to Luisa.

Luisa?

Luisa Gomez Bravo: Thank you very much, Onur, and good morning, everyone. In — Starting in slide 23, with Spain. In 2023, we truly believe we have delivered an outstanding year in Spain. In a context of strong competition, we have demonstrated our commercial strength and digital lead with loan origination growing by 10% year-on-year, achieving important market share gains in all portfolios. As such, despite lower demand from credit in the system, our loan book deleverage remained contained, stable over the last two quarters. In terms of P&L, NII stands as the main engine for revenue growth. NII accelerated throughout the year, achieving a 48.9% growth levered on high rates, effective price management, and ultimately ongoing customer spread improvement, increasing 128 basis points year-on-year.

In a context of higher rates, we have successfully managed to limit the rate pass-through on deposit costs, thanks to an effective customer funds management this was achieved primarily by offering our customers seeking higher returns, mutual funds which as you see grow 12% year-on-year while benefiting from a highly transactional deposit mix supported by the acquisition of new customers close to 900,000 in the year. In the last quarter of 2023, these trends remained. We continued benefiting from loan book repricing and from our sound deposit mix with deposit costs well contained. In terms of fees, very sound dynamics in the fourth quarter across the board, but I would like to highlight the contribution from asset management supported by strong net inflows in the year.

In this particular quarter, this heading also includes the success fees coming from the portfolio’s performance in the year. Turning to operating expenses, the increase in the quarter is explained by the final adjustment in annual variable compensation accrual as earnings have exceeded expectations. All-in strong revenues in the year lead to an outstanding efficiency ratio below 40%, more than 7 percentage points below 2022. On the asset quality side, impairments and cost of risk evolution are aligned with our guidance. In short, another very positive quarter for BBVA Spain leading to a record net profit close to EUR2.8 billion, the highest figure in the last 15 years. Looking forward, we remain very positive on Spain’s performance for 2024.

We expect NII to grow at mid-single-digit in 2024 as there is still some repricing on the loan book to come and we expect a contained deterioration on the deposit costs. Expenses growth will slow down to close to 5%, as we still carry over 2023 effects, maintaining the efficiency ratio below 40% also in this year. Finally, our expectations for cost of risk in Spain is for it to stand at around 40 basis points, a quite contained level in a context of a still high-interest rate environment. The start of the easing cycle will be supportive as the year progresses in terms of NPL entries. Moving on to Mexico in slide 24, I’d like to emphasize that we feel extremely positive about this franchise. The economy continues to outperform expectations with a strong labor market, resilient consumer demand and positive news coming from nearshoring.

Thus, the loan portfolio is benefiting from this momentum, growing close to 11% year-on-year. In the quarter also positive dynamics have unfolded with retail portfolios remaining while the wholesale segment is also gaining some pace, balancing a little bit the growth in the book. All-in, one more year we have outpaced the market, being able also to further strengthen our leadership position as you know we are the number one franchise in the country across the different loan segments in the country. On the income statement, we continue to deliver on top line with core revenues growing by 20% year-on-year bringing net profit to EUR5.3 billion in the full-year 2023. Positive NII dynamics remained in the fourth quarter supported by sound activity close to 3% growth, geared towards retail.

And looking forward, as we have been anticipating, loan growth will be the main driver for NII growth. High fees increasing by 24% year-on-year, to note as in the previous quarters, the growth in credit cards and payment fees along with an increase in contribution from asset management and higher fees from CIB. On the expense side, our main focus is to maintain an efficient operation while continuing to invest to establish the basis for future growth. As it has been the case in Spain, expenses quarterly evolution is also affected by the final adjustment in the annual variable compensation accrual. All-in, operating jaws remain positive in the year leading to further improvement of the cost-to-income ratio to an extraordinary level of 30.7%.

Finally, asset quality has performed within expectations, being consistent both with our strategy in the most profitable segments, and with a tightening monetary cycle. All in all, the cumulative cost of risk stands below 300 basis points, in alignment with our guidance. To sum up, Mexico continues delivering outstanding results quarter-on-quarter on the back of its indisputable leadership and structural strengths. These will allow us to maintain growing earnings going forward and continue outperforming our peers. More specifically, for 2024, we expect the loan momentum to continue, and the loan book to grow at double-digit pace. Based on this sound loan growth, and our proven capacity to preserve spreads, we expect NII to grow at high single-digit in 2024, slightly below activity growth.

With regards to expenses, growth will slow down to high single-digit preserving positive jaws, and on the asset quality side, we expect a moderate increase of cost of risk to around 325 basis points, consistent with our growth strategy in a context of still high rates, especially in the first part of the year. Moving on now to Turkey on slide 25. Turkey, with the gradual transition towards DOCs policies, has started to surprise on the positive side, and particularly in monetary policy, a sign of the country’s commitment to tackling inflation. Last week, we saw the policy reach — a policy rate reach 45%, still relatively low given high inflation but already favoring capital inflows, international reserve buildups and the Turkish lira. Looking at the performance of our franchise in the full year 2023, the net profit reached EUR528 million in line with 2022, despite the very challenging environment we have been facing.

The magnitude of the rate hikes during the year and the regulatory measures in place have put pressure on the deposit costs and ultimately on spreads and NII. However, our franchise managed to offset these headwinds on the P&L through higher fees, mainly coming from payment services, brokerage and asset management, and higher net trading income, thanks to a strong performance from global markets. Very low cost of risk is just 25 basis points due to low net NPL entries in a negative real rate environment, and strong recoveries and repayments in the commercial segments also unfolded. In 2024, Turkey’s earnings contribution to the group could be similar to that of 2023 in a still challenging environment. This guidance includes an expected increase in the cost of risk to around 110 basis points in 2024 after an abnormally low level in 2023.

Overall, we expect 2024 to be a transition year in which the basis for a more healthy, a more sustainable growth model is implemented in Turkey. Without a doubt, Garanti is the best bank in the country with proven capacity to overcome short-term challenges and take advantage of opportunities going forward. Moving on to South America, on page 26. Finally, net profit amounts to more than EUR600 million in 2023. The region maintains a strong performance in total revenues. NII growth remains as the main driver for the P&L in 2023 in the context of loan growth and the most profitable segments and improving spreads. Higher fees also, and strong NTI supported the gross income growth of the year. Despite expenses being pressured by inflation pre-provisioned profit growth more than offsets the increase in impairments due to higher provisioning in a quite challenging macro environment.

All in, cost of risk ends up at around 250 basis points, in line with guidance. For 2024, in an improving macro scenario in the region, we expect loan growth to be somewhat higher than 2023 and cost of risk to be around 280 basis points. Although we expect some inertia in the NPL inflows in the retail segment, especially in the first half of the year, the easing monetary cycle across the geographies will be an important supportive factor for asset quality trends going forward. And now, back to Onur who will highlight the main takeaways of the quarter and the outlook for 2024. Onur?

Onur Genc: Thank you, Luisa. So, we always have this goal to finish in half an hour. So let me not go into every single bullet point that you see here on the page. The only thing I would say is that we are very happy; very happy with BBVA’s performance in 2023. As a team, and we are very focused on creating value for our stakeholders, our stakeholders, our customers, our shareholders, our employees, and the society in general, very focused on that. And as I mentioned to you multiple times in the past, that it’s kind of a circle, and it all starts with delivery. You have to deliver. You have to deliver your commitments, and you have deliver the numbers. And we do think that, that’s what we did in 2023. But 2023, it’s already gone.

So we have to look forward. We have to look into 2024. So, maybe jump — let me jump into slide 29 and the guidance. Luisa has just explained the countries. So, you can see the guidance for every country on the right-hand side of the slide. And all of this combined, the respective guidance for the countries, it then translates into the following group guidance on the left-hand side of the page. And the Group guidance is, we expect our NAP, Net Attributable Profit to continue to grow in 2024. We expect ROTE at high-teens and above 2023 levels, about 17%. And on efficiency, we expect to beat our 42% long-term goal. With this, I conclude the presentation. I give the floor to Patricia to govern the Q&A. Patricia?

Patricia Bueno: Yes. Thank you, Onur. We are now ready to start with the Q&A session. So the first question, please.

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Q&A Session

Operator: Thank you. [Operator Instructions] The first question today comes from Maks Mishyn from JB Capital. Please go ahead.

Maks Mishyn: Hi, good morning. Thank you for the presentation, and taking our questions. I have three on Spain. The first one is on your NII guidance. Any chance if you could update us on your NII sensitivity to interest rates, but also shed some light of what kind of evolution of interest rates do you bake in your mid-single-digit growth guidance? Then, the second question is on loan growth outlook. I was wondering if you could just share more visibility on what you expect for loan book growth in Spain per segment? And then finally on deposit costs, you mentioned you expect contained deterioration in deposit costs. I’ve noticed that the share of time deposit increased notably in the fourth quarter, and I was wondering if this was related to some particular campaigns or this was a sector pressure, and what kind of beta evolution you expect throughout 2024? Thank you.

Onur Genc: Thank you, Maks for all the questions. On the NII change, the NII sensitivity that you talked about, we have been putting this into the appendix of our presentation so that you can clearly see it, because I really do think it’s the right question and it’s a very important number to look into. If you remember this sensitivity to 100 basis points, it’s a symmetric number, plus/minus 100 it’s the same. 100 basis points step function decline in the curves would have implied more than 20% NII impact. So minus 100, minus 20%, NII not long ago, a year-and-a-half ago. That number, we have been managing that number since that period in the last two years, every single quarter. The last number that we are putting into the appendix as you would see is now plus/minus 5%, so every 100 basis point step function change in the curve would imply now a much lower sensitivity because of the ALCO strategies that we have been implementing, and now the number is minus 5% in NII.

You asked about in the guidance that we have given, what is the rate implication, rate reference, and so on. We have multiple scenarios. The base case that we are now working with, Euribor 12 months is a clear reference rate for us. It’s a clear, important number to look into. Again, it’s a range. We have multiple scenarios. In all the scenarios, we see a growth in NII, but the latest scenario that we have is the Euribor 12 months, the average of 2024 will be around 300 basis points. With that assumption, we are guiding a mid-single-digit NII growth. You were asking about the loan growth in Spain per segment because we are guiding flattish growth overall. It’s going to be more or less like 2023. We foresee growth again in the consumer portfolio.

We foresee growth, a segment that we have been focusing, you would have realized it every single quarter we are posting very good numbers there, what we call the medium-sized enterprises. So, the enterprise segment is very important to us. Our average market share in Spain is 14%, but it’s in certain products of retail, it’s 15%, 15.7% in credit cards, for example. So, we are more inclined to retail banking and our enterprise banking is around 13%. So, lower than our average. We do see that there is some potential to grow there and in private enterprise, you would continue to see that we grow. Then you are asking about deposit, deposit in the fourth quarter, Maks, it’s the trend in the market. You would see we were expecting this obviously, some move has happened, and some moves will continue to happen.

And combining them all, we still guide you at mid-single-digit NII growth. In the presentation, I said it wrongly, I was saying that the customer spread will continue to improve in Spain. NIM, not customer spread. Customer spread has already reached or is going to be slightly higher or slightly lower in the first quarter. Customer spread is not the key thing. It’s the NIM margin. Because of the ALCO strategies that we have been implementing, NIM will continue to improve in 2024. So, I correct myself, in the presentation I said customer spread will continue to improve, it’s more the NIM. Anything you want to add, Luisa?

Luisa Gomez Bravo: No, I would just say that on the beta side, I think that we are looking for a slightly higher beta for this year, around 25% to 30%. But we achieved to be within the guidance this year in the beta below 20%. And with regards to the ALCO strategy, I think that, that will also be positively contributing, as you mentioned.

Patricia Bueno: Thank you, Maks. Next question, please.

Maks Mishyn: Thank you.

Operator: Our next question comes from Antonio Reale from Bank of America. Please go ahead.

Antonio Reale: Hi, good morning everyone. It’s Antonio from Bank of America. Two questions for me, please. One on NII trends in Mexico, and secondly on fees, please. The first one on NII in Mexico. Your outlook for high single-digit growth in ’24 is very clear. You’ve talked about seasonality in Q4. Could you maybe just elaborate how much of the quarter was affected by negative carry trades? And the key moving parts for 2024, perhaps across spreads, volumes and hedges? The second question is on fees. Fees have been strong for a few quarters now outperforming peers both in Spain and in Mexico. Can you talk about what are you doing differently here? What products you’re placing? What are the main drivers? And how sustainable this is really going forward? Thank you.

Onur Genc: Thank you, Antonio, for both questions. I mean a similar strategy that we have been employing in Mexico. You can see it also in the NII sensitivity in Mexico. You would remember that a year ago, the sensitivity of a year, a year-and-a-half ago, the sensitivity — NII sensitivity of our Mexican franchise was around 3.7% to a 100 basis points. So minus 100 basis points would have implied 3.7% decline in NII some time ago. And we have been reducing that sensitivity. The latest number that we have is now 2.3% — 2.3%. Why? Because we have been increasing the ALCO book. We have been increasing the fixed part of the ALCO book and so on. You are asking what part is negative carry? A good part is negative carry, but at the moment it’s negative carry.

I mean, you see it in the ALCO details again in the appendix. We have an EUR18 billion — EUR18.2 billion of securities in Mexico. The yield for that book is 8.5% — 8.5%. And we have both, a good part of this, you would see that in the last year only EUR6 billion increase, EUR5.8 billion, to be specific, EUR5.8 billion increase in the ALCO book. And that has come with yields of 9% to 10% in general, 9% to 10%. The central bank at the moment is paying us 11.25% for the liquidity. So we are taking the negative carry because we wanted to manage that NII sensitivity. All in, though combined is the 2.3% number, 2.3% NII sensitivity in Mexico. As such, we are guiding a mid-single — looking into the Mexican numbers, the loans would be growing at double-digit, and NII high single-digit, close to 10%.