And then regulatory headwinds.
Luisa Gomez Bravo: Yes, well, right now we don’t foresee for 2024 any specific regulatory headwind. I think the most relevant impact is obviously Basel, the entry of Basel IV into effect as of today as of 1 January 2025. As we have stated, we expect a very limited impact around less than 40 basis on a fully loaded — less than 40 basis points on a fully loaded basis. But really, of that, we would expect less than 30 basis points to come into effect in 2025. This is easily absorbed by our capital organic generation. Nevertheless, I think that what we are looking at is that it would be reasonable to expect in 2024 CET1 ratio somewhat above 12% in order to avoid the potential cliff effect of this impact in the first quarter of 2025.
Patricia Bueno: Thank you, Sofie. Next question, please.
Operator: Next question is from Ignacio Ulargui from BNP Paribas Exane. Please go ahead.
Ignacio Ulargui: Hi, thanks for taking my questions. I have two questions. The first one, it’s on the healthy core revenue growth that Onur you mentioned for 2024. If you could give us a bit of a sense of what kind of growth levels you are thinking of in terms of revenues? And alongside with that, I have noticed that you have high single-digit growth in Mexico in costs and 5% cost growth in Spain. I mean, is there room to adjust that core space? And then you have done plenty of initiatives to improve efficiency on the core side as well in the last few years. There is kind of ability to manage costs in case revenue gets a bit worse. And the second question is just on the — on the buyback, has it been deducted already the EUR781 million? Thank you.
Onur Genc: Thank you, Ignacio. Let’s start with the last one very quickly. Of course, all the buyback numbers, when you see them, they are deducted from capital. So the number of 12.67% already incorporates the impact of the buyback. The core revenue growth that you’re asking, Ignacio, if I’m not mistaken, you were asking overall, know, Spain and Mexico and…
Ignacio Ulargui: Yes, growth level.
Onur Genc: Growth level. I mean, it goes back to the countries because we have to look into it at the country level to understand the dynamics. Once again, I will highlight this. NII in Spain is growing in our expectations, mid-single-digit, which I do think it’s a very fair number. In the sense, once again, the NIM is going to help us because of the reduced NII sensitivity that we have had now, it will help us. And the volumes, as we also see in the guidance, it’s going to be flattish. So there’s some — but within that flattish, as we commented a little bit in the beginning, there is some mix change. We are going to be changing our growth to higher return, higher value segments. So, some mix change and continued strength in the NIM will help us to deliver this mid-single-digit NII figure.
And in the case of Mexico, the story is a bit different obviously, it’s about volume growth. Again, we discussed it many times in the past, all of you are aware of it. But I have to — I need to specify it once again. Something, in our view, big is happening in Mexico. And the growth rate, GDP growth rate of Mexico is 3.2% in 2023, 3.2% to 3.4%, 3.4% might seem, well, in the context of emerging markets, it might not be that high, and no, 3.4%, if you look into the past 15 years of Mexico, the average is 2.1%. So, as compared to the average, and what Mexico has been living through, something big is happening. And that something big is finally, really this concept of nearshoring, the concept of investments in Mexico. I mean, FDI is up in the first nine months of 2023, the latest published figure is up 30%.
Investments, private investments, especially in machinery and equipment, and imports of capital goods is up 20%. I mean, we publicize, BBVA research publicizes — publishes this notion of the industrial parks and the space in the industrial parks. You cannot find in the north of Mexico, you cannot find open available industrial park space. So this notion of nearshoring, and as you all know, in the first half of 2023, for the first time after decades, Mexico has become the number one exporter to US, passing Canada and China. This is happening, and this is driving private investments. And investments has always been the key issue in Mexico and now it’s happening. All of this, and then I have tied back to our revenue growth expectations, all of this will drive, will fuel loan growth.
We have grown double-digit this year. We are expecting the same, even a bit more in the loan growth, growing at double digit, because the rates will also start coming down a bit in the coming year. As a result, the core revenues in Mexico will also continue to grow. And again, we do have a wonderful franchise. Wonderful franchise in Mexico. We are very confident that, that core revenue growth will continue and the NII growth as we guided high single digit will be realized. Then, you ask about expenses. At the moment, we are seeing more opportunities to grow at the moment. As a result, we are guiding on the expenses, as we have guided in the case of Spain, close to 5%, in the case of Mexico growing at high single-digit, because we still see — do see the opportunity of growing profitably in certain criteria, in certain portfolios.
In that sense, we always have the options, but we don’t see the need and the discussion to have this year when we are facing nice growth in the revenue side. Anything else do you want to add, Luisa?
Luisa Gomez Bravo: No, I would only say that obviously, efficiency is always part of the DNA of the bank, and all the countries have ongoing efficiency plans to support actually fueling continued growth. So, I think that’s compatible as well with the plans that we have in each country to address continued efficiency.
Patricia Bueno: Thank you, Ignacio. Next question, please.
Ignacio Ulargui: Thank you.
Operator: The next question is from Francisco Riquel from Alantra. Please go ahead.
Francisco Riquel: Yes, thank you. Luisa, I have two follow-ups. First, in Mexico, your NII guidance of 2 percentage points below loan growth is consistent with your NII sensitivity to lower rates. But you also mentioned that the mix should continue to improve. You are capturing that in the cost of risk guidance, which has also been increased. But I would have thought that the NII would have grown faster. So, I wonder if you can comment and you can help us reconcile both the increase in the cost of risk with the increase in the NII guidance for ’24, particularly the deposit beta in Mexico. You mentioned that you are paying up for corporate deposits, so what’s the impact there? And if that could offset the impact — the positive impact from the loan mix?
And the second question is about the capital target that you have of 11.5%-12.0%, specifically the 12% threshold to return the excess capital. You said that in ’21, and since then your SREP has gone up by 50 bps, is now 9.1%. Basel IV, you mentioned close to 40 bps. And there is also noise about a potential countercyclical buffer in Spain. So, with all this in mind, do you think that the 12% threshold on a 300 basis points, 350 basis points of MDA buffer is still valid going forward, pro forma for Basel IV, or will you update that during the year? Thank you.
Onur Genc: Thank you, Francisco. On the first question, I wasn’t sure whether you were confirming that we did have a proper guidance or you were challenging it. I wasn’t sure. But what I can tell you is that in the case of — because you are focused more on the asset quality, the mix change is already incorporated in the guidance that we are giving you. Quarter only, not year-to-date, but quarter only, cost of risk in Mexico in the third quarter, where we have seen some uptick if you remember was 308 basis points in the quarter-only number. In the fourth quarter, that number is around 300 basis points, 297 basis points. So, the mix change that, the fact that we are growing a bit more on high margin, high return, but high cost of risk segments is already incorporated in the number that you are seeing.
