And why is– and the deposit betas and why is the NII is growing at high single digit? Because there will be some slight decline in customer spread. With rates coming down, I gave you the sensitivity also, customer spread will come down, and NII will come down and NIM margin will come down slightly. So, as a result, we are going to grow in loans at double-digit. But the NII, we will be growing at high single-digit because of that impact, basically. On capital, as you say, pro forma as of January 2024, as of this month, the requirement is going up to 9.1%, 9.09%, if I’m not mistaken. With the 12%, the gap, the difference is 291 basis points in CET1 buffer, 291 basis points — 291 basis points. What is the average of the largest banks in the European zone?
The 15 peer group that we defined, which is all footnoted in all the presentation pages, the ones who are in the EU in that list what is the average of the buffer that others have? 243 basis points. So we do have a larger buffer than the average of our key competitors. And I remind you once again, we discussed it in the past. So, I feel sometimes that I’m repeating myself. But it is important. If you take a 15-year, 10-year, 20-year, relatively long enough time frame and you look into not quarterly, but annual organic capital generation, and the standard deviation of that, you do see that our number is, first of all, it’s higher, so we do have a better number. But even the volatility around this is relatively low as compared to our peers. In that context, a bank with a business model like us, a bank with a clear competitive advantage, I underline this, clear competitive advantage of having either the best or one of the best banks in the countries that we are in.
I mean, being number one, number two, or being number six makes a big difference in banking in any country. And you look into us and you do see that these — they do have really great banks in the countries that they are in. Even in very tough macro environments that we operate, we typically have either the best or one of the clear best banks in that country. If you look into volatility, the level of profitability that we have, and this notion that we have wonderful franchises in wherever we are, I do think that this buffer is more than enough. You mentioned about some other topics of the cyclical buffer, countercyclical buffer, and so on. Countercyclical buffer, as you know, Francisco, it goes back to negative — it’s credit gap. We are in the negative territory, and the trend is a downward trend.
So the loans are not growing in Spain. So I really don’t understand this discussion that we might need countercyclical buffers. In an environment of credit declining, I don’t see it. But if it happens, okay, we put it in the number and we move along. But we are clearly confident that the buffer that we have is more than enough. Anything on Luisa?
Luisa Gomez Bravo: Well, no, I would only add as well that with regards to the Basel IV impact, we stated that around fully loaded would be around 40 basis points. But as you know from the EVA impact analysis published in September ’23, the CET1 would decrease by 220 basis points for the group one entities and when considering European commission specificities, it would be 150 basis points. So we are going to be one of the lowest, I think impacted banks on Basel IV.
Onur Genc: I don’t — I rarely see this discussion at all in the market. One of the again strengths of BBVA is the fact that we have the highest leverage in Europe among the larger banks. We have the highest risk density, I mean, our — WA density for BBVA is 47%. The average of European banks is 28%. Given that, we are not affected from out to the floor. And there’s something called Basel coming, and the impact on the whole sector will be quite important and the impact on BBVA is one of the lowest. And that will be also a key differentiator for capital returns for many other discussions that we have been having. So I think it’s an important point. It’s not far away. It’s a year from now.
Patricia Bueno: Thank you. Paco, next question, please.
Operator: The next question is from Alvaro Serrano from Morgan Stanley. Please go ahead.
Alvaro Serrano: Good morning. I had a really follow-up questions. Onur, you mentioned the rate sensitive in Spain that was symmetric plus/minus 5%. I just want to double-click on that because, maybe can you share, and maybe this is more for Luisa, the deposit beta assumptions behind the minus 5%? Because the fact that it’s symmetric, I’m not sure if you’re using the same deposit beta assumptions of the way up, and the way down. Conscious that on my numbers you’ve got 21%, 22% beta in Q4 standalone. So, it looks like the standard EUR0.50 beta on the way down could be optimistic, but I just want a clarification there. What assumptions are behind that number? And second, and apologies if you’ve already mentioned this, could you share the rate assumption you’re using in Mexico? Thank you.
Onur Genc: Very good. Well, I said symmetric, but it’s basically, the difference is there, but very little. So, it’s marginal plus-minus. But going back to the deposit beta, Luisa, you want to take it? It’s basically — how you calculate the beta is important. What we are calculating is our deposit cost, the increase in our deposit cost, which was zero when we started the cycle, divided by — with what has happened to the deposit rate of ECB. ECB deposit rate has increased from minus 50 basis points to 400 basis points. So the denominator is 450 basis points. And then in the numerator, what has happened to our deposit cost? It used to be zero, now it’s 86 basis points. Divided you get 19% beta at the end of fourth quarter. With the same assumption, the rates will start coming down, but you take the average in the numerator or what has happened to the rate, and then what happens in the numerator, we are telling you that in our assumptions, it’s going to be 25% to 30% at the end of December 2024, because with the decline of the rates in the numerator, we will also see some help in the velocity of increasing the deposit costs.
So, I don’t see the — I don’t have the quarterly beta and so on, but at the end of December ’23, the beta was 19%. No, Luisa?
Luisa Gomez Bravo: Yes, and I think that, as I mentioned before, we are expecting the deposit betas to go up to 25%, 30%. I think the idea that we have from the ALCO perspective is to maintain the sensitivity at these levels. And obviously, there’s an active management of the portfolio behind that. So that we will see, depending on the velocity of the migration, the eventual price of the deposits in terms of how they’re managed. And obviously, the rates, those moving pieces will determine the evolution. And our idea, as we mentioned is to try and maintain the sensitivity at a current 5% level with regard to those moving pieces.
Onur Genc: And then you asked about Mexico rate assumption, the end of period 2024. So, at the end of December 2024, we are foreseeing the official interest rate to be 9%. At the moment as you know, we are at 11.25%. And we will — we are expecting the first rate cut to start in the first quarter of this year. I would also on this one sometimes some of you mentioned this and so on, independent of the rate evolution we did see these in the recent past, I mean, the rate — the official rate was 4.25, a few years ago, not too long ago. And when it was 4.25, our customer spread was 10%. So we do operate in Mexico with higher spreads because of the nature of our bank and because of the customer segments and the products. So independent of this decline, we have proven in the past that we can operate with very high customer spreads. That is why we are guiding NII sensitivity to be 2.3%.
