Patricia Bueno: Thank you, Alvaro. Next question, please.
Alvaro Serrano: Thank you.
Operator: The next question is from Carlos Cobo from Societe Generale. Please go ahead.
Carlos Cobo: Hello. Carlos from SocGen here. Thank you very much. A couple of questions. One is again on rate sensitivity in Spain. Sorry, I’ve lost my connection.
Onur Genc: No, we hear you, Carlos.
Luisa Gomez Bravo: We hear you.
Carlos Cobo: Yes. Yes, can you hear me now? Sorry, the headphones went off. So one is about the reading and how it changed from say 20% to 5% now. And you explained it very well. Part of that is the hedging, but how — what’s the duration of that hedging? And how could that be, if you couldn’t have those hedges? So, I’m trying to get a better feeling of what is the perspective for that NII, once those hedges expires in 2026, 2027? I know this is very dynamic, but it’ll be interesting to get some color on that if you could. And the second one is on Mexico. In terms of the growth and what is the mix. You said 11% growth this year. How much is corporate? How much is consumer? And if you could add how much you’re getting from Banamex in terms of market share?
And what would be the growth mix expected for 2024? Because so far we keep hearing about the nearshoring, but consumer lending keeps getting a very big share of the growth in Mexico. So, I was wondering if you expect an acceleration of that corporate loan demand to come through. Thank you.
Onur Genc: On the ALCO, do you want to take it, Luisa?
Luisa Gomez Bravo: Yes, well, on the ALCO, as we’ve mentioned before, the focus has been obviously unlocking in our rate sensitivity in the last quarters. We’ve increased the ALCO book EUR8.5 billion in the year. It stands right now at EUR38.7 billion. And the current yield is 3.1%, coming from 2.5% in the last quarter of last year. Duration, including hedges is 3.4%. If we were to exclude the hedges, the duration would be at 4.4%. I think that we’ve been managing also the yield at 3.1% level, especially through the hedges. Right now, the portfolio composition stands at 85% is fixed, and 14% or nearly 15% is floating rate. And I think these are the main variables of the portfolio. We’ve been primarily buying medium-term Spanish bonds and unwinding the hedges that we had.
Going forward as we mentioned before, we don’t expect to be adding a lot on to the portfolio. I think we are happy with the size. We may keep it flat or slightly increasing, taking opportunities to invest maturities at attractive fixed rate levels, if those come to be. But it will obviously be depending, as we mentioned before, on the balance sheet dynamics, especially on the deposit side, and this is what we expect for 2024.
Onur Genc: Very good. I mean, I will give you one more number. The floating part of our ALCO portfolio in the — at the end of 2021, two years ago, the floating part was 60%, and with time, every single quarter, we kept, or lately actually, in the last few quarters, we kept reducing it. And 60% floating at two years ago is now 15% floating. So, we are more fixed. So if rates go up, we might regret this decision, but our expectation is rates will not go up. So, if that’s the case, we have done the right thing. Then regarding Mexico and the growth in Mexico, we do see the internal drivers of consumer growth still to be there. In that sense, once again, the overall leverage in the country is so low that there is room in both segments, in both areas, in different products to grow.
We do expect still a higher growth in retail. I just want to give you one number, though. In the case of commercial, the business side, the growth in the year in 2023, you see it in the pages, but it’s 6.7% growth on the commercial enterprise side. But this is partially impacted by the dollar devaluation or Mexican peso appreciation versus the dollar. If you isolate for this currency impact, because some of the loan book in the company segment is in dollars, if you isolate for this, the growth would have been 10.5%. So, the enterprise segment is also growing. You don’t see it as much because of this depreciation, devaluation impact of the dollar versus the Mexican peso. But in the case of retail, it’s 14.4% higher. And those dynamics will continue to be there because when rates come down, there will be more vibrant consumer spending and so on.
Again, we are very positive on Mexico. I mean, even this year, the growth that we are expecting for Mexico now, and typically in the last quarters, we have upgraded in a positive way the growth. But the growth that we are expecting in GDP for Mexico in 2024 is 2.9%, around 3%. It’s still a very robust environment, and with rates coming down on the retail side, you will still see some strength.
Carlos Cobo: Thank you.
Patricia Bueno: Thank you. Thank you, Carlos. Next question, please.
Operator: The next question is from Britta Schmidt from Autonomous Research. Please go ahead.
Britta Schmidt: Yes. Hi there. Thanks for taking my questions. Could you — so coming back on the topic of capital distributions, I mean, irrespective of the SREP and the countercyclical buffer, the messaging from the ECB is very clear that banks are supposed to maintain or increase their capital buffers. Does this messaging have any impact on how you think about the payout trajectory versus maybe a couple of quarters ago? The second would be, could you explain a little bit on the outlook for the Turkish customer spread with the kind of forced conversion of FX deposits, probably still ongoing? Do you expect this to worsen further or has this bottomed now? And maybe you can also give us the FX and inflation assumptions you used in your guidance to reflect contribution. And then lastly, just a clarification on Mexico. If I piece together the guidance, is it fair to expect around 5% net profit growth in local currency? Or could this be better in ’24? Thank you.
Onur Genc: Britta, you are now asking us to give profit guidance by country, but your number, 5%, it should be slightly better than that. Yes. Not slightly, better than that. Let me say it that way. In the second question, Turkish customer spread, it has bottomed out. We are seeing some pickup in the number in the month of January. It goes back again, as you said to currency protected scheme and the requirements of the supervisor and the central bank in this case on this. You might have seen it, but the requirements of the renewal of what we call the central bank-covered currency-protected scheme, they have relaxed the regulation a bit. They relaxed the rules a bit. And as a result of that, we are seeing some pickup, not big one, but slight pickup in the customer spreads in the month of January.
So, our expectation is that, given the situation that we are seeing some return to normal, return to orthodoxy in Turkey, we have seen the bottom in the fourth quarter is our expectation. And then the first question was on the capital returns. I understand what you’re saying, but you should all be aware, again, of the fact that there is a big discontinuity for the European banking sector, which is Basel implementation in January 2025. It’s a year from now. In that context of Basel impact, I do think that the numbers that you would see today in terms of capital, they will be different and the base will change, everyone will be affected. And Luisa has given the numbers and they have expectation now for the European banking industry is around 150 basis points different.
