Héctor Grisi: Sorry. Thank you, Carlos. First of all, on the outlook of NII in the U.S., I see it flattish, okay? Let’s see how volumes basically turn out. And as I explained before, since we are very much focused on profitability and also in capital allocation, I see that it’s going to be flattish around there, okay? And in terms of cost of risk in the U.K., sorry. The cost of risk in the U.K., as I told you before, when I was explaining Alvaro, I see it very flattish. I mean the guidance is going to be at around 11 basis points to 14 basis points at the most. So below 2% — sorry, below 20 basis points.
José García-Cantera: So if I may add, we — as I’ve said, we see no asset quality pressures anywhere. Labor markets are very strong, new employment, new job creation is also very strong everywhere. So we see really no pressure. There’s no signs of asset quality deterioration. So we could extrapolate what we’ve seen in recent quarters in the U.K., we could extrapolate for the rest of the year.
Begoña Morenés: Thank you. Can we have the next question, please?
Operator: From Marta Sanchez Romero from Citi. Please go ahead.
Marta Sanchez Romero: Thank you very much. Good morning. My first question is on capital. So the Bank of Spain were to introduce the CCI of 100 bps, that is 25 bps for you, but that would leave your 12% fully loaded core equity Tier 1 ratio, leaving or implying an MBDA buffer of just about 177 basis points, which is pretty low for European standards. So do you think that 12% fully loaded Tier 1 ratio target is still the right one in that event? And the second question is on the U.K. So the bottom line is now 25% smaller than last year. Is the shrinking going to continue? Or do you think you can stabilize earnings at current levels? And just quickly a clarification on a previous question. The revenue growth that you are foreseeing, is that just reported revenues? And is that in constant or current euros? Thank you.
José García-Cantera: Let me answer your final question. We are estimating almost or around double-digit revenue growth in constant euros with Argentina in current euros. Obviously, in current euros or in euros with Argentina in constant might be higher than that. But as I explained, we believe this is the best reflection of our underlying performance, eliminating the distortions of hyperinflation in Argentina.
Marta Sanchez Romero: Thank you.
Héctor Grisi: In terms of capital, what I can tell you is basically that exactly, as I said, I reiterate that we’re going to end up the year at around 12 40 to 12 50, okay? And I really do believe — actually reiterate that we’re going to be above 12% after Basel III. I would be — that would be the main points.
José García-Cantera: Yes. And again, the countercyclical buffer will be implemented in a year’s time. So again, the capital target is being decided by the Board. The Board might review that capital target once the variables that led to that capital target might change, but we are going to be comfortably above 200 basis points MDA with our actual capital buffer.
Begoña Morenés: Thank you. Can we have the next question, please?
Operator: Next question from Britta Schmidt from Autonomous. Please go ahead.
Britta Schmidt: Yes. Hi, there. Thanks for taking my questions. I’ve got two questions. You sound more optimistic on net interest income in Spain, UK and Brazil. But yes, there’s more been no change to the official group targets for 2024. What is the delta here? And what do you think is the biggest delta to consensus? And then secondly, you guided to double-digit customer revenue growth and the group revenue target is mid-single digit. What’s the delta here for 2024? Thanks.
José García-Cantera: As we saw in the first quarter, just the monetary adjustment in Argentina, in the first quarter was €600 million. We have €1.2 billion monetary position in Argentina, and inflation was 51% in the first quarter. So just that in the first quarter was €600 million. That’s what we are trying to avoid by looking at constant. So there are charges to the P&L that obviously we don’t control. So that’s the reason why we haven’t changed the revenue target for, I mean, the total revenue target for the group, mid-single digits, but we believe that the customer revenue growth can approach can be close to double-digits.
Héctor Grisi: Britta, in terms of the revenue overall, as you were saying in NII, Yes, I sound optimistic because I’m very optimistic of the trends that we have in front of us. And I reiterate that we’re going to meet the 16% RoTE that we basically have announced onwards, I believe that is — it looks good and it looks promising, but I reiterate the guidance that we have gave you.
Begoña Morenés: Thank you. Can we have the next question, please?
Operator: Next question from the line of Sofie Peterzens from JPMorgan. Please go ahead.
Sofie Peterzens: Hi, here is Sofie from JPMorgan. Thanks very much for taking my question. So I was just wondering about the net cost guidance for 2024. Does it still hold your costs were up 5% in constant euros, 7% in current euros, so how should we think about that as cost guidance that you previously gave? And then my second question would be on rates sensitivity to 100 basis point change in rates, if you could just remind us what that means for Spain, Brazil, the U.K., U.S., all the core markets? And also, if you have any hedging in place to reduce that rate sensitivity? And then my final question would be on Slide 5, you say that your — you only got 5 million new customers year-on-year. But at the Investor Day a year ago, you targeted, I think, 75 million new customers.
Just like a strategic question, maybe it doesn’t make it different if you only have 5 million new customers or does it make it difference? And how do you plan to get the 75 million new customers that you guided for at the Investor Day a year ago? Thank you.
Héctor Grisi: Thank you, Sofie Let me answer you the last question first. I mean, what we’ve been doing here is basically, we are cleaning up a lot of our customer bases. And even though we are growing quite hard, we’ve been cleaning up that and basically that’s, at the end, what’s going to be telling — I mean, moving up towards the number of customers that we are able to include. We’re going to be working on that. And — but I mean, the growth of customers basically is very strong in all different areas and in all different businesses. In terms of the cost, I was basically — as I explained to you, I mean, this remained fairly stable for the third quarter in a row, okay? As you have seen, that’s close 1% quarter-on-quarter.
If you exclude Argentina, that’s minus 3% because Argentina is moving the numbers up and down. That’s plus 2% year-on-year in real terms, and that’s a cost to income at around 42.6% and this is in track to our 2024 target of below 43% cost to income. And I believe that we’re going to be able to get to that. Cost efficiencies are just coming from operating leverage through simplification of products. If you see the amount of product that we have simplificated, we have 10,000 different products, today, we’re down to 7,500 and automation, which is a very important part. And I was explaining you in the change of model how we’re changing the non-commercial FTEs to commercial FTEs. And this is something that, in time, will help us to control costs much better than we’ve been doing, okay?
That’s basically the efficiency gains. If you look at that simplification gave us 17 basis points year-on-year of savings. Automation is helping us out, 58% of product services are now digitally available, okay? That’s 2 percentage points in help versus December 2023. And if I can tell you an example, the U.S. have captured €10 million in efficiencies just in Q1 alone. And that’s €210 million since we started the process in 2022, and that’s just in consumer and retail. So, it’s very important that we also remember that one transformation is not a really cost-cutting exercise for the creation of the single model and with several other benefits, and this trend will continue on and on helping us out as we change completely the model of the way we operate the bank, okay?
So, to reiterate is basically to tell you that we’re going to be in our target below the 43% cost-to-income for the rest of the year.
José Garcia-Cantera: Now, in terms of rate sensitivity, there hasn’t been any change in all countries, in most countries, but Europe, let me — in euros. Let me explain. So, in the U.S., it’s plus/minus €150 million; in Brazil, plus minus €150 million. In the UK, it’s plus/minus €200 million; but we have reduced the sensitivity in euros, in Spain, in particular, significantly. Let me make first 1 particular comment about the UK. Our structural hedge in the UK is £113 billion with an average duration of £2.4 billion. It was £106 billion in December. So £113, 2.4 years, average duration. And in Spain, we have been hedging our balance sheet through a combination of different actions, basically originating — adjusting the origination buying ALCO portfolio.
We now have €30 billion ALCO in Spain at an average duration of between six to seven years at 3.25% yield. And we have been also writing some hedges. The result of that is that of the €240 billion risk-weighted assets, €250 billion average earning assets, we have in Spain, 60% is floating, 40% is fixed. That’s significantly higher fixed portion than before. So now we have now lower sensitivity to rates in Europe.
José Garcia-Cantera: Sorry, Sophie, just to be more precise, what I was saying is the cost to income is going to be below 43%. That’s efficiency that we have said for the year, and we reiterate that. And efficiency this quarter was 42.6%.
Héctor Grisi: Let me — so let me just finish. The NII sensitivity compared to the average of the major competitors we have in Spain has been reduced to 7.5%, compared to their sensitivity at 5%. And we expect to continue hedging the balance sheet as we in the future. Obviously, the decision to this gradually has proven to be good in the sense that rates, curve rates, interest rate curves have picked up a bit, so that has allowed us to earn higher NII and also more time to hedge the positions. But again, we are gradually hedging our interest rate sensitivity in euros, reducing duration through the combination of all these actions that we’ve taken.
Begoña Morenés: Thank you. Can we have the next question please.
Operator: Next question from Andrea Filtri from Mediobanca. Please go ahead.
Andrea Filtri: Thank you for taking my question. The first is on your profitability targets. You’re above 16% RoTE guidance for 2024 implies more than €12.4 billion net profit this year with Q1 on track to hit that with tailwinds in H2 that you indicated in Brazil, in the UK reticketing portfolio in consumer with lower rates. Can you be more specific about your profit target for this year and give us an insight on the 2025 RoTE outlook? Second question, if you could give us a target for 2024, group costs in absolute million? And where do you see them going in 2025? Finally, a quick one on the insurance business, the new banking package improved, the treatment of insurance activities inside banks. Could you consider internalizing this business? Thank you.
José García-Cantera: Thank you, Andrea. You’re right. I mean, we are confident that we are going to reach the 16% target that we set in terms of ROTE for the year. And as we said correctly in our Investor Day, we said 15% to 17% towards 2025. And we are working towards that, and we are working very hard in order to be able to do it. But today, I reiterate to you that we’re going to be at the 16% that we have set, okay? In terms of cost, what we have said is basically around less than 43% in the terms of cost to income. If you see the numbers that we have been, we’ve been very disciplined in terms of — and what we have said, I mean, if you said it, is you saw is quarter-on-quarter is around 1% top, and we’re going to be very disciplined about it.
