Marta Noguer: Good morning, and welcome to CaixaBank results presentation for Q3 2026. As usual, we are joined today by our CEO, Gonzalo Gortázar, and our CFO, Javier Pano. We will spend about 30 minutes with the presentation, followed by the Q&A, which is live, and you should have received instructions by email on how to participate.
Marta Noguer: In terms of the timing, we have the press conference immediately afterwards, so we will have to be mindful. But as always, my team and I will be at your full disposal after the call. Gonzalo, the floor is yours.
Gonzalo Gortázar: Good morning, Marta. Thank you. Thank you, everybody. It is a sad week for all of us in Spain, given the tragic accident, the train accident we had. First thought is for the relatives and associates of the victims of this tragedy. Having said that, we move into our results and the highlights of the results, as you can see from the title, I think, are profitability and growth.
Gonzalo Gortázar: We are, yet once again, combining pretty solid growth with an improvement in profitability, as shown by our close to 19% return on tangible equity, which is really what we want, profitable growth. You see the increased number of clients, close to half a million in the last 12 months. This is net clients gains. It is much larger, 1.2 million, if you look at it on a gross basis.
Gonzalo Gortázar: Performing loans growing pretty much in line with the previous quarter, 8%. Customer funds, 5.6%. Here we have a slight slowdown. I am sure we will talk about it during the presentation and the Q&A session. Very strong performance on insurance premium, +12%. I would say, frankly, very good commercial activity. NII is growing. Obviously, now rates start to be tailwinds for us, and volumes are helping.
Gonzalo Gortázar: I think it is worth highlighting that the customer spread adjusted for hedges has really reached an inflection point. It is up 2 basis points in the quarter, and this is obviously the beginning of a trend. We have also seen NIM, net interest margin, up 3 basis points. So it is not just customer spread, but it is the overall balance sheet and just inflecting at this point.
Gonzalo Gortázar: Revenues from services, as it has been the case this year, very strong growth, 7.7% on year-on-year, and obviously very well sort of broad-based, as we will discuss later on. Asset quality continues to improve. We have reduced non-performing loans, non-performing assets, and improved the ratio despite the fact that in terms of lending growth, Q3 is, as always, seasonally negative. So, quite good.
Gonzalo Gortázar: Coverage at 82%. Frankly, levels that we have not seen for decades. All that obviously is leading us to set the interim dividend at the highest end of the pre-announced range, and also increasing our guidance in services to about EUR 5.6 billion and return on tangible equity from above 18% to around 19%. Moving into the, as always, first the economy. Despite the risks and the environment that is obviously volatile, the reality is we continue to do very well.
Gonzalo Gortázar: We're expecting 2.6% growth in Spain. Any time now, we'll be seeing the GDP numbers for this quarter. I think, actually, what I've been told is that the growth this quarter is very much in line with our projections, so that 2.6% appears even more robust. Portugal, we have increased recently, pretty good levels, and then obviously looking into the near term, we also see continued outperformance vis-à-vis the euro zone.
Gonzalo Gortázar: Yet, there is downside risk looking at the Middle East situation, but the reality is we have had downside risk for quite some time. What we have ultimately achieved is higher growth than expected, so it's a bit of a paradox, I would say, at this stage. I think our numbers show a continued and positive environment. You have the fundamentals there. I'm not going to go through them because you know them well.
Gonzalo Gortázar: Obviously, one of the big differences has been the increase in inflation. It's close to 5% at the end of September. This is obviously resulting in higher rates. Higher rates obviously help us, as you know, but they do slow down the growth in household savings.
Gonzalo Gortázar: So the savings rate, as you can see there, is expected to come down by approximately 1%, from that 12% to 11% region, and that is resulting in, overall in the system, a slower growth of customer funds and particularly sight deposits, as you can see. The system figures have moved from 7.1% to 2.5%.
Gonzalo Gortázar: As you will see later, we are again outperforming the system, precisely where there's a lot of value to be created, the non-remunerated sight deposits. So we are obviously very happy and satisfied that we continue to take the better part of the market.
Gonzalo Gortázar: The three-year plan goes on well. You see that growth as a key target for us and how that's evolved in terms of client acquisition, almost 800,000 since the beginning of the plan. Payrolls and other income deposits growing nicely, business volume. I think when you look at the market shares, be it client penetration, payrolls, business volume, savings, life risk, we see, honestly, a machine that is firing on all engines. imagin, yet another good quarter for imagin.
Gonzalo Gortázar: Business volume, EUR 24 billion, up 18%, increasing number of clients, 9%. Again, as you know well, imagin is still the leading bank in that sort of age 16 to 34, and it's not just the leading bank in terms of penetration in the market, but it's particularly so in terms of the broad range of products.
Gonzalo Gortázar: It's a real universal bank compared to very narrowly focused neobanks, which, as you can see, have a much lower business volume than we do. Transformation, the other big part of our three-year plan, continues powering ahead. You have a number of highlights in this year. I think in the quarter, it's relevant we'll basically rebuild and relaunch the app for businesses, which is actually going down very well.
Gonzalo Gortázar: We have launched Bizum Pay also as soon as it was possible. It's obviously early days, but yet another interesting initiative, again, done by the system as a whole here in Spain. AI continued to apply throughout the business.
Gonzalo Gortázar: I think the highlight this quarter, actually, it is early October when we finally deployed massively to 16,000 commercial people in our commercial network, the AI agent that allows to prepare and to close interviews with our customer meetings, which is actually having a very quick and very successful adoption, and which, because it is sort of aiming at a big process for us, we actually do 14 million of commercial interviews a year, so we are trying to make sure that we direct AI changes to the places where it is really relevant.
Gonzalo Gortázar: This is obviously very transformational, and you have some data down on the page that I will skip for the sake of time. Numbers on the lending book, 8% year-on-year. It is up much more than what we had expected. Actually, lending growth is being very resilient.
Gonzalo Gortázar: Residential mortgages up 7%, consumer lending, you have here some deceleration from north of 10% to slightly south of 10%, but actually very good numbers. Business lending is doing very well. Obviously, that 11% growth includes some international numbers. You look at the overall growth in the domestic portfolio, 6.4%, as you can see, domestic, in this case, including Spain and Portugal, in our core markets.
Gonzalo Gortázar: So, it is very solid growth and an increase in market share. I would say that increase is particularly relevant when we look at SMEs, where we are gaining market share on a consistent basis, and where obviously we see potential growth. It is also the case in consumer lending, which again indicates the basic of our growth strategy. We are growing and gaining market share where we want.
Gonzalo Gortázar: You can see this on this page, looking at our customer funds, and look at the right hand, on the upper side. We are gaining market share on household side deposits, what we have called the jewel of the crown. So yes, there is a slowdown, but we are still growing and growing faster than others, which is a good proof of strategy and also our competitive positioning. Then we are growing also in wealth management as a whole.
Gonzalo Gortázar: If you add pension fund savings and pension plans, we gain yet another 15 basis points year-on-year, which is what we like. Now we are going to be seeing small but positive gains in market share. That is what is consistent with sort of a solid retail banking trajectory. So very positive again, the same way we are gaining market share of SME or consumer lending.
Gonzalo Gortázar: Again, we pick our spots, and we are doing the same on the high value add of the customer fund side. See wealth management growing up north of 10% on deposits. As I said, it is on that 2.7% year-on-year. If we just look at the private sector, it is 3.2%. The growth is, as you can see, across all categories.
Gonzalo Gortázar: To highlight what I said before, looking at the slowdown in the growth of side deposits for the system at 2.5%, our growth is 3%. That is what makes for that 11 basis points of market share gains in the last 12 months. Also, the non-interest bearing deposit balances growing at 4% year-on-year. Keep, I guess, doing the best of us in this market. Wealth management, so further detail on growth. As you can see, pension plans, 8%, mutual and savings above 11%.
Gonzalo Gortázar: Net inflows increasing 17.9%, a pretty good rate that has stayed during the summer and in this month of October. Again, nice gains in market share sustained over a long period of time, yet a big opportunity because this is the reality in Spain. We still have plenty of growth ahead of us. Protection insurance has been an outstanding quarter.
Gonzalo Gortázar: You see premium growing at 12%, a bit over 12% for life risk, a bit below 12% for non-life, but very good numbers that you can see. This, again, is not just one quarter. You have the figures now for the last 10 years, how the differential growth rate of CaixaBank versus the market is allowing us to gain market share and actually to grow the market. Non-life is actually quite impressive when you look at health, household, and auto.
Gonzalo Gortázar: It is clear that our distribution strength is continuously leading us to growing faster than the market, the banking market and the insurance market. Finally, this is all turning to value creation, value for shareholders. You look at return on tangible equity, earnings per share, book value per share, dividend per share on an interim basis. It is all moving in the right direction. To be honest, in the current circumstances, the stars are pretty aligned for this to continue for quite a while. So, I end up with that upbeat message and pass it on to Javier.
Javier Pano: Okay. Thank you, Gonzalo, and good morning. From my side, the usual additional details on P&L and balance sheet. Let us start with the consolidated income statement. You already may see a net income at EUR 1 billion 759 million. This is up by close to 22% year on year. If we move further up, you may see that revenues are also progressing up by close to 6% year on year.
Javier Pano: More details on revenues, NII, as you already know very well, up by 4.6% year on year, 2.5% quarter on quarter, basically sustained by strong business volume growth. Then revenues from services, where we are clearly having a better performance than our initial expectations, up by 8.3% year on year, on the back of strong wealth management and strong protection insurance, as Gonzalo was commenting. On other revenues, not much to say.
Javier Pano: Equity accounted, we have the usual seasonally positive for Q3 from SegurCaixa Adeslas. Then on operating expenses, we are up by 4% year on year, fully on track to meet our guidance for the year, comfortably, I would say. Then below, loan loss charges, cost of risk, 24 basis points, also fully on track.
Javier Pano: We have, again, some positives, some gains and losses from real estate gains. Continue to dispose at a good pace and good margins on that portfolio. Then finally, on taxes, we have a write-up on DTAs. Now one related to the settlement of the fiscal year corporate tax. With that, we continue with Portugal. We have, for the first 9 months, a net income of EUR 339 million.
Javier Pano: You may see that business volume continues to do pretty well in Portugal also, up by 7%, clearly outperforming the industry since we took control of BPI. On market shares, also gaining. I would remark everything related to wealth management, where we are progressing, and also this is having quite a positive impact on fees in Portugal. Profitability is good, around 16.6%, strong balance sheet, NPLs 1.6, coverage 80%.
Javier Pano: As a reminder, the agreement reached to sell the remaining 33% stake in BFA, expected to be closed later this year or early into next year. With that, we go to the usual NII details. On the central bridge, you may see the quarterly evolution. You may see quite a positive contribution in the quarter from client NII, from yields, and also volumes. We have a negative on ALCO. On ALCO, there are a few things going on.
Javier Pano: We have a positive from the fixed income portfolio, as we have rolled over part of our, well, all maturities we have had during the quarter at better yields. Actually, the average yield for the portfolio has clearly improved. But then on the other hand, we have negative from higher rates on hedges, on deposits, and also on wholesale funding. It is a clear quarter where clearly very short-term rates have moved upwards.
Javier Pano: Hence, we have this short-term negative impact. When you take a longer-term view, and this is upper left, the view for the same bridge, but with a year-on-year view, you may see that still rates are having a negative impact on the commercial side of the balance sheet. Business are clearly adding, and then ALCO is also a clear positive with a longer-term perspective. Below, you have the evolution of margins. I would remark net interest margin.
Javier Pano: Gonzalo already mentioned it. It is already progressing quite significantly, the inflection point being one year ago. It means that it is not only customer spread that is progressing, but also the rest of the balance sheet. The customer spread ex-hedges, we think is the correct way to look at it, to really realize what is going on commercially speaking, is up by 2 basis points this quarter.
Javier Pano: Clearly, the second quarter being the inflection point, and it is standing now at 298 basis points and set to clearly progress in coming quarters. That is a result of a back book yield of the loan book at 350 basis points, +7 basis points in a quarter, and client fund costs that are also progressing, obviously, as a pass-through of higher market rates, up by 5 basis points ex-hedges.
Javier Pano: Zooming into our deposits, our customer deposits, this is the usual average quarterly evolution. You may see that overall deposits are up by 3.5%, so much slowdown, as Gonzalo was commenting. But the good part is how it is doing about non-interest-bearing deposits, up by 4%. So, as you may see that there is a relentless progression on that front.
Javier Pano: On the right-hand side, you have the yield of interest-bearing balances up by 17 basis points to 1.78%, mainly driven by indexed deposits that, as you know, is approximately 50% of our remunerated deposits, and mainly indexed to the overnight rate. Hence, the overnight rate has moved upwards, so we have an impact on that front.
Javier Pano: Anyhow, you may see on the right-hand side how we compare with Spanish peers, and our cost of deposits is clearly below the peer average. Those are already figures for Q3. We move to revenue from services, clearly outperforming our initial expectations.
Javier Pano: For the first 9 months, on the left, you may see that are up by 7.7%. Clear outperformance on wealth management and protection, well into double digit. On banking fees, we are able to start stabilizing that part of the business. You may see here a negative, slight negative, -0.9%. If you strip the increased SRT activity, which is impacting on that part of the P&L, that would be slightly positive. You have additional details on that front on the footnote.
Javier Pano: When you combine wealth management, protection insurance, and CIB fee revenues, we are progressing well into double digit year-on-year. On the central chart, you have the quarterly evolution. Not much to say, despite the fact that you can realize that it is a steady progression almost every quarter, a trend that is expected to continue.
Javier Pano: As already said, revenue from services guidance improved now to more than EUR 5.6 billion. Costs, everything on track. Bottom left, you may see the evolution year-on-year for the first 9 months, up by 4.3%. The message is that we are going to be meeting the guidance for the year comfortably. Cost to income below 40%, which compares pretty well with a peer average of Eurozone banks.
Javier Pano: A few words on asset quality. NPLs trending down, additionally by EUR 100 million in the quarter, EUR 7.7 billion. The NPL ratio, 1.76%, also well below the peer average. You may see the breakdown across the different loan segments. Nothing to worry about. We are quite, let us say, upbeat on the evolution.
Javier Pano: Below, you may see that the NPL coverage continues growing, now standing at 82%, a quarter where we have not assigned the overlays, so those continue to be stable at EUR 271 million. On the right-hand side, you may see the cost of risk at 24 basis points, so fully on track to meet guidance. Liquidity, always a hallmark. Robust liquidity sources, over EUR 200 billion. Liquidity cover ratio end of period, 178%, NSFR, 139%.
Javier Pano: That compares extremely well with peers. Those are 12-month averages, which is what is public. In any case, we are in a much better place, which is something really important in the current environment. This is, as you know, on the back of really stable retail deposits and operational corporate deposits. A few words on capital. This quarter, we have a capital accretion of 66 basis points.
Javier Pano: We are investing into the business new lending, 8 basis points, -44 basis points for dividends and AT1s. On markets and others, we have -15. Basically, the impact of higher yields on our fixed income fair value OCI portfolios. With that, we are ending the quarter with a CET1 ratio of 12.52%. On the right-hand side, just to recap the interim dividend, we are paying in a few days, EUR 1,281,000,000. This is a payout of 40% on the H1 results.
Javier Pano: DPS, EUR 0.1844. That is up by 10% versus last year. A final wrap-up on guidance, what we are upgrading today. Revenues from services now expected to be over EUR 5.6 billion this year, and ROTE, as we have obviously better visibility into year-end, fine-tuned to circa 19%. Thank you very much, and ready for questions.
Marta Noguer: Thank you. Operator, please, we are ready for Q&A.
Operator: Thank you. We will now take our first question from the line of Marta Sánchez Romero from JPMorgan. Please go ahead.
Marta Sánchez Romero: Good morning. Thank you very much. My first question is on NII. Earlier this year, you guided to around EUR 2.5 billion for 2027, and consensus has since moved up to about EUR 12.7 billion. Are you comfortable with where the street is? Is the slowdown in deposit growth to around 3% this quarter temporary or a new run rate? What is a reasonable growth rate to assume for 2027?
Marta Sánchez Romero: My second question is on the ALCO book. You did not increase the size of the bond portfolio or your receiver swaps this quarter. What was behind that? Was it your liquidity position or a view on the curve? Given the recent steepening, have you started adding in Q4 so far? How should we think about duration and the structural hedge in terms of size going into 2027? Thank you.
Gonzalo Gortázar: Javier, I am afraid you are going to have more than one per share.
Javier Pano: The only point is that second question was about the run rate on deposits or on what?
Marta Noguer: No, on NII, right, Marta?
Marta Sánchez Romero: Yes. So, it is like, how comfortable do you feel about the EUR 12.7 billion? Is the slowdown in deposit growth to 3% just like the new run rate?
Javier Pano: Okay.
Marta Sánchez Romero: Then the ALCO. Sorry.
Javier Pano: Okay. On NII guidance, we are today reconfirming our guidance. Specifically for 2027, we believe that is still a well-balanced reference point, considering a more uncertain environment, generally speaking, on everything, but also on rates and to what extent rates are going to be in 2027, where the market is pricing today or not. So, I think that is, there is a certain degree of uncertainty on that front.
Javier Pano: So, we believe that is still valid. I am not going to be fine-tuning consensus expectations. We are talking about difference of EUR 200 million, as you say, on an NII of EUR 12.5 billion. I think that probably when we are closer to the date, we may fine-tune if this is necessary. On deposits, well, on the deposit side, I already flagged this issue at the conference in September.
Javier Pano: Gonzalo already mentioned it, and you have some figures on the initial part of the presentation. The question is that there is more inflation, so inflation is running circa 5% in Spain. Personal consumption continues to do pretty well, over 6%. What is happening is that the savings rate is now expected to be lower than initially expected. Not much, by approximately 1 percentage point from circa 12% to slightly, let's say, below 11%.
Javier Pano: This is already having some impact on the pace of deposit growth. This is happening across the system, and obviously is somehow affecting ourselves. I already flagged that question more than a month ago. We are expecting this year to end the year more or less at the same pace that we are now.
Javier Pano: I think that it makes sense to look at the pace of deposit growth for the private sector, excluding the public sector, because the public sector is always more volatile. As we disclosed, our deposits are growing over 3% year-on-year. We expect that that pace can be sustained until the end of the year. For next year, we expect some recovery, because precisely that inflationary negative impact probably will fade. Hopefully, inflation will be better controlled.
Javier Pano: Also, households will recover some income. Salaries probably will be revised, taking into account that additional, and pensions, that additional inflation. Probably that pace of growth will improve a little bit next year. Probably too early to be more specific, but we are working with the hypothesis that the deposit growth pace will improve slightly next year.
Javier Pano: In this environment, we are doing pretty well, honestly, and our focus is on value, it is not on volume. On the back of our strong liquidity position, we are ending the quarter, end of period, with an LCR approaching 180%. Our focus is on client acquisition, payrolls, well, everything you know very well, but that is delivering results in terms of client acquisition, client acquisition with income. We have some figures on the presentation.
Javier Pano: Also at the same time, keeping a positive margin on balances from wealth management, SMEs, et cetera. This is our focus. You may see that our non-interest-bearing deposits keep progressing, something we expect will continue to do. We are happy with evolution, honestly. Moreover, I would remark that when dealing with customers, it is not only about deposits. It is also about wealth management, diversification into long-term savings products.
Javier Pano: We take a broader view, so that we do not have a specific target for deposits and a specific target for wealth management. It is like managing the portfolio with a broad view. As a result of it, you may see that we keep growing inflows into wealth management, over EUR 1 billion per month, gaining market share. This is a business with quite a large present value. I think that is what continues to make sense.
Javier Pano: This is the message. On ALCO, we had quite strong maturities, over EUR 4 billion. We have rolled over as a result of that. We have already been in the market. As a result of that, the average yield of our fixed income portfolio is improving by 20 basis points in a single quarter. We face more maturities going forward. Is there room to roll the book?
Javier Pano: Yes, there is some. You will agree with me that the situation on long-term yields is somehow volatile. You have a situation in certain countries, sovereign spreads are being impacted. It is something that obviously we will do in a gradual manner. I think that with that, I cover more or less all your questions. Thank you.
Marta Noguer: Thank you, Marta. Operator, next question, please.
Operator: Thank you. Next question comes from the line of Maksym Mishyn from JB Capital. Please go ahead.
Maksym Mishyn: Hello. Good morning. Thank you very much for the presentation and taking our questions. Two from me, please. The first one is on the corporate loan book. In Iberia, it has accelerated. Can you provide a little bit more color on the type of demand you are seeing, and how sustainable do you think it is in the current macroeconomic backdrop?
Maksym Mishyn: The second one is on proceeds from real estate disposals. They have once again been a surprise. Could you just update us on what we should expect in the coming quarters? Thank you.
Javier Pano: Thank you, Maksym. In the Spanish loan book, what has worked for us is mostly our growth in the SME front, where we are gaining market share. I think generally in Spain, you have seen some recovering confidence levels, and obviously, we are very well-positioned to capture that. The leverage ratio in Spain for corporates is still well below European levels, 22 percentage points of GDP below European levels. It is 82% versus 104% in the Eurozone, and it has come down from 141%. There is plenty of demand.
Gonzalo Gortázar: Particularly not volatile economic environment because the results have been pretty good, but the perception of risk has been with us for such a while that I think generally we see the sort of the fabric more and more willing to grow and push ahead despite the uncertainties on the future.
Gonzalo Gortázar: We have had GDP growth on a nominal basis that is pretty solid. It is actually close to 6%, 5.9% if you take into account the level of growth and the level of inflation. So seeing robust business growth is not a surprise, I have to say. The CapEx cycle has been pretty strong. It is again, almost 7% year on year, again, in nominal terms. So, it is all moving in the right direction.
Gonzalo Gortázar: Yet there are uncertainties with respect to the future, but people I talk to and the numbers that we see tend to feel like, okay, yes, there are uncertainties, but if I stay still, these may be forever. So, I am going to need to invest and do things, and obviously with some further degree of caution here and there, but the economy clearly is moving, and the GDP numbers for this quarter are very much supporting that.
Gonzalo Gortázar: Again, we are at this stage being particularly successful in the SME market, which I am not surprised given all the changes that we have made, which we did a client new segmentation at the beginning of the year, and it is actually working very well, and we are investing in technology, people, and obviously service onto this part of the market.
Gonzalo Gortázar: Second question on real estate, we continue to expect to show real estate gains. I think for the following quarters, you should think of a positive number in this item of the investment, not necessarily exactly the same level in the second or third quarter that have been pretty strong, but clearly positive, and this should be similarly into next year.
Gonzalo Gortázar: Our real estate portfolio on a net basis, we include both sort of available for sale and rental assets, is around EUR 1.4 billion. We are selling with 50% average capital gain, so pretty simple to do the maths, but obviously, this takes time because these processes are long in Spain.
Gonzalo Gortázar: Again, in summary, positive trend to be continued. Expect to be certainly in the Q4, again, having positive results in this line, and certainly, obviously, in the total of the year, it should be clearly positive.
Marta Noguer: Thank you, Maksym. Operator, next question, please.
Operator: Thank you. Our next question comes from the line of Ignacio Ulargui López from BNP Paribas. Please go ahead.
Ignacio Ulargui López: Thanks very much for the presentation and for taking my questions. I have two questions. One, looking to the deposit mix and the evolution of the deposit mix, you were pointing out that there has been a bit of an instability between the interest-bearing and non-interest-bearing deposits.
Ignacio Ulargui López: Have you noticed any change in terms of behavior from customers? Do you feel retail are becoming a bit more price-sensitive as going forward into your 2027? How should we think about that mix? The second question is on fees and revenues for services. I mean, if you could elaborate a bit on the run rate we are having today is close to 8%, whether you think that that rate is sustainable in the long term based on what you were commenting.
Ignacio Ulargui López: I would expect so, but just wanted to get a bit of color on that growth, being mindful of the market volatility. Also within that, on banking fees, I have seen that banking fees, excluding SRTs, have stabilized this quarter. They are growing for the first time in a long time. Should we see this like the bottom of Q4 for the traditional banking fees? Thank you.
Gonzalo Gortázar: Thank you. Thank you, Ignacio. I will start, and Javier, you complement as you wish. On deposit behavior, I do not think so. I think as Javier has elaborated, this is more a macro factor associated to higher inflation, lower disposable income, or lower growth in disposable income, sorry, and lower savings rate, and also interest rates. Obviously, you look at the previous cycle of interest rates increases in 2022, 2023, we had something similar.
Gonzalo Gortázar: In this case, we saw a strong increase in the purchase of treasury bills. So, there is some money that in the context of an increase in rates will look for, let us say, hot money, will look for the highest rate, and we are not likely to be in that position generally. So, I do not think there is a change in client behavior. It is yet another cycle of increase in interest rates.
Gonzalo Gortázar: Certainly, the numbers we are seeing indicate that behavior. Again, in this context, for us to gain market share and to grow our household side deposits by 3%, I think is very good numbers. I feel I am sure you prefer, and I would prefer a 4% or a 5% because the market was doing better, but in these sort of few quarters where you have the change of the pace, the fact that we are clearly, again, outperforming is something that I value very highly.
Gonzalo Gortázar: In terms of fees and services, generally revenue from services, I will start, Javier, please add. I say the structural trends are quite positive, and they are likely to stay. This is looking into wealth management. Are we going to have sort of high flows into wealth management products on a sustained basis given our market position and given a potential for the country, which I discussed? The answer is absolutely yes.
Gonzalo Gortázar: What is more difficult to forecast is obviously the market's ups and downs. This year has been pretty positive in terms of how market value of our AUMs have evolved, and we are not going to have that every year. That is fairly easy for you to forecast. If there is another good year, you should see obviously very strong growth there. If we have at some point a down year, these will cyclically slow down.
Gonzalo Gortázar: Other than market movements, to be honest, the position is fantastic. We have been gaining market share on these products for as far as I remember. Certainly, we put the last 10 years, and it is kind of quarter after quarter. So that is pretty good, and obviously that results in increase in revenues and protection, and is very much the case. Both non-life and life risk is great dynamics. I will stop there so that Javier, you have the SRTs and whatever you want to add.
Javier Pano: On fees maybe, because you had a question, Ignacio, about if we are bottoming on more recurrent banking fees. Well, we think so. Although you know that we have on that line the impact from SRTs, that we are being pretty transparent on what it is impacting, and as we are expecting to be more and more active, obviously there will be an impact. But it is true that the underlying looks better.
Javier Pano: I think that there are certain parts that are being able to stabilize, like some pressure we had on, for example, on maintenance fees on debit cards for payments, also maintenance fees on current accounts. All that part is, I would say, much more stable. I would not say that it is fully stable, but at least the downtrend has been much less intense.
Javier Pano: On the other hand, we have positives on other parts, like everything related to, for example, securities, to foreign exchange. So those parts are doing pretty well, and to some extent compensating. What also CIB, although it is not, I would say, recurrent banking fees because they are always more volatile, but CIB is also contributing more and more.
Javier Pano: I think that yes, that we may be at the bottom. I am not saying by this that we are going to go the other way around recovering, but at least that this is not going to be a clear negative anymore. You are right.
Marta Noguer: Thank you, Ignacio. Operator, next question, please.
Operator: Thank you. Next question comes from the line of Francisco Riquel from Alantra. Please go ahead.
Francisco Riquel: Yes. Good morning. Thank you for taking my questions. I want to focus on deposits, which is the hot topic today. I understand the macro reasons for the slowdown that you have mentioned, but I want to focus on the relative performance in Spain, because deposits in Spain slowed down to 2.5% growth in Q3, and the sector is up 4%.
Francisco Riquel: Demand deposits in Spain fell 3.4% quarter-on-quarter. It is a seasonally weak quarter, but Q3 2025, the fall was just less than 2%, and Portugal this year is down only 0.5%, and that is also a market impacted by a rise in inflation. I wonder if you think that you are losing ground in Spain in a more competitive sector environment for deposits. You can please comment on the relative performance.
Francisco Riquel: My second question is in the cost of deposits, the gap between the costs with and without hedges has increased this Q3, but you will start rolling over the legacy hedges in Q4 and Q1 next year. If you can please give guidance on cost of deposits or deposit betas going forward with and without hedges. Thank you.
Gonzalo Gortázar: Thank you, Francisco. Obviously, two very good questions. I am going to try again to say what I am trying to say in another way. We have to look at customer funds overall, and then let us look at three buckets. There is household side deposits, and I do not like to talk about corporate side deposits because there you are going to have a small part which is non-remunerated, it is transactional money.
Gonzalo Gortázar: Most of it is going to be remunerated close to the deposit facility rate and creating really funding for the bank, but no margin. We do not need funding as opposed to some other institutions, because we have a very comfortable liquidity position. So we are choosing not to push ahead on that part.
Gonzalo Gortázar: Household side deposits, we love them because they give us. Usually, they are the consequence and the reason for a relationship with a client, and obviously they are zero-cost funding, and we all understand that is very attractive. So we are pushing there. Then we are not pushing on corporate side deposits. Term deposits generally, obviously, it will depend, but includes a lot of the same money that is not adding value, it is providing liquidity.
Gonzalo Gortázar: Then we have the wealth management part, where we see duration and margins and limited capital consumption, so we love that part. These three buckets were gaining market share growing faster in the first and in the third. The two that are really profitable to us, and we are growing less on the market in the second one, which is where we do not see the attractiveness in terms of profits.
Gonzalo Gortázar: Obviously, it provides liquidity, again. I understand that others may be pushing there more, or because they are trying to acquire customers through very high sort of rates, teaser rates, et cetera. That is not what we do. To be honest, we do not think we are losing ground. We think we are gaining ground where we want to. We are very satisfied.
Gonzalo Gortázar: Again, we are very satisfied because I think the reason we were successful on bucket 1 and bucket 3, the two that are really profitable, are structural. We are going to continue to gain traction and market share on that front. Cost of deposits, Javier?
Javier Pano: I think that it is pretty clear the difference between the cost of deposits with and without hedges. You know that we provide all the information about hedges, so you can model exactly which is the impact of that part into, let us say, cost of deposits, depending on the assumptions you make on the yield curve. This is pretty simple and automatic.
Javier Pano: What matters is the commercial trends, beyond those hedges, because, well, it tells you about precisely what Gonzalo Gortázar has just been commenting. On that front, we are working with the base case that the deposit betas are going to be in the low 20s. We do not see any reason to change that forecast. What is true is that probably it applies to a slightly lower volume of deposits than initially expected.
Javier Pano: As said, focusing on what adds value to the bank, that is basically those transactional deposits with very low remuneration, and then also on wealth management business. The exact trajectory of deposit costs with and without hedges, I could say, Paco, that depends a lot on your assumptions on the overnight rate, because actually it is what is impacting that part.
Javier Pano: It is true that with rates moving upwards, that gap probably will increase a little bit. It is true that with the maturity of those legacy hedges will close again, but then it will depend on the evolution on rates going forward. Thank you.
Marta Noguer: Thank you, Francisco. Operator, next question, please.
Operator: Thank you. Next question is from the line of Miruna Chirea from Jefferies. Please go ahead.
Miruna Chirea: Good morning. Thank you very much for taking my questions. I had two on rate sensitivity and on the cost of deposits as well. Firstly, on the rate sensitivity, we know that you have reduced over the summer your sensitivity, or your Q2 sensitivity from 7.5% to 5%. I was wondering if you could explain us better what led to this reduction, and if it has been because you have been growing more than expected in fixed-rate mortgages, for example, why not swap more to manage the sensitivity at 7.5% as you are targeting?
Miruna Chirea: When would you expect to go back to a 7.5%? Then, in terms of the 17 basis points increase in cost of deposits on the interest-bearing balances in the quarter, how much of that has been automatic versus how much has been commercial decision to pass through? Just trying to get a sense of deposit betas on the managed portion of the portfolio. Thank you.
Javier Pano: Sorry, Gonzalo.
Gonzalo Gortázar: No, no. Thank you, Javier.
Javier Pano: On rate sensitivity, the 7.5% is like a target. As you can imagine, you cannot run a balance sheet of EUR 700 billion exactly with same sensitivity almost every day. The balance sheet has its own dynamics, and the sensitivity is always built on the assumption of the future evolution of the business, because actually we are providing, as you know very well, our NII sensitivity is one year, one year forward.
Javier Pano: In order to do that, you have to count on an estimate on the evolution of your commercial side of the balance sheet, on the business itself. What has happened is, as you know very well, is that we have had faster loan growth than initially expected. Hence, we have had a reduction in our sensitivity because part of that new loan production is at fixed rate, not only mortgages. There are also, although obviously to a lesser extent, but there are always some other parts that also add at fixed rate.
Javier Pano: To your question about why no more hedges is because we have assessed that as this has happened in a process that rates were moving upwards, and now rates are already pricing, let's say, ECB rates over 3%, is fine if we are more circa 5% than 7.5% because it's a move that has already happened, okay? Increasing the sensitivity now, you would be betting that rates keep moving upwards.
Javier Pano: This is less clear to us, honestly, compared to what is already priced, so I mean that not that they're actually moving upwards or not, so I mean compared to what is priced. This is why we have decided to keep our sensitivity circa 5%, but anyhow, is pretty close to our target. Sorry, I had a question on deposits.
Marta Noguer: On deposits, yeah.
Javier Pano: On deposits, yeah. The 17 basis points increase. The bulk of the increase is coming from indexed deposits that are basically corporate deposits. Back to the answer from Gonzalo previously, no? This is money that it is obviously expensive money with a margin on the overnight rate, positive margin for us, but obviously not large. The repricing is pretty automatic, and we continue to keep
Javier Pano: We can continue to take this 50/50 between, let's say, indexed and, let's say, time deposits that are usually retail deposits that are usually with maturity six to 12 months, and then there is a renegotiation process, there is a back book, and it takes longer to reprice upwards, no? The bulk of that increase is coming from that part.
Marta Noguer: Thank you, Miruna. Operator, next question, please.
Operator: Thank you. Next question comes from the line of Antonio Reale from Bank of America. Please go ahead.
Antonio Reale: Morning, everyone. It's Antonio from Bank of America. Just a couple of questions from my side, please. The first one, if you could give us an update on what you're seeing on the lending side. You're still gaining market share without diluting returns, at least judging by the ROTE update you've given us. Can you maybe give us a bit more color on what you're seeing in terms of appetite from clients and how your competitors are changing the approach with higher rates? That would be my first question.
Antonio Reale: Secondly, on costs, inflation in Spain is running at around 4%, which is probably higher than anybody would have expected at the start of the year. So I wonder how that would affect your cost base and what flexibility you've retained to mitigate this effect. Thank you.
Gonzalo Gortázar: Thank you, Antonio. On the lending side, we're seeing better trends than what you would expect, and particularly also looking at the recent publication by the ECB on the evolution of lending demand and conditions throughout the Eurozone. There is quite some traction, certainly for us, and to some extent, we're being surprised. You could think that at some point lending growth will gradually come slightly down closer to nominal GDP compared to where we are, and I guess that's probably the conservative and logical assumption to be made.
Gonzalo Gortázar: Rather than the 8% growth that you see now, maybe we're in the year at around 7%, but again, we're seeing fairly strong trends. The other thing is something Javier would speak much better than I do, but you all know that capital markets have become tighter, lower liquidity, and certainly higher funding costs for everybody, including financial institutions.
Gonzalo Gortázar: This is something that I think relative to others because of our liquidity position favors us. I think obviously this experience is that gradually this translates into asset spreads. When you look at capital markets having larger spreads, this usually does not immediately impact, but sooner or later it does. It's not yet asset spreads, but obviously it's been also the base rate.
Gonzalo Gortázar: The combination of all these, I think, is likely to lead to a market that is not as tight as it is now on the asset side as it has been in terms of pricing and in terms of volumes. As I said, obviously some slowdown likely, but I have to say not much. Very, very major sort of distortion internationally. That's how I see it.
Gonzalo Gortázar: With respect to inflation, obviously it's higher than expected, so it does create, I think, upside risks on costs everywhere throughout the system. What I can say is that we should continue to find ways to offset this inflation. That's my sense. Certainly, we are in a position to reiterate our guidance, which obviously includes this year and also for next year in order to meet our 3-year guidance and means a significant slowdown, acceleration.
Gonzalo Gortázar: If the implicit in the target is going to be closer to 3% and above the 4% as we are now. That requires, as you say, quite some efforts, but we're beginning to see results from all the productivity enhancements that we're doing that have to do with our Cosmos project, this technology, including AI, but not only. I think it's going to be tough, but we are optimistic that we can manage our cost base proactively and offset this additional pressure on inflation.
Marta Noguer: Thank you, Antonio. Operator, next question, please.
Operator: Thank you. Next question is from the line of Sofie Peterzens from Goldman Sachs. Please go ahead.
Sofie Peterzens: Yeah. This is Sofie from Goldman Sachs. Thanks a lot for taking my question. In one of the slides, you say that you have seen the inflection point in customer spreads. I know you have the 2027 net interest income guidance, but how should we think about the net interest income and customer spread trends going forward? Is it fair to say that NII growth will accelerate from here?
Sofie Peterzens: If you could just help us kind of think through this. Then my second question would be around the political or the elections we have in Spain in November. How could that potentially impact the Spanish banking tax? What's your view on the tax? Also, how should we think about the DTA benefits going forward, and what's kind of a fair tax rate to assume for 2027? Thank you.
Gonzalo Gortázar: Thank you, Sofie. I will comment on the second question now, to basically comment to say no comment with this. Apologies now, but I say this is a sensitive time, and we are just about to have a new electoral campaign in Spain, and I think it is prudent for us not to speculate on anything that has to do with that.
Gonzalo Gortázar: There has been no new news on the Spanish banking tax, and I do not think this is the time to speculate on that. On DTAs, I think, Javier, you can also comment, but I do not expect changes going forward in terms of the rates, no?
Javier Pano: No, on that second part, you are right. On DTAs, we have had a run rate of, let us say, EUR 130 million, EUR 140 million per quarter, although this quarter, the tax line is positively impacted by a one-off, but this is, as I say, a one-off related to the settlement of the corporate tax of last year. So, you can expect a run rate in line with the first and the second quarter, and that trend is something that is sustainable into next year.
Javier Pano: That is what we believe, and has nothing to do with the result of the election. Back to your first question on the customer spread, you are right. The inflection point was last quarter. We already called that last quarter. From here, we expect to steady progress, and in the fourth quarter, to already be in the 300 basis point handle, and to keep progressing into next year.
Javier Pano: That is my guidance. I think that we are pretty comfortable that this is going to be the case. If I may take the opportunity again, because I was thinking about it, another way to express the situation. The fact that short-term rates have moved upwards quite fast, and remember that in the previous quarter, we were commenting about flattening, et cetera.
Javier Pano: This is, as I was answering to the first question, having a short-term, let us say, negative impact in the sense that we have a fast repricing of some liabilities, on hedges on deposits, hedges on wholesale funding. But at the end of the day, a higher rate environment is a net positive for the bank, so do not doubt about that.
Javier Pano: The way to express this, if I may say, and Marta will love, is that it is like a plane that needs a longer runway to take off. But the plane is going to take off, and it is going to fly at high altitude. So, this is going to be the case. Exactly if next year is going to be 12.5, 12.7, or whatever, for us is, honestly, a second-round problem.
Javier Pano: In any case, that trend is going to continue. We have a very positive view on the evolution of volumes, the evolution of our deposit base, on the strength we have on managing our customers' funds. We have all the legacy position of the ALCO portfolio, not only on fixed income, but also now on all our hedges.
Javier Pano: Because if you take a look to our hedges that have been built at a moment when rates were expected to be, let's say, if you got 2% for some time, to protect any kind of downside. Well, this is no longer the case, so those hedges now are having a negative carry going forward, so hence are going to be impacting the cost of our deposits with hedges, but those hedges are maturing also.
Javier Pano: If you start doing the numbers, not only for 2027, but beyond 2027, when those hedges go away, and also we keep reinvesting our fixed income portfolios, well, there is plenty of upside. So, that's my message. It's like, okay. The plane has been an inflection point. The plane is taking off. We need a little bit longer runway than initially expected, but the plane is taking off, and it's going to fly on high altitude. So that's my message. Thank you, Sofie.
Marta Noguer: Thank you. Operator, next question, please.
Operator: Thank you. Next question is from the line of Britta Schmidt from Autonomous Research. Please go ahead.
Britta Schmidt: Yeah, good morning. Just following up on your comment right there, indeed, the key for Caixa's NIIs to the strength to manage the franchise and pricing. In that context, what is your stance regarding the potential threat that artificial intelligence could pose to customer behavior on the deposit side, and what sort of response do you expect from the sector?
Britta Schmidt: Secondly, on M&A, could you just comment on any interest in Spanish consumer finance portfolios and whether, if there are interesting opportunities, you will be willing to operate within your capital target range, but below 12.5% CET1? Thank you.
Gonzalo Gortázar: Thank you, Britta. Let's just start with the second. Well, let's go in order, sorry. AI, obviously, this is much discussed, and again, we're adopting AI throughout the organization, so we're a believer in AI. One thing is what AI allows organizations and people to do. The other one is change in client behavior, and change in generally human behavior.
Gonzalo Gortázar: I think you're going to have a trend for people to use AI for information purposes, but not for transactional purposes. I personally recommend all of you not to use AI for transactional purposes. It would be the last thing I would do to give control of my personal finance to an agent, given what we know that can happen. I think at least 99.9% of the people are going to be very careful.
Gonzalo Gortázar: Another thing is to be more informed because you have AI, and we have had now for some years, obviously, internet, and we have PSD2 and sharing data, et cetera. So this is a trend, and it's going to continue. I do not think that we're going to have any sort of seismic effect in the way clients behave. Vis-à-vis banks, they will continue to be more informed and more demanding, but look back at the last 20 years, it's exactly what's happening, so nothing new.
Gonzalo Gortázar: We need to be better and better, offer more products, better service, and have our own employees better prepared, better formed. Obviously, we need to make sure that our employees have access to AI tools that augment their capabilities, as we are doing.
Gonzalo Gortázar: An example is, as I said, we just deployed to the whole commercial network the agent in support for customer interviews. So, I don't think we're going to see an impact in short term, and longer term, it creates obviously people and clients that are going to be better informed, and we need to be well prepared for that. We have the time, and we are pacing this fairly well. I think because of our size and our concentration, we can probably do it better and faster than others. But obviously, that's to be seen.
Gonzalo Gortázar: Now, in terms of M&A interest, we do not comment on specific transactions or opportunities, as you know. I think that's what obviously makes sense, and you understand that's the case. We have not changed our strategy. We want to grow organically, and anything that is not organic would need to be very attractive.
Gonzalo Gortázar: Honestly, for the last 12 years, we have done three transactions, Barclays, BPI, and Bankia. Look at it, 12, or in the case of Bankia, closer, 5 years later, or BPI. They have all been fantastic value-enhancing deals. This is our track record. We want to maintain it. So it means very limited opportunities are going to be above that threshold. With respect to capital, of course, we have a target of 11.5% to 12.5%.
Gonzalo Gortázar: Now everybody focused on the upside because that is where we put immediately in motion this share buyback policy, which we will continue to do. But obviously, it means that we are comfortable within that range. Again, I would be reinforcing my previous message. Organic strategy for us is what creates value, and it is the way that we clearly prefer.
Marta Noguer: Thank you, Britta. Operator, next question, please.
Operator: Thank you. The next question comes from the line of Pablo de la Torre Cuevas from RBC Capital Markets. Please go ahead.
Pablo de la Torre Cuevas: Thank you, and hope you can hear me. My first question was on insurance revenues. You are running well above your Investor Day target of mid-single-digit growth there. I guess over coming quarters, some of your peers are expected to start applying the Danish compromise. So, looking into 2027 and beyond, I was just wondering where you expect revenue growth in that line to trend to, given that going to the mid-single-digit level that you guided to would be quite a big step down from the current mid-teens level.
Pablo de la Torre Cuevas: The next question was a bit of a follow-up on a prior deposit question. Sorry if I missed it, but I just wanted to check if there are any one-offs impacting that 3% quarter-on-quarter fall in demand deposits, either at the beginning or at the end of the quarter that would explain this larger than normal seasonal movement.
Pablo de la Torre Cuevas: Related to this as well, if I can, on imagin, I also see quite a big deceleration in customer funding growth rate there. I was wondering if you were considering any changes to the strategy in that part of the business to support deposit retention or as a way to boost client and volume growth, especially non-interest-bearing balances in light of increasing digital competition in Spain. Thank you.
Gonzalo Gortázar: Thank you, Pablo de la Torre Cuevas. I will take the first and maybe the third, and Javier, you can take the second and make any other comments as appropriate. On the Danish compromise, it does not affect us, the fact that others get to go along that route and understand it. We have been using the Danish compromise, obviously, since it existed. The basis of our growth is not a favorable capital treatment related to others.
Gonzalo Gortázar: Obviously, it helps that it is not unfavorable, but the basis of our growth is there is an unsatisfied customer need. We have a great factory and have designed very relevant products. Third, we have a workforce that understands that our core business is not just banking, it is banking and insurance. Again, we were born as an insurance company with a bank.
Gonzalo Gortázar: The CEO of VidaCaixa still has in his office one of the first annuities that we sold, and it is 1906, I believe. So, this is not something that is going to change because you get a license to have a different capital treatment. This is not just that. It is other things. I think it will actually be beneficial that other banks push ahead with insurance products, because we felt we have been kind of the only kid in town.
Gonzalo Gortázar: The market has been growing mostly because we have been growing. I think to have more awareness generally in the system is going to be good, and I think we are always going to be the strongest competitor. I was looking at our market share in savings insurance. It is now close to 39%.
Gonzalo Gortázar: You need to add the next seven players all together to make one competitor that is of our size. Think of that. It is number 2 to number 8 all together amount to what we have. So, I think we are going to have good news on that front again for, I would say forever, but for a very long time at least. That is how I see it. imagin, we are doing very well. We are satisfied.
Gonzalo Gortázar: Again, you look at what is happening, and you may be confused. Not you personally, I am saying generally. Someone may be confused with, "Okay, let us gather deposits and let us pay 4% to gather deposits." There is no value created on that, believe me. There is a limited part of the market that is going to be responding to that. There is initially.
Gonzalo Gortázar: As new neobanks announce that they are coming into Spain and going to have the same strategy, I say, I hardly understand what is the business case. Obviously, the business case is not to pay a lot for deposit balances, but to develop a full, or at least a broader range of services. That is what imagin has today.
Gonzalo Gortázar: It has, in terms of growing profitably, it is obviously doing what we want. It has a complete product range, a unique proposition that blends the digital experience with the support of a big bank like us, including our name, sort of our guarantee for deposits, because they are on our balance sheet, but also the human interaction as we have increasingly more and more people that can manage those clients that want to have a human-only relationship.
Gonzalo Gortázar: Most of our youngsters want, so we get 90% plus acceptance of personal relationship manager. So, we keep doing very well on that front. It is a different strategy. We are going to continue to improve our services, increase the number of products. There will be obviously occasionally where we are competing strongly with lower margins in parts of the market. We are working on revamping our imagin app.
Gonzalo Gortázar: We have done it with CaixaBank, by the way, continues to be number 1 in the market in Spain, ahead of other incumbents or newcomers. So, I would not say we are happy campers because it looks like we are relaxing. We are not relaxing. We are absolutely obsessed with improving at imagin and at CaixaBank, but now talking about this every day. But we are very happy the way things look for us. So, we will continue on that front.
Javier Pano: Pablo, I was just checking. One-off in the quarter, I would not call it a one-off because it is something quite specific for us, that maybe we have more seasonality than the rest of our peers, because we have a larger market share in payrolls. Hence, really large, so 36% is quite much more. So we tend to have a more positive Q2, and then the Q3, we tend to have a more negative Q3. So, that is the situation.
Javier Pano: I was checking the numbers, and I think that when you look at deposit figures, back to the Gonzalo comments previously, so you have to distinguish between what matters for us that are retail side deposits that per se are non-remunerated, versus the rest of deposits, time deposits for retail or corporate and SME deposits that are usually remunerated.
Javier Pano: I was checking, and for the month of September, industry-wide quarter-on-quarter deposits are down by 0.6%. We are down by 1% because that more negative seasonality, because we have a better Q2. But if you look at side deposits, the industry is down by 1.6% quarter-on-quarter, we are down by 1.3%.
Javier Pano: Actually, despite that additional negative seasonality in the Q3, outperforming the market. So basically, on what it matters and what we are focusing on, we are doing well and gaining market share. On side deposits for households, we are gaining market share, we are growing over 3%. Then you could see that on our disclosure of non-remunerated deposits, 4% year-on-year. Last year, in the Q3, we were slightly above 5%.
Javier Pano: Those are average balances that probably are better to understand the dynamics and at the end of the day, the impacts on NII. The slowdown is from 5 something, I do not remember, Marta, if it is 5.2 or something like this, to 4% this year. So it is some slowdown, but it is more related to those macro impacts we have been mentioning during this call than any kind of competitive pressure. That would be my message.
Marta Noguer: Thank you, Pablo. Operator, next question, please.
Operator: Thank you. Our next question. One moment, please.
Javier Pano: No one.
Operator: Our next question comes from the line of Andrea Filtri from Mediobanca. Please go ahead.
Andrea Filtri: Thank you. My first question is on costs. When is the convenio due, and would you expect higher increases in salaries than the previous one, given the high inflation you mentioned before? Secondly, could you give us your view on the potential impact for CaixaBank on the reform of securitizations approved by the EU Commission last week? Thank you.
Gonzalo Gortázar: Thank you, Andrea. Convenio will be nego. The actual collective bargaining agreement finishes at the end of this year, and the negotiation, it is expected, will take place in the first half of 2027. That is the timing. In terms of what will be agreed in a collective bargaining agreement, not at this stage willing to speculate because it will be a negotiation, and I think we need to go through it.
Gonzalo Gortázar: Certainly, the unions will ask for recovering sort of purchasing power because there is high inflation, and obviously, there will be a negotiation on not just on that, but other conditions, et cetera. We will have to wait again.
Gonzalo Gortázar: We will look at these with care, and there will be, I am sure, an impact of inflation rate as per a previous question, and we need to work on other initiatives to try and make sure that we actually meet our targets for the three-year plan, and then obviously beyond, because after 2027, it will become another three-year plan. We are, at least at this stage, certainly confident that we can find a way to control that and confirm our guidance we had for this three-year period.
Javier Pano: Yeah, on SRTs. Andrea. Well, there is always it is going to be a marginal positive. Not difficult to be more specific exactly on what is going to be impacting. There is a political agreement, no details yet. There is a general positive view. Everything that results into a reduction of administrative burdens and improve of access to the product to certain players, it is going to be a positive.
Javier Pano: As you make this question, I take the opportunity to say that we are planning to be active. We are already active, but slightly more, if I may say. We already have plans for SRTs on corporates, SMEs, consumer. We are regularly in the market with transactions. We are working on SRTs for mortgages also. That would be the four main programs that regularly we are going to be with issuances.
Javier Pano: From time to time, also working on some more specific parts on the portfolio, trying to optimize here and there. So that is the plan. Always a positive that there is this more, let us say, positive sentiment towards the product, but difficult to be more specific. We will see.
Marta Noguer: Thank you, Andrea. Operator, next question, please.
Operator: Thank you. We will now take the next question from the line of Borja Ramírez from Citi. Please go ahead.
Borja Ramírez: Hello. Good morning. Borja from Citi. I have one question on deposits, please. Regarding the comment that deposit growth could improve from current levels, could you elaborate on the expected pace of the recovery in the growth?
Borja Ramírez: Should we think about 2027 as a year of gradual improvement in volumes, or do you see a scope of more pronounced acceleration? Linked to this, do you expect this incremental growth to be concentrated inside deposits or term deposits? Thank you.
Gonzalo Gortázar: I will let you comment, Javier, but my sense is that we will have a gradual recovery rather than a sudden acceleration in 2027. Obviously, it depends on economy, saving rate. There can be obviously changes in policies depending on the election, so you have no guarantee on that. That is why we would rather be on the conservative side and think of our recovery, but something that is gradual rather than a sharp increase.
Javier Pano: Nothing to add.
Marta Noguer: Okay. Thank you, Borja. Next question, please.
Operator: Thank you. The next question is from the line of Ignacio Cerezo from UBS. Please go ahead.
Ignacio Cerezo: Yeah. Hi, good morning, and thank you for taking my questions. The first one is going back basically to funding strategy a bit more broadly. You are kind of running loan growth at around 7.5%, 8%, deposits around 4%. You have funding up, actually, that is significant. LDRs are, I think, up a couple percentage points this quarter, already close to 90%. What is the idea here? What is the binding constraint actually you have in terms of LDR, if any?
Ignacio Cerezo: Do you expect actually the balance between lending growth and deposit growth to be reestablished basically as we go into next year? Are you planning to drain excess liquidity, issue debt? Just trying to understand a little bit more broadly the funding strategy. The second one is on the loan yield specifically. I think you have around 64% of the lending book today is floating.
Ignacio Cerezo: That number keeps coming down a little bit because obviously you keep producing fixed-rate mortgages. In terms of the pass-through of the interest rates, is there any reason for the pass-through on lending to be very different to that percentage of floating rate lending you have? Thank you.
Javier Pano: Ignacio. Yes, this year we have an imbalance between lending and deposits. The good thing is that we can absorb it very comfortably. We started the year with liquidity coverage ratios close to 200%. We are now at 180, so there has been an impact of circa 20 basis points. But still is a very high level. We are far from a position where we need to take action in terms of, for example, issuing covered bonds or other forms of wholesale funding.
Javier Pano: Probably this explains also the evolution of our deposit base, where we have been able to overlook a little bit more expensive corporate and public sector deposits, something that other players probably have not been able to do. We retain this funding advantage. I mentioned that in the current environment, this is a clear competitive advantage.
Javier Pano: Looking forward, as we are expecting loan book growth to moderate slightly, back to the previous question that Gonzalo Gortázar answered, we expect a gradual recovery of the pace of deposit growth. We expect that that imbalance, if not closes fully, it would not be as large as this year. That is basically our base case assumption. Hence, it is not going to have an impact on our funding plans.
Javier Pano: You know that we are issuing in the market only for MREL purposes, and this continues to be our plan for next year. On the floating part you mentioned, well, you are right. It is 64% of floating. To add some more details into that, it is approximately, of that 64%, it is like 35% to 40% 12-month Euribor. Six-month Euribor is circa 15%. Three-month Euribor is 25%.
Javier Pano: There are other indexes that is circa 20% that includes overnight rate and other indexes, including foreign exchange indexes. The plan is that the repricing is going to proceed accordingly, always with that kind of a gap.
Javier Pano: I have been commenting previously, with some liabilities probably repricing faster as are indexed to the overnight rate and on the lending side, and ALCO coming a little bit later, hence having that gap in terms of repricing that is impacting in the short term, but that in any case will result into a positive evolution going forward.
Marta Noguer: Thank you, Ignacio. Operator, next question, please.
Operator: Thank you. Our next question is from the line of Hugo Cruz from KBW. Please go ahead.
Hugo Cruz: Thank you for the time. Just two questions. One on fees. If the markets turn a bit, just to try to model that a bit better, can you remind us if you have any performance fees in your asset management products, or success fees, and also perhaps any sensitivity to equity markets? Any color you could give there would be helpful.
Hugo Cruz: Then second, on the cost of risk, it was a bit higher than expected. Overlays, I think, were stable. Anything that's worrying you in terms of asset quality and any particular sectors that you're seeing any deterioration? Thank you.
Gonzalo Gortázar: Thank you, Hugo. I'll take the second one. No, cost of risk is as expected, and obviously there is, relative to last year, there's different sort of accruing through the year. We are comfortable with our guidance, and actually, we have seen, when you look at our reduction in non-performing loans, which is now the lowest among the top five banks in Spain.
Gonzalo Gortázar: Frankly, we have seen an evolution that has been better than expected. No clouds on the horizon, and even if the situation changes, we still have the feeling we've been fairly prudent in this cycle, so that if at some point things change, I expect we'll be quite resilient. Fees
Javier Pano: Yeah. Thank you, Gonzalo. If I may add on cost of risk, you know that we have the recalibration of IFRS 9 models on the Q4. The preview we have is positive, so we are not expecting probably the same delta quarter on quarter than in previous years. So it's going to be a more positive delta.
Javier Pano: On performance fees, yes, we have a small, probably positive by circa EUR 10 million in the Q4, related to some pension plans. In order to model, maybe you can use like 25% to 30% of our overall AUMs invested into equities.
Marta Noguer: Okay. Thank you, Hugo, and thank you all for joining us another quarter. Have a lovely weekend, and talk to you soon.
Javier Pano: Thank you.
Gonzalo Gortázar: Thank you.
