Banco Bilbao Vizcaya Argentaria - Q4 2025
February 5, 2026
Transcript
Patricia Bueno (Head of Investor Relations)
Good morning, and thank you for joining us for BBVA's fourth quarter results presentation. As every quarter, I'm pleased to be joined by our CEO, Onur Genç, and the group CFO, Luisa Gómez Bravo. We will begin with Onur reviewing the group's performance and key strategic developments during the year, followed by Luisa, who will walk you through the business unit's results. After their remarks, we will open the call to take your questions. With that, I now turn the call over to Onur.
Onur Genç (CEO)
Thank you. Thank you, Patricia. Good morning to everyone. Welcome, and thank you for joining BBVA's 2025 full year results audio webcast. I will start with page three right away. So I'm happy to say that in 2025, we achieved outstanding results across critical dimensions: value creation, as you see on the page, growth, profitability, strategic execution, and shareholder remuneration. First, I would like to highlight the excellent value creation achieved during the year, which is rooted in our outstanding profit evolution. Despite falling interest rates in our core markets, we still managed to increase our net attributable profit, which reached a record EUR 10.5 billion, 4.5% higher than last year in current euros.
Secondly, as we have emphasized in previous results presentations, BBVA offers a unique combination of profitability and growth, which was further reinforced in 2025. Our loan portfolio increased by an exceptional 16.2% at constant euros and 11.7% in current euros, an exceptional figure, while our return on tangible equity remained at industry-leading 19.3%. Third, in the page, we are advancing consistently in the execution of our strategy. First of all, we are transforming the bank with a radical customer perspective, leveraging the power of AI and innovation, and also growing the bank, especially in areas where we believe we have an opportunity of superior return.
Finally, all of this is enabling us to significantly increase distributions to our shareholders with a regular payout of EUR 5.2 billion from 2025 results, while at the same time, our CET1 ratio remains comfortably above our target. As you can see on the page, the regular payout against 2025 results will be paid entirely in cash through a total cash dividend of EUR 0.92 per share, being the highest cash dividend ever by BBVA. Additionally, we continue with the execution of the first 1.5 billion tranche of the extraordinary share buyback program, amounting to EUR 4 billion. These are the key highlights that I will expand on in the following pages.
But as you see, in my humble view, 2025 has been a remarkable year for BBVA, and we are on track, we are on track to achieve our ambitious 2025, 2028 long-term goals. Moving to slide number 4, on the left-hand side, our tangible book value per share plus dividends continue to show, an excellent performance, with a growth rate of 12.8% at face value. But it is worth highlighting, however, here, the number, excluding the impact of share buybacks, that is 15.2%.
As you all know, through the share buyback programs launched in 2025, the EUR 993 million already executed and the existing tranche of EUR 1.5 billion, currently in execution, we have been buying our shares at higher value than the book value, which then leads to some negative impact on tangible book value per share creation. On the right-hand side of the page, you can see the very positive evolution of our net attributable profit, which continues its upward trend, reaching a new record, as we discussed, exceeding EUR 10.5 billion, again, despite the negative impact of falling interest rates in our core markets, especially in Spain and Mexico. At the same time, our earnings per share, it reached EUR 1.78, representing a 5.8% year-over-year increase.
If you look into a larger timeframe, a compounded annual growth rate of 26% in the last five years. Slide number 5, I want to underscore the truly unique positioning of BBVA within the European banking sector, combining growth and profitability at the same time. You have seen this page before in other presentations of ours, but the situation has improved even further in our view in 2025. But the page, just to explain the page, on the x-axis, we show the return on tangible equity as a profitability metric, while on the y-axis, we present loan growth in current EUR for equal footing of all large European players.
As an indicator of future value creation, in our view, because growth and profitability, those are the two core dimensions of future value, BBVA clearly stands out, positioned in the top-right quadrant, by far the highest loan growth, by far the highest loan growth in current euros, and best profitability metrics among our peers. On return on tangible equity, as, as the measure of profitability, we should also underscore the fact that this number is partially negatively influenced by the excess capital that we have held throughout the year, because at the denominator of this ratio, as you all know, it's the average equity throughout the year. Moving to page number 6, new customer acquisition. As we have reiterated consistently, again, we put this page also, in every single, analyst presentation. Expanding our customer base is a key driver of healthy and profitable growth.
In 2025, we reached a new record in customer acquisitions with 11.5 million gross new customers. Maintaining this pace year after year is particularly remarkable in our view because we are already one of the largest banks in the markets in which we operate, and it's always a smaller pool to look for new clients, but despite that, a record number in 2025. And the value of this growth, on the right-hand side of the page, there are two factoids there, but they are very important in our view. The value of this growth becomes clear when we look at the monetization of new clients over time. For example, in Spain, revenue per customer increases by 3.7 times between the first and the fifth year of that relationship.
In Mexico, it's very important, this number, 75% of the new credit cards sold in 2025 are to the customers acquired in the last five years. With such focus on cross-sell in place, we believe our future business in the coming years is already hatched with the customer acquisition activity over the past few years. Moving to page 7, all the great results over the past few pages are due to our relentless focus on executing our strategy. You all know our our new strategic plan. Our new strategic plan, announced in 2025, has outlined a few critical priorities to sustain and improve our delivery. The plan foresees the continued need for the transformation of our business.
That transformation, in our view, has to start with the customer, which we call radical customer perspective, putting ourselves in the shoes of our customers. We are adopting a radical approach to understand and analyze every single customer interaction with the bank, so that we act on these insights to improve customer service and eliminate frictions, eliminate frictions with agility and empathy. And this is reinforcing our NPS leading positions in most of our geographies, and is leading to a significant reduction of negative experiences with our customers related to events like fraud, claims, or service waiting times, improving, obviously, quality of service across geographies, as you see on the left-hand side of the page. As part of this new wave of transformation, we are also have started to maximize the potential of AI and innovation within BBVA.
We will pursue this across 8 initiatives listed there in the page, including our digital advisor, Blue, the AI assistant for bankers, and injecting efficiency and effectiveness in different processes across the bank in different areas, like the software development. In addition, AI is increasingly being embedded across our organization. Our 127,000 employees all around the world, they have now access to OpenAI and Gemini. We are still at the early innings on this, but we are already starting to see the positive impact from all of our AI work, and we will update you on this further in the coming quarters. On page 8, as part of our strategic plan also, you see certain businesses that we have prioritized to grow faster than average.
We have achieved that superior growth in 2025 in all selected areas: enterprises, sustainability, and capital-light businesses. On the left-hand side of the page, you see the levers through which we grow our enterprise business, cross-border, a natural lever for a global bank like us to serve our multinational enterprise clients beyond their home geography. And sustainability, also mainly on the enterprise side, a strategic priority for us to accompany our clients in their transition, all yielding excellent results in 2025, again, as you see in the growth rates. You can compare those growth rates with the rest of the bank, which is on the right-hand side.
But in the middle and the right-hand side of the page also, you see the prioritized capital-light, fee-generating businesses, again, displaying excellent growth performance in insurance, in payments, in wealth management, where, again, we grew much better than the average of the bank in all of those areas. Slide number 9. From this slide on, I'm going to walk you through the financials, but let me not and also, to save time, let me not spend too much time on this page, as it is a summary of the following pages. So let's jump into page number 10.
In the annual P&L, a similar story as in the recent years, but I would like to highlight the very strong performance of core revenues, which drove gross income growth to 16.3% year-over-year in constant euros, with 13.9% in NII growth and 14.6% in fee income. I mean, this solid growth in gross income, together with positive jaws, as you see on the page, contained impairment charges. It resulted, again, in the record net attributable profit of EUR 10.5 billion. Slide 11, the P&L for the quarter, for the fourth quarter.
Again, I will not stop long here, but just to remark on the strong quarterly performance with a net attributable profit above EUR 2.5 billion, once again, despite some negative one-offs, like a tax code change in Turkey at the final days of the year. You might have seen it on Christmas Day, actually. The continued and accelerating delivery at the core revenue lines, net interest income and fee income, is worth highlighting again on this page. Core revenue, especially in Spain, in Mexico, is behaving exceptionally well. Then talking about that, maybe on page number 12, talking about Spain and Mexico, our two core geographies. First of all, before the countries at the group level, on the left-hand side of the page, one of the clear highlights of the quarter was the growth in activity.
Loan growth maintained an excellent pace, increasing 16.2% year-over-year, which is translating into that strong net interest income performance. And then talking about the countries within that, in Spain, loan growth further accelerated to 8% year-over-year, while Mexico maintained a solid 7.5% year-over-year growth. In the case of Mexico, excluding the impact of the US dollar affecting the value of our US dollar-denominated loan book in Mexico, if you isolate for that impact, loan growth would have reached 9.9%, fully in line with our 2025 guidance.
On the right-hand side of the page also, you see how all of this, supported by strong loan growth and proactive price management in a declining rate environment, how we translated this into growth in core revenues in both Spain and Mexico year-over-year, but also looking to the quarterly evolution with an acceleration in the last quarter, if you annualize those quarterly figures. Moving now to slide number 13, again, talking about growth. Our strong activity growth is not only due to the overall industry growth, but also due to our clear outperformance versus competitors. As shown on the page, we have been gaining loan market share in all of our markets in the past few years, and in 2025 specifically, we continued that trend in practically all of our markets, again, with meaningful gains across the board.
We have to be careful here. Market share by itself is not an isolated goal for the bank, as the underlying growth has to be profitable. We are not here for the sake of growth. But as we monitor and manage the profitability of any granted loan in any country of the bank, we take pride in the consistent track record of market share gains across the board. Moving to slide number 14 on costs, I would first highlight that once again, and in line with our DNA, we closed the year with positive jaws, with gross income growing by 16%, clearly outpacing the growth in costs. As a result, on the right-hand side of the page, our efficiency ratio continues to be one of the best among European peers, and it improved to 38.8%.
Again, picking up some speed, slide number 15, the evolution of our asset quality, it remains in line with our expectations, even in a context of strong activity growth in our most profitable segments. Starting on the left-hand side, at the bottom of the page, our cost of risk stands at 139 basis points year to date, improving versus 2024, and delivering a better performance versus guidance in most of the countries. At the same time, on the bottom right-hand side, both our non-performing loan ratio and coverage ratio, they continue to improve year-over-year and quarter-over-quarter. Slide number 16 on capital, quarter-over-quarter evolution clearly illustrates both the underlying growth dynamics of the business that I just talked to you about, and the one-off timing effects at year-end. First, results remain at the core driver of capital generation.
Strong earnings contributed 64 basis points to CET1, then with the accrual of the dividends and AT1 coupons deducting 34 basis points. Then, turning to RWAs, activity-driven growth implied an impact of around 57 basis points. Overall, we saw a higher pace of RWA consumption compared with previous quarters. Again, this reflects very strong and exceptional business dynamics across all geographies, with an acceleration in the loan portfolio growth, explaining the majority of the increase in RWAs. In addition, the thing that I mentioned about the fourth quarter exceptional number, the quarter includes also the year-end operational risk calculation, which, in the context of higher revenues and higher activity, also came slightly higher than usual. Importantly, this capital consumption for the right reason, as it is driven by profitable growth.
We would like to underscore this. I mean, it's 57 basis points, much higher than usual, because we have grown much higher than usual, and that's good, as long as the, the growth is a profitable growth. And on that one, again, we remain highly disciplined in the use of capital, as it is a scarce resource. I shared with you before, we have developed this concept of micro capital management framework, which ensures that at the most granular level, at the level of every single loan, again, I'm repeating, but it's important, granted, at any part of the world, capital is deployed profitably above the respective cost of equity in that respective market. In the page, other impacts, marginally positive, adding around 4 basis points, as negative markets-related impacts were more than offset by the positive credit in OCI from hyperinflationary countries and higher minority interests.
Regulatory impacts, we have basically advanced this to you, I think two quarters ago, but we added a 56 basis points, somewhat above the original expectations that we shared with you during the, again, July presentation, I think it was. These effects are technical in nature and mainly reflect the reversion of some portfolios to standard and to foundation in Spain and in Mexico. As a result, CET1 reached 13.75% in December 2025 before capital distributions. Then you deduct the EUR 4 billion of extraordinary share buyback program, a clear demonstration of our commitment to, to shareholder returns and to get back to, to our capital target. But this reduced the CET1 by 105 basis points, taking us to 12.70%. Slide 17 on shareholder distributions.
In line with our payout policy, I'm very pleased to announce that the proposal to be submitted to the governing bodies contemplates a total regular distribution of EUR 5.2 billion for 2025, equivalent to a 50% payout, the upper end of our distribution policy. The distribution will be fully paid in cash, amounting to EUR 0.92 per share, which represents a 31% increase versus the 2024 cash dividend, and this implies a final dividend of EUR 0.60 per share to be paid in April 2026, complementing the EUR 0.32 per share that we have distributed back in November. In short, I mean, by far, the highest dividend of our history.
In addition, we continue to execute the extraordinary share buyback program, EUR 4 billion, announced last December, of which the first tranche of EUR 1.5 billion is already being executed, again, as a share buyback program. Page number 19. As you know, in total, in the second quarter of 2025, in July, we set our ambitious financial goals for the 2025/2028 period. We are completely in track of those numbers. We are still in the first year of the program, but as compared to the numbers we had in the plan for 2025, we are performing in line with our original expectations, in some better, but overall in line with our original expectations in all of the metrics that you see on the page. With this, I pass over to Luisa for the business areas.
Luisa Gómez Bravo (CFO)
...Thank you very much, Onur, and good morning, everyone. Let's start with Spain, which has delivered outstanding results in 2025. Net profit grew at a double-digit number, reaching EUR 4.1 billion for the year, driven by strong business dynamics, with loans up 8% year-on-year, more than offsetting some margin pressure in a declining rate environment. This was further supported by robust fees, contained costs, and improving asset quality trends. The fourth quarter was particularly solid, with net profit exceeding the EUR 1 billion mark. Looking to quarterly dynamics, net interest income remained highly resilient, supported by continued commercial momentum. Loan growth remained very solid, supported by strong new production, up 9% quarter-on-quarter. Loan balances evolved positively across the board, with particular strength in consumer and across the enterprise segments.
This translated into further market share gains in the most profitable segments. To highlight the evolution in the enterprise segment, where we have successfully closed the gap with the overall loan market share, gaining 60 basis points of market share in the year. Robust fee income, driven by sustained growth in asset management and insurance fees, along with the recognition in the quarter of asset management success fees. On costs, expenses remained well contained, growing by 1.9% if we exclude the positive one-off related to VAT calculations recorded in the second quarter. The quarterly increase mainly reflects year-end adjustments of variable compensation accrual according to the strong performance in the year. Overall, efficiency remained best in class, with cost-to-income ratio at 33.1%. Finally, we continue to see positive trends in asset quality.
The NPL ratio declined, coverage increased, and the cost of risk improved to 34 basis points in line with guidance. Turning to Mexico. 2025 was a remarkable year for Mexico, with a very strong performance despite a challenging macro environment. On a full year basis, earnings were supported by robust core revenue growth, up by 8% year-over-year, driven by strong activity momentum outpacing peers, leading to continued market share gains. Total market share reached 25.6%, increasing by close to 30 basis points over the year, while total deposit market share also increased by close to 70 basis points. Looking into the fourth quarter, net profit reached EUR 1.4 billion, up close to 5% quarter-on-quarter, supported by very solid activity dynamics.
Loan book growth accelerated in the final quarter, increasing by 4%, excluding the FX impact, with sound performance both in the retail and enterprise segments. Total deposits grew by 5.4% quarter-on-quarter, outpacing loan growth, driven by strong inflows in retail deposits, particularly the demand deposits. Cost of deposits declined further in the quarter, supported by lower interest rates and an improved deposit mix. All in, this translated into strong gross income growth of close to 6% quarter-on-quarter. Turning to costs, the increase in expenses during the quarter, as in Spain, and by the way, in the other geographies as well, mainly reflects year-end adjustments in the variable compensation accrual. Efficiency levels remain outstanding, with a cost-to-income ratio stable at 30% in the year and in line with guidance.
Finally, asset quality remains solid, with a flattish NPL ratio in the year, higher coverage levels, and broadly stable cost of risk. Moving now to Turkey. The franchise delivered a net profit of EUR 805 million in the year, representing a significant improvement compared to 2024. The improvement in earnings is mainly supported by a strong increase in net interest income, underpinned by higher activity levels and a significant recovery in the TL customer spread in Turkish lira in a context of declining interest rates. Fee income remained robust, supported by growing activity. In addition, the negative impact from hyperinflation adjustment continued to decline, reflecting the ongoing disinflation process in the country. Cost of risk stood at 194 basis points in 2025, reflecting still elevated provisioning needs in the retail portfolios following a long period of negative real interest rates.
Finally, the effective tax rate increased significantly in the fourth quarter by the full year impact of the recently announced tax code change, which, Onur already mentioned, and weighed on Garanti BBVA earnings at the end of the year. Let's turn now to South America. The region delivered a strong performance in 2025. Net profit reached EUR 726 million, growing by 14.3% year-on-year, mainly supported by earnings improvement in both Peru and Colombia, as well as lower negative impact of hyperinflation adjustment in Argentina as this inflation process continues. Core revenues dynamics were very positive in Peru and Colombia, growing at mid-single digit year-on-year in current euros, supported by solid loan growth and wider spreads.
Net interest income in the year is affected by Argentina, reflecting a lower contribution from the securities portfolio and some compression in customer spread over the year, despite the recovery observed in the fourth quarter. Robust fee income across the region, supported by the rollout of new initiatives aimed at reinforcing fee generation and improving efficiency, the cost-to-income ratio improved to 43.9% in 2025. Turning to asset quality, trends continued to improve in Peru and Colombia, while in Argentina, provisioning requirements in the retail portfolio remained high, leading to adjustments in the risk appetite for this segment. Overall, risk indicators improved across the region, with the NPL ratio declining to 4%, coverage increasing to above 90%, and the cost of risk improving to 250 basis points.
All in all, South America continues to show increasingly positive dynamics, reinforcing our confidence in the region's outlook going forward. Going to Rest of Business delivered strong net profit of EUR 627 million, compared to EUR 485 million in 2024. The strong performance was driven by solid activity across geographies. Loan growth remained healthy, with important contributions, corporate lending, transactional banking, project finance. Funding dynamics were also positive across the board. This strong momentum translated into robust revenue growth. Net interest income increased by 15.9% year-over-year, supported by higher volumes and disciplined price management. Fee income also showed remarkable growth, with positive trends across countries, driven by both investment banking and global transactional banking.
On cost, expense evolution reflects the rollout of our strategic growth plans, including continued investments to reinforce our capabilities and growth plans going forward. Risk metrics remain very solid. Cost of risk stood at 16 basis points in 2025, broadly stable Rest of Business continues to show very positive momentum. Back to you.
Onur Genç (CEO)
Thank you. Thank you, Luisa. Let me finish with the takeaways, and the outlook, and the guidance, but we have a commitment to you that we always finish by the hour. So on the takeaways, let me not go through all the bullet points that you have on page 26. In short, I do think we have had one of our best years ever in 2025. Then, guidance, page 27, completely aligned with the midterm goals of our strategic plan. We are expecting strong business momentum to continue, solid loan growth across the board, supporting net interest income and overall revenue growth. On expenses, we maintain our clear commitment to cost discipline. The expected evolution in Spain and Corporate Center is impacted by some...
As you remember, in the second quarter, there were some VAT-related topics there, some base effects. But if you exclude the base effects, completely in line with our also original plan. Cost of risk is expected to remain broadly aligned with the 2025 levels. And overall, as a result of all of this, our expectation across the different business units, it translates into a group return on tangible equity goal of around 20%, better than 2025, is our expectation, and a cost-to-income ratio of below 40%. And finally, on page 28, to deliver on our ambitious long-term objectives and the 2026 guidance that I just talked to you about, we will continue to focus and execute on our strategic priorities. We, again, announced them at the beginning of 2025.
We will devote time in 2026 to further discussing these strategic priorities with you through a series of what we call BBVA Strategic Talks, and obviously, with the involvement of our senior management. These sessions would include country and certain business deep dives, and we are going to start them in March 10, with Mexico and the Enterprises segment. With this, I conclude the presentation. Now I give the floor to Patricia for the Q&A. We are at 9:58 in Spain, so two minutes. Perfect. We are right on time.
Patricia Bueno (Head of Investor Relations)
Thank you. Thank you very much, Onur and Luisa. We are ready to start the Q&A session. So operator, please, the first question.
Operator (participant)
Thank you. As a reminder, to ask a question, please press star one on your telephone keypad. The first question is from Maksym Mishyn with JB Capital. Please go ahead.
Maksym Mishyn (Analyst)
Hello, good morning. Thank you very much for the presentation and taking our questions. Two questions from me, please. The first is on Spain. You target mid- to high-single-digit growth in loans, above mid-single-digit growth in loans, and you grew 8% in 2025, but the NII guidance is low- to mid-single-digit. Can you walk us through the key assumptions there on rates? And then the second is on Mexico. Looking at sector data, and please correct me if I'm wrong, but it looks like the gap in deposit costs you had historically is reducing. You also seem to be growing faster in term deposits. Can you please discuss competition in deposits, and how do you see your customer spread evolving in the coming quarters? Thank you.
Onur Genç (CEO)
Thank you. Thank you, Max. On Spain, our Euribor expectation that we have, for example, 12-month Euribor, is basically flat, but the average spreads that we would be having, average 2025, average 2026, shows a slight decline. As a result, you see a different guidance between the activity growth and also the overall NII and revenue growth. That's the core reason. But the Euribor levels, we do think today we are at 2.22, 12-month Euribor. It's gonna be around these levels. The average that we expect for the year is at 2.25. On Mexico, the deposit pricing, we discuss this every quarter. I mean, our Mexican peso funding is at 2.5 at the end of November for comparison reasons.
In the backup, you also see the end of December, but comparison, the markets authority announces these numbers when our competitors, they are at 4.11%. 2.5, 2.5% for us, 4.11% for the industry. We maintain that very positive gap with the rest in terms of cost of funding and deposits. Going back to the same dynamics that we repeat every quarter here, but they are important, we are transactional, we are in transactional deposits. I did mention this to you before, but I would repeat it. Given our very high market share in payrolls, one-third of our deposits, one-third, is in this bucket of 0-30,000 EUR, the lowest bucket.
The average of that bucket, one-third is in that bucket, 0-30,000 EUR, and the average of that bucket is 790 EUR. So we have millions of customers, and their transactional relationship is with BBVA. That's the best insurance policy against any cost of funding challenges or deposit challenges. You have seen that our loan-to-deposit ratio is basically flat throughout the year, also in Mexico. I did mention to you in the last call that we would be a bit more aggressive in deposits now that the prices are lower. We didn't want to be very aggressive in deposits, and we have chosen to do wholesale funding when interest rates were very high, because we didn't want to trigger that market too much.
But now that the interest rates are at relatively low levels, we are also gaining market share in the last quarter, and it's mainly coming from the enterprise segment, which is then leading to those dynamics. But overall, we feel very comfortable with our deposit positioning and cost of funding positioning in Mexico.
Patricia Bueno (Head of Investor Relations)
Thank you.
Luisa Gómez Bravo (CFO)
I would just to add on to Onur's comment also on the rate side in Mexico, we do expect Banxico to continue to lower rates this year. So we're expecting Banxico rates to be at around 6.5% around mid of the year. So that is also implying somewhat you know compression of spreads in 2026 in Mexico on average versus 2025 just as in Spain.
Onur Genç (CEO)
Maybe we announced our long-term strategic plan. We said that the core driver of the strategic plan numbers that we announced again in July, was the fact that the rates would stabilize, and once rates stabilize, the activity growth will translate into bottom line, right away into profits. That stabilization has already happened in Spain and is very close to be happening, finalizing in Mexico.
Patricia Bueno (Head of Investor Relations)
Yes. Thank you very much, Max. Next question, please.
Operator (participant)
Next question is from Francisco Riquel from Alantra. Please go ahead.
Francisco Riquel (Analyst)
Thank you for the presentation. I have two questions. First one is, Spain customer spread fell 50 basis points in 2025. Local peers are reporting falls of just 20, 30 basis points. You're growing faster in loans, 8%, however, so how can you reassure that market share gains are not coming at expense of profitability? And if you can comment on customer spread dynamics that we should expect in 2026 and 2027. My second question is on capital generation. Net profit, well, results in 2025 and 2026 guidance is in line with expectations, but you are getting there more capital intensive than I thought in view of the negative organic generation in Q4.
So I wonder if you can update on the strategic goals of the 2028 plans in terms of the—do you feel that the EUR 49 billion of CET1 generation is still achievable? How much through SRTs and the mix, how much do you plan to devote between growth and distributions that you guided at the time? Thank you.
Onur Genç (CEO)
Thank you, Paco. Luisa, do you want to take the first one, customer spread dynamics?
Luisa Gómez Bravo (CFO)
Yes, I think, well, the customer spread dynamics have been quite positive in the quarter, to be honest. I think that first of all, I think that we need to also remember that the repricing of our mortgage loan portfolio is faster than our peers. We reprice 2/3 of our mortgage book every 6 months and 1/3 every year. So this pricing dynamics, obviously, you see it feeding into the loan yields quarter-over-quarter. In the cost of deposits this quarter, we had a slight uptick of 2 basis points of cost of funds, and this was driven primarily by a mix effect, because in the quarter, we gained market share in transactional banking deposits in the corporate side, and that's what affected a little bit the cost of deposits.
Going forward, as we mentioned, we think that we will see quarter-on-quarter pretty stable cost customer spreads in the first half of the year and perhaps slightly ticking up at the end of the year, depending on that Euribor rate performance that Onur mentioned. So all in all, I think that we are quite comfortable with the evolution of the spreads going forward. And going to profitability, I think that our profitability, as you can see by the dynamics of core revenues in BBVA this year in Spain, which have been quite positive, you know, with over 3% year-on-year, and NII and 3%, over 3% year-on-year in fees, compared to our peers, I think showcase the profitability outlook of our growth.
Onur Genç (CEO)
Just to add on this one, Paco, on page 38, you see the customer spreads, average customer spreads by geography in the appendix. The average spread has declined by 41 basis points, just to be very precise on the figure. And that 41 basis points, as you mentioned, is slightly higher than the competition, for a good reason. If you look into the growth of our lending book, you would see that we are growing very profitably, to be fair, but still at a different margin or a different spread level versus retail in the enterprise segment. So we are growing very nicely in the enterprise segment. That has an implication. Obviously, the mix effect comes into that play. But that 41 basis point, again, is excellent, in our view. And finally, I would say that this...
the final spread that you see in Spain at the end of the fourth quarter, but at the end of the quarter as well, 280, we expect that number to remain. We have touched bottom, basically, in short. We expect that number not to go any further down. Slight maybe changes, but not too much. From here on, if the rate policy evolves as we are expecting, it's gonna be going up. Then, the second question, the broader question on the growth being capital intensive and the implications of that. You were asking implications of that in terms of goals? We do have our, again, midterm strategic plan and the associated figures.
There are two numbers there that are very important to us, and that are very easy to remember: EUR 48 billion profits and EUR 36 billion capital distribution back to our shareholders, okay? Those two numbers, and then there are many others underneath, but I'm giving you the two figures that is like the- I, I put them into a Post-it note, and I put them next to my bed so that I look into them when I wake up in the morning. They are, they are important numbers. I mean, we are a very self-confident team. If things happen that are beyond our control, and if it doesn't happen, fine. But at the moment, we are completely on track to reach those figures. The, the thing that you mentioned, be growing in capital-intensive areas, as long as it's above your cost of equity, that growth, we love it.
We want to do more of it because you are gonna be-- we are gonna be creating capital more than our cost of equity. The thing that you mentioned might create a bit more different dynamics in terms of the sum of the buckets underneath the capital flow, but at the moment, it's completely in line with our plan. But if it continues like this, meaning we grow a lot in, as you say, capital-heavy areas, then we have an opportunity to do more SRTs, for example. I'll give you the growth dynamics here because you mentioned it's capital intensive. If you look into the quarter-over-quarter growth, you see that in Spain, in the quarter, we grew 2.5% in loans, when the average-- the annual growth was 8%.
So if you annualize the quarterly growth, we have grown much more in the fourth quarter versus the rest of the year. If you look into Mexico, the fourth quarter number growth is 3.7, and the overall annual growth was 7.5. Again, if you annualize Mexico, 3.7, it was a much stronger quarterly growth than the Rest of Business, as also Rest of Business is basically CIB business. We also delivered amazing growth in that area. All of this growth, again, is happening above cost of equity. If we grow like this, again, we will have a higher pool, for example, to do more SRTs. There will be different dimensions. But in short, coming back to your simple question, we are fully committed, and we are completely on track of our midterm goals.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Paco. Next question, please.
Operator (participant)
Next question is from Benjamin Toms from RBC. Please go ahead.
Benjamin Toms (Analyst)
Good morning, both, and thank you for taking my questions. The first one's on costs. At a group level, costs grew 10.5% in 2025, above weighted average inflation of 9.6%. I roughly calculate the weighted average inflation is expected to be 7% in 2026. Is that 7% roughly in line with your expectations, and is 7% the right way to think about group cost growth for this year? I appreciate you have a cost-to-income ratio. And secondly, one of the reasons Mexico is a great geography to operate in is because the population is young and underbanked. From a strategic point of view, I'm interested that when we're talking about new entrants coming to the market and coming to a market like Mexico and disturbing the status quo, does that young and underbanked population actually represent a disadvantage?
I imagine younger customers are less sticky, and if your parents never had a bank account, you'll have no brand aspiration or allegiance. Basically, conceptually, do you think that it's easier for a new entrant to come to a market like Mexico relative to a market like Spain? Thank you.
Onur Genç (CEO)
Perfect. On costs, Luisa, do you want to take?
Luisa Gómez Bravo (CFO)
Yes. Well, I think on costs, what we see is that this year, the performance on costs has been basically affected as well by the VAT one-offs in Spain and Corporate Center, in line in Mexico, and Turkey, affected by Rest of Business in line with our expectations according to our investment plan. So all in all, I think, as I mentioned, very much with what we expected. Going forward, I think the guidance is very clear that we continue and remain investing in our footprint. Spain and guidance for Spain and the Corporate Center is affected by the one-offs on the base case.
I think that in both cases, if you, if you, you know, strip out the one-offs, we will be growing in Spain around circa between 3%-4% on the average of both years, which is in line with the growth that we see for Spain. And in Mexico, again, very, very consistent growth in Mexico, a market where we continue to believe that investment gives a lot of, a lot of return going forward. So I think that the group costs this year are gonna be, you know, in that sense, higher than inflation because of these one-off trends and the continuing investments in the growth franchises that we see in the group.
As you mentioned, profitability is very relevant for us, and as long as we see cost-to-income trends performing the way that we expect, below 40% for the group in 2026, and with our midterm goals going into the 35%, you know, aim, which is what we still stand by, I think we're perfectly fine investing in our footprint at these, return levels.
Onur Genç (CEO)
And on your second question, Benjamin, which is a very good question. Our experience in banking, Benjamin, is that different segments of the society and population, young, mid-age, old, or different segments, whatever metric, whatever dimension that you pick as a segmentation dimension, they really don't care whether it's the neobank or the incumbent bank and so on. What they care about is the service. They want to get the best from their bank. Very simple concept, but very important. Different segments prioritize different areas of the service. As you say, the young segment, for example, the digital experience has to be really good because that's the piece that they care about. But if that digital experience is being provided by an incumbent bank versus a neobank, they don't care about that tag, about that label, they go for the service.
In that context, our claim, and there are many numbers that we can take offline and feed you with, but there are many numbers that tell us that our digital experience in Mexico is amazing. 'Cause, I mean, as compared to those neobanks as well, we do this constant. I'm personally involved in those exercises. We look into what do they have in digital experiences? What do we have? Do we have a gap? If it's positive, perfect, we further build on that. If it's negative, we close that gap right away. If we do that, why would the young segment prefer a certain bank versus another? In that context, I mean, again, the numbers speak for themselves. Those neobanks that you are mentioning, and some of them have been there for many years now.
There are newcomers, but there are also very entrenched now players in Mexico on the neobank side. They have been there for quite a long time. But despite that, we have 4.7 million new customer acquisition in Mexico in 2025, 4.7 million. A good part of them are very young customers. 81% of this acquisition are done through pure digital channels, so they don't go to a branch, they don't go anywhere, and they basically become a customer through pure end-to-end digital channels, which is one of our core competitive advantages in Mexico and beyond. That's why we are providing that service to them, that's why we are getting those numbers. On top, we have certain things that, in our view, neobanks cannot replicate that easily.
We can do what they do, because the digital channel, we are really focused on that. But the things that we have, our infrastructure in the country, Mexico is still a very cash-heavy country. More than 90% of the population says they still deal with cash on a daily basis. We have, by far, the largest ATM infrastructure. We have the branch network, if the customer needs it. For a problem, so, for the young segment, it's only for problem areas, but it does happen. They care about that infrastructure as well. And also, even if you are young, if you are working in a place, we do have a relationship with your company so that your payroll comes to BBVA, which is not very easy for, again, neobanks to replicate.
In short, I think the numbers are very clear that we see that challenge, but we are matching that challenge, and we are gonna compete really hard.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Benjamin. Next question, please.
Operator (participant)
Next question is from Cecilia Romero with Barclays. Please go ahead.
Cecilia Romero Requejo (Analyst)
Luisa, thank you very much for taking my questions. The first one is on Spain. Spain volumes are strong, and you're gaining market share in SME and corporates, while deliberately giving up share in mortgages. Is this pushing the cost of deposits up as you compete for clients, clients that you're now gaining through mortgages? You mentioned before, on risk-weighted asset growth was larger than expected this quarter. Could you clarify whether any large SRT transactions have slipped into Q1, and how we should think about risk-weighted asset growth and further SRT benefits for next year? My final question, the final dividend was entirely in cash. Is this structural going forward, or are you planning to keep flexibility to do a final dividend in 2026 with a share buyback component? Thank you.
Onur Genç (CEO)
Perfect. SRT is the architect and the leader of the SRTs is Luisa, so I'll leave it to you on the second one. On the first one, the cost of deposits may be going up, if I understood you correctly, Cecilia, because we are less aggressive on mortgages, does it have an implication on deposits? Was that the question? But the deposit, you would see it in the numbers as well. Again, in the appendix, you would see it. Our loan-to-deposit ratio in Spain is now 87%.
87%, so we do have so much liquidity and so much deposits that the tension that you might be implying that would be coming from not having that mortgage relationship with customer and hence lower deposits, is not there at all, because we do have, again, abundant deposit space. SRTs, Luisa?
Luisa Gómez Bravo (CFO)
Yeah. So on the SRTs, we generated 35 basis points of capital this year. In 2025, it was around EUR 11 billion of RWA release. We did front-load the deals in the year where they were more biased. We did, like, 23 basis points in the first half. We do see that the trend in the market is for deals to concentrate at the end of the year, and then so we planned our SRTs in a different way. We expect this year to be able to deliver more or less in line with the guidance that we gave last year of around 30-40 basis points, and pretty much in a similar fashion.
We are also expecting to start doing some deals in some of our other core geographies, such as Mexico and also potentially Turkey. We're working on those type of deals as well, in order to try and mobilize the balance sheet further. So in that context, we do expect RWA growth to be below the loan growth as we complete our SRT planning going ahead.
Onur Genç (CEO)
Okay. On the first answer that I gave on deposits in Spain, Patricia here is alerting me that I didn't give a proper answer. But I do think what I said was critical, which is the 87% is the number to look into. But she's also highlighting a very good number, which is one of the clear reasons our deposits are growing in Spain, is also the retail franchise that we are building. Last year, we continued to acquire... I go back to the same topic, but it's very important. 1 million new customers in Spain. 1 million new customers. Excluding the neobanks, we are number one among the incumbent banks in terms of customer acquisition. That brings a lot of deposits as well, huh? Patricia, I added your,
Patricia Bueno (Head of Investor Relations)
Yeah
Onur Genç (CEO)
... your point as well, so I think you should be happy. Then, the dividend topic, you said, I think, Cecilia, that 2026, can there be share buybacks into the, instead of cash? Of course. Of course, as we have done in the past, and this year it's 50% full in cash because we are running a share buyback program already. There is an ongoing extraordinary share buyback program running in parallel. That's why we said, "Okay, let's go with cash on the, on the other side." You might remember, 2024, 2023, we did a piece of the payout, regular payout in share buyback. 40 last year in cash and 10 in share buyback, if you remember.
So we have that flexibility in our payout policy, as we have announced to the market. We typically tend to pay a good part of the regular payout in cash, because we do think it's important the cash dividends continue for our shareholders in a nice way. So a good part of that will always be coming in cash dividends, but there is the possibility and the flexibility, obviously, to do the 2026 regular payout, also some of it in share buyback.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Cecilia. Next question, please.
Operator (participant)
Next question is from Alvaro Serrano from Morgan Stanley. Please go ahead.
Álvaro Serrano (Analyst)
Hi, good morning. Can I ask a couple of questions around the guidance? First of all, in Mexico, and then I've got one on cost in Spain. In Mexico, the mid- to high single-digit NII growth, if I look at the momentum you had in 2025, was very good. And certainly in the second half of the year, you had 3% sequential growth in NII in pesos. And the mid-single-digit, sort of mid- to high single-digit NII growth implies very modest sequential growth over the fourth quarter base. And you're not gonna get, Luisa, you mentioned 50 basis points rate cut that you're putting in. Can you are you being conservative? Is there anything to... I don't wanna go to the cliché of the deposit competition, but is there anything we're missing?
Are you being conservative? Just if you could qualify that guidance a bit, that'd be very helpful. And then on Spain, even the cost income is 33%, which is obviously very good. I'm not, that goes without saying, but if I think about the 2026, you're discussing low- to mid-single-digit sort of NII, fees and expenses underlying around 4%, I think, Luisa, you said. Is that, I'm just thinking, that doesn't imply, potentially implies negative jaws or stable jaws. How are you thinking about costs from here on, given this good starting point in cost income? Should we expect a bit more investment, maybe some negative jaws at some point? Is this the best you can do?
Which is very good. I don't mean it in a bad way. 33% is obviously best in class. Thanks.
Onur Genç (CEO)
Okay, so maybe you take the second one, Luisa. On the first one, Alvaro, congratulations, because in that chart of outlook and guidance, there are many bullet points on the page. The one that we discussed extensively, and we said, "Are we being too conservative on this number or on this line?" was the one that you picked. But, you know our style. That page, again, is very important to us. When we say a number that we want to deliver, we deliver. And maybe a bit on the conservative side, that number, we are very positive on in Mexico, huh? Very positive.
I mean, if we have delivered what we delivered in 2025, despite all the complexities of the year in Mexico, in 2026, based on what we also see at the beginning of the year, we are quite positive. But, we put a number, and we always deliver, and maybe that's one of the reasons why you have that guidance in there. Luisa, on the cost?
Luisa Gómez Bravo (CFO)
Yes, well, on the cost side, I think that, with the current guidance in this year, we do expect some slight negative jaws in Spain if factoring for that tick of 4%, on average for the last two years. But that would still leave us with a very positive cost-to-income ratio for the year in Spain, as we guide it for. And again, we continue to, by the way, invest a lot in efficiency and productivity. By no means are we, you know, standing still. We're actually part of the investments, and the growth in investments and expenses are to achieve further productivity gains in, you know, throughout the year in 2027 and 2028, primarily.
So we are very committed to ensuring that we have very good, solid cost discipline in Spain and the rest of the geographies, but Spain is, I think, a poster child of cost discipline in the past, and we will continue to do so throughout the year and going forward. So yes, slightly negative jaws this year, but again, very positive growth for Spain, you know, going forward in results, I mean.
Onur Genç (CEO)
And, Luisa, maybe we also quantify a bit. I mean, in terms of the number that you see on the page for 2025, Alvaro, you see that the costs in Spain have decreased by 0.7%. Decreased, huh? It was because of that one-off that Luisa also mentioned in previous calls and also today, this VAT one-off. If you exclude that one-off, the growth in 2025 would have been around 3%, and the guidance for next year would have been around that as well. So it's not any different. It's the base effect mainly affecting that figure, and we are gonna be in the first quarter running an efficiency initiative, a voluntary efficiency initiative, in Spain, and that might have a little impact on that number also, especially in the first quarter.
But the guidance is there in that sense, mainly because of the base effect.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Alvaro. Next question, please.
Operator (participant)
Next question is from Marta Sanchez Romero with J.P. Morgan. Please go ahead.
Patricia Bueno (Head of Investor Relations)
Hi, Marta, can you please check if you're on mute?
Marta Sánchez Romero (Analyst)
Oh, sorry for that. My first question is a follow-up on cost. We've seen some slippage in the Corporate Center. Is there space to do something more ambitious in terms of restructurings? It's been a number of years since you did anything meaningful in terms of early retirements. Could we see some capital allocated there? My second question is also on capital allocation. Some may say that your buyback, your current extraordinary buyback, was somewhat stingy, and at the current execution pace, you'll be done and dusted by July. Is there a chance that you reload that buyback, or we are not gonna see anything in terms of capital returns beyond the interim dividend this year in 2026? And just a quick question on the Rest of Business.
So your loan book there is growing like a weed, EUR 16 billion this year, almost EUR 30 billion over the past two years. We're seeing market investors a bit jittery about underwriting, generally, private markets, et cetera. Can you give us some sense of the quality of your underwriting, what you're doing? Thank you.
Onur Genç (CEO)
Perfect. Maybe the last one you take, Luisa, if you like. On the first question, Marta, thank you for the questions. On the Corporate Center, as I just mentioned, to Alvaro's question, in Spain and in Corporate Center, we don't want to... it's not a restructuring program at all. It's something that we do on, in an ongoing basis. But in the first quarter of this year, we will have an efficiency initiative, as we call it, which is a voluntary initiative for some of our colleagues, to benefit from if they want. It's a targeted voluntary initiative that we will be doing.
But I would highlight to you that if you go back to the Corporate Center expenses in the last 5 years, 5 years, you would see that those expenses are always growing less than inflation, always, and except the one-offs, and we can talk about the one-offs. But it has been a commitment that we have had, and even in these calls, we have voiced those commitments, and we are on track with those commitments. The buyback strategy, and you're saying wouldn't... Should we expect something more or less or nothing? We have been very clear, very vocal, and I do think we have built the credibility around this fully.
We do have this commitment that we have a capital target, 11.5-12, that we will distribute all the excess capital above 12. Our commitment on that is full. If you look into our capital number and the evolution of the capital, you would see that we would have excess capital, so obviously you should expect something more. When the time comes, we will announce it, additional extraordinary distribution back to our then Rest of Business, Luisa?
Luisa Gómez Bravo (CFO)
Yes. No, I think that the growth that we are seeing is a strong growth, but this is on the back of plans that have been developed over quite a number of years already and that have gained momentum now. So these are very thought-out plans that basically are trying to gear and leverage the global footprint that we have. We put our clients in connection to our, you know, emerging markets, and we're doing business with large corporates that are growing the strategy in traditional corporate banking with that growth of 21% that we saw in the year in cross-border business. I think that in terms of underwriting criteria, we are quite, you know, conservative as in the rest of the group.
Forty percent of our business is booked in the U.S., and we are, I think, overall, very focused in growth in corporates. That's where we're seeing the main growth, Marta. We're not seeing growth in other types of... I mean, we're seeing growth, but not as relevant growth as in the corporate book. Again, corporate banking, transactional banking, regional banking model across the footprint, this is what we are focusing on developing.
Onur Genç (CEO)
I would double down on this comment, and I'm glad that Luisa has picked up on that dimension. It's on page 8 of the presentation. On the left-hand side at the top, it says, "Enterprise cross-border." Our Rest of Business in general, but our growth in CIB is based on a model that we want to accompany our clients wherever they are. We have this global footprint. Many of our clients do exist in our footprint with different subsidiaries and so on. It's more trade finance, multinational client, corporate banking-focused growth that we are after. And in that one, you see the evolution in that page, on page 8, that the growth is coming from there, from those clients.
It's basically a cross-sell to our clients that we have in Spain, for example, who have a business in Mexico. We go after that. Our big clients in Spain who have a business in the US, we go after that. That's the focus of our growth in CIB.
Luisa Gómez Bravo (CFO)
The capital allocation that we do in these clients Rest of Business and, you know, we see that profitability going into our subsidiaries in Mexico, you know, Latin America, in Spain. So that capital that gets allocated there has the profitability driven by the growth that you're seeing in our business, you know, in fees and margins across the group.
Onur Genç (CEO)
Perfect. Okay.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Marta. Next question, please.
Marta Sánchez Romero (Analyst)
Next question is from Carlos Peixoto from CaixaBank. Please go ahead.
Carlos Peixoto (Analyst)
Hello, good morning. Thank you for taking my questions. So the first one would be a bit on the medium-term targets. So, basically, the 14%, the 42%—sorry, 22% return on tangible equity, average that you had guided to, for 2025, 2028. Well, considering that, 2025 was slightly below 20%, net this year, you're guiding towards 20. So this basically means that over the coming years, the average ROTE would actually have to be around 22% or more, whether you stick to that or you see some downside. And the same rationale, more or less, would apply to net profit, where areas to...
Looking at what is implied in the guidance this year, it seems as though in 2027 and in 2028, you would have you would need to have post a net profit above EUR 13 million to fulfill those goals. What will be the drivers for this improvement in the net profit? And then the second question would actually be on Mexico. Just the cost of risk guidance for the three hundred and forty basis points implies a small deterioration vis-a-vis 2025. Are you just being cautious on this, or do you see here any kinds of concerns? Is it related with loan mix? Just trying to understand a bit there the rationale.
Thank you.
Onur Genç (CEO)
Very good. Thank you, Carlos. Maybe on the cost of risk, Luisa, you help me out. On the first one, the long-term mid-term goals, Carlos, what I can confirm to you, or let me say it first in a very clear way, we are fully committed, and we are still on track, as we have highlighted on page 18 of the presentation, to those goals. But you are asking a very fair and very good question, saying that you did 19.3 in 2025, how come you can get to 22? You have to look into the plan, and in the plan, the only thing I can guarantee you or I can tell you is the year for 2025, what we had in the plan, we delivered above that.
The 2026, our guidance that we are giving to you, we are gonna... If we deliver the guidance, we are gonna be delivering above what we have in the plan. So in the third and fourth year, it's obviously a bit better years than the first two. And you are asking, this is related to the profits as well, so what is the driver of that? I do think we, we talked about this in the past, but it's a very important, relatively simple, but very important dynamic, as we have talked to you about. We are growing very nicely in our core geographies, especially in Spain, everywhere, but in Spain and, and Mexico as well. That activity growth in 2025 and at the beginning of 2026 also, that activity growth is being consumed by the decline in the customer spreads.
Why? Because in those two geographies, we are very rate sensitive. When rates come down, we lose in customer spread. So we grew very nicely in 2025, and this compensated the negative coming from the customer spread decline. Starting from 2026, our expectation, again, it's based on a macro assumption that the rates will not go down any further. In, in Europe, and in Spain and Mexico, it's gonna go down to 6.5. Today, we are at 7, but then stay at 6.5. If those assumptions are correct, if that those macro assumptions are, are delivered, the driver of the better profits in the coming years is the fact that the, the activity growth will not be any more consuming, the decline in the customer spreads and will be flowing directly to the bottom line.
With those assumptions, again, our midterm goals, we are on track, and we feel very comfortable with the numbers that we have put forward some time ago. On the Mexico cost of risk, Luisa?
Luisa Gómez Bravo (CFO)
Yes. Well, I think as you mentioned, it's more driven by a mix effect. As you know, we have been growing in the past years our retail portfolios faster than our wholesale portfolios. This year, our retail portfolio has grown close to 12%. Our wholesale portfolio is growing at 3% at the end of the year, factored by the US dollar also depreciation. But in general, that mix effect and is driving that guidance in terms of cost of risk. Remember that we're growing 14% credit cards, 14% consumer loans, 14% SMEs. So it's a mix effect. The underlying quality trends are supportive, and we don't see any issues other than the mix effect going, feeding into that customer's guidance from Mexico this year.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Carlos. Next question, please.
Operator (participant)
The next question is from Sofie Peterzens from Goldman Sachs. Please go ahead.
Sofie Peterzens (Analyst)
Yeah, thank you. Hi, here is Sophie from Goldman Sachs. So my first question would be on AI and tech. You guide for below 40% cost-to-income ratio in 2026 and around 35% in 2028. But how do you think about kind of AI and tech and the kind of cost-income ratio in the longer term? How much cost reduction do you expect AI potentially could help BBVA? And then my second question would be on Turkey. Revenues are strong, but net income was a little bit lower than expected. Also, guidance for 2026 is slightly lower than expected by consensus. How should we think about the kind of upside risk to Turkey, but also Argentina, from potentially exiting hyperinflation in 2028 and what that could mean for BBVA? Thank you.
Onur Genç (CEO)
... Very good. Thank you, Sophie. In the AI, we are still at, still at the early innings, so we don't know exactly how the efficiency savings that we see, and they are really promising, eh? And we are quite positive on what we have been seeing in the areas that we are applying it at the moment, but we need time. We need time to measure and see the direct impact, and so on. But in the plan, we have given you this 35% in 2028, with the idea that in 2027, 2028, there will be some efficiency savings coming from AI that will be reflected into the figures.
But exactly, AI or other things, we haven't disclosed it, we haven't broken it down, and I think it is too early to quantify it at the moment. But we do have that intention to have some efficiency savings in those two years due to the programs that we are executing at the moment. On Turkey, how should we evaluate the upside risk as you say? First of all, on the 2025 figure also, you asked about. You said that it came a bit lower than planned, than the consensus. Actually, that's the miss consensus versus the group numbers in Turkey for two reasons. Number one, and as I mentioned, there was a change in the tax code.
I'm not sure whether you all have followed it, but there was a change in the tax code in the final days of December, which has created around TRY 50 million, TRY 42 million, to be precise, impact in the tax number, that has created a bit of a dent in the, again, final days. And then the impairments are coming a bit higher in Turkey, because in Turkey, the minimum wage increase happens only once in a year, at the beginning of the year, and towards the end of the year, basically, the minimum wage is not adjusted, but inflation is there, and you see a bit higher inflows in retail, in credit cards, and the consumer lending books. That's what we have seen. I mean, the vintages, when we look into the vintages, we see nothing extraordinary, nothing different than what we expect.
By the way, what we have seen in 2025 is more or less in line with the guidance that we have given to you. So given the vintages are already stabilizing, are already improving, actually, maybe in the first quarter or so, similar to fourth quarter numbers, you would see some provisioning, but beyond that, we are not worried about the provisioning levels. You were asking in general about the upside, both Argentina and Turkey as well. On that one, what we can tell you, as you also look into the guidance, I need to highlight that, thing in the guidance page, there's a footnote to the Turkish, guidance, which is based on inflation, interest rates, and depreciation of the currency. Those three things drive the guidance. We do think we have some fair assumptions in the footnote.
As a result, we are guiding accordingly. But Sophie, your question of: do we have upside in those two countries? In our view, yes, but it depends on whether the countries improve on inflation and interest rates come down or not. If in Turkey, for example, inflation improves and interest rates come down, we do have a very high, very high upside. If that happens, we have... At some point, we have raised it in these calls as well. I mean, the fair value that we should have in Turkey is more than EUR 2 billion in profits. Today, we are less than EUR 1 billion. That upside is there, but it depends on the macro evolution of the country. Finally, you asked about also hyperinflation. As you know, the rule there is relatively clear.
It's not the only rule, it's not sufficient, but if the last three-year inflation cumulative number is less than 100, you get out of hyperinflation. That's why in our strategic plan, we put in 2028 for the two countries get out of hyperinflation. But again, it depends on the macro evolution of those geographies.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Sophie. Next question, please.
Operator (participant)
Next question is from Andrea Filtri with Mediobanca. Please go ahead.
Andrea Filtri (Analyst)
Thank you for taking my questions, and sorry for drilling down on capital and its implications, but they are just, one number answers. First, how much capital generation can you absorb if you push, volume growth further? How much was the op risk revision, in Q4 impacting your risk-weighted assets? And you refer repeatedly to internal cost of equity reference for-- as your Northern Star for new loan generation. Can you share with us the cost of equity you're applying to your networks, in Spain and Mexico for the different, loan categories, please? Finally, Digital Euro. Given the geopolitical evolutions, do you agree that the Digital Euro is likely to be a reality at this point? And how are you preparing to deal with this and may-- and turn it to your advantage? Thank you.
Onur Genç (CEO)
Thank you, Andrea. Very specific questions. I appreciate all the, all the questions, and I'm gonna be very specific to you, too. In the volume growth and the capital generation, the thing I can guide you or tell you is that we still expect in the coming years, that every year... This year, we created 31 basis points, pure organic capital generation, even after growth, after regulation. After growth, after any other extraordinary thing, we created 31 basis points. In the capital plan, we expect every year to create 30-40 basis points. The operational risk in the fourth quarter, operational risk consumption was 16 basis points. Typically, it's 4-5 basis points in a quarter. We do this calculation, as you know, at the end of the year, so fourth quarter always has an adjustment.
That number was 16 basis points for operational risk in the final quarter of the year. Cost of equity of the bank for different franchises, we never disclose it. Thank you for asking the question. Digital Euro, it has pros and cons. It has to be done in a proper way, in our view. I, I do think, for the sovereignty topic that many people talk about, it can be helpful. There is a pro there. We see that angle, we see that point and appreciate it, but it has to be done in the proper way, in our view. And there are certain dimensions that we hope that we can continue to dialogue with the regulators and the politicians on this topic, given the fact that we are pushing private solutions as the banking sector in Europe, you might have seen this.
The solution of Bizum, the Spain, Italy, and Portugal, we are now in the same umbrella. We just concluded an agreement with EPI, which is basically the Netherlands, Belgium, Germany, and so on. So all of these countries, we will have already a private solution developed. We hope that in the Digital Euro discussions, that politicians, and supervisors, and regulators understand the complexity, the costs, and everything else required for the payment solution to be developed. In that context, we hope that the existing private solutions are integrated into that dialogue and discussion.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Andrea. Next question, please.
Operator (participant)
Next question is from Ignacio Cerezo from UBS. Please go ahead.
Ignacio Cerezo (Analyst)
Yeah. Hi, good morning, and thank you for taking my questions. I've got three. The first one is on distribution and capital. You can confirm that this is the year where the CET1 goes much closer to the 12% threshold, or that's gonna be a multi-year process? The second one is in Mexico, we're seeing a significant slowdown of remittances in the country. Does that have any impact in terms of the positive growth and asset quality, you think? And then third, if you can give us a few numbers in terms of balance sheet and P&L for the two digital banks in Italy and Germany. How have they been evolving basically in 2025? Thank you.
Onur Genç (CEO)
Very good. I'll do it very quick, if that's okay, Luisa. I mean, our commitment to go back to the upper end of our capital target is, is absolute. In that sense, you should expect this year also that we get close to 12 as well, exactly, which implies that extraordinary distributions in the year. In the remittances question, Ignacio, we have also reported this back to authorities also in Mexico, 'cause there are channels that are not fully captured in our view in that number. So there's a 5% decline in remittances, but you don't see that in many other geographies where there is a remittance flow between U.S., and Honduras, and Guatemala, and so on.
You don't see that in other countries, and only in Mexico, because we do think it doesn't fully capture the figure. So the reliability of that number, we have some doubts. But we do think that including those informal channels that are not included in the figure, the number has not come down, actually. But in any case, we are quite positive for the Mexican franchise and Mexican economy, better than 2025, we do think, next year. And the remittances is an important part of this. Even in the official numbers that are being published, you would see a pickup, in our view, in 2026. The balance sheet and P&L of digital banks, we started reporting this to you, as if you can see Rest of Business line item.
Rest of Business is basically CIB, beyond the geographies that we report a geographical account, so U.S., U.K., and so on, all in there, plus the digital banks. You do see that in that page 24, customer funds, the digital bank deposits is EUR 12.2 billion at the moment. It's basically, roughly a bit more than half coming from Italy and the other part coming from Germany. We will continue to report, on the balance sheet numbers. As you would see in this page, you will keep seeing the update in the figure. The P&L numbers will be published when we see the maturity of those businesses. At the moment, we are not publishing them separately.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Ignacio. Next question, please.
Operator (participant)
Next question is from Borja Ramirez with Citi. Please go ahead.
Borja Ramírez (Analyst)
Hello, good morning. Thank you very much for taking my questions. I have two. Firstly, on Mexico, I understand that recent macro indicators show improving GDP growth trends, so I would like to ask if you could provide some details. And then also, you're giving to the appreciation in the Mexican peso versus the euro in recent weeks. I think it's around 4% appreciation. And then my second question would be on Spain NII. If I take your Q4 NII for Spain, and I analyze, and I add a bit of growth, I get towards the upper end of your guidance for NII, so it seems your guidance is conservative for Spain.
I saw that you had a very strong deposit growth in Spain, which... So it seems you're gaining market share there. So I think it's also thanks to your stronger digital capabilities. So if you could kindly provide some details there, please.
Onur Genç (CEO)
Thank you, Borja, for the questions. Maybe Spain question, you take, Luisa. On the Mexican side, again, I mentioned the overall positivity that we have for 2026 for Mexico, but you're asking about the depreciation effect. In the plan that we have and in the guidance that we have, we are basically expecting a depreciation of Mexican peso versus euro, depreciation. In the first days of the year, it's the other way around, which is amazing news for us, which is very good news, which is a positive upside potential. But we live with this currency topic day in and day out everywhere. We wouldn't jump into conclusions too quickly. If it turns out to be as such, perfect. But again, our plan basically foresees a depreciation of the Mexican currency versus euro.
On the Spain NII number, we have to pick up some speed, that's why-
Luisa Gómez Bravo (CFO)
No, I mean, I think on the Spain NII number, as we mentioned before, we expect,
... activity, growth to feed into NII with average customer spreads slightly lower than last year, but stable from quarter-on-quarter numbers, and with a positive contribution, continued positive contribution from the ALCO portfolios. Because we did increase ALCO portfolios in the end of the quarter by EUR 3 billion, and that should be also supportive to NII dynamics, which are all embedded into our guidance. And with deposit growth, I think it's primarily a strong growth in the fourth quarter, driven by demand deposits. Obviously, seasonal effects go into play in the retail side with Christmas salary bonus, and so on and so forth, public sector. But also a strong growth, again, as I mentioned before, in global transactional banking, and with specific clients that have supported that growth in the quarter.
And we'll hope to see that going into next year as well. On the back of, again, that growth of almost 1 million retail clients, that will also help support deposit dynamics going forward. Deposit dynamics in the market overall are gonna be also quite supportive as well.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Borja. Next question, please.
Operator (participant)
The next question is from Britta Schmidt with Autonomous Research. Please go ahead.
Britta Schmidt (Analyst)
Yeah, morning. Thank you for taking my questions. I've got three fairly quick ones. Could you remind us what the cost-income ratio in 2025 would have been, excluding the one-off? And maybe comment on how much of the expected cost growth this year above inflation is, let's say, upfront investment versus ongoing cost cost drivers. The second one would be on macro assumptions in Turkey. The rate and inflation assumptions do look a little bit of conservative. Maybe you can expand on why that is, and perhaps also give us a bit of a sensitivity of the fee income to lower rates. And then thirdly, just on on capital, you expect benefits from the fact that there's no countercyclical or systemic buffer in in Mexico, primarily.
How do you think about the simplification suggestions that the ECB has put forward, with changing the... potentially how they think about releasable buffers? I mean, is that a potential risk to your share requirements in the long term? Thank you.
Onur Genç (CEO)
Very good. The cost-to-income number, Luisa?
Luisa Gómez Bravo (CFO)
In the group, it would have been 39.3%, excluding the VAT topic from the 38.8 published in 2025.
Onur Genç (CEO)
The Spain number would be rather than 33, 34.
Luisa Gómez Bravo (CFO)
Thirty-four.
Onur Genç (CEO)
Yeah. On Turkey, I didn't get the full question. Turkey, are we conservative?
Luisa Gómez Bravo (CFO)
On the macro assumptions.
Onur Genç (CEO)
On the macro assumptions. We have to see, we have to see. Maybe we are taking it a bit with a grain of salt, Britta, really, because in 2025, if you go back to our first quarter 2025 presentation, we were expecting better macro in Turkey in 2025. But the rates didn't come down as much, and inflation didn't come down as much. And you have seen the number in January, the inflation came 4.84, monthly inflation. So we want to be a bit on the safe side, to be fair. But the macro assumption that we put into the guidance is in the footnote of that page. If you believe those macro assumptions would be better, perfect, you will have a better number in Turkey.
If you believe it's gonna be worse, it's gonna be a slightly worse number. The sensitivity is also more or less clear. Every 1% inflation has a EUR 15-20 million impact on net attributable profit. Every 1% interest rate has a EUR 40 million impact on the P&L, and every 1% additional depreciation has, again, another EUR 20 million impact on the number. That sensitivity is relatively clear. There are some overlaps, so you have to. It's not directly, but not that far away from what I just talked to you about. If you have other macro assumptions, then the number will change. Then the simplification topic, Britta, it will take two hours to discuss this, really, because we spent a lot of time thinking about this.
At the moment, I think the proposals are still not clear or not finalized. We wouldn't want to comment on them until we see something more certain and more clear on the page.
Patricia Bueno (Head of Investor Relations)
Thank you very much, Britta. Next question, please.
Operator (participant)
Next question is from Hugo Cruz with KBW. Please go ahead.
Hugo Cruz (Analyst)
Hi, thank you for the time. So, two questions. One, on Mexico, perhaps you already gave the detail, but if you could, remind us what guidance you expect for loan spreads and deposit spreads to evolve during the year. And I think you gave a, a comment of ALCO should support the NII in Mexico. Also, what are the assumptions there? Is it more like the size of ALCO, or is it repricing? So if you could give a bit more detail. And then the second question is, you know, you said that, buybacks are starting to slow down your tangible book value per share growth.
So, related to that, I was curious if you think buybacks are still have a return above your cost of equity, and, you know, basically, I'm wondering if it makes sense at some point to stop the buybacks because organic growth or M&A could have a better return. Thank you.
Onur Genç (CEO)
Very good, Hugo. Mexico question, Luisa?
Luisa Gómez Bravo (CFO)
Yeah. On Mexico, well, we don't, we don't give guidance on specific customer spreads. What we've mentioned is that our guidance for NII is going to be mid- to high-single digits. And we mentioned that we expect a compression of average spreads in the market this year versus last year, reflecting the strong decrease in rates in 2025, which is around 300 basis points in the TIIE reference rate and also in the Fed as well. So that's what we mentioned in Mexico. With regards to the ALCO book in Mexico, what we have primarily been doing is extending durations. We did some exchanges of short-term bonds for long-term bonds in the quarter. And we have extended that duration.
The book is right now at EUR 16.8 billion. It's grown around EUR 1.2 billion, pretty stable in the year. And again, the best, the most relevant effect has been that extension of durations with yields at around 8.6%.
Onur Genç (CEO)
Very good. On the share buyback question, Hugo, maybe it's a repetition of some of the things that I always say, and I also partially said today. But in terms of principles, very clear, we are value-focused. Any capital action that we do, it looks into the return of that capital deployment for our shareholders, and compare that also to other alternative uses of, of, of that capital. So you mentioned, for example, the negative impact on tangible book value per share number, so because of that, maybe... No, that's not how we look into it. We look into it from a value perspective. If we create value for our shareholders, then it's still a good investment of that capital. That is why we always look into the intrinsic value of the share, not the tangible book value per share.
So it might have a negative impact on the tangible book value per share, but that's not a criterion for the bank to decide on these. You have to look into the intrinsic value. It is true that given the appreciation of the share price, the attractiveness of share buyback has come down. But in our view, as compared to the intrinsic value, still there is value. That's why the program continues. And then also, I would once again highlight that our commitment to returning the excess capital above 12 is full. So when the time comes, when the capital distribution decisions are due, we will look into the situation, compare that with the intrinsic value, get the feedback of investors in general, and decide. Then we have to wrap up, no, Luisa?
Luisa Gómez Bravo (CFO)
Well, yeah.
Onur Genç (CEO)
Because we have to leave in five minutes.
Patricia Bueno (Head of Investor Relations)
Yeah.
Onur Genç (CEO)
Okay?
Patricia Bueno (Head of Investor Relations)
We have to leave it here.
Onur Genç (CEO)
No, no, I understood.
Patricia Bueno (Head of Investor Relations)
No, we can continue. Yeah.
Onur Genç (CEO)
Very quickly, let's do.
Patricia Bueno (Head of Investor Relations)
Next question, please. Thank you, Hugo.
Operator (participant)
Thank you. Next question is from Seamus Murphy with Carraighill. Please go ahead.
Seamus Murphy (Analyst)
Hi, I have just 3 questions, please, all on Turkey. Can I just clarify one thing? The EUR 40 million you mentioned on the sensitivity to the lower rates, is that excluding the hyperinflation adjustment, or is that including the hyperinflation adjustment? I just want to make sure I understand. So is the impact 4% or 2% in general? Second question: clearly, we're running positive real rates now in the region, and we will get an uptick in NPLs, but I just want to try and understand the relative effect of both on your PBT. So I suppose the NII impact is obviously much more sensitive, given the fact the country has de-levered by 50 points of GDP over the last 5 years, and, you know, household loans are only 9% of GDP.
So I just want to try and understand, like, obviously, a lot of it is credit cards, just in terms of the relative effect of both that real rate policy. And lastly, kind of more a strategic question, can you chat about what would you, you would need to see to buy out of minorities in Garanti as soon as you can? I mean, surely it's a perfect opportunity now to buy the balance, given an enormous return on invested capital that would be delivered to BBVA shareholders, assuming that the Turkish real rate policy persists, which obviously you do expect in your presentation. And so I just want to try and understand how you're thinking about the buy out of the minorities. Thank you.
Onur Genç (CEO)
Very good. Very quickly, because we don't have time. The number that I gave is including the hyperinflation adjustment, meaning it's the perspective of BBVA, looking into it from here, consolidated in a hyperinflationary accounting included way. The cost of risk, again, just to pick up some time, Seamus, it's in the guidance. We are expecting around 200 basis points of cost of risk in 2026, which is more or less in line with 2025. No more deterioration, not much deterioration. In the first quarter, in the first half, what we have seen in the fourth quarter might continue a bit, but vintages have improved. That's why you have the guidance of around 200 basis points. About the minority shares, we are happy with what we have.
We have no plans at the moment. We have no plans to change that, shareholding structure that we have there, so we will, again, we continue with what we have.
Luisa Gómez Bravo (CFO)
Thank you very much. Next question, please.
Operator (participant)
Next question is from Miruna Chirea from Jefferies. Please go ahead.
Miruna Constantinescu (Analyst)
Good morning, Onur. Good morning, Luisa. Thank you very much for taking my questions. I just, I had a follow-up regarding some of your previous comments about the fact that in 2025, you delivered better than what you had budgeted for at the end of 2025 in the strategic plan. I just wanted to make sure that I get that right, and that, that is a comment regarding profits rather than the return on tangible equity. I think at that point, you were guiding for 2025 ROTE to be around 20%. That came in slightly lower. Is the reason behind that slight miss the excess of equity that you've been operating on versus what you were expecting by then?
And then also, if 2025 profits came in better, 2026 expected to come in better as well, why shouldn't we see some upsides to your previous EUR 48 billion guidance for profits cumulatively? And then if I just can ask a more thematic one as well. Just a few days ago, you joined a banking consortium to develop a European stablecoin. Could you please tell us what are your intentions and ambitions there, and how you think about tokenized money more broadly in the coming years?
Onur Genç (CEO)
Very good. Thank you, Miruna. Again, we are too late, so I'm going to go very quickly. Apologies, and if you want to follow up with us, we will - we are always open to the follow-up. But on the, on the 2025 plan versus reality, as you exactly said, we delivered above plan in profits, but the average equity in the denominator of the return on tangible equity has been relatively high, because we only started the share buyback programs, because we have our commitment to go back to 12 all the time when we have excess. We started those share buybacks later in the year due to the Sabadell transaction and the fact that we weren't doing share buybacks throughout that process. But you're right, it was a beat on the profits.
Then, 2026, given where what you see, shouldn't we update 48? Miruna, we are too early in the game. We are only in the first year. I do think 48 is a very good number, and we are on track to deliver that figure. Then the stablecoin consortium, we do think it's a technological topic that needs to be watched very closely. There are certain use cases, in our view, that would benefit from those developments, and we are an innovation-focused bank. We always led the drive in digitalization, now in AI, and stablecoins is part of that dynamic as well. That's why we wanted to be part of a consortium to work through this and to basically stay up to date on all the developments around that. And then a final question we can take.
Patricia Bueno (Head of Investor Relations)
Yeah. Thank you very much, and this is the final question. Next question, please.
Operator (participant)
Next question is from Fernando Gil de Santivañes from Intesa Sanpaolo. Please go ahead.
Fernando Gil de Santivañes (Analyst)
Thank you. Very quick one. What has changed over the FX hedges in the Mexican peso? Because I'm seeing higher volatility or expected in this presentation versus the previous one. Thank you.
Onur Genç (CEO)
The RWA is... Very quickly, Fernando. The RWA has come down because, as you know, again, we have done this regulatory, you see, have seen it in the capital chart. We went to standard in some portfolios, and we went to foundation in some other portfolios, which has led us into the... And then the equity, the sensitivity. The question was sensitivity.
Patricia Bueno (Head of Investor Relations)
The sensitivity, yes, on hedges.
Luisa Gómez Bravo (CFO)
Yes.
Patricia Bueno (Head of Investor Relations)
Sensitivity to currency, as we have reduced the capital, the sensitivity reduces.
Luisa Gómez Bravo (CFO)
Yeah.
Onur Genç (CEO)
Very good. You have the answer from Patricia, and if you want to follow up with her, she's always available for all of you. Apologies for this, because we have an immediate program right after this in the same room with the press. Thank you so much for the questions. For any follow-ups, the team is happy to help you out. No, Patricia?
Patricia Bueno (Head of Investor Relations)
Yes, absolutely. We are at your disposal for any further questions or clarifications. Thank you very much.
Onur Genç (CEO)
Bye-bye.
Luisa Gómez Bravo (CFO)
Thank you.