Earnings call transcript: Bankinter Q1 2025 sees 35% net income rise

Bankinter, the Spanish banking group, reported a strong financial performance for the first quarter of 2025, with net income rising by 35% year-over-year to €270 million. The bank’s gross operating income also saw an 11% increase, reaching €732 million. These results were driven by robust fee income and a focus on digital customer acquisition. The stock price reacted positively, with a 1.76% increase to €9.994. According to InvestingPro data, the bank offers an attractive dividend yield of 9.24% and maintains a defensive beta of 0.48, indicating lower volatility compared to the market.

Key Takeaways

• Net income surged 35% YoY to €270 million.
• Gross operating income grew 11% to €732 million.
• Return on Tangible Equity (ROTE) reached an all-time high of 19.9%.
• Bankinter completed the legal integration of Evobanco.
• The stock price increased by 1.76% in pre-market trading.

Company Performance

Bankinter’s Q1 2025 results highlight its strong position in the European banking sector. The bank achieved a net income of €270 million, a 35% increase from the previous year, supported by an 11% rise in revenues. The strategic focus on digital platforms and wealth management has paid off, as customer volumes grew by 9% to €224 billion. The bank’s cost-to-income ratio stands at 36.7%, placing it in the top quartile among European banks. InvestingPro analysis shows the company maintains a "FAIR" overall financial health score of 2.42, with particularly strong cash flow metrics. For detailed insights and more exclusive metrics, investors can access the comprehensive Pro Research Report, available for over 1,400 US stocks.

Financial Highlights

• Net income: €270 million (+35% YoY)
• Gross operating income: €732 million (+11% YoY)
• Return on Tangible Equity (ROTE): 19.9%
• Cost to Income Ratio: 36.7%
• Customer volumes: €224 billion (+9%)

Market Reaction

Following the earnings announcement, Bankinter’s stock price rose by 1.76% to €9.994. The stock’s movement reflects investor confidence in the bank’s ability to maintain strong financial performance amidst broader market volatility. InvestingPro data shows the stock has delivered a solid 12.48% return over the past year, with a YTD return of 2.48%. Trading at a P/E ratio of 88.13, the stock currently trades just 0.9% below its 52-week high, suggesting positive investor sentiment.

Outlook & Guidance

Looking ahead, Bankinter aims to achieve over €1 billion in net income for 2025. The bank expects high single-digit fee growth and plans to maintain a cost-to-income ratio target of 35-36%. The cost of risk is projected to remain at the lower end of the 35-40 basis points range, reflecting strong credit quality and efficient risk management.

Executive Commentary

CEO Gloria Ortiz expressed confidence in the bank’s strategic direction, stating, "We are in a good position to navigate through this period of uncertainty and volatility." She emphasized the focus on organic growth and highlighted the bank’s efficient business model and superior credit quality.

Risks and Challenges

• Potential economic slowdown in Europe could impact loan growth.
• Changes in regulatory policies may affect profitability.
• Currency fluctuations could influence earnings from international operations.
• Increasing competition in digital banking could pressure margins.
• Geopolitical tensions may create market uncertainty.

Q&A

During the earnings call, analysts inquired about the impact of U.S. tariff announcements. Bankinter assured that its exposure is minimal, at only 2.9% of total risk exposure. Questions also focused on deposit costs, which are expected to decline by 10-15 basis points quarterly, and the bank’s ability to maintain a 2.7% customer margin.

Full transcript - Bankinter (BKT) Q1 2025:

Laurie Shepherd, Investor Relations, Banquinter: Good morning. This is Laurie Shepherd from the Banquista Investor Relations team. Thank you all for joining us for this first quarter earnings presentation. Financial statements were posted with market authorities earlier this morning, and all materials can also be found on our corporate website. On the call today, we are joined by Banquinter’s Chief Executive Officer, Gloria Ortiz and Chief Financial Officer, Jacobo Diaz.

Please refer to the disclaimer in the presentation and note that this call is being recorded. I will now turn over to Gloria to review highlights for the quarter. Hakobo will then talk through the financial results and performance of our business segments across the group before handing back to Gloria to close the presentation.

Gloria Ortiz, Chief Executive Officer, Banquinter: Thank you, Gloria, and good morning to everyone on the call. Banquinter initiated 2025 with significant commercial activity, resulting in higher volumes across all its businesses and regions. We continue to consolidate a trend of increased profitability and strength through the diversification of revenue sources, segments and business products and services. This strength in commercial activity is reflected with solid growth of all customer volumes increasing 9% in total, with our loan book up 5%, retail deposits 7% and assets under management increasing 17%. As our strategic focus is to deliver innovative products and services that add value to our customers, like our wealth management services, for example, we have been able to maintain high fee growth levels above 13%, partially offsetting interest rate compression, leading to the impressive achievement of an 11% increase in revenues this quarter compared to the first quarter of last year.

Supporting these strong growth trends and the the underlying aspects of both our risk quality and strict cost controls, both very essential to maintaining high levels of profitability through all types of economic cycles. This quarter, we reported €270,000,000 in net income, which is 22% increase compared to the last quarter and an even higher 35% when compared to a year ago, resulting in a return on tangible equity, or ROTE, at an all time high of 19.9%. Now let’s look more into the details behind these results. First, with volumes on Page six. As you can see, customer volume growth is well diversified between types and geographies.

Customer volumes grew €18,000,000,000 or 9% this past twelve months, reaching the current sum of €224,000,000,000 Our more mature businesses have reached high single digit growth, Spain, Portugal Eight Percent, with Ireland delivering an impressive 23% increase in volumes. On the next page, revenues increased by EUR 73,000,000, up 11%, supported by strong fee income to offset net interest income pressure. Our core revenues only slightly dropped by 2% with fees increasing EUR 22,000,000, covering 60% of the net interest income compression. Additionally, after applying available deductions in the new tax methodology, we have been able to save EUR 95,000,000 this year versus last and do not expect to incur any additional material banking taxes this year or next. Moving on now to review the asset quality of our loan book.

We wanted to share with you the distribution of the loan growth by asset classes. On the left hand side of the page, you can see that close to 70% of our incremental loan book is backed by real warranties, the majority mortgages, and very well distributed between Spain, Portugal and Ireland. Less than 15% of the new loans are unsecured with a minimal amount of 2% in new credit card volumes. On the right hand side of the page, asset quality of our book remains strong, well below sector averages in all three countries, given our disciplined approach, applying common risk criteria and underwriting policies across all three countries. On Page nine, I would like to begin by sharing my views on our outstanding cost to income ratio, which continues to improve and has now decreased to 36.7% on a rolling twelve month basis.

We rank in the top quartile among over 100 European banks as well as significantly below the average of 48% of 30 European peers. We achieved this best in class class efficiency level through stringent cost control of typical nonproductive expenses within the organization as well as by prioritizing essential new costs. This approach ensures that we adequately support our growth with new technologies and investments, enabling us to continue scaling and improving productivity levels. Our strategic focus on diversified organic growth, risk management and efficiency optimization has resulted in unprecedented profitability levels, achieving a ROTE of 19.9% and ROE of 18.8%, new record highs that exceed the European average of 12.2% and position us within the top quartile across Europe. These figures summarize quite well the debate about the sustainability of our current profitability levels.

I will now hand over to Jacobo to review the financial performance, please.

Jacobo Diaz, Chief Financial Officer, Banquinter: Good morning. Thank you, Gloria. It is a pleasure to present our financial results for the first quarter of twenty twenty five, where we have achieved a 22% increase in quarterly net income compared to the previous quarter and a 35% increase year on year. These results reflect our continuous commitment and effort. As already mentioned, we have seen strong commercial activity driving strong fee income growth, which has partially compensated pressures in customer margins.

In addition to this, the absence of the bank levy expected to the entire 2025 and of course for the past 2024 has fueled the growth of overall income. Gross operating income reached €732,000,000 an increase of €73,000,000 or 11% compared to the first quarter of last year. Net income was €270,000,000 indicating a strong beginning of the year and strong expectations to break the €1,000,000,000 ceiling of net income in 2025. Over the following pages, I will talk through each of these P and L lines. On page 12, the pace of net interest income compression seen in previous quarter has strongly slowed down despite having two fewer days than last quarter.

In terms of customer margin, we remain within our target at two seventy one basis points, demonstrating our ability to efficiently manage margins in a challenging environment. Credit continues to decrease in line with interest rate movements, basically you write our twelve months, at three ninety five basis points. We have seen a notable decrease in deposit costs this quarter of 16 basis points, bringing down the average cost for the quarter to $120.24 basis points. By continuing to decrease the duration and pricing of front book deposits by around 50 basis points and with more than 70% of rate sensitivity deposit maturing next quarter, we are confident in our ability to continue to manage and maintain resilient customer margins this year. Cost of deposits at the end of the quarter is, of course, below this quarterly average.

We are conscious that with recent volatility and some market uncertainty, it is very hard to predict future interest rate movements, but we are still not changing our previous guidance on NII. Moving into the ALCO portfolio. Additionally, to mitigate the impacts of NII from rate compression, we have also gradually increased the size of our ALCO portfolio, up 22% to €14,000,000,000 now representing 11.4% of total assets. The yield of the portfolio stands at 2.5 with the duration of five years, providing some good tailwinds in the coming quarter to support NII levels. Since most of the portfolio is classified as held to collect, approximately 95%, we have limited exposure to valuation adjustments on the fair value portion of the bond portfolio.

Moving to fees on page 14. Fees increased by more than 13% on a year year on year basis, reaching €188,000,000 this quarter. On the right hand of the slide, strong results this quarter in the categories of fund management and brokerage, increasing 15% as well as good growth in transaction and insurance services. This quarter has also been a good quarter for foreign exchange services. The strong commercial activity and the robust macro environment where the group is operating will continue to support the strong fee growth.

We continue to expect fees to be a significant contributor to overall revenue growth in 2025, even if current market scenario might be volatile. On page 15, regarding the other income and expenses lines detailed in this slide, the primary change this quarter is the already mentioned absence of the bank levy, resulting in a reduction of €95,000,000 The new tax methodology includes some potential deduction related to the effective tax paid, permitting up to 25% of the total corporate tax paid to be offset by the final bank tax amount, which in our case is within this threshold. According to our estimates and based on current legislation, no impacts are expected from this new tax for the ’24 period and with minimal or even negligible impacts anticipated for the 2025 and 2026 tax periods. Moving into Page 16 on expenses. On our year end earnings call, we disclosed our intention to balance cost volumes over quarters.

This quarter, we have initiated this cost normalization with cost totaling €269,000,000 which equates to a 2% increase over the average quarterly cost in 2024. In 2025, we aim to continue balancing costs over the quarters and to the end of the year with our target of low to mid single digit cost growth as well as to achieve a year end cost to income below 36%. In this page, we provide you an overview of the distribution of costs by geography and category. The primary driver of our change of cost seasonality or normalization has been personnel expenses with a 23% increase compared to first quarter of last year due mainly to variable remuneration normalization across the year, avoiding the peak in the fourth quarter that we saw in previous years. Since our workforce grew by less than 2% last year, most of the expenses increase is due to provisioning for potential year end incentives.

On page 18, credit risk. We have seen a notable decrease in loan loss provision this quarter, down to €150,000,000 excluding €8,000,000 in profits from a portfolio sale in Portugal. This has resulted in a cost of risk of 32 basis points below our target range of 35 to 40 basis points. However, we forecast that by the end of the year, we will be, as we mentioned in the previous presentation, in the very lower end of this range. Other provisions also under control and performing well, down to seven basis points this quarter, below what we believe a normalized range around eight basis points.

In summary, on page 19, we report €270,000,000 in total net income, very close to a record quarter of €273,000,000 in the second quarter of last year. This reflects an increase of 35% compared to the first quarter of twenty an excellent start to the year. Let’s move to the credit quality, liquidity and solvency ratio section. On page 20, nonperforming loans ended the quarter slightly up at €1,940,000,000 with a high and prudent coverage ratio of 5% from 64% a year ago to 69% today. During the last twelve months, credit exposures increased by 5% with NPLs only increasing by 1.5% on the same period, resulting in a very low NPL ratio at 2.16%.

On the right hand side of the slide, we share the NPLs ratios across our three geographies, all consistently low and well below average industry levels: in Spain, Two Point Five Percent in Portugal, One Point Three Percent and in Ireland, just 30 basis points. We do not perceive any change in our view about credit risk in the markets we operate and confirm that we have limited corporate exposure to sectors potentially impacted directly or indirectly due to The U. S. Tariffs. Liquidity, the loan to deposit ratio stable this quarter at 95%, similar levels to last quarter.

LCR ratio at comfortable levels around 180%, and additionally, we have no more wholesale funding maturities in 2025. Regarding capital, the evolution during the quarter included the impact of the first application of CRR III or Basel IV estimated at 20 basis points. The main impact of the new capital regulation is due to the new requirements for operational risk. The impact in credit risk in portfolios under the IRB approach is somewhat positive, but it is offset by the impact of the portfolios under the standardized approach. Other movements this quarter relate to a positive increase with return earnings and organic growth, resulting in a net increase of 11 basis points.

A strong start of the year in IT investment is reflected within the impact of intangible that will have a much more moderated behavior in following quarters. We closed the quarter with a CET1 ratio of 12.35, well above the minimum requirements of 7.94%, one of the lowest across Europe and again with a quite ample buffer of 4.41%. So before we move on to the review of the performance across individual geographies, I wanted to share a summary of the excellent volume growth and financial results across all franchises. First quarter traditionally display low seasonality in terms of volume growth. However, on the back of consistent robust commercial activity, customer volumes grew 9% in Spain, Eight Percent in Portugal and an impressive 23 in Ireland during these past twelve months.

In terms of financial results, all three regions achieved double digit pretax profit growth of 15% in Spain, Eighteen Percent in Ireland and 19% in Portugal. So moving into Spain. On Page 25, we can see the individual P and L and volume growth figures for Spain. In Spain, loan growth remains strong, increasing 5% year on year to €67,000,000,000 with corporate loans growing 6% and retail loans 5%. Retail deposits have steadily supported loan growth, increasing by 7% and totaling 77,000,000,000 at the end of the quarter.

We continue to see extremely strong wealth management activity in assets under management as well as assets under custody with a combined growth rate of 16% during the past twelve months, reaching total combined volumes of 127,000,000,000 In terms of P and L, strong fee growth of 14% with gross operating income reaching €615,000,000 an increase of 12%. Profit before tax, up 15% to €312,000,000 a promising start and a strong income contribution from our core business lines in Spain. Now moving to Portugal on page 26. Portugal ended the quarter with a strong growth in the retail loan book, up 10%. On the corporate side, a very short term exposure to a large government facility was reduced in the second quarter twenty twenty four, resulting in a net decrease to the loan book in that quarter.

But excluding this short term effect, there was a 9% increase in the combined loan book compared to the first quarter of twenty twenty four, and this is the figure that we will see in following quarters. On the customers’ deposit side, we continue to see strong deposit gathering capabilities, up 19%. Both assets under management and assets under custody also contribute to growth, up 325%, respectively, as we continue to build out our wealth management franchise in Portugal. As of the P and L, income grew by 7%, supported by high single digit growth both in NII and fees, up 79%, respectively. Respectively.

Excellent efficiency levels of 33% this quarter, even with increased costs as we normalize the volumes across quarter, as I did mention before. Profit before taxes of €56,000,000 increase, providing a relevant income contribution to the group. Moving into Ireland. Earlier this month, we completed the conversion of Avan Money into a fully licensed legal branch of Banquinter, permitting us now to roll out new deposit capturing capabilities later this year. We continue to see exceptional loan growth in mortgages, up 24%, and consumer credit up 15%, both on a year on year basis, reaching €4,000,000,000 of loans in the market.

Despite these exceptional growth levels, asset quality indicators remain comfortably low and stable at 30 bps as a result of a disciplined underwriting criteria, high quality book and customer profiles. Operating income up 9%, profit before taxes reaching €11,000,000 a strong 18% increase. The corporate and SME loan book continues to deliver strong results, up 5% in the group and 6% in Spain and against a flattish sector backdrop. One of the businesses that promising growth prospect is still the international business with our Spanish customers. This business segment currently accounts for 32% of the corporate and SME loan portfolio experiencing double digit growth with an increase of 14%.

Furthermore, the international business accounts for close to 40% of new origination. We are confident that our innovative and flexible product offerings in the international segment will remain a significant growth catalyst for the Corporate and SME segments, not only for Spain, but also for Portugal. Moving into our Wealth Management franchise on page 29. We continue to see a step up in quarterly incremental wealth with a €4,000,000,000 increase these first three months of the year. Half of this €4,000,000,000 is from net new money into the bank and half due to market effects.

The growth across our private and retail banking franchises is quite similar with a total increase of 11% versus March. On the next page, we can see how these incremental deposits flows into increased assets under management and assets under custody. So here in Slide 30, the group’s off balance sheet customer volumes reached €136,000,000,000 at the end of the quarter, 59,000,000,000 are classified as assets under management from our proprietary mutual funds, pension plans and alternative investment vehicles that we manage internally or distribute from third parties. On average, we generate approximately 60 basis points per year for these products. We have included a slide in the appendix with the diversification of assets under management across asset classes.

Another significant part of our wealth management business that drives recurring fees come from our assets under custody. These assets reached €77,000,000,000 in equity and fixed income security and generate around eight basis points annual custody fees as well as traditional brokerage and FX fees with the trading activity. So both together grew 15%, eighteen billion euros compared to the first quarter of twenty twenty four, providing increased volumes to sustain and grow our asset management, brokerage and custody fee income lines in 2025 as well as increased customer loyalty through a full set of diversified and innovative investment products. Moving into Commercial Retail Banking. On the last page of this section, retail commercial activity continues to perform well, especially from our digital network, with increased new client acquisition through our salary and our fully digital accounts, growing 7% compared to year ago.

On April 1, we also integrated Evobanco in our books, although all their clients will migrate to Banquintur’s IT platform at the beginning of the third quarter. Mortgage origination remains as strong as last quarter as and well above the first quarter of twenty twenty four, with consistently solid market shares in Portugal, Spain, Ireland between six percent and seven percent. The mortgage backed book also continues to grow, surpassing €37,000,000,000 a solid 6% increase year on year, well above the sector. So now I will make some closing remarks. Before handing back to Gloria, I would like to reconfirm our expectations for this year.

Related to loan volumes, we expect continued growth in all geographies and businesses. Portugal main growth will come from mortgages, corporate and consumer loans this year. In Ireland, we’ll continue to deliver strong growth in mortgages as well as in consumer credit. We also expect to be able to launch deposit gathering capabilities in the summer, although we should expect relevant increases of volume by 2026. For Spain, we continue to see good trends in mortgage lending and continued growth in the corporate loan book, with the main catalyst being our international business segment.

We remain on track to be able to grow our loan book in a diversified and profitable manner around mid single digit. We do not expect to increase our volume growth above this figure as our target client profile and our risk profile remains unchanged. We understand we also understand there is significant volatility and uncertainty around interest rates assumptions. However, we continue to believe that we will be able to achieve our flattish or slightly positive NII in 2025. We are maintaining net interest income levels through customer margin management by decreasing our deposit cost accordingly to rate movements, with additional income from loan growth as well as from our larger ARCO portfolio.

NII in the second quarter should begin to show signs of recovery. Our current assumption is that we will end the year with twelve month Euribor around 2%. For all these reasons, we remain committed to defending customer margin around 2.7%. We also remain confident and optimistic with fee income drivers and look to achieve high single digit growth in fees this year. With higher fee growth and NII assumptions, we aim to continue to grow revenues each quarter this year with 25 total revenues above 24 levels.

We will continue to balance cost volumes over second and the third quarters, yet still target full year annual costs to grow around low to mid single digit, leading to a resilient but low cost to income ratio at the end of the year between 3536%. Finally, for cost of risk, as I mentioned before, we expect to end the year in the very, very low range of the thirty five and forty basis points, benefiting from a very positive first quarter. We anticipate that gross income will achieve this year with a target to exceed €1,000,000,000 of net income in 2025. Gloria, please, back to you for any closing comments.

Gloria Ortiz, Chief Executive Officer, Banquinter: Thank you, Jacobo, for the performance review and the insights. A year ago, I shared with you my first three strategic decisions as CEO. And today, I wanted to recap the progress made in these three areas as well. I’ll talk about the longer term ambitions for each. Firstly, with Ebobanco, we completed earlier this month the legal integration into Banquindr.

The combined talent now leads the digital organization within the bank. The new organization aims to drive over 50% of new retail customer acquisitions for the bank. This initiative enables expansion into areas beyond our current physical locations, providing a full suite of 100% digital retail and wealth management products to segment. This strategy also supports the growth of a more granular deposit base while simultaneously utilizing a cost effective framework for operations and expansion. Secondly, with Ireland in April, we have also completed the legal conversion of our money into a fully licensed legal branch of Banquinter.

This will not only allow us to initiate deposit gathering capabilities later this year to begin to finance our loan growth locally but also provides promising longer term optionality in terms of creating a universal full service digital bank in Ireland. With this strategic project, we approved the implementation of a new state of the art flexible platform that could potentially be exported to other countries in the future. And in Portugal, we invest in growing our joint venture in Sonae to become the leading consumer finance platform in the country as well as continued investment in our technology platforms for improved customer interactions and streamlined internal processes, ensuring essential business capabilities for longer term success. To conclude, I will recap our successful financial results this quarter. Strong recurrent and growing income levels supported by strong commercial activity in all businesses and geographies, increased shareholder remuneration and record levels I am confident that we can repeat and improve on the success of 2024 after this strong beginning of the year.

Many have heard that I have my eyes on breaking the glass ceiling of achieving more than EUR 1,000,000,000 in net profit after tax this year. Having said that, since the April, we are living under higher levels of market volatility and uncertainty that might be present for several months during 2025. The announcement of the imposition of tariffs to all U. S. Imports has initiated a commercial trade war with unforeseen impacts to the global economy, which will depend on the results of the negotiations that are taking place.

Spanish exports to The U. S. Amount to around EUR 18,000,000,000, which represents 5% of our total exports or 2.5% of the Spanish GDP, a very modest figure when compared to the 10% in Germany or Italy. The most representative Spanish exports to The U. S.

Are olive oil, wine, automobile components, refined petrol and pharmaceuticals being the last excluded from the announced tariff measures for the moment. The situation in Portugal is very similar, with the vast majority of its exports made to Spain, France and Germany. And finally, Ireland main export market is actually The U. S, but more than half of these exports are related to the pharma sector, currently excluded once again from these tariff announcement measures. Direct impacts on companies will depend on their capacity to absorb these tariffs into their margins to find new markets or to reconvert, for instance, into the defense sector and look to add increased value to their exported products.

Moreover, Europe has announced very significant investments infrastructure that will strengthen The UAE economies and also the bank credit and, therefore, will help to compensate potential impacts that tariffs may have. There are also opportunities for companies to transform their industries, like I’ve mentioned before, for the automobile sector. This is at a macro level. But when we delve into our loan book, we have a very small exposure of close to EUR 1,200,000,000.0 with the most affected industries and an overall exposure of close to EUR 1,400,000,000.0 if we include the whole European automobile sector. This is a total risk exposure of only 2.9% with main counterparties being solid corporations that will navigate well crisis.

Banquinter has an outstanding efficient business model and a superior credit quality and has been so through the different cycles. Our client base is more resilient than average, and our coverage ratio as well as our capital buffer are more than comfortable at present. With respect to interest rates, they may be volatile and lower than expected in the coming months. However, we have been working to reduce the sensitivity of balance sheet to interest rates, which stands at 3% for a parallel downward shift of 100 basis points in rates. And we have ample room to reduce the cost of deposits as shown by trends that we have reported in this first quarter.

We are, therefore, confident that we will be able to maintain client margins around 2.7%. Moreover, we have a diversified and dynamic fee business. Asset management average fees might compress slightly as client stake refuting lower risk funds, but the foreign exchange and the brokerage business will provide upside risk with increased volatility markets. In short, I believe that we are in a good position to navigate through this period of uncertainty and volatility with determination and flexibility to preserve our consistent growth and performance. With our excellent team at Banquinter, our target is attainable.

We will continue to focus on organic growth, consistent commercial momentum, offering high value products and services to our customers underpinned with disciplined risk and cost management across all regions. I leave you now with the key KPIs for the quarter and pass back to Lori to initiate a Q and A session. Many thanks again for joining us in this call.

Laurie Shepherd, Investor Relations, Banquinter: Thank you, Gloria. Thank you, Hakobo. Let’s now move on to the live Q and A session. And as per the instructions sent previously via e mail, please remember to select or press 5 on your phone to submit a question. And we kindly ask you to limit your questions to two, please.

The first caller that we have on the call today is Francisco Riquel from Alantra. Francisco, please go ahead.

Francisco Riquel, Analyst, Alantra: Yes. Hello, so thank you for taking my questions. The first one I want to ask is about the deposit mix, which has not changed much in the first quarter. And you were expecting a major shift out of time deposits during 2025. The number of payroll and digital accounts is not growing either quarter on quarter.

So if you can update on trends here on the deposit mix. And where do you see the cost of deposits landing in the coming quarters with your assumptions that the Euribor will finish at around 2%? And my second question is on fees. Market related fees account for over 50% of the total asset management brokerage. So this is driving most of the growth in fees.

As you mentioned, markets have changed in April with a sharp increase in volatility. So how do you see inflows, mix, transactionality the coming quarters? And how does it change your guidance on fees for the full year? Thank

Jacobo Diaz, Chief Financial Officer, Banquinter: Thank you, Paco. The first thing I’m going to answer probably the second one first. I mean we’re not changing our guidance on fees for second quarter because we think that we can still achieve our targets in terms of gathering volumes. There is a strong commercial activity, and we think that really we can keep growing in assets under management and asset custody in the coming quarters. There is a good inflow of new clients on board.

And the other thing which is important is that brokerage activity is also very strong, and they bring us not just trading income but also FX income. So we think that maybe there might be some transition from one fees into another fees, but the overall picture for the time being, we are not changing our views on how fees will behave at the end of the year. Moving to your fourth question, I think the deposit mix has moved slightly in Spain. So we know that the term deposits in Spain accounts for approximately 22% of all our deposits. It has moved almost one full point.

But in Portugal, it has moved already by five full points. The trend is there. And since rates are continuing to go down, we expect that this mix will continue to move probably at a higher speed in the coming quarters. So we do expect that by the end of the year, the current proportion of term deposit will continue to slide down probably somewhere five to seven full points below the current situation today. And this, combined with the reduction of the cost of deposit that we are already achieving and that I did mention, will drive down the cost of deposits deposits probably at the similar path as we saw in this quarter.

You also mentioned the payroll account. I think we’re still having good figures in growth in current accounts and digital accounts. We are, as you know, quite active in commercial activity with digital accounts and the Cuenta Intelijente. And honestly, are very happy with the current results. And the cost of these accounts will be managed across the year to find a better or the best possible balance between the financial performance and the commercial performance.

Laurie Shepherd, Investor Relations, Banquinter: Thank you, Jacopo. Our next call comes from Sophie Pedersens from JPMorgan. Sophie, please go ahead.

Sophie Pedersens, Analyst, JPMorgan: Yes. Hi, this is Sophie. Thanks a lot for taking my question. So just on the net interest income guidance, so you assume roughly a flat net interest income in 2025. Could you just discuss if rates were kind of somewhere closer to 1% or 1.5%, how should we expect your net interest income guidance to change?

So if you could elaborate a little bit more on this. And then the second question, if you could just give a little bit more detail why you don’t expect any banking levy in 2025 and 2026, if you could just detail a little bit more the kind of corporate tax offsets? Thank you.

Gloria Ortiz, Chief Executive Officer, Banquinter: I will take the second question that relates to the bank levy. The bank levy, as you know, changed last year. The way well, first, it was a tribute, now it’s well, it was a levy, sorry, and now it is a tax. That is the first difference. Why is it important?

Because this means that you have to recognize it along the year rather than when you pay it, which was the case last year. So this is the first difference. The second difference is that it is progressive, so it is not 4.8 for everyone. It is a progressive tax. When we make the calculations for the tax that was due in January, that was calculated over the figures of 2024, applying the new scale for the tax, we had EUR 54,000,000 of tax, okay?

So this is the gross figure of the tax that we had to pay in January. But there is a deduction to this tax, okay? The deduction is 25 percent of the effective when I say the effectively paid corporate tax. In Banquinter, in 2024, the tax that we actually paid to the taxman was EUR 300,000,000. This means that we could deduct from the levy or the tax up to EUR 75,000,000.

So if you make the calculations, EUR 54 less EUR 75,000,000 makes that this year, we don’t have to pay anything in January. What happens in the tax that we have to pay in January 2026? Well, exactly the same. What we are doing is projecting the gross figure, which will be slightly higher, obviously. But the effective tax paid, we expect it to be around the same figure, okay?

So this is why we are saying that the tax that we have to accrue this year and to pay in January 2026 will also be either zero or very near to zero. I hope I have explained it properly. Otherwise, I can explain it again.

Jacobo Diaz, Chief Financial Officer, Banquinter: Morning, Sophie. I’ll take your the first question. I think that you were mentioning that we were keeping our NII guidance flattish and what was supporting this hypothesis. First of all, of course, growth. As we mentioned, we are achieving excellent levels of growth.

And this is probably the main support to our assumptions. The second one is the resilience of the client margin. I think we have demonstrated this quarter that the pressure in client margin has almost been compensated. So we are very, very similar level that the one that we had in Q4. And we think that we are able to keep it in similar levels in the coming quarters, basically, because there is plenty of room for reduction of customer deposits.

There is room for still moving, as I did answer in the question before, the percentage of term of deposits representing the total of the overall deposits. And I did mention also that we are increasing the size of the ALCO portfolio. That is a good another good inflow of NII. The overall NII sensitivity hasn’t changed. We keep our minus 3% for 100 basis points decline.

That means that we shouldn’t expect much more decline in rates. And therefore, whatever movement in rates will be largely compensated by those two items that I just mentioned. The yield of the ALCO portfolio still at 2.5%, by the way, above the level of ECB rates. And therefore, we are very confident that we can whatever happens with the rates, we will compensate and we’ll have a resilient client margin, but also a resilient NIM with I’d like to remind that we have a very strong proportion in our balance sheet of client activity versus others, and that will drive much more resilience in the NIM as well. So whatever the yield of the loans will do according to the level of rates, this is exactly what we will replicate in terms of cost of deposits, just making sure that the overall client margin stays quite resilient.

Laurie Shepherd, Investor Relations, Banquinter: Thank you, Jacopo. Our next call comes from Alvaro Serrano from Morgan Stanley. Alvaro, please go ahead.

Alvaro Serrano, Analyst, Morgan Stanley: Good morning. Hi, good morning. I’ve got a follow-up on NII and then one on Ireland. On the NII trends, can you just clarify or give us a bit more color on what kind of deposit growth you think you can achieve this year because Q1 was obviously very good and the mix improved. You’ve already touched on the mix, what kind of deposit growth you think you can have for the rest of the year?

Should we analyze Q1? And is that what’s giving you confidence? Because I guess your guidance implies that the bottom in NII is basically Q1. Just wanted to confirm I’ve got that right. And then in Ireland, Maury, you’ve confirmed that now you’re fully licensed in Ireland.

Can you give us an update of what your plans are to launch a deposit offering? And what should we be looking out for? Thank you.

Gloria Ortiz, Chief Executive Officer, Banquinter: Hello, Alvaro. I’ll answer the second question about Ireland. Well, in Ireland, our plans are to be able to start commercializing deposits by the summer, but we will do it slowly and trying to test our capabilities there, okay? I think we should expect a greater activity in 2026. So don’t expect big increases in deposits in Ireland or an aggressive campaign this year or massive aggressive campaign this year because we are going to be testing our capabilities on the market.

Okay?

Jacobo Diaz, Chief Financial Officer, Banquinter: Morning, Alvaro. I’ll answer the first one. As you know, deposit growth is quite linked to the growth of the loans. So we manage the loan to deposit or the deposit to loan to stay in similar figures where we are today. So that should be the expectation of growth in terms of deposit.

However, I want to remind you that our commercial activity brings to the bank approximately €7,000,000,000.8000000000 of net new money every year. And this is something that part of it will stay as deposits on balance, but another strong volumes will be transformed in value added products in assets under management or assets under custody. Therefore, for us, deposit is quite a very relevant tool to generate fees as well. So this is exactly what we will do. We will try to do as much commercial activity as possible, and then we will generate as many fees as possible as well.

And at the same time, we will make sure that we have a proper equilibrium in terms of growth, making sure that we keep strong and comfortable levels of liquidity.

Laurie Shepherd, Investor Relations, Banquinter: Thank you. Our next call comes from Max Mishan from JB Capital. Max, please go ahead.

Max Mishan, Analyst, JB Capital: Yes. Hello, good morning. Thanks very much for the presentation and taking our questions. I have two. The first one is on the outlook for loan book growth.

I was wondering if you’ve seen any impact of macro uncertainty on demand for corporate financing? And what are your expectations for the rest of the year? What drives growth in your corporate loan book? Is it more short term lending? Or you also see a recovery in investment loans?

And then the second one is follow-up on Sophie’s question. Could you remind us the sensitivity of your NII to moves in interest rates, please? Thank you.

Jacobo Diaz, Chief Financial Officer, Banquinter: Yes, Max. The sensitivity is minus 3% for a 100 basis parallel shift down negative parallel shift. Okay? This is the sensitivity. And then regarding the loan book, I think the loan book, we have a slide where I think it’s well explained.

We have the growth in this quarter has been around twothree with real assets or guarantees and onethree in personal loans. So I think it’s quite well diversified. And in terms of the corporate side, the corporate side, we have, I would say, a good equilibrium between short term and long term. As you know, we have government facilities that are trying to incentivize long term funding and the EU European funds, etcetera. So there is I would say there’s a good equilibrium between short term and long term.

Laurie Shepherd, Investor Relations, Banquinter: Thank you. Our next question comes from Britta Schmidt from Autonomous Research. Britta, please go ahead.

Britta Schmidt, Analyst, Autonomous Research: Yes. Hi there. Good morning. Thank you for taking my questions. One of my questions is regarding the cost of risk.

You’re guiding to end the year at the lower end of your 35 to 40 basis points guidance. Does that include any IFRS nine impacts? Are you seeing anything relevant for your business? And are there any overlays that you can deploy in that? And then the second one is one on the banking tax, just to understand what you are actually booking because obviously with the numbers being basically zero, it’s very hard to tell.

The 2024 would have been therefore reflected in your accounts as well as the 2025 accrual for 2025? Or is there a difference in the timing? Thank you.

Gloria Ortiz, Chief Executive Officer, Banquinter: Rita. We have booked fully the 2024 tax, which has been zero. The result has been zero. And we have booked 100% the accrual of one quarter of the 2025 tax, which our estimation now is zero.

Jacobo Diaz, Chief Financial Officer, Banquinter: Britta. Regarding the cost of risk, no, no, no. We are not releasing anything. No overlays, no IFRS nine, anything. Nothing weird, nothing extraordinary apart that what we mentioned, a sale in a Portuguese portfolio that has an extraordinary result.

But that’s it. I mean, from that, no changes. In fact, we don’t perceive any changes in the risk profile or in the risk in the trends on cost of risk in the following quarters. But basically, we keep we just prefer to be sort of prudent and make sure that the guidance stays in the very low range of this 35 to 40 basis points.

Laurie Shepherd, Investor Relations, Banquinter: Thank you. Our next question comes from Carlos Peixoto from Caixabank BPI. Carlos, please go ahead.

Carlos Peixoto, Analyst, Caixabank BPI: Yes. Hi, good morning. So a couple of questions from my side as well. The first one will actually be on fees. So you had a pretty strong performance in first Q and then you reiterated the guidance for the full year results considering the pace of growth in the first quarter.

Basically, question is, do you expect this pace of growth to hold on throughout the year? And what would be the levers for that? And then a second question on Basel IV. So I noticed that the final impact was around 14 basis points, a little bit lower than the 20 you had guided before. If you could give us a bit of color on the reasons behind that?

And also within the impact, do you see there things related to operational risk mainly related to litigation charges that could be reverted or have lower impact in the future if litigation charges go down? Or do you think the impact is relatively stable and shouldn’t be reverted? Thank you very much.

Jacobo Diaz, Chief Financial Officer, Banquinter: Hi, Carlos. I’ll go through the Basel IV first. Indeed, in the slide, there is an impact of 14 basis points. So we were expecting around 20 basis points. The reality is it is not always very easy to isolate the impacts.

So it might be some impacts in the RWAs column that might have been mixed and it’s impossible to isolate. So the impact might be probably a little bit more than this 14 basis points, which is identified as in the column of business. But yes, I mean, the main Basel IV impact is operational risk. But operational risk is a function of the income. So basically, the new rules or the new formulas make this operational risk much more demanding in terms of capital consumption.

And then I’m linking to the litigation. The litigation risk is more in the has no impact in this Basel IV impact. The impact is in the other provisions line, which has had a very good behavior this quarter. We still think that probably the normalized basis points should be around eight basis points instead of the seven where we are today, but basically better than the years before. And regarding the fees, we think in our guidance, was like high single digit guidance at the end of the year.

Today, we are sharing with you a double digit growth in fees. But at the end of the day, we do expect that we will stick to our guidance of high single digit by the end of the year. And again, since macro environment is still robust and benign, we think there is good economic activity in the country where we are operating. That means that the transactional fees, we will expect to be supportive. And in the market related fees, assets under management, etcetera, we still have a very strong commercial activity.

We might think that there will be, as you see in the slide in the appendix, some positions in terms of fixed income securities or versus equities, etcetera. There might be some difference in the coming quarters. But at the end of the day, we have very well profiled our clients into the different types of investment funds. We do not expect strong movements there. And we still expect income in terms of new money, net new money coming to these two businesses.

So we don’t have any reason why we should expect or we should change our guidance as of today. Thank you.

Laurie Shepherd, Investor Relations, Banquinter: Thank you, Jacobo. Our next question comes from Ignacio Ulargi from BNP Paribas. Ignacio, please go ahead. Sorry. Ignacio, we can’t hear you.

Are you on mute?

Ignacio Ulargi, Analyst, BNP Paribas: You hear me?

Laurie Shepherd, Investor Relations, Banquinter: Yes, we can now. Thank you.

Ignacio Ulargi, Analyst, BNP Paribas: So thanks for the presentation and for taking my questions. I have two questions. The first one is on given the relevance that your international business is getting, I mean, you got any sense from customers about lending appetite and potential growth opportunities during April? Have you seen anything in the last weeks in terms of all this uncertainty with the tariffs? Is that giving you any sense that things are going to be more resilient than what people may think?

And the second question is linked to your NII. I mean, you have said it in the call that we should expect an improvement in Q2. Just wanted to get a bit of a sense of how much of the loan book is already repriced to the current level of your LIBORs? And what kind of path of rates you are incorporating in that expectation? Is it going down and then they’re going up?

Or just to get a bit of a sense of how we should see the NII evolving from here in the coming quarters? Thank you.

Gloria Ortiz, Chief Executive Officer, Banquinter: Hello, Nacho. I will answer the first question regarding to tariffs and the impact in our business. Really, for the moment, I mean, I agree with you, but that it’s a moment of uncertainty and a lot of volatility. We haven’t seen great impacts. Actually, we have seen nonimpacts in the business at all.

I mean, the international business products continue to grow. You have I mean, here, we have to take into account that really the export of Spain to The U. S. Are very small. We are not really very much into the agriculture business.

So the percentage, as I’ve mentioned before, of the risk that we have on our books that is related to companies that export or companies that are in a sector exports to The U. S. Is of only 1.4% of our total risk. So it is very small, and we haven’t seen any impact so far. We haven’t seen impacts either, for instance, in the assets under management business.

Actually, there continues to be net new money going into the funds. It is true that we have seen some refuge of our clients in funds of lower risk and therefore, also lower fees. But the impact of this has been not even one bp of average fees. On the other hand, what we have seen that is positive is doubling transactions in the broker online, which means, well, that there will be we will see this impact also in fees. And we have also seen very active the corporations hedging their S.

Exposures, And this will also, of course, boost fee income. But as I’ve mentioned, longer term trends, we haven’t seen anything for the moment. We are very attentive. And obviously, we will have to wait and see what happens in the next ninety days.

Jacobo Diaz, Chief Financial Officer, Banquinter: Ignacio, I’ll answer the other one. As you know, Euribor closed yesterday at already at 2%. So we all our assumptions were are made based on Euribor in the following bonds around 1.92%, okay? So we have taken into consideration the current forward curve of Euribor, which is quite flattish around 2%. We did reprice as of the March.

Almost the vast majority of the corporate banking book was already repriced. And the mortgages, I would say, they were halfway. Since we have again a step down in around thirty, forty basis points comparing to the figures of the €2.4 euro, 12 months average in March compared to the current 2% in euro, there is a 40 bps again that all the books and everything need to start to reprice in the coming quarters. But I remind you that cost of deposits are reducing at quite higher speed. And although the front book obviously is much below the back book, again, that’s why we are assuming that we can preserve this 2.7 percentage of our client margin levels coming quarters.

And then supported by growth and supported by ALCO, supported by hedging activities, everything should start recovering in the coming quarters.

Laurie Shepherd, Investor Relations, Banquinter: Okay. Thank you very much. Our next call comes from Marta Sanchez from Citi. Marta, please go ahead.

Gloria Ortiz, Chief Executive Officer, Banquinter0: Thank you very much. My first question is a follow-up on the cost of deposit. I think, Jacobo, you may have said that you expect a quarterly drop similar to what we’ve seen in Q1. So that means the cost of deposits around 75 bps by the end of the year? That’s my first question.

My second question is on your cost to income target, 5% to 36%. I understand that is kind of a binding constraint. So if for whatever reason fees are lower, you will have the ability to pull back on your cost investment? Thank you.

Jacobo Diaz, Chief Financial Officer, Banquinter: Good morning, Marta. Yes, I think our assumptions are that every quarter we should reduce the cost of deposits somewhere between 10 to 15 basis points. That’s correct. We did 14 in the first quarter, so somewhere between 10 to 15 every quarter. This is the target.

You mentioned we end up the year at 75 That probably will be the end of year or the last month of the year. That could be a good assumption. But again, this will be the speed will be related to commercial strategies and also based on the level of repricing of the loan book. I think basically, the assumption is that we should end up the cost of deposits in the last quarter quite below 1%.

Regarding the cost of income, of course, this is something which is very quite relevant for the return on equity and the RoTE. So basically, yes, we are very committed to this efficiency ratio.

Laurie Shepherd, Investor Relations, Banquinter: Thank you. We just have a couple of minutes left, so I’d ask our last callers just to limit their questions to one, please. Our next caller is Ignacio Ferreto from UBS. Ignacio, please go ahead.

Gloria Ortiz, Chief Executive Officer, Banquinter1: Good morning. Sorry for coming back basically on the customer margin and the cost of deposits. But if you can give us the exit number for Q1 on both customer spread and the deposit cost. Thank you.

Jacobo Diaz, Chief Financial Officer, Banquinter: Sorry, do you want me to tell you the exact number of what of the cost? March. March.

Gloria Ortiz, Chief Executive Officer, Banquinter1: Customer spread and deposit cost?

Jacobo Diaz, Chief Financial Officer, Banquinter: Yes. It’s been around five basis points lower than the average of the quarter.

Gloria Ortiz, Chief Executive Officer, Banquinter: The deposits

Gloria Ortiz, Chief Executive Officer, Banquinter0: are not the client margins.

Jacobo Diaz, Chief Financial Officer, Banquinter: Client margin, it’s two seventy, two 70 one, yes.

Laurie Shepherd, Investor Relations, Banquinter: Thank you. And our last question comes from Fafilia Romero from Barclays. Fafilia, please go ahead.

Sophie Pedersens, Analyst, JPMorgan: Thank you very much, Ricardo, for taking my question. This is just a quick follow-up on Britta’s question. You mentioned that there was no extraordinary items on gossip this quarter. But hasn’t your growth outlook across markets weakened? Would you be updating your models to reflect that?

And when do you typically revise your provisioning assumption in your models?

Jacobo Diaz, Chief Financial Officer, Banquinter: Thank you, Cecilia. We review them always at the beginning of the year. I guess that your question is if we update our models based on the macro environment, etcetera, macro expectation, etcetera, if I properly understood your question, the answer is this is something that we do every first quarter of every year. Having said that, we are not expecting to change anything in our models until 2026.

Sophie Pedersens, Analyst, JPMorgan: Thank Thank

Laurie Shepherd, Investor Relations, Banquinter: you very much, Cecilia. That now concludes our call. And on behalf of the entire Banquista team, we want to thank you for your support, interest and participation in this webcast. As a reminder, both Felipe and I will be available from the Investor Relations team after the call to answer any questions you may have. Thank you all very much, and have a wonderful day.

Jacobo Diaz, Chief Financial Officer, Banquinter: Thank you. Bye bye.

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