Thank you, Patricia. Good morning to everyone.

I will start, I'll jump into it right away, starting with page number three, by highlighting the acceleration of our profitable growth strategy in the year, as the title says. First, I want to highlight that the best way that we can contribute to our stakeholders and the society in general is through our activity of lending, our activity of banking business, and through growing our business.

In that sense, we have increased our loan portfolio by 7.6% this year, and we have acquired more than 11 million new customers. Second, from the top, the financial results that we see today are the outcome of the significant progress in the execution of our strategy.

In 2023, 79% obviously, a record of our unit sales were done digitally, and we also continue at the frontline of the industry in sustainability. In 2023, we channeled EUR70 billion in sustainable business, again, an all-time high.

Third, we have achieved the highest annual net attributable profit ever, over EUR8 billion, an increase of 22% versus 2022, which translates into a 27% increase in earnings per share. Fourth, we continue delivering on our commitment to value creation for our shareholders with return on tangible equity at 17% and an exceptional 20.2% increase of tangible book value per share plus dividends.

All of this is allowing us to significantly increase distributions to our shareholders for a total amount of EUR4 billion, which is equivalent to EUR0.68 per share, increasing payout, while at the same time our CET1 ratio remains comfortably above our target. These highlights are what I would be expanding upon in the coming pages.

But just to reiterate, the common theme in my view of all the numbers in this page is that we continue growing, and we are growing in a profitable way. Moving to slide number four, our positive impact on society, we continue to help our customers achieve their life and financial goals.

We have increased our loan book, as I mentioned by 7.6% in the last year. It's a very high-level number at the top, but this implies, for example, that during 2023 we have helped more than 140,000 families buy their homes.

We have supported more than 550,000 SMEs, self-employed individuals, and around 70,000 larger corporates in financing their growth, financing their business. And in terms of transactionality, we have more than 20 million payrolls collected by our clients on a monthly basis.

As we grow our activity, we promote employment, we promote investment and we promote welfare in the society. Moving to page number five, new customer acquisition, one of our important pages.

And as we keep reiterating, expanding our customer base will allow us to continue growing our business in a healthy way, in a profitable and healthy way. And with 11 million gross new active clients in 2023, we have grown to more than 71 million active clients in 2023.

And even more impressive is the share of those customers acquired through digital channels, which increased to a new record of 65% in 2023. And I do think that this is our key difference, the way that we acquire customers through digital channels is our key difference versus most of our competitors out there.

On slide number six, our leadership in digital, it has proven to be essential and differential in serving our customer base as well. On the left-hand side of the slide, we have surpassed 52 million mobile customers, a figure more than twice of that in 2018 and a record high 74% penetration rate.

And at the same time, our digital sales, it has reached 79% in terms of units and 63% in terms of value, again, one of the best, if not the best in our industry. This leadership in digital, it has also translated into a higher client satisfaction.

As you can see in the right-hand side of the slide, the net promoter score, it continues improving in the group with clear leadership positions across the main countries of our footprint. Slide number seven, a message that again defines 2023.

We continue growing, outperforming our peers. Our competitive advantages, like our digital strategy and our globality, it has supported our loan growth as you see on this page, and as you see in the bubbled numbers, in every single country, we have gained market share in total loans.

And if you observe the trends over the last few years, because we have five years in this chart, we are gaining market share, especially in those highly profitable segments that we wanted to grow, I mean, consumer credit cards and businesses, private businesses, across our footprint. Turning to slide number eight.

Sustainability, as I said many times in the past, it's an incredible -- sustainability is an incredible business opportunity, and we are trendsetters in this area. As you can see in this page, we accelerated in mobilizing sustainable business volumes across segments, and we set a new record with more than EUR70 billion channeled in 2023, and the total of EUR206 billion since 2018.

We maintain the top-ranked European bank position in the Dow Jones Sustainability Index as well for the fourth year in a row now. Moving to slide number nine, as you can see on the left-hand side of the page, we have established clear portfolio alignment targets in key CO2-intensive industries for 2030.

So that we get to Net Zero by 2050. This last quarter, we have included targets in two more sectors in the list, Aviation and Shipping, as you can see.

And during 2023, we have started tracking our performance against these targets and included the degree of portfolio alignment as part of the compensation of those employees who have long-term variable remuneration. And as you can see in the chart on the right hand, starting from 2022, the baseline, we have already managed to reduce the emissions in the top six sectors by 19%.

Slide number 10. From this slide on, I'm going to walk you through the financials.

First, net attributable profit, as I mentioned it set a new record. In the bars at the center of the slide, you can see the upward evolution of our annual results, wonderful trend in my view.

2023 has been an outstanding year with profits at EUR8,019 million, 22% higher than the EUR6.6 billion recurring net profit of 2022, which was already an exceptional figure. These results bring our earnings per share up to EUR1.32, an increase of 27% year-over-year, higher than the growth of the net attributable profit, thanks to the share buyback programs that we have been executing.

Moving to slide 11, our tangible book value per share plus dividends, it continues to show an outstanding evolution. Beyond the excellent figure of 20.2% year-over-year growth in tangible book value per share plus dividends, we wanted to remark that in the last five years, our tangible book value per share plus dividends increased by 68%, despite COVID -- despite COVID, 68%.

This growth, in my view, is one of the most impressive figures in this presentation. And regarding profitability, we continue to improve our excellent profitability metrics, reaching 17% in ROTE and 16.2% in Return On Equity.

Moving to slide number 12, the best measure of our performance is the one where we compare ourselves to competitors. Obviously, this is how we live with it in the bank.

We breathe this competitive success. In all the key financial metrics, we have done better than our competitors.

One more year, we remain clearly one of the most value-creating, most profitable, and most efficient European banks out there. Moving to slide number 13.

This is a summary of the pages to follow where I would talk to you about the P&L. I will talk to you about revenue growth, costs, asset quality and capital.

So, let me jump into it on page number 14, on P&L. I would like to highlight the excellent evolution of gross and operating income, growing 19% and 20% in current euros respectively.

Slide number 15, the P&L for the fourth quarter, I will not stop long here as the strong depreciation of the Argentinian peso in December has affected the comparisons for the quarter in both current and constant euros. However, all in all, in the fourth quarter, despite the negative seasonality of the fourth quarter marked by the annual deposit guarantee scheme contributions as you know, especially in Spain, we have reported once again at the bottom line a net attributable profit above the EUR2 billion mark in current euros.

Slide number 16, let me focus a bit more on the revenue growth in our two core markets of Spain and Mexico. On the left hand side of the slide, you can see the strong loan growth in the most profitable segments in both countries, especially Mexico.

In the center of the slide, you can see the evolution of customer spreads. In the case of Spain, the improvement continued in the last quarter of the year with spread reaching 3.42%, and for Mexico customer spread is at 11.67%, a solid year-over-year increase, although reducing versus last quarter explained by two reasons, two very straightforward reasons.

First, lower yields on loans due to some seasonality with the impact of the holiday period campaigns at the end of the year, especially obviously in credit cards. And second, switching from expensive wholesale funding, expensive market funding to grow volumes in deposits from customers.

This is financially neutral on NIM, but it obviously affects the customer spread. The result of all you can see on the right-hand side of the slide the core revenue growth year-over-year in both countries, 32% growth in Spain and 12% growth in Mexico in constant, and also the growth on a quarterly basis in both countries.

In core revenues, some of you have been asking about the peak, when are we going to reach the peak? As we have been commenting in the past and as this page also shows, due to the continued spread improvement in Spain and the strong volume growth in Mexico, we believe we will continue to post healthy core revenue growth in 2024.

Slide number 17 on costs, I would highlight the fact that once again we end the year with positive jaws with gross income growing above 30%, clearly more than the costs at 19.7%, which is affected mainly by the high inflation rate in some of the countries of our footprint. Also you can see on the right side of the page our efficiency ratio, one of the best among our European peers, it further improved to 41.7%.

Slide number 18, in this page you can see that the evolution of our asset quality metrics, it remains in line with our expectations in the context of the activity growth in the most profitable segments as we have been saying, and also the higher interest rates. First of all, on the left-hand side of the page at the bottom, you see the standalone cost of risk in the fourth quarter remained at the same level as the ratio in third quarter, and this derives accumulated cost of risk to 115 basis points year-to-date.

So, some stability quarter-over-quarter, and the yearly number is 115 basis points, as we have guided to you in the last quarterly call. As such, this is in line with our expectations.

And there are two trends here that we anticipated to you last quarter. Once again, the mix effect as activity growth is biased to highly profitable, but higher cost of risk retail segments and emerging market geographies.

And second, a gradual deterioration of the macro environment in South America. Then on the page, the NPL ratio on the right, it remains stable in the year-over-year comparison at 3.4%, and our coverage ratio slightly reduces to 77%.

Slide number 19, on capital, our CET1 fully loaded ratio as of December '23 remains at a very strong level, 12.67%. Needless to say, this level is well above our target range of 11.5% to 12%.

Following the waterfall, main impacts of the quarter are, first, our strong results generation that contributes 57 basis points. Second, the dividend accrual and the AT1 coupon payments, all in detracting 32 basis points.

Third, 36 basis points for RWA growth, a figure that embeds some annual catch-up this quarter for operational risk as capital for operational risk is a function of the gross income which showed a better-than-expected performance, as you all know. And last, the bucket others of 5 basis points positively impacted by the credit in OCIs coming from the hyperinflationary countries, and the good performance of the hold-to-collect and sell bond portfolios.

The combined effect more than offsetting the negative postings to highlight the Argentinian peso devaluation this quarter, and some higher-than-usual model update impact. At this point and in a full-year view, let me stress that once again our ability to generate organic capital has allowed us to keep financing a desirable profitable growth to significantly remunerate our shareholders with an increasing momentum, and an extraordinary share buyback of 32 basis points, as you know, EUR1 billion, and still showed a year-end CET1 ratio well above the upper part of our target range.

Regarding shareholder compensation, next page, slide 20, as we have again repeatedly stated, we have a clear focus, clear focus on value creation for our shareholders, which guides all of our decisions, everything in the bank. In this regard, and in line with our payout policy, I'm very happy to announce that the proposal to be sent to the next annual general meeting, it contemplates the distribution of a total amount of EUR4 billion for 2023, equivalent to a 50% payout at the maximum end of our distribution policy, and obviously above the 47% payout of last year.

This payout is equivalent to a total shareholder remuneration of EUR0.68 per share. It's split into two, a total cash dividend of EUR0.55, which is 28% higher than last year in cash dividends, which implies EUR0.39 per share to be paid in April -- to April '24, complementing the EUR0.16 per share interim cash dividend that we already distributed last October, October '23.

In addition to the cash dividend, we will be proposing a new share buyback program of EUR781 million equivalent to 1.6% of BBVA's market cap. Including this new payout, in total, the shareholder distribution would be EUR13.2 billion since 2021, EUR5 billion of that from the results of 2023, including the EUR1 billion extraordinary share buyback that we did in 2023.

And in terms of share buyback programs, and assuming yesterday's market price for the execution of the EUR781 million of the share buyback, we would have reduced BBVA's total outstanding shares since 2021 by 14%. And finally, slide 21, regarding our long-term targets announced on the Investor Day, let me not go into each one of them for time purposes, but on all the metrics, we are well on track to realize our upgraded expectations, clearly beating all of our original goals.

And now for the business areas update, I turn it to Luisa. Luisa?

Thank you very much, Onur, and good morning, everyone. In -- Starting in slide 23, with Spain.

In 2023, we truly believe we have delivered an outstanding year in Spain. In a context of strong competition, we have demonstrated our commercial strength and digital lead with loan origination growing by 10% year-on-year, achieving important market share gains in all portfolios.

As such, despite lower demand from credit in the system, our loan book deleverage remained contained, stable over the last two quarters. In terms of P&L, NII stands as the main engine for revenue growth.

NII accelerated throughout the year, achieving a 48.9% growth levered on high rates, effective price management, and ultimately ongoing customer spread improvement, increasing 128 basis points year-on-year. In a context of higher rates, we have successfully managed to limit the rate pass-through on deposit costs, thanks to an effective customer funds management this was achieved primarily by offering our customers seeking higher returns, mutual funds which as you see grow 12% year-on-year while benefiting from a highly transactional deposit mix supported by the acquisition of new customers close to 900,000 in the year.

In the last quarter of 2023, these trends remained. We continued benefiting from loan book repricing and from our sound deposit mix with deposit costs well contained.

In terms of fees, very sound dynamics in the fourth quarter across the board, but I would like to highlight the contribution from asset management supported by strong net inflows in the year. In this particular quarter, this heading also includes the success fees coming from the portfolio's performance in the year.

Turning to operating expenses, the increase in the quarter is explained by the final adjustment in annual variable compensation accrual as earnings have exceeded expectations. All-in strong revenues in the year lead to an outstanding efficiency ratio below 40%, more than 7 percentage points below 2022.

On the asset quality side, impairments and cost of risk evolution are aligned with our guidance. In short, another very positive quarter for BBVA Spain leading to a record net profit close to EUR2.8 billion, the highest figure in the last 15 years.

Looking forward, we remain very positive on Spain's performance for 2024. We expect NII to grow at mid-single-digit in 2024 as there is still some repricing on the loan book to come and we expect a contained deterioration on the deposit costs.

Expenses growth will slow down to close to 5%, as we still carry over 2023 effects, maintaining the efficiency ratio below 40% also in this year. Finally, our expectations for cost of risk in Spain is for it to stand at around 40 basis points, a quite contained level in a context of a still high-interest rate environment.

The start of the easing cycle will be supportive as the year progresses in terms of NPL entries. Moving on to Mexico in slide 24, I'd like to emphasize that we feel extremely positive about this franchise.

The economy continues to outperform expectations with a strong labor market, resilient consumer demand and positive news coming from nearshoring. Thus, the loan portfolio is benefiting from this momentum, growing close to 11% year-on-year.

In the quarter also positive dynamics have unfolded with retail portfolios remaining while the wholesale segment is also gaining some pace, balancing a little bit the growth in the book. All-in, one more year we have outpaced the market, being able also to further strengthen our leadership position as you know we are the number one franchise in the country across the different loan segments in the country.

On the income statement, we continue to deliver on top line with core revenues growing by 20% year-on-year bringing net profit to EUR5.3 billion in the full-year 2023. Positive NII dynamics remained in the fourth quarter supported by sound activity close to 3% growth, geared towards retail.

And looking forward, as we have been anticipating, loan growth will be the main driver for NII growth. High fees increasing by 24% year-on-year, to note as in the previous quarters, the growth in credit cards and payment fees along with an increase in contribution from asset management and higher fees from CIB.

On the expense side, our main focus is to maintain an efficient operation while continuing to invest to establish the basis for future growth. As it has been the case in Spain, expenses quarterly evolution is also affected by the final adjustment in the annual variable compensation accrual.

All-in, operating jaws remain positive in the year leading to further improvement of the cost-to-income ratio to an extraordinary level of 30.7%. Finally, asset quality has performed within expectations, being consistent both with our strategy in the most profitable segments, and with a tightening monetary cycle.

All in all, the cumulative cost of risk stands below 300 basis points, in alignment with our guidance. To sum up, Mexico continues delivering outstanding results quarter-on-quarter on the back of its indisputable leadership and structural strengths.

These will allow us to maintain growing earnings going forward and continue outperforming our peers. More specifically, for 2024, we expect the loan momentum to continue, and the loan book to grow at double-digit pace.

Based on this sound loan growth, and our proven capacity to preserve spreads, we expect NII to grow at high single-digit in 2024, slightly below activity growth. With regards to expenses, growth will slow down to high single-digit preserving positive jaws, and on the asset quality side, we expect a moderate increase of cost of risk to around 325 basis points, consistent with our growth strategy in a context of still high rates, especially in the first part of the year.

Moving on now to Turkey on slide 25. Turkey, with the gradual transition towards DOCs policies, has started to surprise on the positive side, and particularly in monetary policy, a sign of the country's commitment to tackling inflation.

Last week, we saw the policy reach -- a policy rate reach 45%, still relatively low given high inflation but already favoring capital inflows, international reserve buildups and the Turkish lira. Looking at the performance of our franchise in the full year 2023, the net profit reached EUR528 million in line with 2022, despite the very challenging environment we have been facing.

The magnitude of the rate hikes during the year and the regulatory measures in place have put pressure on the deposit costs and ultimately on spreads and NII. However, our franchise managed to offset these headwinds on the P&L through higher fees, mainly coming from payment services, brokerage and asset management, and higher net trading income, thanks to a strong performance from global markets.

Very low cost of risk is just 25 basis points due to low net NPL entries in a negative real rate environment, and strong recoveries and repayments in the commercial segments also unfolded. In 2024, Turkey's earnings contribution to the group could be similar to that of 2023 in a still challenging environment.

This guidance includes an expected increase in the cost of risk to around 110 basis points in 2024 after an abnormally low level in 2023. Overall, we expect 2024 to be a transition year in which the basis for a more healthy, a more sustainable growth model is implemented in Turkey.

Without a doubt, Garanti is the best bank in the country with proven capacity to overcome short-term challenges and take advantage of opportunities going forward. Moving on to South America, on page 26.

Finally, net profit amounts to more than EUR600 million in 2023. The region maintains a strong performance in total revenues.

NII growth remains as the main driver for the P&L in 2023 in the context of loan growth and the most profitable segments and improving spreads. Higher fees also, and strong NTI supported the gross income growth of the year.

Despite expenses being pressured by inflation pre-provisioned profit growth more than offsets the increase in impairments due to higher provisioning in a quite challenging macro environment. All in, cost of risk ends up at around 250 basis points, in line with guidance.

For 2024, in an improving macro scenario in the region, we expect loan growth to be somewhat higher than 2023 and cost of risk to be around 280 basis points. Although we expect some inertia in the NPL inflows in the retail segment, especially in the first half of the year, the easing monetary cycle across the geographies will be an important supportive factor for asset quality trends going forward.

And now, back to Onur who will highlight the main takeaways of the quarter and the outlook for 2024. Onur?

Thank you, Luisa. So, we always have this goal to finish in half an hour.

So let me not go into every single bullet point that you see here on the page. The only thing I would say is that we are very happy; very happy with BBVA's performance in 2023.

As a team, and we are very focused on creating value for our stakeholders, our stakeholders, our customers, our shareholders, our employees, and the society in general, very focused on that. And as I mentioned to you multiple times in the past, that it's kind of a circle, and it all starts with delivery.

You have to deliver. You have to deliver your commitments, and you have deliver the numbers.

And we do think that, that's what we did in 2023. But 2023, it's already gone.

So we have to look forward. We have to look into 2024.

So, maybe jump -- let me jump into slide 29 and the guidance. Luisa has just explained the countries.

So, you can see the guidance for every country on the right-hand side of the slide. And all of this combined, the respective guidance for the countries, it then translates into the following group guidance on the left-hand side of the page.

And the Group guidance is, we expect our NAP, Net Attributable Profit to continue to grow in 2024. We expect ROTE at high-teens and above 2023 levels, about 17%.

And on efficiency, we expect to beat our 42% long-term goal. With this, I conclude the presentation.

I give the floor to Patricia to govern the Q&A. Patricia?

Yes. Thank you, Onur.

We are now ready to start with the Q&A session. So the first question, please.

Hi, good morning. Thank you for the presentation, and taking our questions.

I have three on Spain. The first one is on your NII guidance.

Any chance if you could update us on your NII sensitivity to interest rates, but also shed some light of what kind of evolution of interest rates do you bake in your mid-single-digit growth guidance? Then, the second question is on loan growth outlook.

I was wondering if you could just share more visibility on what you expect for loan book growth in Spain per segment? And then finally on deposit costs, you mentioned you expect contained deterioration in deposit costs.

I've noticed that the share of time deposit increased notably in the fourth quarter, and I was wondering if this was related to some particular campaigns or this was a sector pressure, and what kind of beta evolution you expect throughout 2024? Thank you.

Thank you, Maks for all the questions. On the NII change, the NII sensitivity that you talked about, we have been putting this into the appendix of our presentation so that you can clearly see it, because I really do think it's the right question and it's a very important number to look into.

If you remember this sensitivity to 100 basis points, it's a symmetric number, plus/minus 100 it's the same. 100 basis points step function decline in the curves would have implied more than 20% NII impact.

So minus 100, minus 20%, NII not long ago, a year-and-a-half ago. That number, we have been managing that number since that period in the last two years, every single quarter.

The last number that we are putting into the appendix as you would see is now plus/minus 5%, so every 100 basis point step function change in the curve would imply now a much lower sensitivity because of the ALCO strategies that we have been implementing, and now the number is minus 5% in NII. You asked about in the guidance that we have given, what is the rate implication, rate reference, and so on.

We have multiple scenarios. The base case that we are now working with, Euribor 12 months is a clear reference rate for us.

It's a clear, important number to look into. Again, it's a range.

We have multiple scenarios. In all the scenarios, we see a growth in NII, but the latest scenario that we have is the Euribor 12 months, the average of 2024 will be around 300 basis points.

With that assumption, we are guiding a mid-single-digit NII growth. You were asking about the loan growth in Spain per segment because we are guiding flattish growth overall.

It's going to be more or less like 2023. We foresee growth again in the consumer portfolio.

We foresee growth, a segment that we have been focusing, you would have realized it every single quarter we are posting very good numbers there, what we call the medium-sized enterprises. So, the enterprise segment is very important to us.

Our average market share in Spain is 14%, but it's in certain products of retail, it's 15%, 15.7% in credit cards, for example. So, we are more inclined to retail banking and our enterprise banking is around 13%.

So, lower than our average. We do see that there is some potential to grow there and in private enterprise, you would continue to see that we grow.

Then you are asking about deposit, deposit in the fourth quarter, Maks, it's the trend in the market. You would see we were expecting this obviously, some move has happened, and some moves will continue to happen.

And combining them all, we still guide you at mid-single-digit NII growth. In the presentation, I said it wrongly, I was saying that the customer spread will continue to improve in Spain.

NIM, not customer spread. Customer spread has already reached or is going to be slightly higher or slightly lower in the first quarter.

Customer spread is not the key thing. It's the NIM margin.

Because of the ALCO strategies that we have been implementing, NIM will continue to improve in 2024. So, I correct myself, in the presentation I said customer spread will continue to improve, it's more the NIM.

Anything you want to add, Luisa?

No, I would just say that on the beta side, I think that we are looking for a slightly higher beta for this year, around 25% to 30%. But we achieved to be within the guidance this year in the beta below 20%.

And with regards to the ALCO strategy, I think that, that will also be positively contributing, as you mentioned.

Thank you, Maks. Next question, please.

Thank you.

Hi, good morning everyone. It's Antonio from Bank of America.

Two questions for me, please. One on NII trends in Mexico, and secondly on fees, please.

The first one on NII in Mexico. Your outlook for high single-digit growth in '24 is very clear.

You've talked about seasonality in Q4. Could you maybe just elaborate how much of the quarter was affected by negative carry trades?

And the key moving parts for 2024, perhaps across spreads, volumes and hedges? The second question is on fees.

Fees have been strong for a few quarters now outperforming peers both in Spain and in Mexico. Can you talk about what are you doing differently here?

What products you're placing? What are the main drivers?

And how sustainable this is really going forward? Thank you.

Thank you, Antonio, for both questions. I mean a similar strategy that we have been employing in Mexico.

You can see it also in the NII sensitivity in Mexico. You would remember that a year ago, the sensitivity of a year, a year-and-a-half ago, the sensitivity -- NII sensitivity of our Mexican franchise was around 3.7% to a 100 basis points.

So minus 100 basis points would have implied 3.7% decline in NII some time ago. And we have been reducing that sensitivity.

The latest number that we have is now 2.3% -- 2.3%. Why?

Because we have been increasing the ALCO book. We have been increasing the fixed part of the ALCO book and so on.

You are asking what part is negative carry? A good part is negative carry, but at the moment it's negative carry.

I mean, you see it in the ALCO details again in the appendix. We have an EUR18 billion -- EUR18.2 billion of securities in Mexico.

The yield for that book is 8.5% -- 8.5%. And we have both, a good part of this, you would see that in the last year only EUR6 billion increase, EUR5.8 billion, to be specific, EUR5.8 billion increase in the ALCO book.

And that has come with yields of 9% to 10% in general, 9% to 10%. The central bank at the moment is paying us 11.25% for the liquidity.

So we are taking the negative carry because we wanted to manage that NII sensitivity. All in, though combined is the 2.3% number, 2.3% NII sensitivity in Mexico.

As such, we are guiding a mid-single -- looking into the Mexican numbers, the loans would be growing at double-digit, and NII high single-digit, close to 10%. You would see the numbers high-single-digit in the coming year.

Regarding fees, the second question, overall the business is doing so well, especially in the payment systems. A good part of Mexican fee situation is payment systems, 59% of the fee income comes from what we call payment services.

50% of the 59% is actually cards and POS, the acquiring business. And that has grown 20% in the year, 20% year-over-year, 12 month '23 versus 12 month '22, so -- and we are gaining market share in credit cards as you know well.

Asset management is also important. It has grown 17%.

So overall, when I look into all the line items, I see very robust growth. So, we are quite positive on the fee income evolution in Mexico as well.

Thank you.

Thank you. Thank you, Antonio.

Next question, please.

Good morning, both, and thank you for taking my questions. As a management team, you've historically spoken about your excess capital, but spoken less about timing and cadence of buybacks.

I was hoping you could remind us of how you define your excess capital? And at what point do you expect to have returned the majority of that back to shareholders?

And then secondly, on cost of risk in Mexico, that's up 25 basis points the guidance year-on-year, I mean, presumably, that's at least partially driven by mix. Your consumer and credit cards are about 25% of your Mexican loan book.

Where do you see that number ultimately going to? And will that come ultimately with a cost of risk that is higher than 325 basis points?

Thank you.

Thank you, Benjamin. The second one, Luisa, maybe you take that one on the first one, on the excess capital.

We have been saying it all along, and we will reiterate it once again today. We don't want to operate -- we don't like to operate with excess capital.

And we have a clear commitment to return the excess capital, as we have been doing, in my view, over the years back to our shareholders. So, you remember that the upper end of our capital targets range is 12%.

That 12% is still our goal, our management's reference. In that sense, we will time it properly, obviously, but we will continue on the path that we have been having.

The commitment is clearly there. There is this regulatory impact topic, I mean, organic capital generation is very robust.

We have guided you in the past that around 60 basis points we will organically, beyond the regular payout that we have, we will continue to generate around 60 basis points of organic capital. That is still our plan and our expectation.

If you put that into the excess capital that we have, I do think that there will be more share buybacks to come along the way, but again, we will time it properly. Luisa, on the cost of risk in Mexico.

Yes. Well, I think that, as you mentioned, the increase to 325 basis points is primarily driven also, again, by the continued growth in the retail portfolios that yield more.

So there is definitely a mix effect there. I think the underlying trends as well this year have been supported also by positive impacts on the recalibration of our models, and we believe that the underlying trends as we grow in the retail portfolios continue to grow there will be more aligned with the 325 basis points cost of risk while maintaining the profitable growth in the portfolios, as mentioned in terms of returns.

So, that's primarily what drives the increase in the cost of risk. And we also think that the start of the easing cycle expected in the first quarter of this year will help progressively improve the trends going into the year.

And we have also been working in the fourth quarter in fine-tuning our admission policies, specifically in the consumer segment, especially in the open market. So that's obviously has implied a better, I think, admissions, quality admissions of the vintages that are new.

But we still have to also see how the vintages, the older vintages progress. So that's why we have that 325 basis points going into the year again, more biased towards the beginning of the year than towards the end and supported on the continued growth in the retail side.

In Mexico, I would once again highlight something that we talk about all the time. The banking debt over GDP in Mexico is 36%, one of the lowest, lowest in all the emerging markets landscape.

It's half of Brazil, it's one-third of Chile. It's again, we keep saying about it, but it's lower than Nicaragua.

So, the banking debt -- it goes back to the Tequila crisis many years ago and so on. So, Benjamin, the lending book, that's why we are guiding a double-digit loan growth.

The banking book will grow in a healthy way because the leverage in the system is very high. In credit cards, we have a much higher than average market share in credit cards.

We are very well positioned. Our scale is very positive on that one.

You asked about the 25% weight of the loan book. In general, the loan book will grow.

That's the key story in Mexico. And within that, given our strength, I would expect that 25% to go higher, but you would not expect a dramatically different number going forward because the overall lending book will also increase in a very healthy way.

Thank you, Benjamin. Next question?

Thank you.

Yes. Hi.

This is Sofie from J.P. Morgan.

So my first question would be how you view inorganic growth opportunities, especially in South America and also in Spain? And then my second question would be in Mexico, Nubank is becoming quite aggressive.

They've had a huge success story in Brazil. But how do you see kind of competition in the Mexican banking market?

And does it make any impact on BBVA? And then just a final follow up question.

How should we think about the regulatory capital headwinds or any capital headwinds in '24? I guess you will see the share buyback deducted, but if you could just comment on that.

Thank you.

Thank you, Sofie, for all the three questions. Maybe on the regulatory topic, Luisa, you help me out.

On the inorganic growth there is nothing new. We are focused on organic growth, our complete focus is on organic growth.

It doesn't mean that we don't look into opportunities, but we are focused on organic growth, and nothing more to say on that one. On the Mexico question, I have this chart.

I wish I could project it to all of you now and you can see that, which is the neo-banks market share in the new cards that is printed in Mexico. So, forget the base, forget the stock.

The new cards that are emitted in a single month, what percent of that is BBVA, and what percent of that -- it's an estimation, it goes back to our own data. But what percent of that newly emitted cards and the spending from those cards come from neo-banks in general.

And some of the names that, or one of the names that you mentioned, we respect them a lot. They are very successful, very nimble, very agile players, and we always respect our competitors and we appreciate them.

But I also see the trend in this curve, and when I look into this trend, it's a very nice trend. In the last seven quarters the peak, the neo-banks market share in these new cards emitted, it peaked in the first quarter, 2022.

And since then, every single quarter, it's coming down. This is a clear strategic program for BBVA.

We are defending our turf. We are getting closer to our customers.

We will do our best to make sure that we compete in the best possible manner. And then regulatory headwinds.

Yes, well, right now we don't foresee for 2024 any specific regulatory headwind. I think the most relevant impact is obviously Basel, the entry of Basel IV into effect as of today as of 1 January 2025.

As we have stated, we expect a very limited impact around less than 40 basis on a fully loaded -- less than 40 basis points on a fully loaded basis. But really, of that, we would expect less than 30 basis points to come into effect in 2025.

This is easily absorbed by our capital organic generation. Nevertheless, I think that what we are looking at is that it would be reasonable to expect in 2024 CET1 ratio somewhat above 12% in order to avoid the potential cliff effect of this impact in the first quarter of 2025.

Thank you, Sofie. Next question, please.

Hi, thanks for taking my questions. I have two questions.

The first one, it's on the healthy core revenue growth that Onur you mentioned for 2024. If you could give us a bit of a sense of what kind of growth levels you are thinking of in terms of revenues?

And alongside with that, I have noticed that you have high single-digit growth in Mexico in costs and 5% cost growth in Spain. I mean, is there room to adjust that core space?

And then you have done plenty of initiatives to improve efficiency on the core side as well in the last few years. There is kind of ability to manage costs in case revenue gets a bit worse.

And the second question is just on the -- on the buyback, has it been deducted already the EUR781 million? Thank you.

Thank you, Ignacio. Let's start with the last one very quickly.

Of course, all the buyback numbers, when you see them, they are deducted from capital. So the number of 12.67% already incorporates the impact of the buyback.

The core revenue growth that you're asking, Ignacio, if I'm not mistaken, you were asking overall, know, Spain and Mexico and…

Yes, growth level.

Growth level. I mean, it goes back to the countries because we have to look into it at the country level to understand the dynamics.

Once again, I will highlight this. NII in Spain is growing in our expectations, mid-single-digit, which I do think it's a very fair number.

In the sense, once again, the NIM is going to help us because of the reduced NII sensitivity that we have had now, it will help us. And the volumes, as we also see in the guidance, it's going to be flattish.

So there's some -- but within that flattish, as we commented a little bit in the beginning, there is some mix change. We are going to be changing our growth to higher return, higher value segments.

So, some mix change and continued strength in the NIM will help us to deliver this mid-single-digit NII figure. And in the case of Mexico, the story is a bit different obviously, it's about volume growth.

Again, we discussed it many times in the past, all of you are aware of it. But I have to -- I need to specify it once again.

Something, in our view, big is happening in Mexico. And the growth rate, GDP growth rate of Mexico is 3.2% in 2023, 3.2% to 3.4%, 3.4% might seem, well, in the context of emerging markets, it might not be that high, and no, 3.4%, if you look into the past 15 years of Mexico, the average is 2.1%.

So, as compared to the average, and what Mexico has been living through, something big is happening. And that something big is finally, really this concept of nearshoring, the concept of investments in Mexico.

I mean, FDI is up in the first nine months of 2023, the latest published figure is up 30%. Investments, private investments, especially in machinery and equipment, and imports of capital goods is up 20%.

I mean, we publicize, BBVA research publicizes -- publishes this notion of the industrial parks and the space in the industrial parks. You cannot find in the north of Mexico, you cannot find open available industrial park space.

So this notion of nearshoring, and as you all know, in the first half of 2023, for the first time after decades, Mexico has become the number one exporter to US, passing Canada and China. This is happening, and this is driving private investments.

And investments has always been the key issue in Mexico and now it's happening. All of this, and then I have tied back to our revenue growth expectations, all of this will drive, will fuel loan growth.

We have grown double-digit this year. We are expecting the same, even a bit more in the loan growth, growing at double digit, because the rates will also start coming down a bit in the coming year.

As a result, the core revenues in Mexico will also continue to grow. And again, we do have a wonderful franchise.

Wonderful franchise in Mexico. We are very confident that, that core revenue growth will continue and the NII growth as we guided high single digit will be realized.

Then, you ask about expenses. At the moment, we are seeing more opportunities to grow at the moment.

As a result, we are guiding on the expenses, as we have guided in the case of Spain, close to 5%, in the case of Mexico growing at high single-digit, because we still see -- do see the opportunity of growing profitably in certain criteria, in certain portfolios. In that sense, we always have the options, but we don't see the need and the discussion to have this year when we are facing nice growth in the revenue side.

Anything else do you want to add, Luisa?

No, I would only say that obviously, efficiency is always part of the DNA of the bank, and all the countries have ongoing efficiency plans to support actually fueling continued growth. So, I think that's compatible as well with the plans that we have in each country to address continued efficiency.

Thank you, Ignacio. Next question, please.

Thank you.

Yes, thank you. Luisa, I have two follow-ups.

First, in Mexico, your NII guidance of 2 percentage points below loan growth is consistent with your NII sensitivity to lower rates. But you also mentioned that the mix should continue to improve.

You are capturing that in the cost of risk guidance, which has also been increased. But I would have thought that the NII would have grown faster.

So, I wonder if you can comment and you can help us reconcile both the increase in the cost of risk with the increase in the NII guidance for '24, particularly the deposit beta in Mexico. You mentioned that you are paying up for corporate deposits, so what's the impact there?

And if that could offset the impact -- the positive impact from the loan mix? And the second question is about the capital target that you have of 11.5%-12.0%, specifically the 12% threshold to return the excess capital.

You said that in '21, and since then your SREP has gone up by 50 bps, is now 9.1%. Basel IV, you mentioned close to 40 bps.

And there is also noise about a potential countercyclical buffer in Spain. So, with all this in mind, do you think that the 12% threshold on a 300 basis points, 350 basis points of MDA buffer is still valid going forward, pro forma for Basel IV, or will you update that during the year?

Thank you.

Thank you, Francisco. On the first question, I wasn't sure whether you were confirming that we did have a proper guidance or you were challenging it.

I wasn't sure. But what I can tell you is that in the case of -- because you are focused more on the asset quality, the mix change is already incorporated in the guidance that we are giving you.

Quarter only, not year-to-date, but quarter only, cost of risk in Mexico in the third quarter, where we have seen some uptick if you remember was 308 basis points in the quarter-only number. In the fourth quarter, that number is around 300 basis points, 297 basis points.

So, the mix change that, the fact that we are growing a bit more on high margin, high return, but high cost of risk segments is already incorporated in the number that you are seeing. And why is-- and the deposit betas and why is the NII is growing at high single digit?

Because there will be some slight decline in customer spread. With rates coming down, I gave you the sensitivity also, customer spread will come down, and NII will come down and NIM margin will come down slightly.

So, as a result, we are going to grow in loans at double-digit. But the NII, we will be growing at high single-digit because of that impact, basically.

On capital, as you say, pro forma as of January 2024, as of this month, the requirement is going up to 9.1%, 9.09%, if I'm not mistaken. With the 12%, the gap, the difference is 291 basis points in CET1 buffer, 291 basis points -- 291 basis points.

What is the average of the largest banks in the European zone? The 15 peer group that we defined, which is all footnoted in all the presentation pages, the ones who are in the EU in that list what is the average of the buffer that others have?

243 basis points. So we do have a larger buffer than the average of our key competitors.

And I remind you once again, we discussed it in the past. So, I feel sometimes that I'm repeating myself.

But it is important. If you take a 15-year, 10-year, 20-year, relatively long enough time frame and you look into not quarterly, but annual organic capital generation, and the standard deviation of that, you do see that our number is, first of all, it's higher, so we do have a better number.

But even the volatility around this is relatively low as compared to our peers. In that context, a bank with a business model like us, a bank with a clear competitive advantage, I underline this, clear competitive advantage of having either the best or one of the best banks in the countries that we are in.

I mean, being number one, number two, or being number six makes a big difference in banking in any country. And you look into us and you do see that these -- they do have really great banks in the countries that they are in.

Even in very tough macro environments that we operate, we typically have either the best or one of the clear best banks in that country. If you look into volatility, the level of profitability that we have, and this notion that we have wonderful franchises in wherever we are, I do think that this buffer is more than enough.

You mentioned about some other topics of the cyclical buffer, countercyclical buffer, and so on. Countercyclical buffer, as you know, Francisco, it goes back to negative -- it's credit gap.

We are in the negative territory, and the trend is a downward trend. So the loans are not growing in Spain.

So I really don't understand this discussion that we might need countercyclical buffers. In an environment of credit declining, I don't see it.

But if it happens, okay, we put it in the number and we move along. But we are clearly confident that the buffer that we have is more than enough.

Anything on Luisa?

Well, no, I would only add as well that with regards to the Basel IV impact, we stated that around fully loaded would be around 40 basis points. But as you know from the EVA impact analysis published in September '23, the CET1 would decrease by 220 basis points for the group one entities and when considering European commission specificities, it would be 150 basis points.

So we are going to be one of the lowest, I think impacted banks on Basel IV.

I don't -- I rarely see this discussion at all in the market. One of the again strengths of BBVA is the fact that we have the highest leverage in Europe among the larger banks.

We have the highest risk density, I mean, our -- WA density for BBVA is 47%. The average of European banks is 28%.

Given that, we are not affected from out to the floor. And there's something called Basel coming, and the impact on the whole sector will be quite important and the impact on BBVA is one of the lowest.

And that will be also a key differentiator for capital returns for many other discussions that we have been having. So I think it's an important point.

It's not far away. It's a year from now.

Thank you. Paco, next question, please.

Good morning. I had a really follow-up questions.

Onur, you mentioned the rate sensitive in Spain that was symmetric plus/minus 5%. I just want to double-click on that because, maybe can you share, and maybe this is more for Luisa, the deposit beta assumptions behind the minus 5%?

Because the fact that it's symmetric, I'm not sure if you're using the same deposit beta assumptions of the way up, and the way down. Conscious that on my numbers you've got 21%, 22% beta in Q4 standalone.

So, it looks like the standard EUR0.50 beta on the way down could be optimistic, but I just want a clarification there. What assumptions are behind that number?

And second, and apologies if you've already mentioned this, could you share the rate assumption you're using in Mexico? Thank you.

Very good. Well, I said symmetric, but it's basically, the difference is there, but very little.

So, it's marginal plus-minus. But going back to the deposit beta, Luisa, you want to take it?

It's basically -- how you calculate the beta is important. What we are calculating is our deposit cost, the increase in our deposit cost, which was zero when we started the cycle, divided by -- with what has happened to the deposit rate of ECB.

ECB deposit rate has increased from minus 50 basis points to 400 basis points. So the denominator is 450 basis points.

And then in the numerator, what has happened to our deposit cost? It used to be zero, now it's 86 basis points.

Divided you get 19% beta at the end of fourth quarter. With the same assumption, the rates will start coming down, but you take the average in the numerator or what has happened to the rate, and then what happens in the numerator, we are telling you that in our assumptions, it's going to be 25% to 30% at the end of December 2024, because with the decline of the rates in the numerator, we will also see some help in the velocity of increasing the deposit costs.

So, I don't see the -- I don't have the quarterly beta and so on, but at the end of December '23, the beta was 19%. No, Luisa?

Yes, and I think that, as I mentioned before, we are expecting the deposit betas to go up to 25%, 30%. I think the idea that we have from the ALCO perspective is to maintain the sensitivity at these levels.

And obviously, there's an active management of the portfolio behind that. So that we will see, depending on the velocity of the migration, the eventual price of the deposits in terms of how they're managed.

And obviously, the rates, those moving pieces will determine the evolution. And our idea, as we mentioned is to try and maintain the sensitivity at a current 5% level with regard to those moving pieces.

And then you asked about Mexico rate assumption, the end of period 2024. So, at the end of December 2024, we are foreseeing the official interest rate to be 9%.

At the moment as you know, we are at 11.25%. And we will -- we are expecting the first rate cut to start in the first quarter of this year.

I would also on this one sometimes some of you mentioned this and so on, independent of the rate evolution we did see these in the recent past, I mean, the rate -- the official rate was 4.25, a few years ago, not too long ago. And when it was 4.25, our customer spread was 10%.

So we do operate in Mexico with higher spreads because of the nature of our bank and because of the customer segments and the products. So independent of this decline, we have proven in the past that we can operate with very high customer spreads.

That is why we are guiding NII sensitivity to be 2.3%.

Thank you, Alvaro. Next question, please.

Thank you.

Hello. Carlos from SocGen here.

Thank you very much. A couple of questions.

One is again on rate sensitivity in Spain. Sorry, I've lost my connection.

No, we hear you, Carlos.

We hear you.

Yes. Yes, can you hear me now?

Sorry, the headphones went off. So one is about the reading and how it changed from say 20% to 5% now.

And you explained it very well. Part of that is the hedging, but how -- what's the duration of that hedging?

And how could that be, if you couldn't have those hedges? So, I'm trying to get a better feeling of what is the perspective for that NII, once those hedges expires in 2026, 2027?

I know this is very dynamic, but it'll be interesting to get some color on that if you could. And the second one is on Mexico.

In terms of the growth and what is the mix. You said 11% growth this year.

How much is corporate? How much is consumer?

And if you could add how much you're getting from Banamex in terms of market share? And what would be the growth mix expected for 2024?

Because so far we keep hearing about the nearshoring, but consumer lending keeps getting a very big share of the growth in Mexico. So, I was wondering if you expect an acceleration of that corporate loan demand to come through.

Thank you.

On the ALCO, do you want to take it, Luisa?

Yes, well, on the ALCO, as we've mentioned before, the focus has been obviously unlocking in our rate sensitivity in the last quarters. We've increased the ALCO book EUR8.5 billion in the year.

It stands right now at EUR38.7 billion. And the current yield is 3.1%, coming from 2.5% in the last quarter of last year.

Duration, including hedges is 3.4%. If we were to exclude the hedges, the duration would be at 4.4%.

I think that we've been managing also the yield at 3.1% level, especially through the hedges. Right now, the portfolio composition stands at 85% is fixed, and 14% or nearly 15% is floating rate.

And I think these are the main variables of the portfolio. We've been primarily buying medium-term Spanish bonds and unwinding the hedges that we had.

Going forward as we mentioned before, we don't expect to be adding a lot on to the portfolio. I think we are happy with the size.

We may keep it flat or slightly increasing, taking opportunities to invest maturities at attractive fixed rate levels, if those come to be. But it will obviously be depending, as we mentioned before, on the balance sheet dynamics, especially on the deposit side, and this is what we expect for 2024.

Very good. I mean, I will give you one more number.

The floating part of our ALCO portfolio in the -- at the end of 2021, two years ago, the floating part was 60%, and with time, every single quarter, we kept, or lately actually, in the last few quarters, we kept reducing it. And 60% floating at two years ago is now 15% floating.

So, we are more fixed. So if rates go up, we might regret this decision, but our expectation is rates will not go up.

So, if that's the case, we have done the right thing. Then regarding Mexico and the growth in Mexico, we do see the internal drivers of consumer growth still to be there.

In that sense, once again, the overall leverage in the country is so low that there is room in both segments, in both areas, in different products to grow. We do expect still a higher growth in retail.

I just want to give you one number, though. In the case of commercial, the business side, the growth in the year in 2023, you see it in the pages, but it's 6.7% growth on the commercial enterprise side.

But this is partially impacted by the dollar devaluation or Mexican peso appreciation versus the dollar. If you isolate for this currency impact, because some of the loan book in the company segment is in dollars, if you isolate for this, the growth would have been 10.5%.

So, the enterprise segment is also growing. You don't see it as much because of this depreciation, devaluation impact of the dollar versus the Mexican peso.

But in the case of retail, it's 14.4% higher. And those dynamics will continue to be there because when rates come down, there will be more vibrant consumer spending and so on.

Again, we are very positive on Mexico. I mean, even this year, the growth that we are expecting for Mexico now, and typically in the last quarters, we have upgraded in a positive way the growth.

But the growth that we are expecting in GDP for Mexico in 2024 is 2.9%, around 3%. It's still a very robust environment, and with rates coming down on the retail side, you will still see some strength.

Thank you.

Thank you. Thank you, Carlos.

Next question, please.

Yes. Hi there.

Thanks for taking my questions. Could you -- so coming back on the topic of capital distributions, I mean, irrespective of the SREP and the countercyclical buffer, the messaging from the ECB is very clear that banks are supposed to maintain or increase their capital buffers.

Does this messaging have any impact on how you think about the payout trajectory versus maybe a couple of quarters ago? The second would be, could you explain a little bit on the outlook for the Turkish customer spread with the kind of forced conversion of FX deposits, probably still ongoing?

Do you expect this to worsen further or has this bottomed now? And maybe you can also give us the FX and inflation assumptions you used in your guidance to reflect contribution.

And then lastly, just a clarification on Mexico. If I piece together the guidance, is it fair to expect around 5% net profit growth in local currency?

Or could this be better in '24? Thank you.

Britta, you are now asking us to give profit guidance by country, but your number, 5%, it should be slightly better than that. Yes.

Not slightly, better than that. Let me say it that way.

In the second question, Turkish customer spread, it has bottomed out. We are seeing some pickup in the number in the month of January.

It goes back again, as you said to currency protected scheme and the requirements of the supervisor and the central bank in this case on this. You might have seen it, but the requirements of the renewal of what we call the central bank-covered currency-protected scheme, they have relaxed the regulation a bit.

They relaxed the rules a bit. And as a result of that, we are seeing some pickup, not big one, but slight pickup in the customer spreads in the month of January.

So, our expectation is that, given the situation that we are seeing some return to normal, return to orthodoxy in Turkey, we have seen the bottom in the fourth quarter is our expectation. And then the first question was on the capital returns.

I understand what you're saying, but you should all be aware, again, of the fact that there is a big discontinuity for the European banking sector, which is Basel implementation in January 2025. It's a year from now.

In that context of Basel impact, I do think that the numbers that you would see today in terms of capital, they will be different and the base will change, everyone will be affected. And Luisa has given the numbers and they have expectation now for the European banking industry is around 150 basis points different.

So, the capital of today and the capital after Basel, they will be two different numbers because the baseline would change or the calculation or the approach would change. In that context of, there will be this Basel impact also, I cannot square the fact that there will be further requirements and big requirements, I don't see that.

But again, we are dependent on our supervisor, on our regulator on these decisions, and let's see what happens. The thing that on the capital returns, I would reiterate one thing which might not be that clear.

We are again very committed, as we have been telling you from the first day, that we will return back to our capital target range, the upper end of our range, which is 12%, and we will time it properly, but we will continue to do share buybacks or extraordinary payments to our shareholders because we do have this excess capital. And more importantly, we do create organically.

We do create capital in every single quarter. So, the 12% to avoid the cliff effect, then let's again be very specific on this, the expected Basel impact for BBVA is less than 40 basis points.

But less than 30 of this will come in, in 2025, in January. So there will be some phasing and so on.

We always will look into fully loaded, but the impact in January 2025 will be less than 30. To avoid the cliff effect, we would not be immediately going below 12% because of the Basel impact and so on.

Incorporating the 2025 Basel impact, we are still very committed to return the excess capital to our shareholders.

Thank you, Britta. Next question, please.

Yes, thank you for taking my questions. More specific question on NII sensitivity, please.

What would be the NII sensitivity with forward rates and flat beta? And the second question is on payout.

Do you stand by the 50% regular payout split between 40% in cash and 10% in share buyback? Thank you.

On the first one, do you have an answer? No, [Ignacio] (ph), why don't we get back to you on that one?

We don't have the models in front of us, but we can get back to you.

This is the assumption that we have is the current basis of what we've been managing. So the other assumptions are not what we are managing.

Let's call it that way.

Yes. But deposit beta, with deposit beta being flat, what would be the sensitivity?

We can come back to you on that one. Then on the regular -- on the payout of 50, 40 plus 10, we did talk to you in the past that we do have this tendency of having a significant part of our payout for cash dividends, which is the 40% that you have seen.

Then, the rest as long -- it depends obviously on the share price, on the value that we create for our shareholders. But our threshold there, or our level, where we would then say, no, we won't do any more share buybacks is the fair, in our view, a fair value of the share price, which is not the tangible book value of the share, because the fair value in our view is much higher.

So, there's still a lot of room to get to that level where we would not consider anymore the share buybacks and we would only do the cash dividends. So I would say that 40, 10, or in that range will be obviously, it's the decision of the Board, and it's the decision of the General Assembly, but our suggestion would be in these ranges going forward.

Thank you. Thank you, Andrea.

Next question, please.

Yes. Hi, good morning, and thank you for taking my questions.

I've got two, if I may. The first one is your best approximation of Argentina's profits in '24, or how much are you budgeting versus the '23 number?

And the second one is qualitative, open-ended question, but how long do you think it's going to take Turkey to go back to a normalized profit contribution? I'm not going to ask you exactly what that contribution is going to be, but from a timing point of view, actually, is it like a two, three year period, or do you think it can take longer than that, based on what you have today in terms of macroeconomic assumptions and measures being taken in the last six months?

Thank you.

On Argentina, you did become the expert on Argentina, Luisa.

Well, I think that the first thing that's -- what's important under our assumptions is the macro scenario, especially on the devaluation front. So, obviously, as you know, we saw a 54% devaluation in the last quarter at the Argentine peso, and we think there will be a further devaluation.

And our research teams are expecting the depreciation or the currency to go to 15.42. So that obviously affects the environment or obviously the P&L development.

And also the inflation, because, as you know, with hyperinflation, we also need to consider inflation. We see a context of inflation increasing in 2024.

We will have an end of -- an average inflation growing. Obviously, end of the period inflation will come down.

We had 211% at the end of 2023, and we're expecting end-of-period inflation of 175% in 2024. However, when you look that on average basis, the average inflation will go significantly up in 2024.

So that obviously impacts how we see the hyperinflation accounting and the net profit -- net monetary loss. And obviously, these are moving pieces.

But within those contexts of further strong depreciation of the currency, higher average inflation in the year, we are expecting Argentina to be around perhaps 20% to 30% below the numbers that we have in the year. But again, these are very much moving pieces, and this is in current terms.

Yes. It doesn't change the overall big picture, but slightly lower is what we are -- in the planning cycle, that's what we have.

Regarding the Turkish situation, I just remembered that I forgot to answer Britta's question in full. The expectation of inflation in our numbers, in the expectation for 2024, the inflation for the country is at 45% at the end of the year, 45% inflation in 2024.

Obviously, the government is expecting less, but our forecast is 45% at the moment. Then the question Ignacio on when do we expect Turkey to normalize?

Is that two, three-year period or a five, six-year period? Our expectation is two to three-year period.

What we have seen in the last six months in Turkey is even better than our positive expectations that we could have had. This return to orthodoxy is proving to be working.

You are seeing it in multiple dimensions, you are seeing it in the CDS spreads. It went down below 300, like half of what it was some months ago, and then now it's a bit back up above 300.

But the CDS spreads the money flow, and there are something -- they are going on the right path in our view. There is a new economic team, as you all know in Turkey, and the economic team is doing what they need to do.

And they are also keeping a very close focus on fiscal deficit, they are keeping a very close focus on inflation, and so on. If the path continues, which is our base case expectation, then Turkey will come back to normal in two, three years.

This is what also the government has in the plan I mean, they are expecting, if I'm not mistaken, 33% 2024 inflation. In 2025, they are expecting around 15% inflation, which basically says that they will normalize.

Turkey will normalize in two years. So there might be some margin around these expectations -- around these forecasts of the government, but if they continue on the path that they are on, then it's a two, three-year time frame that we are talking about.

And when that happens, there is this option value that we talk about Turkey. Turkey is a very large country, more than $800 billion of GDP and so on.

If that happens, if that path continues, we have an amazing option value in Turkey. If there was no hyperinflation in Turkey, or hyperinflationary accounting in Turkey, we would have posted not EUR500 million, EUR2 billion of profits this year in local currency, it's in that range, know, EUR2 billion.

If Turkey continues on this path, we do have this upside that will be coming along from Turkey.

Thank you, Ignacio. Next question, please.

Thank you very much. My first question is on the structural hedging in Spain.

So you've got EUR39 billion of ALCO portfolio. Are you expecting to increase that over time, or is that the end target?

And then if you could add any color on receiver swaps that you may have, that would help us with our model. So, any receiver swaps that you've added in your book.

And on capital, the -- I think Onur mentioned plans to generate 60 basis points of capital per year organically after dividends. But this year, you've only generated 14 basis points, even if I strip out the EUR1 billion share buyback last year.

So, my question here is, are you expecting any other recalibration of models that you've been doing to get back to you in 2024? Are you working on the optimization of internal models that would release some risk-weighted assets?

And related to this sorry -- the impact of recalibration that we've seen this year would be very helpful. Thank you.

On the first one on ALCO?

Okay. Well, as I mentioned before, we are looking at the size of the ALCO book to be reasonably the one that we would like to have.

We may be ending the year at this level or slightly above, depending, again, on the rate levels, and if we find opportunities to renew maturities at these levels or not. And obviously, yes, again, depending on the dynamics of the customer fund evolution in the year.

With regards to the swaps, I think that aside from the hedges that we have on the ALCO books, primarily, as you know, we hedge the mortgages. Around 30% of retail mortgages are currently a fixed rate.

And out of the 70% floating rate mortgages that we have, we have hedges in place for around 45%, 50% of the book. And therefore, we do have some hedging in place on the mortgage book that we again, dynamically manage going into the year.

Very good. On the second question, which is a very precise, very right question.

Marta, thank you for the question. First of all, I mean, at the surface, we have reduced the -- capital of the bank has been reduced by 13 basis points.

The share buyback of EUR1 billion is 32 basis points, 32 plus -- minus 13, it's 19 basis points. So 19 basis points is what we have organically created, as it seems on the surface.

But if you remember when we said the 60 basis points, organic capital generation, we always said it excludes two things, regulatory impacts in model updates and also the M&A. We didn't do any M&A, but in the year there were, if you remember, in the first quarter, we told you at the time there was a 20 basis points regulatory impact in the models.

And in the fourth quarter, we discussed it as I was going through the presentation, there was this annual model update, and this year it produced more than usual negative impact on the capital figures, which was around 20 basis points. When you add the 19 basis points, plus the 20 basis points that you have seen in the first quarter, plus the model updates, again, we are not expecting in the coming years that the annual update will produce as much.

But when you add this year's number of around 20 basis points, you get to 60 basis points. And that's our guidance for next year as well.

We are -- when we look into our numbers, the organic capital generation, excluding regulatory impact and model updates, excluding M&A should be around 60 basis points.

Thank you, Marta. Next question, please.

Hi, thank you for taking my questions. Three quick ones, please.

First one is, can you please update on the unrealized losses, on the hold-to-collect portfolios? I think in Q3 it was less than 250 basis points of tangible book.

The second one would be, can you please comment on asset quality and Stage 2 increases we saw in Q4? And finally, the last one is, are you going to plan do an Investor Day during this year for the next three years?

Thank you.

Very good. Let's do it very quickly because we are running out of time a bit.

The unrealized losses in the hold-to-market -- hold-to-maturity books is around EUR400 million, EUR400 million very low as compared to many other banks out there, and it's mainly Turkey, by the way. And then the Stage 2 on the Q4, the increase in the Stage 2, it's mainly because of the -- if you go country by country, it's mainly because of the mortgage portfolio in Spain, given their variable rate mortgages and so on, we did help our customers in the last few quarters on restructuring their mortgages, and we do apply new definition of default into those portfolios.

When you do the restructuring, although the customer is fully fine and paying and so on, the fact that you do the restructuring takes them to the Stage 2 or Stage 3, even in certain cases. This is also one of the reasons why the coverage has come down a little bit because it's mainly the increase in the NPLs also is mainly because of the mortgage portfolio, which typically are covered, as you know, I mean, the LTV of our mortgage portfolio in Spain is 42%, if I'm not mistaken, around 40%.

So, these are very nicely covered portfolios. But given the fact that we are helping our customers, our accounting obviously implies that we had to increase the Stage 2s, 3s and which then also implied lower coverage.

Investors Day, we are planning for it, yes, in the coming years. We are in the process of thinking about it, on when, and how.

We will be updating you when we clarified it. But the last time that we did it was three years ago.

We will be recapping what we have achieved versus the goals that we have set. And yes, we are planning to do it probably in the first quarter of next year.

That's the current thinking, but we will update you when it's finalized.

Thank you, Fernando. Next question, please.

Thank you.

Yes. Hi, good morning.

A couple of questions from my side, a bit of a follow-up, actually. So, on Turkey, the question would actually be, you do flex or you do mention in your guidance that deterioration in cost of risk to around 110 basis points, but you expect net profit contribution to remain broadly stable.

I was wondering if you could shed some light on the main drivers of setting the date back from a higher cost of risk. And then the second was a follow-up on what Luisa mentioned on Argentina.

When you -- I believe you mentioned the contribution to net profit should be something like 30% lower than this year, but this would be in constant euros, and then you mentioned that Argentinean peso you're expecting it to rate to 15.42. So around 42% devaluation, if I'm correct.

So, should we flex or should we pause, we put this on top of the 40% drop you were mentioning before, or how should I look at it? Thank you very much.

Well, maybe on the second one, very quickly. It's in current euros.

Yes.

It's in current euros. And just to be very clear, and some of you also write this in your reports and so on complication of understanding.

So in the hyper countries, it's very simple for us. We always look into current euros, current euros.

Okay? So the number that you see is the final number.

So, in the case of numbers that we talked about the profits of Argentina and so on, current euros. Cost of risk in Turkey, you're saying with the higher cost of risk, how come Turkey will deliver more or less the same profit?

The answer is in the customer spread. We have seen the bottom, in our view, in the fourth quarter, and the customer spread will continue to improve in the coming year.

Anything? Anyone else?

Are we done?

No. There is another question.

Thank you, Carlos. Next question, please.

All right. Thank you very much.

I just wanted to ask you about the long-term potential for loan growth in Mexico. Is there a point where we could start to see the loan growth to decline?

And so can I think about the cap in terms of nominal GDP or in terms of bank loans to GDP, where you could see that loan growth coming down? Or how do you think about that?

Thank you.

Hugo, I mean, you partially mentioned that the banking debt over GDP is 36% in Mexico. Banking debt over GDP in Brazil is 72% double.

Given the dynamics of Mexico, and I will repeat myself, we do think that something big and positive is happening in Mexico. The market -- the U.S.

market is so big and this notion about nearshoring, shortening the supply chains, the driver, the tendency is so big that we are very positive on the loan growth at least in the coming two, three, five years, it's going to be quite positive. There is still so much room.

It goes again -- it goes back to -- I really looked into this. It goes back to the Tequila crisis and everything there.

The leverage in the country is so low that there is room to grow in a profitable way.

So, this was the last question. Thank you very much.

Thank you everyone for participating, and as always, let me remind you that the entire IR team will be available to answer any further questions you may have. Thank you.

Thank you to all. Bye-bye.

Thank you.