Earnings Call Transcript
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (BBVA)
Earnings Call Transcript - BBVA Q2 2022
Operator, Operator
Good morning, and welcome, everyone, to the BBVA Second Quarter 2022 Results Presentation. Thank you very much for your interest. I'm joined today by Onur Genc, BBVA Chief Executive Officer; and Rafael Salinas, Group CFO. As in previous quarters, Onur will start reviewing the group figures, followed by Rafa, who will go through the business area results. Then, we will move straight to the live Q&A session. And now I will turn it over to Onur.
Onur Genc, CEO
Thank you, Patricia. Good morning to everyone. Welcome, and thank you for joining us. So let me jump into it. Start with slide number 3. Before going into the details of the presentation, as you know, we announced a few weeks ago that we are applying IAS 29, which is hyperinflationary accounting in Turkey, in our business in Turkey, starting from January 1, 2022. So all the results that you would be seeing from this date show the fully adjusted figures. On the left-hand side of the slide, you can see our recurrent net attributable profit evolution, reaching €1.877 billion. One more quarter, we are posting record results. This figure, this €1.87 billion, excludes the negative impact of €201 million in the quarter due to branches repurchase agreement with Merlin in Spain, as you know we have done this transaction. And with these numbers, we are 45% above the results of the same quarter of last year and 41.5% higher than the first quarter 2022 results, restated due to hyperinflationary accounting. Even after including the negative impact of the Merlin transaction, even after including that, this was our best quarter. These excellent results bring our earnings per share, at the bottom of the page, earnings per share up to €0.28, 58% higher year-over-year, a higher growth rate than the net attributable profit due to the share buyback program that we are implementing, as you all know. And the graph on the right-hand side of the slide shows our capital position, our capital ratio at 12.45%, above our target range and well above regulatory requirements. Moving to Slide number 4. You can see the incremental contribution of different business areas versus the same quarter last year, basically breaking down the overall increase of 45% into different areas. As you see in the chart, especially South America and Mexico have outperformed, reaching very good results, as Rafa will explain later in the presentation. In the case of Turkey, it had a positive contribution in the quarter even after implementing the hyperinflationary accounting. It is worth mentioning that due to hyperinflationary accounting, we registered a negative P&L impact due to the value loss of the net monetary position of €524 million in the second quarter. So these results that you're seeing are obviously after all those impacts. Moving to Page number 5. I want to highlight the outstanding evolution in the quarter of our tangible book value per share plus dividends, which closed at €7.5 per share. 18.4% increase year-over-year in tangible book value per share plus dividends, and 8.5% growth in the quarter. Regarding profitability, we continue to improve our excellent profitability metrics, reaching this quarter 14.1% in return on equity and 14.8% in return on tangible equity. We remain, with these numbers, clearly one of the most profitable European banks, and we keep advancing on this metric, obviously. Slide number 6. What stands out in terms of the key messages for the second quarter? First, excellent core revenue evolution. In my view, this has been the highlight, 30% versus the second quarter of 2021, supported by the strong loan growth across the board. 12.6% growth in loans at the group level versus the same period last year. Second, our leading efficiency ratio improving to 43.9% in the first six months of the year with positive jaws. Third, we are also reporting a strong operating income growth of 27.1%. Fourth, cost of risk at 81 basis points, better than expected, better than 2021, and better than pre-pandemic levels, thanks to solid underlying asset quality trends that we'll be discussing in a second. Fifth, our capital position is comfortably above our target range. And lastly, the outstanding progress in key areas of our strategy, which then feeds everything else on this page. But our strategy is moving very well. We are reaching new record figures with 5.3 million customers acquired in the last six months of 2022, of which 2.7 million have been acquired in the quarter. And then also regarding sustainability, another key component of our strategy, we have extended €112 billion of sustainable financing since 2018. Again, a record in the quarter here as well. Given all this, we continue on the right path to achieve our ambitious long-term targets that we have disclosed to all of you in November last year.
Rafael Salinas, CFO
Thank you, Onur, and good morning, everyone. As anticipated by Onur, we are very happy to share with you another excellent quarter results in all geographies, supported by very sound operating trends across the board. Starting with Spain in Slide number 19. Another quarter with very positive business dynamics. The loan book is growing at 3.6% year-on-year with a strong performance of consumer lending, where we are almost delivering double-digit growth, and commercial segments also growing above 10%, mainly in short-term lending due to the recovery of the activity, leading us to gain market share in both segments during the quarter. In line with activity, all headings of the P&L evolved very nicely. First, core revenues grew close to 6% in the quarter, leveraging high fees, mainly explained by banking services fees and a higher contribution from CIB. And a very positive NII dynamics, growing at 5.6% quarter-on-quarter, driven by loan growth and disciplined price management with a clear focus on profitability. Second, cost control efforts are reflected in the performance of expenses, declining by 4.8% year-on-year, in line with our guidance, widening jaws, and improving the efficiency to an outstanding 46.7%. And third, on asset quality, we continue to see very sound underlying trends with lower NPL entries and higher recoveries, because the risk stands at low levels of 20 basis points in the year, below guidance. Due to a better than expected performance of the risk indicator, we are upgrading our guidance on cost of risk in Spain to around 25 basis points for the whole year. All in, very good results with recurrent net attributable profit reaching €1 billion in the first half of 2022. Based on the positive dynamics seen so far, we expect the loans to grow a low-single digit in '22 and the NII to grow around mid-single digit as the rate increase will start kicking in, in the second part of the year. Let's move to Mexico, Slide 20. Once again, we report excellent results. Net profit reached an impressive €1 billion in the quarter, being this one of the strongest quarters ever. In Mexico, we are benefiting from a strong activity and credit origination dynamics, with balanced growth on both retail and wholesale segments. The strong growth in consumer lending, supported by payroll and preapproved loans and also by the rebound of auto loans, our cash sales has taken off. SME loans grew close to 20% year-on-year, supported by activity recovery and our differential value proposition for this segment in Mexico. And finally, as we anticipated last quarter, wholesale portfolios have regained momentum in the context of higher investment and working capital needs. Moving on to the P&L. Results are excellent, reaching a new all-time record, driven by an outstanding growth of core revenues of more than 20% year-on-year. Strong NII growth supported by sound and robust loan growth and the continuous improvement in customer spend, benefiting from higher yield on loans, while the cost of deposits remains contained. Based on those dynamics, we have upgraded our guidance for '22. We are now expecting loans to grow at double digits and NII to increase around 20% above loans growth in a context of higher interest rates.
Onur Genc, CEO
In Mexico, we foresee bigger opportunities to strengthen our leadership. We have a clear organic growth warm-up in this country and we will continue investing in segments with greater value. Additionally, inflationary pressures and our growth strategy in the country have led us to adopt a more cautious outlook on expenses. We now see expenses growing slightly above average inflation in '22, maintaining positive jaws. Finally, on asset quality. Good underlying trends drive the cost of risk below 260 basis points. Low NPL entries and some recoveries make us upgrade our guidance for the year. We expect the cost of risk to end up around current levels in 2022.
Rafael Salinas, CFO
Regarding Turkey, we have experienced various events this quarter. As announced at the end of June, we are implementing hyperinflationary accounting in Turkey effective January 1st. The primary goal of this accounting method is to accurately reflect the real changes in activity, removing the nominal growth resulting from high inflation. As shown on this slide, we reported a positive net attributable profit of €160 million in the second quarter of 2022, compared to a loss of €98 million in the first quarter of the year on a constant basis. This improvement is largely due to the positive growth in revenues, better utilization, and reduced impairments. In terms of activity, lending in TL is controlled and is currently growing at 54% year-on-year, which is lower than the annual inflation rate of 79% recorded up to June.
Onur Genc, CEO
We need to assess our immediate situation before considering long-term plans. These points summarize our current focus. Concerning recession risks related to capital and any potential adjustments to our management guidelines, Britta, our management benchmark is set at 12, but realistically, let's say it's between 11.5 and 12. Focusing on the higher end, we have a requirement of 340 basis points. It’s important to note that while many look at capital, they often overlook this requirement. The significant gap here is crucial. The 340 basis points we have is considerably higher than the average of major European banks, which stands at 307 basis points for management reference.
Operator, Operator
Thank you, Onur. We are now ready to begin with the live Q&A session. So the first question, please.
Operator, Operator
The first question today comes from the line of Francisco Riquel from Alantra.
Francisco Riquel, Analyst
My first question is about Mexico. The results this quarter are impressive, so congratulations. Loan growth in Mexico accelerated primarily due to large corporates, increasing from 6% in the first quarter to 15% in the second quarter. I'm curious about what is driving this growth and how sustainable it is. Additionally, could you provide insights on the sustainability of the €1 billion quarterly profits in Mexico? With interest rates expected to rise further, at what levels do you anticipate a negative impact on the economy, loan demand, and cost of risk? Considering the U.S. economy is technically in recession, how do you view the correlation between the U.S. and Mexico during this economic cycle? My second question is regarding capital. Could you update us on the regulatory headwinds you previously mentioned, specifically the last guidance of at least 35 basis points for the year?
Onur Genc, CEO
On Mexico loan growth, if we focus only on the corporate segment, I would be a bit disappointed because that’s not the full picture. There’s growth both quarter-over-quarter and year-over-year. The year-over-year figures are already included in the presentation. For quarter-over-quarter, mortgages are up 3.3% just this quarter, which can be annualized. Consumer loans increased by 4.1%, and credit cards by 5.4%. For SMEs, a segment we are enthusiastic about and want to emphasize, growth is at 3.8%. Corporate loans have also seen an increase of 6.6%. Overall, there’s strong growth across the board. In the presentation, you can see the year-over-year growth of 18% in SMEs and credit cards, showing broad positive trends. Specifically regarding the corporate sector, investment numbers are looking a bit better for the overall economy, indicating some investment-driven trends. However, primarily, short-term working capital loans are contributing to the growth, as companies require that financing due to inflation. While the final quarter numbers aren’t out yet, we are gaining market share across the board, roughly by 40 basis points. I truly believe we have an outstanding bank in Mexico. It is an excellent franchise with a 24% market share in lending. The strength of this franchise, the talent we have, the customer loyalty, and our brand presence in Mexico are remarkable. The difference between us and the second player in the market is significant. Our Net Promoter Score and customer satisfaction levels illustrate this gap. We are delivering exceptional service because we have the top talent and the best franchise in the country. In that context, is it sustainable in the U.S.? There are uncertainties, of course. However, Mexico is poised to continue its growth. People are questioning why this is sustainable when the Mexican growth this year is projected to be less than 2%. Over the past 10 to 15 years, Mexico's economic growth rate has been around 2%, which isn't much different from what we've typically observed. It's important to note that the growth in Mexican banking isn't solely tied to GDP growth; rather, it's driven by increased penetration. In fact, banking loans as a percentage of GDP are among the lowest in emerging markets at approximately 39%. For comparison, Brazil stands at 70%. Therefore, regardless of economic growth, the expansion of lending and banking in Mexico is set to continue, which we believe will foster healthy growth for our balance sheet. In the vintages and new flows, we do not see any signs of deterioration at all. That is why we have upgraded the cost of risk guidance for Mexico for this year. Regarding regulatory headwinds, let me reiterate our previous position. At the end of January, I mentioned it was around 35 basis points. In the last quarter, we indicated it would be slightly higher than 35 basis points. Today, we have good news; it appears it will be lower than 35 basis points. However, it is a process.
Operator, Operator
Next question, please.
Operator, Operator
The next question today comes from the line of Benjamin Toms from RBC.
Benjamin Toms, Analyst
Two for me, please. You just printed an annualized ROTE of 14.8%, which you said in the presentation you'd hope to advance on. In this context, should we think about your 2024 guidance of 14%, presumably that target is now obsolete. Can we expect you to come back with a new target at the year-end? And what would the 14% target have been, do you think, if you'd advanced it in the current rate environment? And then on operating expenses, they're up 12% on a constant year-to-date basis. I think last quarter you gave us this number adjusted for a low variable comp base. Can you give the equivalent number this quarter, please, if you have it? And I guess in your perspective crucially, it's just below your weighted average inflation footprint. What you have penciled in for your weighted average inflation for your footprint in 2023?
Onur Genc, CEO
Very good. On the 14.8%, would we upgrade it or what would be our new number? That's what you're asking, as I understand, Benjamin. There was a cut in the line. But we just said it. So it 6 months ago. And the Investor Day was in November. And we have a 3-year plan. I see your appetite, but it's too early. And we will revise it. We will look into it. But at the moment, it's too early to talk about revising the goal after we said it 6 months ago. Just because the numbers are going so well, we should not be jumping into conclusions right away. We have committed 14%, and we are clearly on that point that we will deliver the targets that we have committed to the market. On the operating expense, regarding variable compensation, we are accruing it at the current figures, which are slightly higher. The accrual for variable compensation is reviewed approximately every six months, and this time we have adjusted it to reflect the levels you see. Therefore, a small portion of the increase is attributed to our strong results, leading to a slight rise in variable compensation accruals. As for weighted average inflation, it stands at 13%. While we don't have the final number yet, we anticipate it will be around this level due to the high inflation rates we are currently observing.
Operator, Operator
The next question today comes from the line of Maks Mishyn from JB Capital.
Maks Mishyn, Analyst
I have 2, if I may. One small follow up on Mexico. I was just wondering if you think that part of the acceleration in growth comes from the fact that there is consolidation in the market and some of your peers might have lost their focus a little bit. And then the second question is on macro model. Macro estimates have been downgraded across the board for most of the countries worldwide, but you improve the cost of risk guidance for most regions. And I was wondering if this is related to the fact that you have been more conservative with model input? And what kind of COVID-19 buffer do you still keep in your books?
Onur Genc, CEO
Rafa, please share your thoughts on this. I believe the situation is not solely related to our competitor being sold, although that certainly benefits us. There is currently a disruption in the market, which enhances our competitive position. However, I would not attribute our market share gains to that factor alone. When I analyze our performance against that specific competitor as well as others, I see that we are also gaining ground against additional players. My perspective is that the situation extends beyond just this one competitor, although the disruption has certainly contributed to our advantages. If the question is whether we are releasing any provisions from the macro models, the answer is no. We are not in a situation where we are releasing provisions due to macro conditions. Currently, there is a slight negative impact from macro modeling regarding future losses. However, the guidance we are providing indicates improvement because of the underlying risk parameters, which include usual business operations, delinquency rates, and non-performing loans. Both of these aspects, along with collections from non-performing loans and related accounts, continue to show very positive trends. It’s important to acknowledge the uncertainty ahead, as we are living in unpredictable times. Nonetheless, the signals we have at present are quite encouraging. The improvement in our cost of risk and guidance comes solely from the underlying risk metrics and observable trends.
Operator, Operator
Next question, please.
Operator, Operator
The next question comes from the line of Alvaro Serrano from Morgan Stanley.
Alvaro Serrano, Analyst
Can you provide an update on your capital expectations for the end of the year? I understand that the 35 basis points may vary, but could you share some insights on the progression from the current levels, given the recent changes? Additionally, do you foresee being in a position to consider buybacks, especially since your current program is ending? It seems important to address the concerns of investors disappointed by the situation in Turkey. On another note, regarding the bank tax, now that we have the details, do you have any initial thoughts on the information shared yesterday? Is there any consideration to apply the core charge, and what do you think about the feasibility of the tax proceeding as currently structured? Any early insights would be appreciated.
Onur Genc, CEO
On capital, let me clarify what I previously mentioned. The base case is that we expect to receive additional impact from the supervisor this year, specifically in the fourth quarter. There may be some adjustments to this timeline, as we had indicated in previous quarters that it might occur in the second quarter, which has now been extended. However, we still anticipate the charge in the fourth quarter. Regarding the charge, there's some uncertainty due to it being an ongoing process, which is why it will continue into the fourth quarter. Nevertheless, there is some positive news. Our original guidance was for 35 basis points, which was later updated to slightly more than that. Now, we are informing you that it is likely to be somewhat lower than 35 basis points. This will be our guidance moving forward, expecting it to be somewhat less than 35 in the fourth quarter. The only uncertainty here is the market component. The supervisory impact has some uncertainty, but it's manageable. The key uncertainty lies in the market component, particularly regarding yields. Despite different scenarios, we are confident we will exceed the 12% range by year-end. Regarding buybacks, our stance is consistent. We analyze situations as they arise. We raised our payout policy from 35% to 40% and then to 50% last year, and we have included flexibility in our payout strategy, allowing for some of that to be executed through share buybacks. So depending on how the share price evolves and so on, there is always that flexibility within the policy itself. Beyond that, we will obviously always look into where we are, where we would be. And it's an ongoing discussion, ongoing decision, obviously. On the bank tax, any early thoughts. The early thought is a very simple one. We really think this is bad for Spain. I mean, you put a tax on a sector if you want to restrict the activity of that sector. Banking sector does not have a negative externality, as economists call it, which is we don't create a negativity in the economy. We don't create a bad GDP feed. We actually prosper and we push the growth of the economy. As such, if you don't have a negative externality, why would you impose a tax on a sector that you need the most at the moment?... In that context, I hope that other countries also look into that empirical evidence and look into that academic work.
Operator, Operator
Next question, please.
Operator, Operator
The next question comes from the line of Sofie Peterzens from JPMorgan.
Sofie Peterzens, Analyst
Here is Sofie from JPMorgan. So just going back on the banking tax. From the outside, it seems a bit unfair given that the smaller banks are excluded. In Sweden, we saw a similar banking tax or, although much smaller, but the banks actually pushed back and it was kind of reviewed by the ECB. Do you have any similar plans of kind of pushing back and potentially saying that it's considered given that smaller banks are excluded? And also related to the banking tax, do you see kind of any potential banking taxes in any other of your jurisdictions that you operate in? So that will be my first question. And then my second question would be on Turkey. I know you say that the earnings contribution will be quite limited going forward. But in the second quarter, you printed €160 million net income. Could you maybe just elaborate a little bit more on how we should think about the Turkish earnings contribution going forward? Is €160 million sort of a good run rate? Or should we expect a smaller number? And then maybe just one final question. There were some press rumors about Onur, you leaving BBVA. Anything you can say here?
Onur Genc, CEO
I feel you should answer some of these questions, including my possible departure.
Rafael Salinas, CFO
Okay.
Onur Genc, CEO
So regarding the smaller players being excluded from the tax, the latest information we have indicates that it is still to be finalized, and there are still details to be clarified.
Rafael Salinas, CFO
The most recent information indicates that if the total net interest income, net commission income, and net fee income fall below €800 million, the entities will be exempt from this tax. This exemption applies to saving banks and similar institutions. When asking about the implications and whether this will impact competition, the clear answer is yes. There is no doubt that it will influence competition, and this situation is certainly unfair. Even as a sector-specific tax, it remains unjust, and creating competitive imbalances within the sector is, in my opinion, unfair and detrimental to the overall economy, leading to unhealthy competitive dynamics.
Onur Genc, CEO
Do we see any other tax discussions like this happening in other geographies? Not at all. And once again, I emphasize that this is not only true for Spain but for any country. Taxing the banking industry, which does not have a negative externality and actually needs to grow to support the rest of the economy, is not beneficial for any nation.
Rafael Salinas, CFO
On Turkey, first, I would say, Sofie, that the result of the second quarter reflects at the end of the day the good management of the great bank that we have there. I think, clearly, if you see, I mean, net trading income and also the fee income that we have there, this is very, very, very brilliant results. And then also, the team is clearly managing all the hyperinflation impacts mainly through the management of the ALCO portfolio with the CPI linkers. At the end of the day, they are just managing the day-to-day business. The reality is that a net monetary position above €5 billion is partially balanced by a CPI-linker portfolio close to €4 billion. So, the results reflect a good reality of business. However, as guidance for the future, the macro uncertainties are high, making it very difficult to predict how things will evolve.
Onur Genc, CEO
In that context, I hope that other countries also look into that empirical evidence and look into that academic work.
Operator, Operator
Next question, please.
Operator, Operator
The next question comes from the line of Ignacio Ulargui from BNP Paribas Exane.
Ignacio Ulargui, Analyst
I have two questions. The first is about your perspective on the Single Resolution Fund contributions and other regulatory charges banks face, which are expected to end in 2024. What can we anticipate in that regard? This could potentially offset some of the tax headwinds we've discussed previously. Secondly, I would like to understand more about the performance of fees in Mexico, even though I know you don't provide specific guidance on that. How sustainable are those fees, in your view? Additionally, could you provide some insights on the trends in insurance revenues? You mentioned that insurance revenues in Mexico were quite strong, so I would like to know what we should expect moving forward concerning these two areas.
Onur Genc, CEO
On the Single Resolution Fund, we contributed €251 million this quarter, which is about €60 million more than last year. There is a regulatory requirement to fund this pool until 2024 to ensure we have enough resources for potential losses in the future. The increase this year is due to two reasons: first, the multiplier has been raised to ensure the safety of this pool. There is a rule that if there is a consolidation within Europe, as seen in Spain last year, the consolidated entity is exempt from this. However, the main reason for the increase was due to the multiplier. I am providing this detail because there is a precise calculation on how to fund that pool by the time you mentioned. In that context, we do expect that the regulatory requirements will be fully met and that there will be sufficient funds in that pool, which will lead to a cessation within that timeframe. However, we will have to wait and see. Our base case expectation is that it will indeed stop, as there is a clear framework guiding us. Regarding fees in Mexico, the primary source of these fees is payments, and we are significantly increasing our market share in credit cards, point of sale systems, and the acquiring business. The year-over-year growth in the payment business in Mexico is 27% because we are gaining market share and exerting significant effort. There are a few key areas that I personally focus on with the team, including finance and risk. We are committed to expanding our payments business, which is why we achieved that 27% growth. As for sustainability, if we maintain our current trends and continue to build on our existing momentum, I have high expectations that our fee income generation in Mexico will persist.
Rafael Salinas, CFO
On the insurance topic, we are going, again, extremely well, growing double digits.
Operator, Operator
Next question, please.
Operator, Operator
The next question comes from the line of Andrea Filtri from Mediobanca.
Andrea Filtri, Analyst
Could you provide more details on your NII sensitivity beyond what is presented in Slide 44, so we can better observe it regularly? Specifically, could you explain by country what the NII would look like if we used forward rate curves with no deposit beta? This would help us understand your guidance better. Additionally, you mentioned cost guidance relative to a 13% inflation rate. Should we anticipate higher cost growth in various regions due to increased inflation, or do you plan to offset these costs in different areas? Lastly, regarding Turkey, while the macro environment is indeed challenging, the impact on the group is significant on a line-by-line basis. Can you provide a rough estimate of where you expect the main P&L lines to be by year-end?
Rafael Salinas, CFO
Regarding NII sensitivity, you inquired about various geographies and their realities. In our situation, the primary NII sensitivity to interest rates is related to the euro balance sheet. Ultimately, we have maintained the same sensitivity, which ranges between 15% and 20% in response to a parallel movement on the curve. At the end of the day, these are the assumptions related to the NII sensitivity that we provide. It's specifically about the term deposits and the amount we expect to transfer to clients from changes in rates.
Onur Genc, CEO
On the cost question, Andrea. First of all, when analyzing the cost number, it’s important to break it down and consider the mix of countries, as I mentioned in the presentation. If you focus on just two countries, which are relatively small overall, Turkey and Argentina, both experiencing high inflation, the 12% growth in costs would have translated to 3.8%. Looking ahead, we have confirmed the guidance for Spain, where we expect costs to decrease in the mid-single digits. We stand by that guidance, anticipating a decrease in mid-single digits.
Rafael Salinas, CFO
And in terms of expenses, clearly, around average inflation rate. And the cost of risk, we are expecting to be around 150 basis points given the high macro uncertainty.
Onur Genc, CEO
But the uncertainty of the costs going forward is that we don't see a major change from that 13% that you see.
Operator, Operator
Next question, please.
Operator, Operator
The next question comes from the line of Ignacio Terroso from UBS.
Ignacio Terroso, Analyst
A couple of quick things for me. Most of the questions have been answered. But the fees in Spain, if you can give us a little more detail, basically, of the delta between Q1, Q2. You're talking about like €40 million increase in the quarter. You mentioned CIB, but if you can put numbers basically to the different segments. And then in Mexico, if I have a look at volumes, if I have a look at customer spread, I might have expected probably NII to grow a little bit more. So I'm not sure basically if there is anything holding that growth back coming from treasury portfolios or any other aspect basically of the balance sheet? Or maybe my expectations were a little bit too optimistic.
Onur Genc, CEO
I will start with the second one. I mean, God bless you, Ignacio. I mean, you're expecting more NII in Mexico? No, compared to your numbers, I understand. I was joking. But in the first quarter, there was this BPA, inflation-linked bonds. Regarding fees in Spain, they primarily originate from our banking services, especially payments. We are actively promoting credit cards and acquiring business, which has helped us capture significant market share in acquiring during the first half of this year. The quarter-over-quarter growth in payments, including credit cards and POS terminals, is 24% in Spain. The total amounts to around €15 million to €16 billion. Banking services played a crucial role in this, showing a 14% quarter-over-quarter growth. The Corporate and Investment Banking segment performed well, achieving a 19% quarter-over-quarter growth. Insurance related to the Allianz deal, while still a small part, is also showing positive movement.
Operator, Operator
Next question, please.
Operator, Operator
The next question comes from the line of Daragh Quinn from KBW.
Daragh Quinn, Analyst
First question would be just on the level of inflation in Argentina and Turkey. Do you feel at some stage it could be worth stripping them out of the P&L and just reporting their contribution in terms of cash dividends that are actually paid out of those countries as they significantly distort revenues and costs relative to the rest of the group? And then a second kind of broader question.
Onur Genc, CEO
Turkey, Argentina, any comments, Rafa, on the inflation levels? I mean, if it gets any worse than this, it's even a much larger crisis. They are already too high in my view. But any comments from you?
Rafael Salinas, CFO
We have a base effect. The second half of the year will see improved inflation rates in both countries because they are comparing to lower prices from the first half of '21.
Onur Genc, CEO
The key risk we might face is, as I've mentioned every quarter, the situation in Turkey. There are many factors to consider, but the primary concern that could negatively impact our business there is the devaluation of the currency. This devaluation could also affect our foreign exchange lending portfolio. Therefore, addressing this issue is our top priority, and that’s what we have been focusing on. To cut a long story short, there are balancing factors. It's still uncertain. We have to be careful with the guidance these days. But we see positive trends for other reasons. As such, we are repeating our guidance as we have done today.
Operator, Operator
Next question, please.
Operator, Operator
The next question comes from the line of Carlos Peixoto from CaixaBank.
Carlos Peixoto, Analyst
The questions will actually be centered in Spain. One of them will be a bit of a follow up. If you could just repeat what type of growth in NII are you seeing for '22? And then a bit following up on that, you mentioned the mid-single-digit increase in loan volume. That's taken. I was wondering how you're seeing this behaving through segments. Whether you're noticing a lower demand on the market segments in light of the interest rates movement, of the recent interest rates movement and basically the concerns of higher interest rates capping demand on that segment? Overall, how you see that evolving? And then another question would be on the cost side. I believe that your previous guidance was a mid-single-digit decline. Do you keep it? Or inflationary pressures probably should deteriorate? Just how do you see things evolving on that front?
Onur Genc, CEO
We couldn't address all the questions, Carlos. Here are the key points: first, the growth of net interest income in Spain; second, the latest information on activity growth; and third, the cost side. Rafa, please take the NII discussion. To begin with, regarding activity, as you can see in the presentation, we are experiencing growth in the areas we aimed to develop. Looking to year-over-year growth in Spain, consumer and credit card, they are growing 8.6%. Very small businesses. The PMS, they are growing 3.8%. And the back segment, the commercial segment, the core commercial segment, it's growing 14%. Those were the areas that we wanted to grow, and we are growing very nicely in all of them. That's why we are upgrading or we are telling what we told regarding the activity growth expectations for the rest of the year. But you are right. I mean, we are in this uncertain period. We shouldn't be too rosy on the activity levels going forward in my view, because the rates would be going up. And given the uncertainty, given the impact on the companies, people might be shying away from taking that leverage, that additional leverage. Regarding costs, we are maintaining our guidance. In light of the inflationary pressures, we acknowledge the uncertainty, but we are standing by our expectations for costs to decrease in the mid-single digits.