Good morning, Miguel Maia speaking. Welcome to BCP Earnings Conference Call. As usual, I will mention the highlights of our performance and then Miguel Braganza and Bernardo Colasso will follow, providing additional detail. The first quarter proved particularly challenging with the global context marked by increasing instability and intensifying geopolitical tensions as conflicts erupted in the Middle East. These events have had a severe impact on international trade and energy costs worldwide, which in turn is affecting global economic growth. Despite operating in a complex environment, the bank's performance remains strong. Net profit grew by more than 25% year on year, reaching 306 million euros and translating into a return on equity of nearly 16%. This profitability underscores the resilience and ability of our business model to generate sustainable value as outlined in our strategic plan for the cycle up to 2028. Our commitment to creating value is matched by our ambition to increase shareholder remuneration. We exceeded our initial target in this matter, having announced last quarter the intention to implement a shareholder's distribution of 90% over results 2025. The competent authorities have, meanwhile, granted the required permission for our share buyback proposal of up to 40%. Yesterday, the Board of Directors approved the share buyback related to 25 profits that will lead to the acquisition of shares in the amount of 407 million. In Portugal, we achieved a net income of 265 million in the first quarter, an increase of 21% that reinforced the growth and profitability trajectory of previous quarters. This result is grounded in a solid balance sheet, rigorous and effective NII management and diligent cost control, while executing ongoing investments essential for the bank's future positioning. Our international operations posted a significant 65% increase, notably driven by Bank Millen in Poland, whose net profit rose by 68% to reach 71 million euros. This performance was supported by a strong commercial momentum and a 61% reduction in charges related to FX mortgage loans. The increasing containment of risk and impact associated with FX loans demonstrates the quality of the franchise and realized the potential for value creation of the operation in Poland. There was growth across several business lines, especially corporate lending, which increased by 26.5%, materializing an important priority of our strategic plan for this market. In Mozambique, although millennial BIM profitability continues to be heavily affected by sovereign rating impacts, the bank delivered a positive performance. There was relevant commercial activity, with notable increase in both customer resources and lending, maintaining a robust capital position with a capital ratio above 42%, and rigorous risk management, ensuring the bank's balance sheet remains a benchmark in the market. Millennium BEAMS is therefore well capitalized and positioned to take advantage of the economic growth phase that will be driven by the resumption of major natural gas projects. On a consolidated basis, the quality of our relationship banking model is evident with a rise of over 7% in customer loans and a nearly 8% growth in customer funds. We continue to operate with a very strong capital ratios, with a common equity tier 1 at 15.1% and total capital at 19.3%. These figures already account for the maximum value of the share buyback equivalent to 40% of the 2025 net profit and include just 10% of this quarter's profit in line with the new shareholders distribution policy. At the same time, we are continuing to improve balance sheet quality with a reduction of 238 million in NPEs year-on-year and a stable cost of risk around 35 basis points for the group and 33 in Portwell. At group level, our customer base expanded almost 5% in the last 12 months, reaching the 7.4 million customers mark, out of which nearly 2.9 million in Portwell. Most notably, mobile customers continue to grow at 80% per year, accounting for 75% of the group's customer base and 67% in Portugal. Individual and corporate clients continue to choose Millennium as their preferred bank, and our services were again awarded this year with several relevant distinctions. Our ongoing investment and continuous customer-centric innovations in the mobile platform, with a constant focus on outstanding user experience, have resulted in a consistent upward trend in both interaction and sales. This quarter, customers carried out 6% more transactions on the app, with a notable rise in transfers. Sales figures increased by 5%, highlighted by an 18% growth in card sales. customers are increasingly choosing the app as their preferred method for conducting their most significant financial operations as shown by the high penetration rates of the channel for example for services such as mortgage related related activities and the acquisition of personal loans or to perform financial investments with this week's general meeting if as expected the proposals submitted for the shareholders' decision are approved, a new term of office will begin. This will be a term of office in which we will maintain our purpose and commitment to innovation, operational efficiency, prudent risk management, and a strong value creation for shareholders. It is an evolution through continuity, maintaining the performance trajectory that has been consistently recognized by the market both in the execution of the strategic plans and the increase of bcp value i would also like to take this opportunity to express my gratitude to the two members of the executive committee who are leaving namely jose miguel psan and rui texeda for their exceptional contributions throughout their executive functions and in the preparation of the two outstanding professionals who will now join the executive team our commitment to creating more value remains unchanged. Miguel, the floor is yours.
Thank you very much, Miguel. Presenting now the income statement, as you see, a very resilient P&L with the net interest income, in spite of the general reduction of interest rates, growing 2.4%, in contrast to what's happening in the majority of the banks in Europe. Commissions growing also a very healthy 8%, mainly linked to asset management, insurance, and payments and and cards which means that the core income so the almost four percent operating costs at four and a half is our guidance with with a strong contribution here from IT investment that is part of our general adaptation institution to this new environment the core operating profit growing in spite of the reduction of interest rates. On top of this, we have other income, mainly in the sale of some legacy assets. That was a positive evolution this quarter, so that the profit before impairment and provisions grew around 10%. In terms of impairments and other provisions, a very healthy evolution of the impairments that stayed constant in spite of the growth in the credit portfolio and the strong reduction of, as anticipated, of the legal risk charges in Poland. I would like to highlight these four indicators in page nine that clearly are our benchmarks and what we want to be, with an ROT of almost 17%, 16.6, a growth in the book value per share plus dividends per share above 18% and an EPS growth above 29% so it is a really positive development going forward we continue to expect an ROT and the book value per share plus dividend per share rose in these high teams as you are seeing here in terms of the EPS looking at the future we also expect it to continue to grow materially above 15% for the years to come within the period of our strategic plan. Going now to our accounts in more detail, the NIM showed a strong resilience, reducing only 14 basis points in spite of the reduction in interest rates in Poland. And this explains why it was possible to grow the NII to 2.4%. It is together, of course, with the volumes. The neem in Portugal even increasing from 2.12 to 2.2, which is a good neem to have in a mature market, such as the Portuguese market, which together with the volume growth that we will see allowed us to grow around 10% in terms of NII in Portugal. In the international operations, and I would remind that when you compare quarter-on-quarter, Poland, which is the main operation, reduced the benchmark interest rates in the market almost 200 basis points. We only reduced the NIM around 60 basis points in spite of this 200 basis points reduction, and the NII reduced 3.7 percent. As we have pointed out in our previous conference calls, our expectation for this year is as the quarter's slow, as time goes by, is to have a quite stable NII when you compare it with last year, with the volume growth compensating the reduction in interest rates. Fees and commissions also growing healthy, both in Portugal and international operations, 8.5% in Portugal, 7.4% in international operations, both in banking fees and commissions and market-related, market-related includes asset management. Here, a strong contribution from clients, transactionality, cards, and asset management products. Other operating income, as you see here in page 13, the net trading income in Portugal showing here a very positive evolution in the quarter, mainly linked to the sales of some legacy assets that is obviously not recurrent on a quarter-by-quarter basis. So this around, this difference, this growth from 13.3 million to 37 million, I would classify this difference as a one-off. In the international operations, what we see is that there was some increase monetary contributions mainly in poland however this has more to do with the mix of the monetary contributions if we take a look at the the full year we expect the mandatory contributions to be broadly constant in poland operating operating costs uh evolving at the very contained and disciplined or in a very contained and disciplined way in spite of all the investments that we are doing as you see here mainly in the other administrative costs in Portugal the cost to income at 36% in Portugal the cost to income only at 31% so this clearly shows the competitive advantage that we have and the possibility that we have to remain and to be quite competitive in the market cost of risk also very contained so we are not seeing in our market any warning signals in spite of what's happening in the Gulf and of course in Ukraine so very much in line with our plan with a cost of risk in Portugal in the low 30s as we also have anticipated and in our international operations also reducing from 47 basis points to 41 basis points. This was achieved together with the continued reduction of our NPEs so that today, as you see, our hard NPE ratio, so the really day-past-due ratio is only at 1.2%, and the more traditional NPE loan ratio at 2.3%. In terms of business activity that explains this evolution of the P&L, we see that strong growth in customer funds, which shows the resilience of our business model and the ability that we have to originate new customer relationships and to deserve the trust of our customers in terms of our advisory businesses, asset management businesses that here grew more more than 10%, as you see, but also in terms of term deposits and of the transactionality that shows up in the demand deposits. And this in the several geographies. You see Portugal, a more mature market, we have been growing and gaining market share growing 6.3%. And in the international operations, where we are a challenger, mainly in Poland, growing 11.1%, with a very strong contribution, as you see here, from asset management also. The loan portfolio also growing well in Portugal at 9.6%. As I had anticipated in the last call, our objective for this year is to see some deceleration mainly in the mortgage market. So the mortgage market is very, very healthy in Portugal. We are expecting some deceleration in Portugal. However, to continue to grow, looking forward at the mid-single-digit level, no more bias towards the SME and the corporate sector. In international operations, a slower growth, but a very good composition. So what we had said is that we wanted to rebalance our business mix in Poland towards the corporate segment. As Miguel Maia commented, we grew more than 20% year-on-year on the corporate segment. This strong growth is continuing, showing that we really have a business model that works in Poland also for the SMEs and corporate segment. This last year, we have reduced somewhat our mortgage portfolio, as we had commented. However, in the first quarter of this year, it has already stabilized. So the mortgage portfolio that during last year, mainly the last two quarters was a drag in terms of volume growth will start also to contribute in in poland to the growth of the of the credit portfolio in terms of capital as you see a very a very strong capital position that compares well with the the minimum capital ratios both in terms of ct1 and in terms of of of total capital ratio here this next page i think it's very important to to understand the evolution of the capital of course in the data that we had presented in december 25 the the share by back that we are now going to implement was not deducted yet because we did not have the authorization it was disclosed that we had this objective and that this would represent 35 basis points so uh on a pro forma basis would have to just for the share buyback then the other the other elements of the capital waterfall i would say are more recurrent elements and others not so recurrent elements so the pnl and of course the distribution of the pnl as we are distributing almost everything and we as we are deducting from capital 90 of the pnl is not contributing to increase the material to increase the capital On the other hand, we are continuing to grow, to grow on a healthy way mainly in the corporate sector both in Portugal and in Poland. This growth in the corporate sector, of course, consumes more RWA than the growth in the mortgage segment. So these 20 basis points that we see here in the first four columns of the waterfall, What I would classify more as a more recurrent evolution of our capital ratio on a quarter-by-quarter basis, as I commented in the last call. As you may have recalled in our last call, I had commented that we should expect a P&L before distributions between 55 and 65 basis points on a quarter by quarter basis. We had here 70 basis points because of this extraordinary gain that I just commented. And in terms of RWA growth or RWA linked exactly to this strong focus on the corporate business, we would have, so to say, a consumption of RWA's between 20 and 25 basis points. This is exactly what I said in the last conference call, and this is what I am reaffirming here. Then there are other elements in our capital waterfall that are not so recurrent, so to say, namely the evolution of the IFS reserves. We do not have a very material exposure to interest rates in IFS reserves in terms of our fair value through OCI portfolio, but still with the volatility that we had in the market, this has an impact. Part of it has already been reversed, but there are some small changes here. And as time goes by, some of the securitizations that we have, namely here there was one important securitization in Poland, lose a part of its contribution to the capital ratio. This is something that when we take the view of the full year is not necessarily to be considered because what happens is that the securitizations lose their eligibility, they reduce, so to say, the secured amount, so to say. But what happens is that we, in the meantime, we prepare new securitizations. So right now, as we did in the last years, we are preparing new securitizations to be executed in Q3 and Q4 that will represent between one and two billion of risk-weighted assets. So these will be more than compensated as time goes by by new securitizations. and these other are some small effects that may work one way or another all of them are below five basis points typically linked to to market risk or to operational risk or to minority minority deduction so it's a small effect so all in all so the guidance that here i would like here to to comment is that it is a constructive view of of the capital position the capital is growing is evolving exactly aligned with what we wanted and it is, so to say, a virtuous capital consumption because the reason why we are consuming most of the capital is because we are being successful in terms of the implementation of our SME and corporate strategy in Poland but also in Portugal. This is the MREL, very comfortable above the MREL requirements, and we are executing our funding plan exactly as commented. The liquidity position, very robust, as you say, with the net loans to deposit ratio at 68%, which is important because this is exactly what allows us to be very confident in terms of the management of our spread on deposits. So if we were not in such a comfortable position, probably we would not be able to grow so heavily in terms of the deposit margin as we have right now. And I'll pass it now to Bernardo.
Okay. Thank you, Miguel. And good morning, ladies and gentlemen. And this time, in order not to take too much of your time, I will briefly go through some of the slides and I will not follow the full set of slides that you have, as you already had the opportunity to look at it. So, starting on page 26, net income in Portugal grew 21%, reaching $265 million. And as Miguel said, this performance was driven by the increase on NII of 9.1% and also by the strong improvement on fees and commissions that grew 8.5%. It's also important to highlight, as Miguel also stated, the disciplined management costs and costs in portugal just rose 4.5 percent on page 27 net interest income stood at 357 million in the first quarter of 2026 that is 9.8 above what was recorded in the first quarter of 2025 and this is equivalent to an improvement of almost 32 million let me also highlight here that on a quarter or quarter basis and i went up 4.1 percent and in the last this is something that we have shown it's the constant consistency consistency in terms of nii growth over the last six quarters regarding year-on-year evolution and as you can see also in the graph i mean it's important to highlight the increase of the credit portfolio and also the strict management of deposits more than compensate the effect from lower interest rates this means that the commercial activity was responsible for more than 25 million of the positive evolution of nii year on year and this also it's important to remember that it's important also to consider the decrease of almost 30 basis points of the average three-month arrival that was registered in the first quarter of 26 compared with the first quarter of 25. Moving to page 28, commissions amount to slightly more than 160 million at the end of the first quarter 26 increasing 8.5 percent that it 8.5 percent compared with the same period of of last year banking fees and commissions went up 7.1 percent supported by higher contribution from cards and transfers and also let me highlight the strong contribution and improvement from bank assurance fees regarding market related fees um that that there was a significant increase that is coming from security transactions, but also from asset management and third-party distribution of investment products. Here also on this slide, as Miguel said, there was some change and improvement in terms of the trading line that, as it was stated, it was mostly driven by gains from the disposal of some legacy assets steaming from the recovery of non-performing loans. On page 29, operating costs stood at 176 million in the first quarter of 26, 4.5% above last year. And the increase in operating costs in the Portuguese operation was driven by the increase on admin costs and amortizations and depreciations, as Miguel said, related with some investments. And as you can see, staff costs were broadly stable compared with the first quarter of 25. Cost to income stood at 31%. That compares with 34% in Q1 last year. And as I said, I will jump some slides. And if I may, I will ask you to move directly to page 33 to deep dive on volumes. On volumes and starting with customer funds, as you can see, there was a continuation of the growth trajectory reaching at the end of the first quarter, 26, more than 75 billion and compared with 71 billion in March 25. This represents an increase of 6.3%. I think it's also important to highlight the growth on balance sheet funds, which grew 5.2%, driven by the stabilization of term deposits and the increase in demand deposits. Off-balance sheet funds posted also a positive growth, increasing more than 10%, and this reflects what I already said, the growth in terms of the distribution of third-party funds, alongside with the positive performance recorded in sales of financial insurance products and by the improvement of asset center management. Gross loans stood at $44 billion at the end of March, 9.6 above the $40 billion reported at the end of the first quarter, 25. And this growth reflects, in one hand, an increase in mortgage lending, which rose by more than 11 percent. Semois also driven with some support by the state initiatives for young people and on the other hand by the positive performance in corporate lending, which was materialized in a growth of 7.6% or more than 1.3 billion debt in this portfolio related with companies. Once again, I will ask you to jump some slides and move to page 36. in the year um i mean leaving the portuguese operation um let's have a quick look on the on the international operations that as you can see there was there was a strong improvement and the contribution grew after deducting minorities almost 65 percent reflecting mostly the strong improvement from the polish operation bank millennium as i'm sure you have followed there the results disclosure on the 28th of April and it's it's this improvement in the in the Polish operation was somehow I mean apart from the the positive evolution on volumes but it was basically I mean it was improved it has improved mainly with a decrease related with with CHF with CHF costs but it's also important to highlight regarding Poland that, I mean, it has been applied since the beginning of the year, a higher tax on banks. There was also an increase in terms of mandatory contributions and the interest rates in Poland have decreased significantly. I will not detail, I mean, the following slides about Bank Millenium, but I would like just to reinforce, as I said, the resilience of NII, taking into consideration that there was a reduction of almost 200 basis points on the three-month viber registered in the first three months of 26, compared with the three-month viber registered in the first three months of last year. So, let's move to page 40. Once again, about volumes and starting with customer funds, as you can see, are still growing at the fast pace, reaching more than 35 billion. That compares with 30.6 billion euros, and this is in euros, from March 25. And regarding the loan book, it's important also to highlight the positive trends on mortgage lending on Zlotys and the strong increase on loans to companies that grew more than 26 percent compared with March 2025. Loan book growth was not more pronounced due to the continued chart production in CHF on the CHF mortgage portfolio. And to show that, I will ask you to move to the following page that provides some detailed information that I'm sure all of you are aware of it, but regarding the FX mortgage portfolio. So here, once again, it's important to mention the strong drop of the CHF outstanding portfolio that registered a decrease of 44% on a year-on-year basis and 15% on a quarterly basis. The percentage of the CHF loan portfolio at the end of march was just 0.7 of the gross loan book that compares with 1.4 percent at the end of the first quarter 2025 cumulative provisions for legal risk at the end of march 26 represented 169 of the outstanding chf mortgage portfolio and here and it's also important to highlight the significant drop in the number of individual lawsuits that is explained by the effort of the banks to achieve extrajudicial agreements, and even more relevant, as it was already mentioned, the significant drop of 61% of pre-tax costs related with CHF portfolio. Turning to page 32, regards Melanie Beam in Mozambique, reporting net income amount It was slightly above break-even, and the results continue to be somehow constrained by the provisions associated with the exposure to the sovereign debt in local currency. But it's also important to highlight that from an operational standpoint, net operating revenues are growing almost 4%, and costs are under control. And I will conclude here, but before we move to Q&A, I will hand the floor to Miguel Pereganza for some final remarks about the execution of the strategic plan on page 47.
As you know, around two years ago, we have presented, one and a half years ago, we have presented a plan to a market with a roadmap until 2028 that implies further evolution and, I would even say, transformation of the bank, a plan of growth in terms of number of customers, in terms of making sure that these customers use the mobile channel, making sure that our cost to serve these customers and our service quality, both in terms of quality of the advisory and quality of the transactionality, improves so as to achieve a low cost to income, a very controlled cost of risk within the limits of a present CT1 ratio and an ROE ratio that was above benchmark. And all of this together with more distribution, so to say, of these values, of the generated value to the shareholders. And at the time, what we had presented was 75%. What I would even here like to say is that in qualitative terms, we are clearly ahead of schedule. So in terms of the customers that we are acquisiting, in terms of business volumes, in terms of the conversion of our customers in more mobile usage or digital enabled customers, we are clearly ahead of schedule. and the fact that we are ahead of schedule in qualitative terms shows that our strategy is the correct strategy and we want to maintain the strategy that we have defined and we have presented to the market. Having said that, it is clear that we are overachieving this strategy in financial terms. So what we see is that we said that we intend to have an ROE above 13.5, for instance, that is the synthetical measure, as you see, and we have an ROE today close to 16%, and if we use the ROTE, even clearly above these values. We have also, in the meantime, proposed to the AGM and communicated to the market a new shareholder distribution policy that is basically a table that, depending on the need of capital, we could go up to 90% of value. So very clearly, we are overachieving this plan, as I have commented in the first page that we have commented here. We feel very comfortable that we will continue, as I commented in the first slide I presented, we will continue to grow book value per share plus dividend per share on the high-teams level. We will continue to grow, of course, EPS in the next years also on the high-teams levels. And we are also having an ROTE on the mid-to-high-teams. So, of course, we have been giving this guidance to the market in the several conference calls. But with the results of Q3, without changing the strategy, so we will maintain the strategy, but with the results of the Q3, we will give a more formal guidance of what is our objective for 2028. And we hope that with all this transparency and with all this commitment from our teams and the confidence from our customers, we will continue to generate and create more value for the different stakeholders. Thank you very much.
Operator
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one and one on your telephone and wait for your name to be announced. And to withdraw your question, please press star one and one again. Please stand by while we compile the Q&A queue. Thank you. First question today comes from the line of Max Mission from JB Capital. Please go ahead.
Hi, good morning. Thank you for the presentation and taking our questions. Two questions from me, please. The first one is on portugal given the strong quarter-on-quarter pickup in the name and the still high long book growth how do you see your nii guidance for 2026 and also if you could give us a hint on how the current rate curve impacts your 2027 outlook would be super useful and the second one is on your cost base some iberian peers are executing headcount optimization is this something bcp could consider as part of the digitalization and implementation of I.I.? Thank you.
Thank you very much for your questions. In terms of N.I.I., the last guidance I gave was the N.I.I. growth in Portugal growing between the mid-single digits and the high single digits. This was the last guidance I gave here. with the evolution that we've seen in the market interest rates right now we are much in spite of the fact that the bank is quite hedged but we are much closer to the high single digits and this would would run both for 26 and 27 so the the nii guidance that i would like here i mean assuming i mean the the market is very volatile but the nii guidance based on the current structure of interest rates both for 26 and 27 is on the high single digit area okay in terms of of costs um of course we are in a transformation phase we are in a transformation phase that the world is in the transformation phase we are exploring all or most of the opportunities that ai gives us We were clearly innovators in terms of service model, in terms of mobile, in terms of everything that has to do with technology. It's part of our DNA to be a technology-driven innovator, so to say, since the inception of BCP. And actually, there are several case studies on how BCP has been an innovator in technology since its inception. But there is here, so to say, a J-curve. So there is a phase of investment and then the phase of saving of the cost typically takes some time. What we are trying to do is to make sure that we profit from these opportunities and that we reinvent ourselves. In the period of this plan, I would say that the potential cost savings that we will be having, and we will be having some cost savings, will be invested exactly in the transformation to assure that the bank continues to be a reference bank, that the bank continues to be a main player in this. So I would not review our guidance, so to say, in terms of total costs in the mid-single digit area. What I would here say is that the composition of these costs will become more and more different. So we will probably have more and more, as time goes by, more costs related to change the bank, more to IT, more to technology, more to training, and somewhat less the pure traditional headcount costs. So, the guidance, we would keep the guidance in this mid-single digit area for the time Thank you very much.
Operator
Thank you. Next question today comes from Ignacio Olargi López from BNP Paribas. Please go ahead.
Thanks very much for the presentation and for taking my questions. I have to, if I may. The first one, Miguel, looking to the capital performance, how should we think about it? You have just given some sense that part of the impact that we have seen in the quarter might be recovered throughout the year. But how should we think about capital and distribution into 2026? Is 90% still kind of the current target payout ratio? And a link to that, actually, if we see an acceleration of lending growth, could we expect a relevant acceleration as well in NII? Is there a conversion effect on that profitability improvement that may be not captured at this stage in your guidance?
I mean, the answer to the second question is yes, it's mathematical. So if the growth of the credit accelerates even further, of course, we will go even more than what I said. It's mathematical. But I would say that at this point in time, with so much uncertainty in the world, probably what I would keep, so to say, the guidance that I gave in terms of volumes, except, I would say, if suddenly all this uncertainty that we are seeing in the Gulf, in Ukraine, and so on, in a very, I would say, Goldilocks scenario, suddenly the investment picks up. And potentially, in this scenario, we could have a much higher growth in terms of upgrade. But this is not our base case. In terms of our capital distribution strategy, first, I would like to highlight that we have been quite innovative here. So instead of doing what most banks do, that is presenting a target payout ratio, what we have said is we wanted to come up with a situation in which we we ensured a couple of objectives first we wanted to make sure that the market sees through and almost anticipates what may happen based on the evolution of the bank and that's why we have so to say a capital a maximum reference value for capital distribution that is a function of the ratio this assures this transparency okay but it also ensures strategic flexibility so if suddenly there is a much a much better so to say opportunity to create value in let's say growing smes in creating poland or in portugal we think that exactly the fact that we are giving quarter after quarter very close to the market. How we will reason and how we will go about it allows us also to do what at the end of the day is our main mission, that is to create value. So our main mission, I mean the capital distribution is a means, it's not an end. So what we want is to create value, is to create value. And thirdly, transparency, strategic flexibility and thirdly what our strategy assures is exactly this balance between discipline so that we do not accumulate unneeded capital and value creation. So the objective of the payout ratio is to assure this discipline because the market puts a premium to this discipline. So the objective is not 90% per se. The 90% is a means to assure discipline and is a means to be transparent and is a means to assure this strategic flexibility with value. Having said that, based on the projections that we have right now and based on the guidance that we've just given you, together, of course, with the fact that some of these securitizations that are coming to an end will be replaced by new securitizations, what I can comment is that it is still a likely scenario that we can reach the 90%. it's not the only possibility but it's still it is still likely of course if we do not if if we do not do it it is we do it for good reasons it's because we are creating even more value namely in terms of a semi-creator growth but it is still likely it is not i mean this is equity it's not fixed income so i cannot i cannot assure exactly what will be the growth the growth of what our clients will do, how our competitors will move, and what will be the growth of our trade portfolio in Portugal and Poland. What we have is, I mean, a view, this view will, the reality will then be the confrontation between this view and what will happen in the market in the next quarter. I remind you that it's still the first quarter. So, what we can commit to you is to give you and to keep you posted in every one of these quarter meetings, and you'll see in a much more transparent way and in a much closer way what we'll be doing and how we are reasoning and thinking about it.
Very clear. I mean, so in a sense, it will be that if the payout is 80 for the reason of growth, that will probably mean a better profile in the P&L. Yes. It is at the end of the day the conclusion of the message. Thanks very much.
And of course, I mean, it's better to have a smaller payout in a larger P&L than a larger payout in a smaller P&L, I would say.
Operator
Thank you. Next question today is from Francisco Riquel from Alantra. Please go ahead.
Yes, thank you for the presentation. Two for me, please, on margins and volumes. On margins, I wonder if you can update on the NII tailwind that we should expect from the hedging portfolio. You include in the appendix of the presentation with a yield of just 2.3% in 26-27. And if you can share with us how you are managing those rollovers if you are already looking forward agreements or if you will just replace those hedges at the prevailing rate at the time. And in this context, I just provided guidance for NII. I wanted to ask you about guidance for NIM in Portugal, which came at 2.2 in Q1. If you can please comment. And my second question on volumes, the sector in Portugal is growing loans 8% and deposits 6%, so a 2% touch point gap. The gap for BCP is 5 percentage points, so plus 10 and plus 5. And I wonder if you want to close this gap or not. In loans, you've mentioned that you're going to slow down the growth in mortgages. I don't know if this is housing demand or you want to be more conservative here. And then in deposits, you're growing a bit less than the sector. If you can please explain what is driving this underperformance, if it is growth in retail or corporate deposits.
So starting with your last question more around deposits gap and so on. So first, we are in individuals, we are clearly gaining some market share in terms of deposits. In the corporate sector, we are more opportunistic there in terms of term deposits. so we only quote when the price makes sense for us and given that we are in a situation because there is not so much franchise link to it. So mainly in the large corporate deposits, we are not overpaying or we consider all the costs and here and there, we may lose one or other large deposit to a competitor that needs more, so to say, the deposit that we do. But all in all, it is large corporate deposits But all in all, as you see, we are evolving very much aligned with this. In terms of the hedge of the balance sheet, as you see here in the annex, we have here a hedge book. and this hedging book that uses swaps and unhedged bonds, so to say, is used to hedge the balance sheet as a whole, so to say, and because it is used to hedge the balance sheet as a whole, what we typically do is that we have our own metrics, typically the standard of metrics of uh basis point value and so economic economic value sensitivity to to interest rates and typically what we do as most of the banks according to the guidance of the eba is that most of our demand deposits are modeled to a large part as a five years not not everything but to a large part is the five years as a five years zero coupon liability if you want most of it so what we tend to do is that we use the interest rate swaps and the unhedged bonds to hedge so to say these i mean the balance sheet as a whole and we we hedge both our demand deposits and so to say the beta part of our deposit so typically when we do it we'll take a look at I typically our term deposits have a beta of 50% so we typically in terms in terms of NII hedging we typically hedge so to say 50% of it to to emulate so to say the sensitivity of our margin to interest rate so this means that our margin is not very sensitive to interstate movements. As you see, when you compare with our competitors, we are in a very immunized margin. So the way to look at this slide in page 55 is that on average as these hedging positions mature, and not all of them mature in one day, we typically will be maintaining, so to say, this level of 32 33 billion plus the increase in the in-demand deposits and we will be typically be investing at the then prevailing five-year rates so i think this is a uh today the five-year rates are at at 2.8 so more than a a headwind i would say this is a tailwind so you should look at this page as the opportunity that we have as time goes by to reinvest for instance in 27 the difference between 27 billion and 32 billion that are now invested on average at 2.3 they will be invested at 2.8 if the five-year rates continue so this will be a positive contribution to the margin going forward and not a negative contribution okay okay let's let's move i'm sorry in terms of volumes i'm here i mean we don't to make it clear we we we don't we're not worried about having a a commercial gap so to say what we want to make sure is that the credit that we originate i mean pays well our cost of equity and that the deposits that we uh of course originate are well priced so to say that we make money on the on the on the deposit we want to grow in SME credit and we want to grow in corporate credit as we have presented in our strategy however what we don't want to do is to destroy value in this value in this in this growth so our I would say we will not grow credit just because we want to close the gap or what we want to do is to make sure that every credit that's decided really pays well the cost of funding and the cost of equity and we are not limited by the equity but we are very disciplined in terms of our cost of equity because we prefer to distribute if we have excess capital then to do value destroying business so we are not worried about about having a gap thank you for it thank you and the next question comes from Carlos Peixoto from CaixaBank please go ahead hi there good morning thank you for taking my question so I would actually have a couple of follow-ups which would be one of them on NII
basically you upgraded or you put the guidance on the top end of the previous guidance on NII for Portugal but basically if we annualize first you NII and adjust for the day count we will already be on a performer basis on an 8% year-on-year increase so my question here is shouldn't we see actually something above that considering that you'll be having some loan growth throughout the year and also some some tailwinds from from from interest rates even though part of that is etched um then the second question would be on capital or a second follow-up would be on capital um just a couple of issues here so you mentioned the secretizations of one to two billion um i just wanted just wondering here to clarify the one to two billion are the impacts in rwa's or are the size of the of the secretizations that you could be doing and then still within capital the 100 basis points sorry the 100 basis points increase in capital requirements in Poland in September that that should mean a lower deduction from minorities you have an estimate on exactly how much could that what that mean I'm calculating around 15 basis points but I wanted to cross-check that and then just sorry finally on cost of risk outlook maybe if you could comment on what what what you're seeing not what your expectations and whether you're seeing any any sign of situation in the corporate segment driven by the higher The rises in all you know in all prices. Thank you very much Okay, okay.
Thank you. Thank you very much I mean first in terms of NII. It is true that when when we Anualize what what we have we are already at 8% But it is also but it's also true that mainly when we consider what we had achieved in the in the end of last year it was also a positive it was also a positive evolution so looking looking forward we we want to maintain this high single digit high single digit maybe nine maybe seven it's also eight so let's see based on the uncertainty that we are seeing right now is is what we see the credit growth as you know the main impact of the credit growth mainly if it starts now or the start uh later in the year i mean in the year where the crate grows it is not it is not so material for the nii it becomes more material the year after because it does not contribute so much for the uh for the average balance so to say so create growth even if we grow a lot credit is here this may this may mean more 10 million of nii so to say so it is not so sensitive but it will be more sensitive for the year after and we will be here at the end of the year to see whether we can be more optimistic for 2027 but for 2000 at least for 2026 i think that it's now present to to to focus on the on the high single digit in terms of rwa in terms of the rwa the one to two billion are are traditional or are srt's so srt's and equivalent equivalent deals through insurance protections and so on and the values that i mentioned and they are not guaranteed but we typically do them we do them all the years but the the values that i mentioned are rwa's in portugal and in poland so to say the cost of risk as i commented in the presentation We are not seeing any warning, early warning signals that would point to an increase in the cost of risk. So, neither in Portugal nor in Poland. Of course, it's early days. And of course, I mean, every day we hear something new about Hormuz and we do not know whether the end will end today, whether it has ended or whether it will restart in one week and whether the the full prices will stay high for a very long time so it is it is a very complex situation the situation that we have right now but i would say in a baseline scenario and assuming that the the situation normalizes the type the level of cost of risk that we are seeing right now we do think it's recurrent yeah i'm sorry thank you very much okay i mean
the the additional requirements from paul from september 26 um that that will be around one one of the basis points this will have an impact uh at city one at group level of around 30 basis points but it's also important to highlight that i mean then this will have a positive impact on okay okay okay let's let's then move forward thank you we'll now take the next question this is from Alvaro Fernandez from UBS please go ahead yeah good morning thanks for taking my questions I have two first on
operating jaws you were expecting kind of flat operating jaws at a group level So revenues growing more or less in line with net costs. Is this still the case or do you now expect positive jobs in 26 and 27 given volume growth and a better yield curve? And second, there has been recent news on Fosun looking to divest their stake. So do you see any risks of a sale to a bigger player in Europe and then therefore BCP becoming an M&A target? And what actions could you take to protect yourself from that happening?
First, in terms of operating JAWS, we have to separate here Portugal from Poland. In Portugal, effectively, what we are pointing to is a growth in costs in the mid-single-digit area. And right now, what I commented is that we were targeting NII in the mid-to-high single-digit. If the NII goes to high single digit, there could be a slight positive operating jaws in terms of the recurrent NII and the recurrent costs, so to say. Of course, there are always some non-recurrent items, as it happened this quarter, that was positive, that may change this on a quarter-by-quarter basis, but this is the situation in which we are. In Poland, as you know, we come from a situation in which the interest rates were very high, where they went down very sharply and what we are trying is in spite of this strong reduction of interest rates to have a stable NII and the costs as the guidance in terms of costs are more on the high single digit area so in Poland we will continue to have negative operating jaws but from a very i would say from a very high value in terms of the the name so so all in all this is the the situation that we have but i would say slightly more positive at least in portugal in poland than what we had before in terms of our equity investors and so on i mean we are totally committed and totally focused in in creating shareholder value and we we we do we do not condition any of our investors neither institutional investors nor more strategic investors nor i mean on what they want to to do with their participation what we want to are totally and relentless focus on is on generating value and i don't think it is i mean even advisable for me to comment on what investors in bcp that's always an honor to have good investors in bcp i mean who want to do with their participation so we are totally focused on generating value and making sure that our share price reflects this value and i think this is the best thing to do for our for our shareholders thanks thank you next question today comes from maruna chareya from jefferies please go ahead good morning thank you very much for taking my questions.
Firstly, I have a clarification, please. Your high single-digit NIA growth guidance in Portugal for 26 and 27, does it assume any hikes from the ECB? And if you could please remind us what is your NIA sensitivity to 100 basis points higher rates in the Eurozone, and if there is a meaningful difference between your year one and year two sensitivity.
And then also on fees, I guess your fees are also performing better than your previous guidance, both at the group level and in portugal we are going above eight percent here and here and i think previously we're discussing about mid single digit growth in 2026 so just wondering if there is any upside there thank you very much uh starting starting with um with the uh the fees starting with the fees uh what uh i would like to comment is the the difference in fees is to a large extent also uh related to market to market related fees and to asset management fees and and these depend a lot in the situation of of the market so uh what we had commented before was amid single digits in a in a in in portugal probably right now given the performance that we had in the first quarter with more go to between mid and high single digit contingent on the on the market evolution The market has been volatile, as you know, and the retail investors close, as you know, because you're active in the asset management area, have also been volatile. But if the market performs well, if the retail investors come back, so to say, mainly to invest in products, there is room to go closer to the high single digit. If we have here more challenging market environment, probably the retail investors would focus more on deposits and on balance sheet products. Our projections and other guidance that we gave were very much aligned, have implicit, so to say, the forward rates. When we give the guidance, we typically give it based on the forward rate. So the numbers that I gave were basically, if you go to the present forward rate, the forward rate is off today, if you want. In terms of that reflects, of course, some ECB rate increases. In terms of our sensitivity, our sensitivity is a low to the margin. So our sensitivity in year one is both in Portugal and in Poland around two to three percent of the NII for each 100 basis points increase in the interest rate. So our NII sensitivity is very low. Our year two sensitivity is not an information that we have been giving publicly. probably is something that we have to improve but let me let me just check on and then when we start giving it let me we'll give it in a more formal way okay thank you we'll move to the next question and this is from dimitri kergan from medio banker please go ahead uh thank you yeah just two questions on volume growth in portugal firstly how much of the mortgage demand is doing by the
current government scheme for young borrowers and second how would you see the resilience of corporate borrowers to the energy prices right now and maybe if there's any guidance for the corporate long growth in portugal for this year thank you i'm sorry the the connection is very very poor i i only understood your in the first question i don't know if you can hear me better now yes yes yes yes yeah so the first question would be on the mortgages in portugal how much of the mortgage demand comes from the government scheme for the young borrowers and the second question is on corporate long growth is there any guidance for this year and how how the corporate
borrowers resilient to the energy prices right now okay thank you okay so um in terms of the percentage of the of the of the production it was done according to the guarantee was around 40 40 In terms of the corporate loan growth, there is some expectancy right now in terms of how the situation will evolve. We do expect the loan growth to be around the mid-single digit, but this is probably one of the most volatile parts of our P&L, because, or the most uncertain parts of our P&L, because it depends a lot on investor confidence, on corporate confidence, and due to current volatility, I mean, some of the investments are being at least postponed. So, I would say around mid-single digit, but it could be, I would say, low single digit or high single digit with an equal distribution. In terms of the impact of the crisis yet, as I've commented, we are not seeing yet any material impact of the crisis in terms of the business profitability of our of our customers up until now it is not happening but we all know that if this takes too long i mean the the the impact may be may be exponential we take some comfort from the fact that portugal has a large part of his of its of its energy um from renewables and portugal almost does not import any oil and gas from Hormuz from the Persian Gulf. So our providers come from other parts. So we will be more impacted by the price than by the quantity. So let's see. I would say if there is an issue, I would say probably that our economy will suffer much less than other economies. But, of course, if the situation remains for very long, I mean, all the world will suffer. So we have to be realistic about this. Got it. Thank you.
Operator
Thank you. As a reminder, if you would like to ask a question, you'll need to press star one and one on your telephone and wait for your name to be announced. And to withdraw your question, you can press star one and one again.
We will now take our next question. this is from cecilia romero reyes from barclays please go ahead um thank you very much for taking my questions the first one is on nii again um in a higher rate scenario do you expect the positive data to remain stable with current levels at current levels or is there a risk of further pass through that what we have seen in the past given that you are now growing more on corporate and SME, which are usually more race-sensitive. And then I would like to clarify, what are the rate of functions that are embedded in your Poland NII guidance, which is currently flattish? And then the last one is on provision.
I know you just said that there is no reason to change cost of grace outlook, and you're not seeing any declaration, and you're for now quite comfortable, but obviously the situation is very fluid. do you have overlay provisions available that could be used in the macro scenario detail days to soften the impact of changing macro scenario thank you so in terms of in terms of provisions we we have our normal normal provisions so to say that that come from the models and then Then we have additional provisions exactly to – so we have what we call the overlays that to cope with additional scenarios. These overlays are properly disclosed in our accounts and they are there exactly to cope with the potential scenarios and they are allocated to industries that are most sensitive to the current risks, so to say. Right now the overlays are slightly above 100 million in Portugal and around 40 in Poland. That's the situation that we have right now for these overlays. But all in all, we think this is aligned. In terms of the stable NIA in Poland, as you've seen, in Poland, the reference interest rate decreased very materially to around 200 basis points. Right now, the forward interest rates in Poland are, reasonably stable. And as I commented in the previous question, we typically give our guidance based on the forward interest rates. So the guidance that we gave was based on forward interest rates that are stable. This means that if this stability continues then to 2027, In 2027, we will start growing with volumes. In 2026, basically what we are expecting is that the volume growth will compensate this massive reduction in interest rates that happened in Poland.
Operator
Thank you. We'll now take the next question. This is from Luis Pratas from Autonomous Research. Please go ahead.
Good morning, everyone. Thank you for taking my questions. My first one is on the NIM in Portugal this quarter. I think there was a small pickup in NIM for Quarture Q&Q. I wanted to ask you what was the driver for this, whether there was any change in the mix, edging, or something else. Then my second question is on the CT1 this quarter as well. There was like a small admin from Available for Sale. and given the strong recovery in equity and debt markets in April, my question is whether we should see a tailwind instead in Q2 and maybe the full recovery of the 10 bips negative that you felt in Q1. Thank you.
Okay, starting on your last question, as you correctly pointed out, this is sensitive to the market. Our sensitivity of the fair value to OCI is very low, So with all that happened in the market, it totally impacted our capital ratio 10 basis points, which is very little. And, of course, a part of it has been already recovered in April. But I do not want to disclose any non-public information, but it's reasonable to expect that as interest rates then reduce, both in Portugal and in Poland, I mean, this has an impact on the fair value through OCI. So a part of it has already been recovered. I will not get into detail because this is not public information. In terms of NIM, I mean, actually our NIM is much more sensitive to the composition between credit and government debt portfolio than anything else. So there was not any special reason to explain this NIM, except the fact that we are having a larger proportion of our credit vis-à-vis government debt and this has, of course, a higher spread. In the meantime, as the interest rates have already picked up a little bit, in our deposit spread, as we have a beta that is not 100% but is typically 50%, even with a low sensitivity, this then has a small impact on the name. But I would not make it too much on the NIM in any specific quarter, because there will be always some small volatility in the quarter-by-quarter NIM.
Thank you. Maybe can I just do a quick follow-up? Maybe could you provide then a sensitivity to sovereign spread?
A sensitivity to the sovereign spread? Yes. Our sensitivity of our fair value to OCI to a sovereign spread, if all the sovereigns, the Polish sovereign, the Portuguese sovereign, and the European Union super-national go up by 25 basis points, the impact on our capital, so to say, would be around 50 million euros, it's very small.
Operator
Thank you. And there are no further questions, so I will now hand over to Mr. Miguel Braganza for final remarks. Thank you.
Thank you very much for your trust. Thank you very much for following our equity story and our story of value creation. We will continue with our plan to grow and to create shareholder value and to adequately remunerate our shareholders and we will ensure that we will not disappoint you. Thank you very much.
