Good morning, everyone. Here with me today are Onur Genc, Chief Executive Officer of the group; and Rafael Salinas, BBVA CFO. As in previous quarters, Onur will start with the presentation of group results and then Rafa will review the business areas. Then we will move straight to the live Q&A session. And now I will turn it over to Onur to begin with his presentation.

Thank you, Patricia. Good morning to everyone. Welcome, and thank you for joining our 2021 results audio webcast. I will start, as always, directly with the pages. Page 3, I will highlight some of the key achievements of 2021. First, the first line, we have made, in our view, significant progress in the execution of our strategy focused on profitable growth, at the same time, leading the digital and the sustainability space. We have ended the year having acquired close to 9 million gross new clients, an all-time record. 73% of our unit sales have been done digitally, another all-time high, and we are also at the front line of the industry in terms of sustainability. In 2021, we channeled more than €35 billion in sustainable finance. Second, today, we are reporting the highest recurrent results over the past 10 years. Net attributable profit, excluding some nonrecurring items, is above the €5 billion mark. Excellent results at operating level as well with operating income growing at double-digit 10.8% in constant euros versus 2020. Third, we'll continue delivering on our commitment to profitable growth and value creation for our shareholders, ROTE at 12% and a strong 10.1% increase of tangible book value per share plus dividends. All of this is allowing us to significantly increase distributions to our shareholders, including a proposed distribution of a cash dividend amount of €0.31 per share, the highest cash dividend in the last 10 years, and we are on track executing one of the largest share buyback programs in Europe. And last, we are on the right path to achieve the ambitious long-term targets that we announced in our Investor Day in November. These highlights are what I will be expanding upon in the coming pages. So Page 4, new customer acquisition. As always, I…

Thank you very much, Onur, and good morning, everyone. Let me begin with Spain, Slide 20. Positive loan growth close to 2% year-on-year in 2021, driven by a continued growth in the most profitable segments, consumer lending and SMEs and improvement in mortgage portfolio deleverage rate and a progressive recovery in the commercial segments, accelerating in the last quarter of the year. For 2022, we expect a slight growth in performing loans in Spain with consumer loans to continue growing at high single digit. Going to the profit and loss account. In 2021, pre-provisioning income grew 14.5%, thanks to core revenue growth and higher contribution from the net trading income. Core revenue growth was delivered by the strong performance of fees growing above 20% in the year with growth in more headings, mainly in those coming from asset management, banking services and insurance after the JV with Allianz. Expenses decreased slightly in 2021, reflecting our continued cost control effort that have offset the increase in the variable compensation as activity and result continue to recover. In any case, we should keep in mind that expenses compared with an abnormally low 2020. And when compared to 2019, they have declined by 7%. All in, we can see a very positive jaws in Spain this year that lead to an improvement in the efficiency ratio of 3.4% to 51.1% ratio in 2021. Sound asset quality ratios with cost of rate down to 30 basis points in '21 in line with expectations. All in all, very good results with net attributable profit in Spain above pre-COVID levels. For '22, in terms of the P&L guidance, we expect in Spain NII, excluding TLTRO, flat to slight growth. Net fees and commission flat consolidating 2021 outstanding levels. Expenses to decrease in mid-single-digit and efficiency improving…

Perfect. Thank you, Rafa. We have this goal of finishing our presentation by 10:00, so I will skip Page 25 and jump into 26, which is the outlook for 2022. At the group level, very simple. Core revenues, we are expecting them to grow around double digit, maintaining our strategic focus towards the most profitable segments, as you would also see in the growth that we have been driving in this year in different portfolios. On costs, we expect the growth to be less than inflation and efficiency to improve across the board in all the countries. Cost of risk is expected to be around 100 basis points, slightly better than pre-COVID levels. And lastly, sizable distributions to our shareholders will continue in 2022, with the full execution of the €3.5 billion maximum share buyback before October. But again, we expect it to be lasting 4 months, and we expect to start the second wave in March. And with this, I conclude the presentation. I go back to Patricia for the Q&A. Patricia?

Thank you, Onur. We are ready now to begin with the live Q&A session. So the first question, please?

. The first question comes from Maksym Mishyn at JB Capital.

I have two, if I may. The first one is on Turkey. I was wondering if you could update us on the approval process for the Garanti beat? And what acceptance rates from minorities would you consider as a success? And then on Mexico, I was just wondering to hear your view on sector consolidation. Would you favor domestic consolidation or a new entrant in the case of potential acquisition of Banamex? And do you think that it is possible BBVA could become one of the bidders? And what time line for the process do you expect?

Perfect. Thank you, Maksym. Very quickly, Turkey approval process, it's in its path. It continues. We guided when we announced it back in November that it will be in the first quarter of 2022. That's still the expectation. So the regular approval processes continue. You asked about the acceptance success, what do we expect and so on. As again, we mentioned back in November, we are happy with any outcome on that one. We would be happy to get it all. Or as you know, we own 49.85% of shares guaranteed today, and then we pass the 50%. So if we get another 0.15% of the shares, we pass this important threshold of 50%, which gives us flexibility, a big optionality for the future of getting shares without the full tender. So with respect to market, we do think that our offer is an attractive one. Whatever the outcome, we will be fine. We will be happy with any of the outcomes that might be coming out. You asked about the consolidation process in Mexico. Obviously, we don't comment on potential transactions and who might buy, who might not buy and so on. The only thing I can tell you is when you look into our results in the last few years and even today, for sure, today, Mexico is so important for BBVA as a country, as a business, as a franchise. We will continue whatever happens. Whoever buys, whatever happens, we will continue to invest and we will continue to grow in the country. We do have the best franchise in the country, in my view. By far, I'm a very quantitative numbers focused person and I look into ROEs and I look into NPS, customer satisfaction, I mean efficiency, whatever number that I look into, I see an amazing franchise of BBVA in Mexico. And our goal would be whatever outcome of this process is, we will continue on that path.

The next question comes from Benjamin Toms at RBC.

The first one is on Turkey. Inflation data is out today and the official estimates inflation is running around 49%. People keep track of this number due to potential implications for hyperinflation accounting, which will be unhelpful for the valuation of the Turkish franchise. When you talk to accountants and just interested, when you talk to them about Turkish inflation, do they focus on the official estimates? Or do they also take into account unofficial estimates, which tend to be higher? And then secondly, can you just give us an update on your digital push into Italy?

Very good. Thank you, Benjamin, for both questions. On the hyperinflation in Turkey, first of all, it's a decision of the accounting board. So the accounting board decided on this. It's not like us or -- and they look into multiple metrics. So it's a decision of an external party. But as you know, the decision-making on this is that the 3-year, 3-year cumulative inflation, if it exceeds 100%, then it gets into a pool of discussion and decision. It's not an automatic decision. Many other factors are recounted. If you look into the details, for example, the evolution, the trend of the inflation and so on, I mean whether the population keeps their wealth in nonmonetary assets, it's a long list of different criteria. But for that criteria to be discussed, as far as I understand, the Board first considers whether the 3-year cumulative inflation is above 100%. There's one good news on this one, which came 3 days ago. I think for 2022, the accounting Board decided that hyperinflationary accounting will not be applied in Turkey. So 2022 is not -- is clear. For 2023, let's see. This 49% that was announced today this morning actually was expected. It's not a surprise actually. So we do -- our BBVA research team, they do expect this to continue for the next few months and quarter -- actually, quarters. But then they see if the situation continues as such, they see a tempering in inflation in the third and the fourth quarter and so on. So to cut the long story short. 2022 is safe. 2023, it's not an automatic decision. It's the decision of the accounting board to look into this. As far as we understand beyond the cumulative 100%, which might be broken in this case, the trend…

The next question comes from Alvaro Serrano at Morgan Stanley.

I've got one on capital and another one in costs in Spain. On capital, I'm just trying to get my head around because I remember in Q1 2020, capital also dipped and then it bounced back. Obviously, the market element, those 11 basis points that you've called out, presumably, we can hope and that's kind of a question, we can hope that comes back. But I wanted to focus on the 29 basis points. Onur, you mentioned that it was strong activity in credit growth, kind of a good problem to have. But the reality or at least my perception is a lot of it is a very strong growth in Turkey, obviously, related to the inflationary situation. And ultimately, that's despite the returns are high, they're high for a reason. And the PE multiple, the market is being very, very low. So can you sort of confirm if that's the case? And if you are deploying more capital de facto in Turkey organically, wouldn't it be more sensible to cut back on lending at this point? So that was on capital, sorry. And very quickly on costs. In Spain, I think Rafa said mid-single-digit growth in costs in Spain. And that's despite the €250 million cost savings that you achieved with the restructuring. I just want to understand what's going on because salary inflation is not that high in Spain. And my understanding is the collective bargaining agreement reached until 2023. I get your point about variable pay, but just a bit more explanation around that figure, if I got it correct.

Perfect. Thank you, Alvaro. Rafa, maybe you take the second one. On the first one on capital, Alvaro, a very good question. But your deduction of a good part of this is coming from Turkey is wrong because the Turkish loan book increased. You see it also in the presentation. In the -- when you look into different countries and so on, this is in Turkish lira. So the Page 12 of the presentation that you have seen, the number that you see for Turkey is actually declining in the fourth quarter. This capital evolution, 29 basis points, is the fourth quarter number, the fourth quarter evolution that we are looking into. So not at all because this is in Turkish lira, and then it depreciated in current euros. The capital consumption is not coming not at all from Turkey. It is coming from. If you go to the country pages that, again, you have in the presentation and that Rafa explained, in Spain, we have grown our what we call back midsized companies segment. We grew our loans in mid-cap 10%. And stock growth of 10% in Spain, in my view, is an amazing number. The other portfolio that you see in Spain that has grown is 9% consumer business, consumer lending. You know the yields there. I mean our average yield is around -- customer yield is -- lending yield is 6%. These are very high-return portfolios. Then the other key portfolio that has grown in the quarter is if you go to Mexico, you see credit cards, 13.4% year-over-year growth. And you can compare that with the previous quarter to deduct also very quickly the quarterly figures. And SMEs, 15% growth. Our growth is coming from areas where we wanted to put capital. I'm very clear on this. We only grow. We have this -- I mentioned this to some of you or all of you, I guess, in one of the results presentation. We have this micro capital planning process. You have to show as a business unit, even as an RM, if you are a corporate or mid-commercial RM, you have to show that the lending that you do to a business, to a client, to a customer or at the portfolio level, if it's retail, it has to deliver a certain return, and we adjust that certain return to the realities of where we are in which country we are, in which portfolio we are and so on. That's a micro capital planning process that we have in the bank. You cannot grow in areas where the capital return is not above the cost of equity of putting that capital in there. As a result, basically, you see it in the figures, the growth and this 29 basis points, I'm very happy with that 29 basis points because it came from areas where there is a lot of capital return. On the Spain question, Rafa?

In Spain, Alvaro, I think the guidance for '22 is just a decrease on the expenses at mid-single digits. The fact is that, as you mentioned, clearly, the restructuring program is going to provide a saving of €225 million on a 12-month basis in Spain and an additional €25 million at the corporate centers. So at the end of the day, this €250 million are going to allow us just to decrease the expenses in Spain in 2022. Regarding '21 number, in fact, I think some savings were already included. I think it was €66 million in '21 and around €16 million -- €9 million in the corporate center. That compensates the increase on the variable remuneration given the good results. But for '22, as I said, the guidance is a reduction of mid-single digits.

And maybe -- Alvaro, maybe it's also important to confirm that when we did the collective saving, the destruction program in Spain there, we committed €250 million savings a year for that program. We can confirm to you that the €250 million still holds.

The next question comes from Sofie Peterzens at JPMorgan.

Sofie from JPMorgan. So I was wondering if you could update us on your hedging policy, especially for Turkey. Could you kind of give an update on how much of the profit on capital in Turkey has been hedged? How much you have paid for the hedges? And similarly, could you also update us on the hedging policy for Mexico? And then the second question would be on Turkey, again. Net interest income is very, very strong in the fourth quarter. Kind of how -- and I know you said NII will grow a high yield on the loans in 2022. But what are your underlying assumptions kind of for Turkey? And how do you see things evolving from here?

Perfect. Maybe Rafa, you can take the guidance for 2022 and Turkey. On the first question, the hedging policy for Turkey and Mexico. As you all know, we do have this 30% to 50% of our incoming year profits to be hedged in the P&L level. And as you also know, we also hedge the capital 60% to 70% every year, we hedge the excess capital of respective subsidiaries that we have. This P&L hedging, it's a flow hedging, obviously, 30% to 50%. We have done much more than that in the previous years because we were -- we wanted to be even more cautious, and we wanted to -- the markets were also helpful and friendly on that one. So we have done more, but the 30% to 50% is our policy. And what we typically do is that we start hedging for the coming year in the fourth quarter of the previous year, and we typically complete that get to those levels, again, depending on the market situation, in the first quarter of the respective year. Having said this, given this whole policy, as it stands today, the 65% of the results of Mexico is hedged, 65% and 20% of results in Turkey is hedged. Also for Peru and Colombia, basically, it's all hedged 100%. The reason that it's 65% in Mexico, 20% in Turkey as it stands now, again, we are -- every day, we are dynamically evaluating and increasing if we need it. It depends on the market conditions. And the key thing here is the cost of the carrier, the cost of the hedge, the cost of the carrier. So we have to look into the market conditions. We have to lay our perspective on what might be happening with the costs, and we adjust accordingly. So that's the policy, and that's where we are as of today. On the Turkey NII, Rafa?

On Turkey, I mean, the guidance, you have seen is just that the book, the loan growth is going to be around 25%. Clearly biased in favor of the TL book, growing around 39% on Retail and 16% on Commercial. On the other hand, we -- I mean, keeping our strategy to continue reducing or declining the foreign currency loan portfolio. We are expecting that book, the U.S. dollar limited loan book to decrease around 13%.

The next question comes from Ignacio Ulargui at BNP Paribas.

I have two questions. One is on capital. I think, Onur, during the Investor Day, you flagged that you would expect in the bank to generate around €1.2 billion, €1.5 billion of capital every year. I wanted just to see whether that is pre or after RWA growth? And what kind of RWA growth we should expect into 2022? Just to get a bit of sense of the organic capital generation of the bank. And second question is on Mexico. We have seen a strong growth in SMEs and cards in '21. I was wondering in the mid-single-digit growth guidance which are the segments that you are just sort of like expecting to grow faster and also whether you are taking into consideration current market expectations of rate hikes in Mexico.

Perfect. Thank you, Ignacio. On the capital, yes, it was €1 billion to €1.5 billion organic capital generation. This does include for sure the RWA growth because it's EBIT driven by us, and we know how the markets will evolve. So it's more estimable and calculatable. It does not include the regulatory and supervisory impacts and also M&A because they are one-off things, and you cannot judge sometimes. It's a bit unexpected and this and that. So the regulatory and supervisory impacts and M&A is not included, but everything else is included in our capital planning. With those RWA estimates that we have increased estimates that we have, we do create €1 billion to €1.5 billion average, depending on the payout in the coming years. Then the Mexico question, the growth is still going to be a biased towards retail. Retail has been the driver for many years and also last year, 9% growth in retail balances, very high return books. We do have amazing competitive advantages, let's say, in that segment. I mean, I mentioned it before. We do measure the success or the strength of our franchise with the relationship on the cash management side, on the daily banking side that we have with our clients. So on retail, it's about payroll, it's about credit cards and so on. In the case of a company, it's about cash management and so on, and then using technology tools to be able to provide those services to the clients. In the case of retail, we have close to 40%, 4-0 in terms of salaries paid, volume of salaries paid, 40% market share in Mexico. And we do think that that's a great competitive advantage, and that helps us in gaining further market share in retail credit cards. We have gained a huge amount of credit card market share this year, and we will continue on the retail growth. So biased towards retail. We will see how the investment demand will be on the enterprise side, on the company side. But I would -- we are -- at least in the plan that we have, we are putting more focus on the retail side.

The next question comes from Marta Romero of Bank of America.

I've got a couple of follow ups in Mexico. Can you be more explicit on what are you expecting for interest rates this year, CPI and GDP growth? And then if you can give us more color following the Matt's question. How do you see the year starting for SMEs and corporate demand? Do you expect growth, any growth this year in that book? And just quickly, sorry, on fees in Spain, if I understand correctly, you're guiding for just flat, which seems a bit weak relative to the guidance given by other banks in Spain. What is driving that? Could you split banking fees versus asset management fees?

Perfect. Maybe Spain, you can take, Rafa. Very quickly on Mexico. The interest rates, 5.50% was the end of the year, as you know very well, Marta. We are expecting that 5.50% end of year to go up to 7%, so 150 basis points. That's what BBVA Research is estimating on what might be happening driven by inflation, so 150 basis points increase in the rates. And as you very well know, we are asset sensitive in basically all of our geographies, including Mexico. Our NII is positively correlated with the rate rises, so we will hopefully get some help from this as well. Regarding the other macro parameters that you asked, the GDP growth that BBVA Research is expecting for Mexico for the coming year is 2.2%, lower than obviously this year, lower than potential in our view. But this -- let's see, I mean it's -- the supply chain bottlenecks and all of that will feed into this, but 2.2% is the current expectation. And inflation expectation that we have for Mexico for 2022 is 4.1 average. This year, we expect it to be 7.4, the final number and next year, 4.1. Regarding the loan growth, do we expect loan growth to happen in SMEs and Commercial? The answer is yes. So you were asking that it can be negative. Our clear expectation is it will be positive. You see even this year, the SME book has increased by 15%, not purely because of the market. We are gaining market share. The reason is that SME is a segment that we like across the board. We do have a clear program on it globally. We did create what we call Banco de Barrio, a very strategic program in Mexico, and we are getting benefits from that program. And that program is going to continue to give us positive growth in lending balances for both SMEs and I would say, what we call the back mid-corporate, mid-companies segment as well. Rafa, on Spain?

On the fees in Spain, I think this conservative guidance that we are providing for '22 is based first one on the outstanding performance of the fees in 2021, clearly, with very high levels. Second, we want to be conservative on the contribution of the asset management related fees given the very good performance of the markets in 2021 and the uncertainties clearly in '22 in terms of market. But underlying, I think we continue seeing very solid dynamics in terms of activity and especially on those related with rationality and activity.

Next question comes from Andrea Filtri at Mediobanca.

First question on fees. If you could give us the contribution of upfront and performance fees in fee income in 2021 and in Q4? And the second question is on the NII and cost of risk guidance. Could you disclose what absolute contribution from ALCO portfolio you are assuming in 2022 versus 2021? And in the cost of risk guidance, if you could detail if you have any assumptions of write-backs from COVID overlay provisions? So finally, if you can just remind us of the TLTRO maturities.

Perfect. On the fees question, Rafa, if you have it, please say it, otherwise, we can come back to you, Andrea. On the NII and ALCO portfolio contribution to NII, the ALCO contribution, we didn't increase the contribution of ALCO yet. We wanted to see the markets before we can decide on anything. We kept basically our ALCO book in the planning cycle, at least. It is changing. It might change that decision in the coming months depending on how the yields evolve. But we kept the ALCO portfolio size relatively flat and replacing the ones that are expiring, but not doing much beyond. You might have seen that our HQLA portfolio, it's in the backup of the presentation as well. Our HQLA portfolio have come down. We had a very short-term HQLA portfolio to manage the liquidity basically, but we have been holding on the decision to increase our ALCO book until we see the yields tick up a bit. Let me say it that way. We are seeing some of that. But again, in the planning cycle and in the forecast in the guidance that we have received, we have not put an additional incremental -- materially incremental contribution from ALCO books. On the cost of risk guidance that you are seeing, we will see how it evolves, Andrea. But we do have these -- I don't want to call them buffers, because they are there for a reason, but we have built up some COVID related that we call them buffers, it's fine. It's the easier word to use. And a big chunk of that was for Spain. And we wanted to see how -- what we call the ICO loans, the government guaranteed loans behave, because some of those loans were given 3 years ago. They…

Sorry, no, I didn't follow with you because I was...

The TLTRO maturities, the 38, it we will be -- the €11 billion is expiring this year. And then in the next 1.5 years, we will -- all of that will be expiring in the €38 billion basically. I answered it very quickly. On the fees, on the performance and the success part of it, do you have any details on that one, Rafa?

Okay. On the TLTRO, I mean the relevant maturities in June '23 with €21 billion, but before that, we have €7 billion by the end of the year and another €1 billion on the end of the first quarter of '23. And in terms of the composition of fees in Spain, I mean, Andrea will provide you with more detail. But just what I have in mind is just the fees for asset management is around €900 million in 2021, around 70 or 73 out of those 900 are performance fees related with the behavior of the markets below the funds.

Next question comes from Carlos Peixoto from Caixa Bank.

So the first question was actually a follow up on one of the earlier questions, which is regarding dynamics. I was just wondering because it didn't come out clear to me whether you see yourselves as a potential bidder for this unit or whether you think that given your size in the country, it will make sense to acquire it? And if you see it yourself as a bidder, how would you think that this deal could be structured? I'm asking here whether you could have to finance it through a capital increase. Secondly, in terms of outlook, I was -- well, fees in Mexico in the fourth quarter have an exciting performance. Let's call it that way. I was wondering how do you see the trends going forward? And what type of restrictions what frustrations -- you see in fee income evolution in Mexico?

Very good. Carlos, on Banamex, we don't comment on potential transactions. We don't. I mean we don't know even how the transaction will be structured in what way, form or so on. So we don't comment on the potential transactions. On the outlook for Mexico on the fee income, the fee income for the fourth quarter was partially affected by the CIB situation, and that might -- as you know, that's a very volatile or quarter-to-quarter different performance. We are very positive on the fee income evolution in the coming quarter. As you know, a large part, the majority, actually, a large part of the fee income in Mexico is driven by what we call payment systems. Overall, the credit cards and POS and so on. And we see very positive dynamics there, very positive dynamics. Hence, the numbers will be strong, might be even in 2022.

The next question comes from Carlos Cobo from Societe Generale.

Can I please ask you to clarify the TLTRO III impact in NII in Spain? We have the total TLTRO III number, but if you could just clarify how much of that is Spain and what is the step down? Just to follow up on that previous question, which I think it was a focus for me, one on tangible book value per share. If you don't mind explaining their performance, in the quarter. I was expecting some drops driven by the Turkish lira depreciation, but it actually went the other way around. So I was wondering if the capital was held in excess of the capital surplus or how do you manage to offset that currency impact in tiering? And also, if you could guide us to what is the total expected hedging costs, to be booked against capital in 2022. What's going to decide and how that compares with 2021 due to the high cost in Turkey?

Very good. Maybe the last one you can get, Rafa. On the first one on TLTRO, Carlos, €97 million is the expected hit for the expiration of TLTRO minus 100 basis points impact, so it's going to be €97 million to be precise, impact in net interest income. But as you all know, there is this discussion of increasing the tiering multiplier, which we will -- I presume you will know in the March meeting, so we will see in March whether the hearing multiplier has increased. That might have a positive impact. Independent of that decision, though, the expiration of the program in June 2022 has an impact of €97 million for net interest income. Tangible book value per share. We actually have increased 1.6% in the quarter. You should know that 0.3% of that was due to accretive impact of the share buyback program. So at the end of December, a certain part of the shares were obviously purchased. At the end, we started in November, as you know, November to end of December, we acquired some shares. And as you know, we are acquiring shares at lower than tangible book value. And as a result, you create some accretive impact in tangible book value per share, but that's only 0.3%. The other 1.3% of the 1.6% is basically helped by the profits. I mean we have €1.3 billion, more than €1.3 billion profit in the quarter, and that's the key core positive impact for the numbers. For the third question, Rafa?

In terms of the planning, what we do is just to take into consideration the differential of interest rates between the different currencies. So at the end of the day, we are just including all our planning process that carry all the hedges or the P&L against -- P&L and all the hedges against capital go against the capital base.

The next question comes from Ignacio Cerezo at UBS.

I've got 2. If you can give us your best approximation of how much RWAs are going to grow in the year is a mid-single-digit number is a reasonable ballpark for you? And then the second 1 is on the capital return. Do we need to work with a 50% payout ratio? Or do you think there's a space for extra dividend or another buyback in the back of '22 earnings?

Okay. Let me start with the second one. When we sold the U.S., it was all triggered by that. It was a big decision, obviously. And then in that time, we said we will do a few things to be able to create value for the shareholders. I underline this, create value for the shareholder. We said we will be investing in profitable growth in the markets that we are in. That's what we are doing, as you see in the figures, and we will be increasing the distribution to our shareholders. The €3.5 billion, it's still -- it's one of the largest share buyback program that has been announced in Europe. And then we then increased our payout from 35%, 40% to 40% to 50%. Depending on the different opportunities that would be coming. And all of those opportunities will be connected under this umbrella theme, of we will create value for the shareholder and whichever is the better return-generating alternative, we will invest in that alternative. That's our guidance on this one, Ignacio. So I can -- I will not comment to you we will do this or that until we see how the situation evolves. We are in the process of some of the largest, again, buyback programs and increase the increased. We are paying the largest cash dividend that BBVA has seen in the last 10 years. So we will continue on our path, see how different opportunities come around. And depending on that, obviously, we will continue to create value for shareholders. I'm giving you a very high-level answer. But it's very important. It's very important that you understand, everyone understands that our key driver in any of the decisions that you take is that value creation. And if we cannot find great value creation…

The next question comes from Fernando Gil at Barclays.

Two questions, please, from my side. First one is if you can refresh the capital impact on Turkey acquisition? If we are assuming 100% take-up and today's currency levels. This is one. The other one is on CPI linkers in Turkey, and the link to this hyperinflation that we are seeing. What should we expect for this line in 2022?

Very good. On the first question, Fernando, the December 31 impact that we have from the OPA, if 100% is taken is 32 basis points. And as we mentioned, we don't know. We don't know the take up. It can be much less than that. It can be in the middle, 100%, but the total impact we are talking about, the latest number is 32 basis points. Then the CPI linkers, what do we expect? We will see. We did our budget with a much lower figure, but after also today's figure, this morning's figure of 49%, we will see. You should know that our CPI book in Turkey is €2.3 billion, €2.3 billion. So every 1 percentage point in inflation has an impact, as you can see, in '23. So there is the sensitivity that you can look into.

The next question comes from Britta Schmidt at Autonomous Research.

I've got three questions, please. Firstly, could you just update us on regulatory impacts on capital that are still outstanding? What do you expect in 2022? The second one would be on the cost outlook. What is the blended inflation rate that you assume in your guidance? And could you perhaps quantify a little bit the basis, the COVID-related basis at what sort of euro million numbers are we talking here. And then lastly, on Mexico, there is obviously a macro worsening, but loan growth is still strong and the cost of risk guidance still looks okay. How do you explain that the sort of disconnect?

Britta, can you repeat the second question? I couldn't get the second question.

The second question was on the cost outlook. Could you tell us what the blended inflation rate is that you assume for the group when you say you want to grow below inflation? And can you also give us some help quantifying in euro million terms what the COVID-related base effect is? Obviously, there were some COVID-related savings, T&E expenses, et cetera. What sort of million number are we talking about?

Okay. Rafa, maybe you can take the cost question. On the regulatory impacts outstanding, as we have told you before, the main regulatory piece, supervisory piece is remaining, it is EBA guidelines. You would notice that we talked to you about EBA as guidelines on multiple pieces of the models, also the PD, probability default, LGDs and margin of conservatism and MoCs as we call them. So this PD impact on the EBA guidelines has already been incorporated in 2021. In the last quarterly calls, we told you that we are expecting EBA guidelines on LGDs to come online in 2022. We were expecting 15, 20 basis points on that one, and that is there to be taken into account in 2022. And then the EBA guidelines on what we call MoCs, the margin of conservatism, it might also be coming and impacting us. The EBA guidelines have put some new strict, actually, rules on that one. So the total, total that you would be expecting for this year, including the LGD is around 35 basis points. Then on the Mexican -- maybe you take the cost question, I go back to Mexico, Rafa.

The blended inflation for our footprint that we are assuming for 2022 is 11.3%.

On the Mexican cost of risk question, well, this year was not easy either. And we have delivered, as you have seen in the documentation in the discussion, 267. Our typical before COVID, our cost of risk was around 300 basis points, if you remember. Our 10-year average for cost of risk in Mexico was around 340 basis points. When we look into how or why that improvement has happened and then you isolate for the mix effect. So different portfolios and maybe it's a different mix of portfolios and so on. At isolated for the portfolio level, when you go into credit cards in Mexico, consumer in Mexico, we are seeing very good numbers. And then going to it, it's also our performance improving. We have better information, better data, better modeling, better processes. We have invested, for example, a lot on collection infrastructure and collection processes in Mexico in the last 3 years, even during COVID. As a result of all of this, some of the improvement that we have seen from 340 in the last 10 years to 300 just before COVID and 267 this year, we do think that it's structural improvements that we have done internally in our bank and some of that is there to stay. That's why we are guiding less than 300. So the independent of the market and the macro, we do think that -- we are confident that we will be realizing those numbers. And the start of the year, it's confirming this view.

The final question comes from Pamela Zuluaga at Credit Suisse.

I have 1 regarding the next gen EU funds that you were mentioning before, possibly translating into higher loan growth in Spain. Do you have a clear idea of the role banks are playing in the deployment of these funds? And if so, can you give some details on the evolution of the loan mix into support? Would there be some margin compression if there is a collaboration between the banks and the government? Or if alternatively, most of the activity we expect in Spain will come continuing growth in the consumer segment, do you see some margin pressures from high competition there? And then as a follow up on something that you were saying before in the ICO loans, other peers have granted extensions to the grace period on these loans? Do you anticipate granting further extensions and potentially delaying even further any write-backs related to that COVID overlay?

Very good. Thank you, Pamela. On the next-generation EU, obviously, we are very open to operating with the government in channeling and distributing these funds to the economy. There are different products that we have even launched, we call them NGU, advanced loan factoring to be able to complement the subsidized part of this project. So the subsidy you can get from the government and then you can get the complementary financing funding from the bank. So we do have specific products, and we are in constant cooperation with the government on this. But in terms of the impact, you were more asking for the impact, I guess. For the GDP, first of all, for the GDP, this next-generation EU, our BBVA Research team, they do expect a 1 percentage point impact in the GDP growth because of next-generation EU in 2022, and 1.5% percentage point increase in GDP growth in Spain due to next-generation EU funds. So overall, economic situation will be helped from this. We have also deep dived into which sectors are going to be receiving this, which types of companies, what is the subsidy level, how much financing, additional financing those clients might be needing and so on. We do expect annually an 8% increase in the what we call new loan production in the Commercial segment, SME and Commercial segment due to these programs. And in the stock door, this will be corresponding to 1% to 1.5% increase more than otherwise, more than -- if you isolate or this impact only 1% to 1.5% more higher increase in loan balances in Commercial and SME segments. So positive for us. Regarding the further extensions on ICO. There might be another 6 months, maybe at the end of -- because most of them will be expiring in terms of this nonpayment period in the second quarter this year and the third quarter. There might be a slight extension on this, but I don't think there's much need on the topic. I wouldn't expect that to be the base case, I would expect that everything to normalize as all is in the plans, which is the second quarter, third quarter expirations. But if also, it is extended to the end of the year, a slight increase of 3 months, 6 months, I wouldn't rule out that either. But beyond that, I don't think there will be anything else needed in terms of extensions and new durations and new nonpayment periods. I don't think it's needed, because the portfolio is behaving quite nicely.

Thank you. So thank you for all your questions. And let me remind you that the entire IR team will be available to answer any questions you might have. Thank you very much for attending this call.

Bye, bye, everyone. Bye, bye.