Banco Santander Central Hispano (SAN) Q4 2021 Earnings Call Transcript

Banco Santander Central Hispano (SAN)
Q4 2021 Earnings Call
Feb 02, 2022, 4:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, everybody, and welcome to Banco Santander's conference call to discuss our financial results for the year 2021. Just as a reminder, both the results report and the presentation we'll be following today are available to you on our website. I'm joined here today by our executive chairman, Mrs. B; and our CEO, Mr.

Jose Antonio Alvarez. Our CEO will provide an overall view of the performance of the group, regions, and some of the main countries, as well as the business divisions throughout the year. Our chairman will provide key highlights of the year as well as the strategic priorities and key targets going forward for both 2022 and the midterm. Following their presentations, we will open the floor for any questions you may have in the Q&A session.

With this, I will hand over to Ms. Botin. Ana, the floor is yours.

Ana Botin -- Executive Chairman

Thank you very much, Begona, and good morning to everybody. It's great to be with you all and thank you for joining us. So as Begona said, and as an introduction to our 2021 results, I would like to provide you with some context of what we have achieved since 2015. Our resilient business model has allowed us to grow, to increase our balance sheet strength, our profitability, and deliver attractive shareholder returns.

Again, key elements continue to be our scale, our diversification and our customer focus. All of which remain a source of strength of more predictable and earnings results through the cycle. In fact, if you look back 20, 25 years, our earnings per share represents the lowest volatility versus our peers and growing results. And this is, again, a key attractiveness of our business model.

So we have laid these foundations to deliver great value, to service a growing customer base, which is up 30 million customers since 2015, increasing profits, improving profitability. Our RoTE is up close to 170 basis points since 2015, and of course, strengthening our capital base in a very significant way as well as delivering sustainable returns to our shareholders. Just a couple of numbers on this. We have remunerated shareholders with EUR 19 billion since 2015, and our tangible NAV has grown by EUR 12 billion since then.

So I'm very pleased to report that a strong 2021 takes us very close to meeting our 2019 investor day targets in spite of the pandemia. Actually, in some cases, we're ahead. And we will continue to focus on growth, profitability, strength, including shareholder remuneration. We are guiding for 2022 a mid-single-digit revenue growth, cost income close to 45%, and return on tangible equity above 13%.

And we are aiming to keep our CET1 fully loaded at around 12%. We're also aiming to keep the 40% payout in 2022, of which, as we already said, will be 50% share buybacks and the other 50% in cash. I also want to say that longer term, we aspire to increase our total shareholder remuneration beyond the 40% to around 50%, again, through share buybacks and growing our cash dividend while maintaining a CET1 of 12%. This would be, of course, subject to future corporate and regulatory decisions and approvals.

So if we go to the next slide, you've seen a very strong '21 results. Our net profit is actually up 25% from '19 underlying in a similar percentage, reflect, as I said, the strength and resilience of our business model. We onboarded five million new customers. We are growing revenues by 7% to over EUR 46 billion.

We again increased efficiency and reduced the cost of credit. That's down to just 77 basis points. And generating a return to shareholders as measured by tangible NAV per share and cash dividend per share of 11%. Importantly, 2021 was a pivotal year for us in terms of capital.

We are at the high end of the range, delivering a 12% CET1 fully loaded. And going forward, as I already said, we expect to keep it at these levels of 12%. So you can see our P&L here. We have been able to recover, actually more than recover our pre-pandemic levels of customer activity.

In terms of the underlying profit before tax. Again, it's a record high of EUR 15.3 billion. Actually, on the quarter, it's the highest underlying in 12 years, and this is up 21%. Our underlying profit of EUR 8.7 billion.

That's up 80% versus last year, 23% compared to '19. And again, this reflects optimal cost of risk, but also very strong execution of what I have said many times is a structural change in our business model. Very importantly, as you can see, revenues are growing more than cost, with a positive operating leverage. Very strong capital generation in the year and -- up to CET1 of 12%, even though we had significant regulatory headwinds this year.

Even more important is the strong business momentum. And you can see some examples here. We are moving our business model to more fees, diversifying into different sources of revenues linked to our customer focus. These are only some examples.

Loans and deposits are growing. Mutual funds are growing at 13%. But in the higher return, value-added services, which are really what's adding to our profitability, our POS, point of sales, up 38%. Insurance premiums, up 12%.

Our new buy now, pay later, this is a business we have built on top of our tech stack Openbank in Germany. It's going across Europe soon. Two million customers in the first few months. Debt capital markets, M&A fees up 16%.

This is really important for the future, and these are the businesses in which we're investing more heavily. Jose Antonio will give you details later on the regions. During the year, we also leveraged the diversification and scale of the group. These are two key elements, and we are working more and more in this key strength of our business model.

So operational performance is improving across the board, Europe, North America, South America. Our Digital Consumer Bank, which, as you know, combines our auto and Consumer Finance and Openbank is one of our important growth initiatives. In Europe, we are working really hard to transform the business model. Return on tangible is close to 10%, as you can see in the slide.

Our customer focus is also showing up in better NPS across the different countries. And again, the structural changes have led to cost efficiencies of around EUR 200 billion, and this is an area we continue to focus on for next year. North America, we generated a return on tangible equity of close to 25%. We are working also in a structural basis in the U.S.

I'll give you more details later on. And really trying very hard to leverage the connectivity across the group, our experience in Consumer Finance in Europe and Latin America and other relationships that are global. Corporate & Investment Banking also have made great progress in North America. And in Mexico, we are increasing profitability and been very successful in growing new business, like the auto business organically.

South America, again, a standout performer, with Chile and Brazil being the best bank in terms of profitability in their respective markets and overall returns of 26%. We're growing double digit in terms of revenues, growing in terms of market share and growing customers in very different segments in all these markets. Our Digital Consumer Bank, again, very strong year, producing a return on tangible equity of around 15%. I would like to point to two key numbers in this slide.

If you look at the group's customer loans and group underlying profit, you can see Europe is where we have 60% of our loans and 28% of our profits. Again, this means our business is more dependent on lending in Europe. This is something we're working on to increase fees and increase profitability. It also means reduced risk as a lot of these loans are secured and mortgages in countries like the U.K.

and Spain. South America, on the contrary, you can see 14% customer loans, 31% underlying profit. This is exactly the example of very positive operating leverage, very diversified businesses, many of them, high-growth fee businesses linked to digital initiatives like auto platforms, Getnet and other such businesses. Same in North America, as you can see, 14% of the loans and 29% of the profits.

We have been leading and intend to continue to lead on the responsible banking. And here, we have very specific targets in terms of our green transition for us and our customers, building a more inclusive society and, of course, talent and diversity. So in terms of the green transition, we are working with our customers to help them in that transition. We are focused on delivering on our own net zero ambition by 2050, which, of course, includes our customers.

In terms of our own operations, we're already net zero. And we are working, again, on the advisory side, on the capital markets, but also increasingly developing retail and SME products. We originated EUR 61 billion in green finance since '19. We have EUR 27 billion under management and with the No.

1 bank in project finance in renewal energy. But we're, again, making a lot of progress in our very important goal of empowering 10 million individuals by '25. We're on target to reach that. We've done some.

We've empowered seven million people in '19 and also allocated EUR 500 million in microfinance in '21. As I said before, we are very, very focused and proud to have been No. 1 bank in Bloomberg Gender-Equality Index and No. 2 company worldwide.

And this is an area where we'll continue to focus, as we think diversity is not just the right thing, it's also good for business. So in summary, responsible banking we believe is key to delivering on all our other commitments. We are creating value for our shareholders. We did set a 40% payout of underlying earnings -- in equal parts between cash, dividends, and also buyback programs.

We'll be announcing in a couple of weeks the second dividend after the interim dividend of EUR 1.7, which was half and half between cash and buybacks. We continue to believe buybacks are an excellent investment of our capital. And so that would be the intention for the second dividend as well. So I will now pass over to Jose Antonio, who's going to review the regions and detailed operating metrics for the year.

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Thank you, Ana, and good morning to everyone. As Ana has already commented, we recorded that a pretty strong set of results in 2021 with an underlying profit of EUR 8.7 billion, 78% higher year on year in constant euros, driven by a very positive performance across the board, notably in U.S., U.K., Brazil and the CIB and Wealth Management businesses. Our net operating income pre-provision profit was around EUR 25 billion with an increase of 9% year on year, but I think is remarkable. This was driven by a 7% revenue growth.

Net interest income grew 7% on the back of higher volumes, lower cost of funds, better credit spreads in Latin America and some -- starting some positive impact from recent interest rate hikes in some Latin American countries and Poland. Net fee income rose 8% year on year. Double-digit growth in corporates, wholesale banking, and Wealth Management & Insurance due to greater commercial and financial activity. Costs increased half of the pace of the revenue, what has driven significant efficiency improvements.

The significant fall in loan loss provision across the group accelerated in Q4 with -- driven by the improving in the macroeconomic outlook and the very positive performance of our main portfolios. If we look at one step down in the P&L and we analyze the quarterly trends in core lines, we saw improving trends across the board and the P&L lines through the year, Q4 was the profit of 2021 of EUR 2.3 billion after a good behavior, particularly on the provisioning side. But also this, some of the releases were offset for the contribution to the positive guarantee from bank levy, the charge for the Swiss francs in Poland. So net-net, the quarter is fairly comparable with the previous ones.

In more detail, sustained customer revenue growth, plus 4% NII and 3% income quarter-on-quarter driven by greater volumes, initial impact for interest rate hikes, as I mentioned before, and growth in higher value-added products and services. Q-on-Q increase in cost is almost fully explained by [Inaudible]. So this does not represent a running rate for the coming year. In addition, a lower loan loss provision in Q4 favored the aforementioned provision release.

I will run through the costs and provisions in more details in the following slides. On the cost side, we have seen significant inflationary pressure around the world. Group costs rose 4% in constant euros but were 2% lower in real terms, absorbing higher IT expenses, digital developments, increased activity, and labor agreements that particularly affected in the second part of the year. Our efficiency ratio improved to circa 46%.

This was basically driven by Europe, minus five full percentage points, which recorded the highest efficiency gains. I should stress that the cost in Spain went down 7%; in Portugal, 5%; and U.K. also decreased. This is more to come in 2022.

And we are on -- our running rate will decrease in line with our targets for the region. We continue to make a structural change to our operating model to drive new improvements in productivity, which should enable us to maintain cost growth below inflation and further improve our efficiency rate. So on the credit quality, the balance sheet remains, I would say, robust. NPL ratio at 3.16%, below 2020 and 2019.

Provision is down 37% in constant euros due -- partly due to the releasing provisions in Q4. We also have significantly cost of credit, was mentioned already by Ana, to 77 basis points below 2020 and 2019 levels and exceeds our initial 2021 target. In 2022, we expect to maintain the cost of credit below our ratio through the cycle. Spain will be key as we expect cost of credit to reduce to approximately 50 basis points, offsetting some normalization in the U.S.

and U.K. Finally, on capital. In 2021, we reached a fully loaded core equity Tier 1 of 12.12%, thanks to the strong operating results with the lever quarter-over-quarter. In Q4, we generated 42 basis points organically, a combination of net profit, net of dividends and also the efficiency -- efficient risk-weighted asset management that the risk-weighted assets were flat in the quarter.

Negative impacts in the quarter of two basis points due to small regulatory impacts, we already spoke about this in the previous quarter, nine basis points due to market movements affecting some ALCO portfolios, and five basis points from the minority interest that in Mexico, including acquisition of SCUSA that was approved the same week -- was executed in the same week -- of eight basis points, we closed at 31st of January 2022. And the announced acquisition of the broker-dealer Amherst Pierpont, that affects eight basis points, with this still subject to completion, which will have an impact of 16 basis points on our pro forma CET1 ratio will stand at 11.96%. We were able to combine this performance with an increase in tangible net asset value share. Looking at the regions.

Starting with Europe, we are accelerating our business transformation. It's where we are pushing harder in changing our operating model. Profits doubled in the region, reaching EUR 3 billion with higher profitability due to volume growth, particularly mortgage in line with economic recovery. 24% net operating income supported by wider jobs in most countries.

Revenue was up 11%, particularly customer revenue, while costs were flat ongoing due to the long efficiency gains. 32% reduction in loan-loss provision and our cost of credit improved to 140 basis points. In the following slides, for the sake of clarity, includes the return on tangible equities adjusted to the 12% return core equity Tier 1 in all the units due to the fact that in order to have a like-for-like comparison between the units and given the fact that they have different -- very different capital ratios, we are making this adjustment. So in Europe, starting with Spain.

Spain showed a strong pickup in activity in individuals, mortgages, consumer lending. Customer funds also grew significantly in the last year. Profit nearly doubled, boosted by strong net operating income performance, 10 full percentage points, revenue grew 3% and efficiency gains drove 7% reduction in costs. Loan-loss provision reduced 8% year on year.

And in 2022, we expect to have our cost of credit. So as we expect, a single-digit balance sheet growth in 2022. In U.K., we improved fourfold -- is a fourfold increase in profit basically by record net mortgage lending. You don't see this in the loan book, that only grows 0.5% due to the fact that we completed the transfer of the CIB business to the London brands, and this affect some of the loan portfolio went from [Inaudible], plus 22% year-on-year growth in NII due to repricing on volumes on the mortgage that I mentioned before, cost savings from our transformation program, partially offset by IT investments and regulatory related programs.

Efficiency improved by nearly 11 full percentage points. Loan-loss provision releases reflecting balance sheet strength. As a result, we achieved double-digit return on tangible equity in U.K. In North America, we improved our competitive position in the increasing connectivity in the region, consolidating IT functions and advancing significantly in the business simplification.

We also announced several transactions in 2021, in line with our strategy to deploy capital in the most profitable business. Volumes grew, driven by our main segments in both countries. Profit doubled, driven largely by the lower provisions and higher revenue in the U.S.o. In the U.S., we had extremely positive 2021.

On a like-for-like basis, excluding Puerto Rico and Bluestem portfolio disposals along with double-digit growth in auto originations, customer funds increased due to retail deposits with a significantly lower cost of funding. Underlying profit increased sharply, supported by an 11% increase in net operating income and NII fees and auto lease results, and 85% decline in loan-loss provisions. In short, strong performance with U.S. being one of the engines of the group in 2021 results.

Mexico, to increase our stake to over 96%, and continue to invest in the franchise, reflecting in positive results and customer growth. In a challenging environment, rate cuts in 2020 unfolding volumes, we were able to quickly adapt, resulting in improving trends during the year. As a result, we delivered 8% increase in profit, thanks to the loan and deposit growth, controlled costs, well below inflation despite IT investments and better cost of credit. Finally, the region of South America.

We continue to stand connectivity. We are a market leader across the region. We are capturing synergies across the region. And we had new business opportunities, investing our already profitable franchise.

We saw strong customer growth in all the countries where we are leader in quality of service as we measure in NPS. In terms of results in 2021, we delivered greater volumes in all countries, double-digit customer revenue growth, increased productivity, with gross growing below inflation and lower cost of credit in all countries, that resulted in strong profit and very high return on tangible equity. In Brazil, another excellent year. Record customer attraction, more than five million customers, which -- made to significant growth in individuals growing -- loans to individuals growing 22%.

Consumer Finance, 12%, and SMEs, plus 15%. This translates into the P&L with a return on tangible equity well above 20%. Double-digit growth in customer revenue and record annual efficiency levels below 30% for the first time, maintained credit quality at comfortable levels. In Chile, our digitization process allow us to increase significantly our customer attraction, which is reflected in the plus 23% increase in demand deposits and double-digit fee income growth, widen the gap in NPS, with our competitors being the market leader.

Excellent year-on-year profit performance, NII plus 10%, improved efficiency, increase in capital [Inaudible], lower cost of credit, driven by better than expected performance in SMEs and corporates. The consumer bank -- Digital Consumer Bank, balance sheet dynamics were solid. New business activity has recovered to the pre-COVID levels, up 10% despite the challenges posed by COVID restrictions and the semiconductor shortage. Of note was auto plus 13% origination on the back of increasing our market share by 50 basis points across Europe.

Additionally, we are working on the expansion of Openbank, which performed very well in the year in terms of customer increase and volumes. Loans grew 48%, customer funds, 24%. Total Digital Consumer Bank revenue was boosted by the new business recovery, particularly fee income and leasing, positive year in credit quality, with further reduction in cost of credit. In summary, excellent results reflecting a 16% underlying profit growth and increase in profitability, return on tangible equity achieving 14%.

Going to the two businesses that we report as secondary segments. Both have had in the industry a very good year. And the Corporate & Investment Banking, well, revenues grew 10%, sharp improvement in loan-loss provision. We are gaining share, and we are on top of the market in finance, top 3 in project finance in Europe and Latin.

And as Ana mentioned, focused on the sustainable alternatives and ESG through the green financing. We are investing in the business, the cost increase as we are investing both in Continental Europe, U.K. and U.S. to develop new capabilities to serve our customers.

In Wealth Management & Insurance, excellent business performance in 2021. Record commercial flows of EUR 20 billion, EUR 12 billion in private banking, and EUR 8 billion in the asset management. Insurance premium and protection business increased double digit. Wealth Management & Insurance total contribution to the group increased 12% to EUR 2.3 billion.

Finally, on PagoNxt. Well, we made the commitment to grow the business -- to grow the revenue 50%. So we achieved EUR 500 million, 47% year on year. Merchant acquiring Getnet continue to deliver growth, increasing the number of active merchant and total payments volume by 50%.

Getnet Brazil recorded significant market share gains. Getnet Europe started to operate in the second half of the year as a pan-European acquirer following integration of former Wirecard's technology. International trade, One Trade currently connects our customers in [Inaudible] Santander banks, exceeding 8,000 active SMEs and corporates, double in size since March. In summary, we have significant progress in the last 12 months as PagoNxt -- as we invest in world-class technology and to create the best payments [Inaudible] to continue doing the right thing and launching new products.

And I turn over the floor to Ana to continue with the presentation.

Ana Botin -- Executive Chairman

Thank you very much, Jose Antonio. So as I said, we're delivering today, and we are building the Santander of tomorrow. We believe in an area of digital revolution, this is absolutely essential. And I have to say, first of all, I am hugely proud of our team and the progress we have made over the last few years.

We have made the foundation to deliver great value and service to our growing customer base, which, as I said, was up 30 million since 2015. We have at the same time increased profit. We have improved our profitability. And we have strengthened our capital base as well as delivering sustainable returns to shareholders.

I am incredibly excited about what lies ahead. We are continuing our journey to become the best open financial services platform, acting responsibly and earning the lasting loyalty of people, customers, shareholders and communities. And this is what is driving our day-to-day across regions and businesses. In our daily work, actually, we're not just, of course, meeting our legal and regulatory expectations, our aspiration is to exceed all our stakeholders and our people's expectations.

This is a key driver to attract the best talent, which, as we know, is the basis of success for any company these days. So we are focusing on the areas where, as a group, we can have the greatest impact, helping more people and businesses prosper in a way that is simple, personal and fair. I mentioned earlier our unique business model delivering more predictable and growing results through the cycle. And this is the case, not just over the last few years, but over the last 20, 25 years.

We have a diversified geographical footprint, which is well balanced between emerging and developed markets. I would like to note especially the contribution of the U.S. to the group's underlying profit increase from 7% in '19 to 22% this year. We are building on a global scale.

And this is really what's allowing us to grow revenues, but also to expand our business. One great example you have here is Getnet. Getnet is a global platform now operating in six countries. And our global businesses, insurance and corporate banking continued to add value with very strong revenue growth compared to '19, up 25% for CIB and 12% in Wealth Management & Insurance.

These are areas where we're intending to invest more as they have very high profitability and strong growth. Importantly, and this is a key goal for us across the bank, is customer satisfaction. We want customers that love our products. Our NPS is already at the top 3 in most of our markets, and we intend to continue building on that.

Improving customer service but also increasing connectivity. This is one of the, I would say, more difficult but more successful goals we have set for ourselves over the last few years. We are continuing to invest in technology to change our business model. Increasing the connectivity, not just sharing but building across the group together, creating a better bank.

Where do we see the return on these investments? I think these are two key facts you have on the screen over the last two years. This is compared to 2019. Our digital transactions of our core banks have gone from 55% in '19 to 76% in '21. Our digital sales again, across the group over total sales from 36% to 54%.

And again, I want to stress, in many cases, now building those solutions together. I will comment a bit more later, but PagoNxt aims to me a common tech backbone on payments for all our customers across the group as well as for open market. One Santander, we're redefining our own operating model, and I want to give a couple of examples. Our regional consumer finance platform in South America, a single platform for all of the countries in South America.

In Europe, our common app, but also other initiatives to develop key products and drive connectivity, where we have horizontal business owners already in place leading for Europe. And in North America, where, for example, technology is already being shared across the U.S. and Mexico. We saved $100 million over the last couple of years, just for '22.

We're aiming for an additional $50 million in this region. Last but not least, Digital Consumer Bank, where we are replatforming our legacy auto and consumer on top of our retail banking, native digital Openbank. I want to stress in this vertical. We're going digital, building our own technology.

At the same time, we are maintaining a 14%, 15% return. I want to now briefly share with you how we are managing our capital allocation and how we're increasing every year, the discipline. We today have the tools to manage in a very granular way our capital. You can see here in '21 that we had 30% of our RWAs below the cost of equity.

We're aiming to have 20% in '22. Of course, these are businesses where we're investing for the future. And I want to say that in 2015, that 30% was 60%. So we've been ruthless in this discipline.

We intend to continue to manage in this way going forward. We will allocate more capital as we have done over the last few years to our most profitable and higher growing geographies, segments and businesses. We are expecting RWAs to expand at lower rates than loans again in '22. We again have a target for a front book to not have assets going on the books on average across the bank below 2.2 in '22 compared to 1.8.

And we'll continue to actively manage our underperforming portfolios, as I mentioned. We are also making some accretive investments. Of course, the offers to buy minorities we've done -- we did Brazil at the end of '14. We've done Mexico and Santander Consumer, as Jose Antonio mentioned, was actually closed this Monday, two days away -- two days ago.

And we also made -- still pending closing the acquisition of Amherst Pierpont, that's pending regulatory approval, but this is incredibly accretive to us and the connectivity with our franchises -- CIB franchises across Europe and Americas is really important. In every case, we are -- in these acquisitions, we are always having returns on investment above our cost of capital. So again, we continue to expect strong and actually growing organic capital generation. This is based on solid growth, optimal return on risk and RoTEs above 13%, keeping fully loaded at 12%.

So we can continue to grow in the future, increase shareholder returns going forward. So as a summary, strong focus on capital discipline will be key. We have done it in '21. We aim to deliver tangible net asset value per share growth, growing cash dividends and profitability -- sorry, growing cash dividend as profitability improves and making share buybacks a meaningful part of our remuneration strategy.

We continue to target a 40% payout ratio, even though in the future, we would aim to increase that to 50%, again, subject to a more than -- to the performance of the bank. Longer term, this is the intention. And very importantly, we aim to keep our CET1 at the 12% level, as I mentioned. So how are we going to deliver on these goals? We want to continue to deliver on our business model.

We are working on the increased connectivity. Our three strategic initiatives, which I will mention briefly now, One Santander, PagoNxt and the Digital Consumer Bank, all of which are providing a distinctive competitive advantage because we're building a globally recognizable brand that customers trust and value, at the same time, improving profitability. So first, with One Santander. This is the way we are building first regionally, but also from today across the global footprint, shared services.

I mentioned the Latin America in consumer finance, but the many others are European operating hubs. And we're aiming, first and foremost, to improve customer experience, but to do that in an efficient way, in a profitable way. So these are the targets for Europe, again, structural change while delivering sustainable profitability. This covers the four countries, Spain, U.K., Portugal and Poland.

We are very, very confident that this turnaround, you've seen already some of those numbers this year. For individuals, the focus will be enhancing digital but always building on that personal and digital combination. We are working through PagoNxt on delivering for SMEs, a differential services cross-border. We announced also the EUR 1 billion cost synergies by the end of '22.

We are remaining committed to that. Obviously, it's going to be a bit more challenging given the inflation environment. We are expecting for '22 some tailwinds. So normalizing cost of risk by '23.

And in addition, we'll continue to reallocate capital among, not just segments and countries, but also into more profitable and higher-growth businesses. In North America, we expect to develop and work further on the synergies on the back of that cross-border U.S., Mexico, but also across the group opportunities. Operational efficiencies will be meaningful. We are now working -- actually, we already have the plans in place.

We've got the approval yesterday to manage the business in a different way. I will comment on that in a few minutes. We launched a few years ago the U.S.-Mexico business corridor. We're generating very high growth in cross-border customers.

Just as an example, total revenue had a 20% increase year on year on this business, and we're aiming to continue that growth. The aim for the region would be around 20% RoTE and an efficiency of 44%. In the U.S., and I want to focus on the consumer side, the goal is to simplify the bank and really build a consumer auto business, leveraging on what we have done in Europe and also in Latin America, but also on the very strong Santander consumer franchise and the core deposits in our retail bank. Amherst Pierpont, again, is going to allow us to deliver for many more customers.

The connectivity is already great, around 10% for example in our wealth management customers in the U.S. have been referred by our bankers in other geographies, and this is a business where we can actually grow much faster. And in Mexico, again, accelerating growth, improving profitability, where we have been investing in technology together with the U.S. for the last couple of years.

Just a bit more detail on the U.S. and how we are looking at the business. I want to just remind everyone that for a few years, we are very much focused on -- and of course, that will continue to be a focus. But now we can focus on growth and on the management of the business, which is aligned to the U.S.

peers. So the consumer business will be focused on a consumer model, much like the Digital Consumer Bank is in Europe. We'll be leveraging on two very key group assets: One is technology and the second one is our OEM and experience across and relationships across the world. This year, we delivered 24% return on equity.

Actually, a bit above that. For next year, the goal is 19% with efficiency around 43%. This simplification is going to be key. We're actually exiting some businesses in the U.S., like the home equity and mortgages to really simplify the bank on what it is we believe we need to support our retail customers and the consumer business.

In terms of the CRE and multifamily, we are top 10 in the U.S. Very profitable through the cycle funded by commercial deposits. CIB, I mentioned already, we see a lot of upside in low-risk customer base businesses where Amherst Pierpont adds a significant investor, institutional customer base and leading brands we have in all of Latin America in high net worth. Again, there's many opportunities here for add-on businesses where we are investing, and we believe this is going to be one of our drivers of growth.

We will -- by the way, we're working some time in Q2 to have a more detailed meeting with investors on our strategy in the U.S., giving you more detail on how it is that we're going to execute in this key market for us. South America, again, strong growth in customers and revenues. We remain absolutely confident that the region is a high-growth opportunity, delivering through the cycle. One key aspect is the growth of the middle class.

In many of these markets, that is the key to the expanding demand for our services. We are expecting double-digit growth in retail. We will consolidate more and more operations across the region in many of the verticals. We believe there's a lot of value operating as a single bank with its regional approach and building of the connectivity that I described.

In corporates, just to give you an example, we're growing by around 25% with multi-Latinas, that's a EUR 250 million business today. And of course, with very strong opportunities also with Amherst Pierpont in terms of accessing dollar markets. In wealth, the connection with our bank in Miami is a key differentiator for us and in the global businesses. And here, I mean, cards and payments, again, building on the global platforms.

And all of that leading to a regional return on tangible equity of around 25%, and that is in spite of the cyclical currency depreciation with the current efficiency of around 35%. So let me briefly turn to PagoNxt. This is a very strategic initiative. Payments are at the heart of our customers' banking relationships.

It's key for our loyalty strategy. That's not new. It has happened for many years. Now it's turning digital and scale becomes crucial.

So again, this is a high growth, high profitability business. And I want to say that as we build this platform, we're also delivering revenue growth. We are very pleased with the progress that PagoNxt has made this year. We're investing to integrate all these payment systems to benefit the scale across the Santander banks, but especially customers but also open market.

As you can see there in the slide, we have been ambitious target for '22. We grew close to 50% of revenues. This year, we're aiming for a 50% growth in revenues next year. You can see there our payments hub.

Again, this is where uniting all our banks with a common tech platform and payments, we are aiming to reach 26 million customers this year and to be managing the payments. The legacy payments will be managed for all our banks eventually here, but about a third of the total payments volume already in 2022 and more than EUR 3 billion. By the way, these are trillions of transactions, if you measure that in billions. We're going to continue to accelerate the growth.

Here, we're working on integrating the merchant-acquiring business, including with Wirecard under a common platform. We have a very strong e-commerce proposition. Again, we are aiming to increase our active merchants to 1.6 million, our payments volume to EUR 147 billion, and very importantly, to generate 20% in open markets in acquiring. The international trade, again, we're aiming to grow this in a significant way.

This is the way we're going to bring together our SMEs, the SMEs that trade. These are the higher growth, higher profitability, usually customers. And we are also, as you know, with Ebury, we're very happy with the progress and with a 50% revenue growth aimed for '22. Our third strategic pillar, I mentioned several times already, the Digital Consumer Bank.

It's operating in 16 European countries. It's being replatformed as we maintain profitability into the Openbank tech stack. And I want to say that '21 has been a very important year. We have set important targets for '22, as you can see in the slide.

We are now -- Openbank is the world's largest full-service global digital bank operating in five countries, including in Argentina now, we launched yesterday. For '22, we're expecting to serve close to two million customers, but with very strong double-digit growth in certain products like robo-advisor and customer assets. We are serving more than 85,000 -- sorry, 65,000 roughly this year and aiming for 85,000 offline and e-commerce merchants with very high growth on customer loans, especially through the buy now, pay later, which we're aiming to launch in Spain in '22. In the auto business, again, where we have not just in Europe, but in North America and South America, we're probably the global leader in this business, we're planning to serve 6.8 million customers with new originations in leasing and auto growing more than 10% and 25%, and digital sales also doing incredibly well and growing double digits.

For '22, our RoTE expectation and guidance is 15% with efficiency at 44% driven by double-digit customer growth. So I just want to end by saying again that, as I started, we have delivered every single year, in many cases, above our guidance. But very importantly, 2019, and in spite of COVID, we're today ahead of where we were in 2019 in many aspects. On capital, we set a target of 11% to 12%.

We're at 12% on a fully loaded basis. On RoTE, we said 13% to 15%. We're very close to 13% and aim to be above 13% for '22. We are guiding to continue revenue growth in the mid-single digit, EUR 1 billion efficiencies, and that is double what we said in 2019.

If you remember, we said EUR 1 billion efficiencies. We added another EUR 1 billion last year, which will be completed in '22 and a 45% cost-to-income for next year. So very importantly for shareholders, shareholder returns, 40% of underlying profit with again, this is a first for Santander. We believe investing in our own shares is an excellent choice, and this will be a permanent feature of our shareholder remuneration.

All of that, while we're advancing our dream finance objectives. I'm not going to go through these. Obviously, we can give you more detail, but we are really trying to lead the sector on this. We've provided specific 2030 targets for our energy portfolio for coal, specifically.

We're very ambitious in our financial empowerment. We believe an inclusive society is crucial, and we can really be a leader on this also. And of course, embedding ESG in general into our decision-making processes and culture and ensuring we do things across the bank and across the group in an inclusive and sustainable way. In terms of the medium term, and this is preliminary, of course, our intention is, as we finish 2019 plan, which, of course, will finish this year, we will be having a new investor day.

We still have to decide the date. But we are confident that our medium-term targets would be at 15% RoTE, 40% efficiency while keeping capital of 12%. We will continue to invest in higher growth, higher profitability businesses. We believe diversification continues to be important [Inaudible], building global technology platforms are key.

We need to be able to compete and we are competing with the tech disruptors and winning, in many cases. We want to ensure we are top of mind to consumers that consumers love our products and that we deliver those in a profitable way for you, our shareholders. Scale geographic footprint and business line diversity, again, remain at the key of our business model. It's going to allow us on numerous organic growth opportunities and what we want to be the primary choice for our customers and increasingly in the open market.

We believe our 2015, '21 strong performance, step-by-step, delivering every year, our commitment to be radically improving our profitability through capital allocation to achieving cost savings through structural changes will be very important and will make us a winner in the digital age. And of course, I want to finish by saying thank you to our teams. A huge thanks to everybody. I was visiting you all in the countries during the pandemia in branches.

You've done an amazing job for our customers. You are committed to living our purpose. And I want to thank you for this extraordinary work during these years and look forward to more ahead. Thank you also to all of you, our investors, for your attention.

And of course, we're now very happy to answer questions. Thank you.

Questions & Answers:

Operator

[Operator instructions] Our first question is coming from [Inaudible] from DBS.

Unknown speaker

First one would be on the asset quality guidance in Brazil, if you see any downside risk to that stable cost of risk guidance you have given considering the slow economy and the fast growth of the retail books in recent years. And the second question is around city selling retail operations in Mexico, if you can give us any color around potential interest on the asset. How would you approach the funding? I mean, the 12% CET1 target is a binding constraint, even including potential M&A in Mexico and some of the places.

Ana Botin -- Executive Chairman

So let me take the second one. I mean, Jose Antonio can take the second -- the first one on Brazil. So we are very satisfied, and we have a great business in Mexico. We do not need to buy.

We're generating great profits. We believe that's going to accelerate. We're gaining market share. I actually commented this morning that we've built from scratch an auto finance business that in a couple of years is 10% market share.

So let me be very clear, we do not need to buy to generate very attractive and profitable growth. Having said that, Mexico is one of our core markets. And so when and -- the process is expected to begin and actually it's months away, we expect to be part of that process. I can assure you we're generating a lot of capital.

We want to generate more capital and that is one of the goals of all the management team, ensuring that we are putting business on the books that is profitable and reducing the investing in new businesses, as I said, from 30% to 20% of our total RWAs. So we would do that in a way that is attractive for our shareholders. That's really all I can say if it ends up happening. If you look back the last couple of years, in some cases, we actually went ahead and the transactions in others, in Brazil, was a good example, we did not do the deal that was obviously an end market co-market opportunity.

So that is really all I can say at this point. On the asset quality, on Brazil, Jose Antonio, would you take that, please?

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Yes. Sure. As you've seen in the results presentation that we're going to grow in Brazil. I should say that these two different speeds in the loan book in Brazil.

One is speed from the -- I'm referring to 2021, in the consumer side, where we're growing around 20%. That particularly grew faster in the first part of the year than the second half where we tightened a bit our credit standards, and we grew less in the second part of the year. Going forward, on top of this, we were building a significant amount of provisions for the expected loss, taking into account the macro outlook that, as you mentioned in your question, we expect GDP to grow -- barely to grow in 2022, and we are adjusting to this situation. And we already feel that we are -- we provide for this scenario already.

In 2022, our growth is going to be -- what we are seeing right now is a relatively low demand on the corporate sector. And our growth now in the consumer side is going to be advance in line with inflation at best. I should say, inflation running now at 10%, expected to run out at the end of the year in the 6%. Probably you should expect a high single digit, but in line with inflation or below inflation, and probably we're going to grow less than the market.

So this makes us comfortable that taking into account our provisioning levels, our origination stand as we're going to be able to manage the slowdown. So remember that we face a more difficult situation in 2015 and 2016 when the market was extremely negative. And although we are not in a position to reduce cost of risk as we did in 2015 and 2016, we think that we be in a position to -- but not to change significantly the cost of risk from what you've seen in the last couple of quarters.

Ana Botin -- Executive Chairman

Yes. I may just add one fact, which I think is crucial for all of you and the reason that we're doing so well in Brazil. Of course, we have a great team, and there's great execution. But please do not forget that for South America and Brazil is 80%, 13% of our loans and 31% of profits.

And the reason for that is we have a lot of fees and a lot of diversified different income streams that are growing really well. This is crucial, aside from the actual credit management that Jose Antonio was explaining.

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

I forget to mention that lending to consumers now 52% is secured. In the past was below 40%. Now it's 52% secured. That means that is payroll-based lending and mortgage.

So this make us more comfortable vis-à-vis with the synergy you mentioned.

Operator

Our next question is coming from Francisco Riquel from Alantra.

Francisco Riquel -- Chief Financial Officer

And first one, I wanted to ask about your cost-to-income target for '22. If you can please comment on what should drive the improvement in the ratio at the group level, in particular, how do you see cost inflation in emerging markets? And Brazil, in particular, if you think that cost-to-income could improve in these markets or not? And also in developed markets, you admitted the EUR 1 billion cost-cutting target is challenging. You maintain a high level in technology. So I wonder if you can give more guidance in terms of costs for the business units, U.K.

particularly the restructuring seems a bit slow. And second question on capital, you can update on the headwinds expected for '22 in terms of restructuring charges, given -- and then also the regulatory headwinds that we might expect? And also related with capital and a follow-up on the previous question if I wonder what is the minimum CET1 that you would be comfortable in leveraging up if you were to embark on M&A, for example, the PagoNxt deal? I see that you are guiding for 12% both in '22 and in the medium term, which is an increase versus the previous range. So I wonder if this is also your new threshold in terms of capital also in the event of M&A?

Ana Botin -- Executive Chairman

Thank you very much. So let me just give you a high level view on capital again. So as I said, 2021 has been a pivotal year for Santander from a capital perspective. We gave a range of 11% to 12% back in '19.

I want to stress that from a regulatory perspective, from a supervisory perspective, from an economic and prudence perspective, the 11% to 12%, i.e., the 11.5%, gives us ample buffers against some minimums. This is really important. We finished at 12.12% actually fully loaded and 12%, if we take account of the inorganic. And I really want to stress that the 12% is because we understand investors want the 12%.

So we are going to be at 12% for 2022. Throughout the year, this allows us, as I said, us to be very strong from a balance sheet perspective, it allows us to grow profitably and also to reward our shareholders, increasing as our profits increase. So again, the buffer is just to give you a number, 365 of our minimums, but also because we have proved and I gave these numbers, not all banks require the same amount of capital. Business models are different.

They're more or less volatile. We have proven to be the most resilient bank in the latest EBA stress test with, I think, it's 250, a bit more capital depletion in the adverse. That's 485 on average for the banks. But very importantly, our geographic diversification, retail commercial business, you've seen that in the '08 crisis.

You've seen that in the global pandemia, year after year. This is not just last 10 years. The last 25 years, we have the lowest EPS volatility. Another evidence, of course, is the fixed income investors, which look at our balance sheet inside and out.

We have the -- I think the first or second -- probably the second lowest credit cost than any of our peers. So again, this is crucial. Having said that, as I said, we are going to be at 12%, and 12% is our target for '22. And very importantly, and you've seen that year after year, we're generating more and more capital organically, increasing our profitability, and that's still the intention, I just said for the medium term and we'll give you detail, how we get there.

We'll be at 15% or actually maybe even above that. So this is really, really important. Jose Antonio, I think answered that at least on the higher level, which I think is something which we care about. Again, we're listening to you.

We're listening to investors. And it's been a pivotal year. And our aim is that this is not the issue that we need to discuss. We want to focus more on growth and opportunities ahead.

On the cost income, I think we were reluctant to give many more details, but obviously, we want to going to give more. I would stress that we have said that we are committed to the EUR 1 billion. I'm just saying that it's going to be harder to do because of the inflation. But we're going to listen.

And hopefully, our track record...

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Your question, if I understood you well, it's more related with emerging markets, where we are facing very high inflation, both in Brazil and Mexico. Nothing to say about Argentina, and let's show in Chile, what we think given the efficiency levels that we got in these countries, we do not expect -- we expect -- we already elaborate on Brazil's outlook, we do expect not to grow constant top of revenues. Probably there's not much room to go lower in the [Inaudible] in Brazil, where we're already below 30%. So we're going to probably stay at these levels.

In Chile, where we are slightly below 40%, 40% continues to be referenced to be. In Argentina, we have room to improve. We are still above 50% and medium-term target, and we should make significant progress toward this is to go to the 40% that we deem is the right cost-to-income ratio for an emerging market like Argentina. So this is our view.

But the main gains, again, should come from Europe, yes? So cost in Europe, we have a target. We feel comfortable with our target in Europe, and we're going to continue to show some gains in costs, and costs in Europe in 2020 should go down in nominal terms. I didn't mention -- Ana, is telling me that I didn't mention well is, in 2022, we expect a significant -- still in Spain costs going down 7%, 8% in nominal terms. Portugal, probably more so, probably in the region of double digits, minus 10%.

And U.K. probably in the region of close to mid-single digits. So down in Europe. So this is the big deal on cost in 2022.

As Ana mentioned before, we are on track to meet our target, and our target requires us to be negative territory, taking in account inflation. In Poland, we may be around flat. Inflation in Poland is pretty high. Salary increases in Poland are running in the region of 7%, 8% and taking account of this respect to be in line with the flat costs in Poland.

So that's the work we are doing chaining our operating model in Europe. That one Europe means, taking advantage of our scale in the four quarters to increase the productivity on the back of a better operation model -- operational model.

Operator

Our next question is coming from Britta Schmidt from Autonomous Research.

Britta Schmidt -- Autonomous Research -- Analyst

I've got three questions, please. Just to confirm on the CET1 ratio. If we included a buyback element for Q4 and the pending deals, would it be right to say it will be at 11.8%? And can you just confirm that the regulatory headwinds are still expected at around 30 basis points? The second question is on Spain. Despite a decrease in the customer spread, NII was up.

Can you give a bit more color on that? And maybe also on the reduction in insurance fees. And the third one is on the U.S. operating model, you commented on some regulatory approvals. Could you tell us a bit more about that, please?

Ana Botin -- Executive Chairman

Regulatory approvals. Yes, regulatory approvals in the U.S. We got approval for Santander Consumer buybacks, and we executed that on Monday. We have pending approval for the Amherst Pierpont, which is the other transaction.

That's the only one pending. On the CET1, including everything we know until now, would be not -- would be very close to 12%. I think it's 11.96%, 11.97%. So including all the -- we were at 12.12% exactly at the close of December, will be very close to 12%, 11.97%, 11.98%, something like that, it's in the 11.96%, including the pending approvals, which will happen in Q1.

In terms of -- so again, we said we will be at 12%. As I explained, we have a diversified, very predictable business model. We've delivered every single year. And there will be some ups and downs every quarter, but our goal is to be at the end of the year at 12% or above.

And I'd say, every quarter also. Regulatory headwinds, I think maybe Jose Antonio you can take that one and the Spain insurance. Regulatory headwinds, I think -- have you said anything about that? Do you want to expand? Again, we're going to be at 12%. We feel very confident on -- and they should be leveling off and, of course, a lot less than in 2021.

That's for sure.

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

On the capital, naturally, there is some potential regulatory headwinds coming basically from [Inaudible] difficult to assess at this stage. But we feel that aside from any kind of inorganic that we don't have things that we do not contemplate at this stage. We're going to be running around 12%, maybe a bit higher, a bit lower than that, including the regulatory headwinds. And probably, taking into account the look for interest rates, some impacts coming from the ALCO portfolios.

So everything in good basis and our expectation of right now. So this is in CET1. Insurance, well, we have -- insurance businesses is running -- is going very well all across the world including Spain. Spain is growing a lot.

What we have had in Spain is some one-off coming from annuities that -- well, probably it's not going to -- no, for sure, it's not going to repeat it in 2022. But I will be surprised if our insurance fee, insurance generation in Spain does not grow in the region of 15% in 2022. So I'm fairly optimistic about insurance. And I think Insurance continues to be our -- one of our best opportunities to grow our fee income.

Finally, the third question, you want to take it, the operating model in the U.S.?

Ana Botin -- Executive Chairman

Sure. So we will give more detail on -- at some point in Q2, we are planning to do a special in the U.S. But the operating model in the U.S. has four business lines, as you can see in one of the slides.

One is a consumer vertical. We're not aiming to compete as a full-service bank, but rather follow more the digital consumer model in Europe, i.e., consumer, where we have the 10th largest consumer auto lender in the U.S. We are going to manage that as a consumer vertical where we're going to fund with core retail deposits. This is essential to grow our business in consumer into the prime and near prime because of cost of funding.

In parallel, we're going to streamline our retail operation. We are planning to exit certain businesses that are not scalable, where we're not competitive and focus on where we are competitors. We're working on a new tech stack that we believe will allow us to achieve significant synergies, and that's not just for the -- from the management of the business with the consumer, which, by the way, we're not able to do because it was a listed company. And so you're going to see very much a bank that mirrors U.S.

banks, where you have the consumer funded by core deposits, where you have a commercial operation that is based on the connectivity with markets, I explained Mexico and others. And finally, the wealth management and CIB that I refer to in my presentation. So that's really the operating model we are working on.

Operator

Our next question is coming from Alvaro Serrano from Morgan Stanley.

Alvaro Serrano -- Morgan Stanley -- Analyst

The first one is kind of on the payout. I mean, you've reached your 12%, which you've described at length, which is where you want to be profits outlook is significantly better than what consensus is saying is according to your guidance. You're expecting only sort of low single-digit RWA growth. Why not 50% payout rate in 2022? Is it because -- can we expect some reassessment or top up of the buybacks maybe later in the year? Or is there some restructuring charges that we don't know about that might happen? Or are you leaving some room for add-on M&A? Just what it feels like your capital accumulation should be very strong this year and it feels like there's a disconnect there.

And second, on the U.S. strategy. I realize you're going to give more color presumably in Q2 with a special but -- have you had any more interactions with Chrysler? I realize they're all in-house financing arm, and your joint venture comes to an end in May next year. Do you have any more color, maybe what part of the revenues you think you can keep and what would be a risk? I mean, in the past, I think Jose Antonio has explained that the subprime part is probably something you can keep.

I don't know if you can quantify that for us and how you're going to be able to offset that? What's the idea?

Ana Botin -- Executive Chairman

Very much. Excellent question. So on the payout, as we've said, we intend to increase and we are aiming for increased profitability, which means if that happens, and we are confident it will, we would be increasing dividend per share and buybacks at the moment. The intention is a 50-50 for next year.

I also said that we expect to -- sorry, we aspire to increase total shareholder return beyond the 40% with around 50% of remuneration through share buybacks. And that is really all we can say at point. Again, we have profitable growth opportunities. We think it's interesting for you, the investors that we do that in an era of increased competition.

We've been very disciplined about where we put our investments. We are getting returns. I mentioned 50% revenue growth for PagoNxt again next year. And I can tell you also, it's going to be EBITDA positive actually next year.

So that is the goal. The other very important change I want to stress is the current management is absolutely bent, and the Board is absolutely supportive, and we all believe it's an excellent opportunity to buy back our shares. We are not going to issue new shares at this price. We are buying back shares.

I want to leave that very clear that, that is something we will not do. It was an exception last year because of our retail investors and ECB guidelines. We want to buy back as many shares as we can within the guidance we've given you. In terms of the U.S., Chrysler has indicated that we will continue to be their preferred provider.

We've arrived on a very attractive agreement in Europe with Stellantis as their auto partner. This is a great business. It's a great business in Europe, in the U.S. and in Latin America, and we have a great relationship, which is working for both sides.

Operator

Our next question is coming from Sofie Peterzens from J. P. Morgan.

Sofie Peterzens -- J.P. Morgan -- Analyst

It's Sofie from J. P. Morgan. So just a follow-up question on the previous comments.

So you mentioned that you are not going to do any more kind of -- you're not going to issue any new shares. Does this also relate to any potential bid for Banamex in Mexico? So if you could just elaborate on these points. And then also another follow-up question, could you just confirm that the regulatory headwind -- capital headwinds in 2022 will be around 30 basis points? And then my final question would be in the U.S., we saw 43 basis points of loan losses in 2021. In the past, I remember you're talking more about 300, 400 basis points was a normalized level.

Could you just comment how we should think about the loan losses in the U.S. going forward? And what is that through the cycle normalized level of cost of risk in the U.S.?

Ana Botin -- Executive Chairman

So I want to be very clear. We are not contemplating in any case to issue new shares for Banamex or whatever. We are buying back shares. We believe it's an excellent opportunity.

It would make no sense for us to be buying back shares and then to issue new shares. We're not planning. We're not contemplating issuing new shares for any acquisition at this point at this share price. We believe, again, it's an excellent investment opportunity.

You've seen myself buying every time I can. I mean, I bought many, many shares. It's a public number. So that is very clear.

We're not contemplating issuing shares. In terms of the regulatory, I believe Jose Antonio mentioned that less than 30%. It's not 30%, it's less than 30%. In terms of the U.S., and maybe you can comment on the cost of risk.

But what's important in the U.S., and of course, we are delivering 24% and 19% this year. We are using 12% as the adjusted RoTE across our markets, because U.S. and Mexico, for example, we're expecting very large dividends this year and some next year. Actually, the U.S.

would be managed around 11%, not 12%. And the returns on the U.S., including the cost of risk and everything else, we are aiming 15% medium term through the cycle, which is a very attractive return to our shareholders. On the cost of risk?

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Yes. I should say, our business -- you're referring to SCUSA, the cost of risk in 2021, as you see in the presentation, was unusually low. We expect some normalization going forward, not coming back to the same levels in 2022. And even looking in the coming years, our business, we continue -- we're going to continue to be a preferred partner for Chrysler for the next couple of years.

This is our expectation. And we are generating -- originating more on the primary space than in the subprime space. Naturally, the cost of risk, the second number will depend on the mix, because on one side, across the cycle, we have the subprime space where the cost of risk is in mid- to high single digits; and in the prime space is less than 2%. So naturally, this is what is going to drive this.

On the long run, this will come to -- this will be maintained across the cycle, not in 2022 where we are -- we expect the cost of risk to be still significantly lower than the number you mentioned, the 3% that we have had in the previous year. So it's not going to be the case in 2022. And going forward, the mix is what matters. Probably, we're going to have more prime and less subprime because we are, as Ana mentioned in the presentation, we have booking in the bank more prime launch.

Operator

Our next question is coming from Benjamin Toms from RBC.

Benjamin Toms -- RBC Capital Markets --- Analyst

Two on the U.K., please. Firstly, in terms of customer spread, we saw that fall slightly in the U.K. quarter-on-quarter. In relation to your sensitivity guidance for a 100 basis points rate rise in the geography, can you just clarify what you've assumed or talk a bit more about assumptions for customer spread changes, deposit beaters and margin erosion from competition? And then secondly, we saw some data released recently in the U.K., which showed that bio-mortgage demand was very strong over the Christmas holidays.

Can you just clarify what you're assuming for loan growth or mortgage growth in the U.K. for this year?

Ana Botin -- Executive Chairman

Jose Antonio, maybe you take those?

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Yes. So in U.K., this two -- you mentioned the rate rise, we are taking, in our assumptions, some raising rates not as big, probably. And our assumption is to go from the current 25 basis points to 75 basis points, maybe a bit higher. This has two effects.

As you rightly said, we expect to make some margin expansion on the liability side. On the mortgage -- on the asset side, that means more which depends on the competition. The competition drives prices in U.K., is a market that is fairly competitive. And as you mentioned, the second part of your question is, during Christmas, we have strong demand in mortgages, and we were keeping our market share, we grew along with the market.

We expect to grow along the year [ 3%, 4% ]. The mortgage book in line -- very much in line with the market, not losing or gaining market share. And the big question mark is competitive pressure in the market. We saw 2021 with year -- the first half of the year, more competition in the second half.

Now it's fairly stable, yes. So that's the situation on the market. And this is what I can comment to you at this moment. Naturally rate prices place in favor of us.

So sensitivity to the balance sheet is toward higher rates.

Operator

Our next question is coming from Ignacio Ulargui from BNP Paribas.

Ignacio Ulargui -- Exane BNP Paribas -- Analyst

I have two questions. One is on ESG commitments. I mean you have given guidelines on what is the support that you are planning in terms of lending on green finance targets. I was wondering whether at what stage the bank is considering to disclose a Scope 3 emissions for the loan book, and to track a bit more on progressing toward that net zero by 2050? And the other question is a bit more linked to the previous one.

At the bank level, if you could just run through a bit of what's your interest rate sensitivity on the main units of the bank?

Ana Botin -- Executive Chairman

Thank you. So let me take both of those. I mean, the interest rate sensitivity, actually, we are positioned for higher rates. So net, it should be positive.

Sometimes it takes some time to feed through, but clearly positive. On the ESG commitments, Scope 3. So we are taking into account Scope 3, as we go through the stress test. We did some of that already last year.

We're doing that this year. We're actually going to be very focused on embedding that bottom up. But obviously, to measure Scope 3, we need consistent numbers. We need our customers to give you numbers that we can rely on.

And we then need to compare that with others in a way that's comparable. And all of that is going to take some time. So it's really important. And we are working with regulators and supervisors that we take these stress tests, where we are going to measure the Scope 3 as a learning exercise, so we can have common measurements that we can compare much as you do with financial numbers.

We are very involved. I'm personally very involved in the working group, so we can ensure that that happens in a fair way. Again, the countries -- we're not in Africa, but of course, we are in Latin America, that are now beginning to develop and to ensure that we can measure those, what is green and what is acceptable, we need some common grounds. But yes, we are measuring that.

And we will disclose as soon as we believe we can do that in a way that is comparable across others as soon as possible. 

Operator

Our next question is coming from Marta Sánchez Romero from the Bank of America.

Marta Sanchez Romero -- Bank of America Merrill Lynch -- Analyst

My first question is going back to Banamex. Given the relative discount of Santander Group shares, would you consider rating equity using your listed companies in Mexico or minorities are done? Related to this, have you run preliminary numbers on potential cost synergies in Mexico where you could buy Banamex? And my last question is if you can comment on the general outlook on asset quality in Spain? And also more specifically, what are your plans for your real estate subsidiaries Merlin, Metrovacesa and the JV with Blackstone. There's been a lot of headlines recently in the papers. Are there any risk of further impairments in this space?

Ana Botin -- Executive Chairman

So let me take those. I think what's really important is we are not contemplating in any way, issuing group shares. We want to buy back our group shares. It's really too early to say.

We are very happy with our organic growth. As I said before, when the process begins, we do expect to be part of the process, but we are not going to, in any way, contemplate at these prices, group share issuance. In terms of Banamex numbers, for years, we follow our competitors. We know our competitors' numbers.

So we do have an understanding. We're not working on that specifically at the moment. It's really too early. In terms of asset quality, let me just comment on the group and say that normalization through the cycle of cost of credit, we expect to happen in '23.

So '22 would still be below the cycle. And again, Jose Antonio gave some detail already, I believe on Brazil, which could be one of the areas where there could be some questions. In terms of our real estate subsidiaries, these are not permanent holdings in any way. We're trying to make sure we maximize value in terms of when we have to restructure some assets.

The goal there is to stay as long as it makes sense. At some point, obviously, this is not a core business. But for the moment, we don't have any specific plans there to actually do anything. It's -- we believe we can generate value for now.

Operator

Our next question is coming from Daragh Quinn from KBW.

Daragh Quinn -- KBW -- Analyst

Just a first one on Banamex, if you could give us an idea about how you understand the time line for that process this year? And then a second question just on the U.K. and NII declining in the quarter. Maybe just remind us of how you see the U.K. NII reacting to higher rates and the impact, the current expectations for higher rates could have on loan growth, if any? And then just a final small question.

Just on the 2021 dividend. I mean, traditionally, you've always announced the dividend proposal with the results and I think you said you'd be announcing the dividend in a few weeks' time. Just curious on what kind of change in time line and if you could be more specific on the timing for the announcement of the final 2021 dividends?

Ana Botin -- Executive Chairman

Again, on Banamex, I think the crucial thing for investors is -- and I am also a significant shareholder, at least at my level, we're not going to issue shares. And the process, we have no idea, but we believe it's going to be long. We don't think it's going to be for a few months because there's a carve-out involved. They have announced that they need to put in place a new subsidiary where they would be actually putting the assets they want to keep.

So we don't think that's going to happen for months, probably more Q3. But again, we are not in -- we're not -- we do not know. We have not engaged at this point. In terms of net interest income in the U.K., I think Jose Antonio explained that in sufficient detail.

In terms of higher rates in the U.K., would have a positive impact -- a significant positive impact in the U.K. That was the previous question. It would be hundreds of millions of a positive impact for 100 basis points parallel rise in the curve. In terms of the dividend, there is no mystery.

I mean, we have said what it's going to be effectively without saying. The reason is that buybacks require a different process from cash. And so that is one of the reasons, but mainly it's because we'd like to keep some announcement to our shareholders' meeting. So I'm a bit surprised at the questions on this.

We have said it's going to be 40% of underlying income, 50% cash, 50% shares. So again, I would not like to give the number, but it's a pretty simple mathematical calculation. So in a few weeks, we'll be saying that, again. We have a shareholders' meeting coming up, and we'll be calling the shareholders' meeting at the end of February.

That's when we will be giving that.

Operator

Our next question is coming from Mario Ropero from Bestinver Securities.

Mario Ropero -- Bestinver Securities -- Analyst

My first question is on revenues in Spain. NII outlook for 2022 is probably hard. So I just wanted to ask if you think the fee growth will be enough to offset this and perhaps linked to this to give some fee guidance in Spain in 2022? And then the second one is on PagoNxt. Well, basically, an update on when you expect breakeven to be reached?

Ana Botin -- Executive Chairman

PagoNxt, EBITDA positive next year. 50% growth in revenues. We'll be giving more detail on that. In April, we're planning to give a restatement and showing you the horizontals in more detail.

It's a business that's growing 50% revenues, EBITDA positive in '22. On Spain?

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Well, the question of NII in Spain, I should say volumes will be relatively flat, probably grow a bit both in loans and deposits. The main driver is going to be TLTRO. So as the TLTRO expires, it's -- the negative will come basically from the TLTRO impact in the NII in Spain.

Operator

Our next question is coming from Andrea Filtri from Mediobanca.

Andrea Filtri -- Mediobanca -- Analyst

First question on capital. Can you tell us the expected impact from the EBA regulatory changes on the treatment of minorities, please? And just a clarification, I'm following from Britta's question before, the 12% CET1 ratio fully loaded that you've given pro forma for all inorganic operations is not including the second tranche of the buyback against 2021 profits. Including it, it would be 11.8%, if I'm correct? Second question on M&A. If you're not issuing shares, is the 12% CET1 target you're giving a firm target, even in case of Banamex acquisition? And finally, you announced you're exiting some businesses in the U.S.

If you could detail for us the profits and risk-weighted assets attached to this?

Ana Botin -- Executive Chairman

So the EBA minimum?

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Well, it's not yet a regulation. It's suppose to come, that is not yet reregulation. In any case, as it is what we know as of today, maybe in the region of a couple of basis points, maybe five, maybe three, maybe four in this region. So it's what we know today, OK, because it's not still translated into, as far as I know, into a regulation.

Ana Botin -- Executive Chairman

Right. On capital, again, the pro forma included both acquisitions. One has closed, the other one hasn't. I reiterate that 12% for '22 for every quarter, as I said before.

The target is to be at 12% for '22, including every quarter in '22 including Q1, including buybacks and cash. And of course, that gets accrued when you actually do it and the accrual will happen in Q1, most likely. In terms of the U.S., we'll give more details on when we do a special day on the U.S. We're planning to do that in New York, we'll announce that briefly in a few weeks, probably, so we can give you all the details on that.

And again, the 12% is a target for this year, and we're not planning to issue new shares in the event that we do something inorganic.

Operator

Our next question is coming from Benjie Creelan-Sandford from Jefferies.

Benjie Creelan-Sandford -- Jefferies -- Analyst

I had a question on the Digital Consumer Bank. Just looking at the RoTE and the cost/income guidance for 2022. It sort of implies you expect the cost of risk there to remain still relatively low this year. I was just wondering if you could perhaps discuss the trajectory of the cost of risk in the digital consumer business and what you would see as the normalized level? And also on the Digital Consumer Bank, you've talked before about some of the synergies potentially available between the traditional consumer business and the digital bank.

I'm just wondering whether you could confirm whether you're currently able to use deposits raised in the digital bank to fund business out of the consumer bank in Europe and -- or whether that's still a potential tailwind for the profitability of that business going forward?

Ana Botin -- Executive Chairman

So yes, we are running those businesses together. And so that deposit funding, which is now at EUR 11 billion is it's able to fund the consumer. We're aiming to grow that in a significant way. We've grown customers actually through Openbank in Germany, Holland, for total outside of Spain, around 80% in those markets and Germany, and we believe we can do much more of that.

Again one of the goals by managing these customers in a native cloud-based platform is going to be easier to launch a new market. But very importantly, what we have learnt in Spain with Openbank is we are very effective at cross-selling and actually achieving what I don't believe any other digital bank has achieved, which you have core deposits, customers that use the bank as a primary bank and therefore, much lower cost of deposits than other native digital banks. So that's the opportunity. You haven't seen that yet.

And we should expect to see that in '22, '23. Cost of risk, normalized cost of risk?

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

In 2022, we have early. We're going to be already in line with 2021. So we do not see a significant risk there. Yes, so the credit quality is very good.

Ana Botin -- Executive Chairman

It's still good. Yes.

Operator

Our next question is coming from Fernando Gil de Santivañes.

Fernando Gil de Santivanes -- Barclays -- Analyst

Just a quick follow-up question, please on 2022 guidance. First is on ALCO strategy. Is there any big change on the ALCO strategy that you are including in your guidance? I think that the Polish book is still big. This is one question, one part.

The second is on provisions taken on that outlook RoTEs above 13%. Are you contemplating any reuse of the overlay provisions do you still happen then?

Ana Botin -- Executive Chairman

So on the ALCO strategy, we're not anticipating any change there. As I said, we are positioned for higher rates, 100 basis points by our little shift. We have the biggest benefits in the U.K. but even bigger in the Eurozone.

Again, if you take both together, over EUR 1 billion if you take Europe, the Eurozone and the U.K. But again, we don't have the...

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Yes. We are just projecting the portfolios we already having the one initiated at the end of December.

Ana Botin -- Executive Chairman

On provisions release for overlay, I don't think we have anything in '22.

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

We still have some overlay in the balance sheet, as you know. And this -- well, maybe a reduction, may be offset potential credit losses depending, but we are -- as I mentioned, in relation with our questions, very well provide to offset potential headwinds on the macro side. While we are working on this, being IFRS in respect to the losses and expected losses naturally depends largely on GDP growth. So we have synergies for different countries, not that unique, I should say, in line with IMF.

Ana Botin -- Executive Chairman

Yes. We use IMF and we use the curve. And again, going back to my point early on diversification, there could be some positives, but we believe positives could be offset by the negatives, and at the end of the day, the model is going to continue working. So should be, in principle, no surprises, even though you might get surprises in individual countries, we believes the trends would offset each other.

Operator

[Operator instructions] Our next question is coming from Pamela Zuluaga from Credit Suisse.

Pamela Zuluaga -- Credit Suisse -- Analyst

I have two. The first one is regarding the FX denominated mortgages in Poland. How should we think about your exposure to those? We've seen other banks both actively reaching for out-of-court settlements and increasing their coverage levels amid unfavorable court decisions. Do you anticipate increasing charges related to the resolution of these mortgages? And then my second question is basically a follow-up.

You had initially guided for an RoTE ranging from 13% to 15%. Now you're guiding for 13% in 2022. Is this level encompassing any downside risk from the higher-than-anticipated costs amid higher inflation like you are highlighting?

Ana Botin -- Executive Chairman

First one, and then Jose Antonio, on the Swiss francs. So I believe it's remarkable what the team has achieved. We are achieving close to 13% in '21 after COVID. So in 2019, we guided medium term, that's three, four years.

So that's '22, '23 to 13% to 15%. We're going to -- we're close to 13% now. We are saying above 13% next year. Second very important point, again, that shows we not just delivered but over delivered, when we gave the guidance, we said 11% to 12% CET1.

The goal there was 11.5%. We're delivering close to 13% after a pandemia with a lot more CET1 than what we guided in '19. So that shows you the strength of our model, the strength of our strategy and of our execution. We're now saying medium term, we said 15%, but we're still working on what would be our next three to four-year plan, which we'll present to you in '23.

So I just want to stress that we're not just delivering, we're overdelivering in some aspects, if you consider the extra capital that we have versus what we were planning for in '19 and of course, the pandemia and so on. So in terms of the Swiss francs, Jose Antonio?

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Well, it's very long. We have an exposure between the consumer bank and the bank of EUR 2 billion -- around EUR 2 billion FX Swiss franc mortgages. Our provisioning levels now are 22%, 23%. Well, we are doing some settlements with the customers, as everybody is doing the same.

The final cost of this largely depends on some rulings for the courts and the success of the settlements we are doing. But -- well, this is largely behind us on the back of much better outlook for the Polish business on the back of higher interest rates. You see the margin NII expanding 24% quarter-on-quarter in the Q4, and this is going to give us enough room to offset potential losses that come from there that are not going to be very large.

Unknown speaker

We are running out of time, but I have two questions left. I will ask you to be very brief.

Operator

Our next question is coming from Stefan Nedialkov from Citi.

Stefan Nedialkov -- Citi -- Analyst

I have just a couple of quick ones. On NII at the group level, what's your assumption for the -- in the guidance that you're giving us for '22 mid-single-digit revenues, what's your assumption for the ALCO portfolio? You've decreased the allocation to Spain quite significantly while keeping the overall ALCO portfolio level pretty constant versus 2020. What should we -- how should we think about it going forward? How about tiering, for example, what's your assumption baked into the guidance as well as rate rises in Europe and across your geographical footprint? So that's on NII. And if I may, a super quick one.

On the DGF and ERF charges from 2024 onwards or even maybe '23. Are you expecting a significant reduction there?

Ana Botin -- Executive Chairman

OK. Jose Antonio, could you just -- if you could be -- if I may ask you to be brief. We have one more question, and we have...

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

NII growth, you're referring specifically to the ALCO portfolio, yes? So in the second half of the year, we already had in 2021, I mean, less revenues coming from the ALCO portfolio in the back. The ALCO portfolios are basically in Brazil, Chile, Mexico, somehow in Poland and somehow in U.S.; not in Europe, where the portfolios are small on the system and U.K. is not system. So higher rates naturally means lower revenues from this, but this is included in our NII guidance and in our guidance for 2022 with the expectations we have for rates, yes? So that is to go up in Mexico, Brazil, U.S., U.K.; not in Europe, but Europe does matter in this regard.

That's it. The second question was? Yes. Well, in 2023, if I'm not wrong, we cover the back -- the low side of the range established by Bank of Spain. So very likely, this year, they already reduced somehow the contributions by a small amount, EUR 10 million, EUR 15 million, EUR 20 million, no more.

But this shows you the path going forward. Well, the resolution -- the same may happen, yes? So those are two things that cost us EUR 600 million a year, EUR 700 million. So well, this -- and this is something happens, this is the path going forward.

Unknown speaker

Can we have the last question, please?

Operator

Our last question is coming from Carlos Cobo Catena from Societe Generale.

Carlos Cobo Catena -- Societe Generale -- Analyst

I'll try to be quick. One is on organic capital formation. You've guided to -- sorry, you explained the 42 basis points formation this quarter. But if I deduct the cash payout in dividends and [Inaudible], I may get to something more around 20 basis points.

So I was wondering what is the difference? And whether that delta is record going forward or not, if that includes any sort of securitizations in the group? And the second question is about Stellantis in Europe, you reinitiated the agreement. And I was wondering if you could give us a little bit more color on what are the expected changes in the business plan going forward, different business lines? Or how that new agreement would affect the business performance?

Ana Botin -- Executive Chairman

So let me just take the second one. On Stellantis, again, we have a very strong relationship in Europe. We've already agreed a very, I think, interesting agreement for both sides, which would allow us to grow our business together over the next few years, really, that's baked into the numbers that you have. Again, we are making a strong digital transformation as we deliver every year, and we are committed to continue to do that.

And again, Stellantis is a very strong partner of us here and in the U.S. In terms of the -- just as a general point, I'd say that we are generating more and more capital organically. In '21, you've had headwinds, not just on regulation, but also on markets, especially exchange rates and interest rates to some degree. I think Jose Antonio showed that in his presentation.

I don't know what you want to say about the future, but...

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Securitization naturally is a tool to match capital. The guide there is fairly simple. As long as we can release capital, do securitization with an implicit cost of equity below the cost of equity, we're going to do that. How much is going to be this? This 2021 was fairly positive because in granular portfolios like the consumer finance ones, we were able to release capital at the levels at 4%, 5%, 6% that are very attractive, and we continue to check the securitization market.

If we offer opportunities, we're going to take it. If they don't offer an opportunity, we will keep more loans in our balance sheet. It's fairly simple, our approach. But naturally, this is a source of flexibility given the very nature of our portfolio, particularly the consumer finance ones.

Ana Botin -- Executive Chairman

So I think that's it. We will try to answer every question. We very much appreciate your attention. We know this has been a bit long.

But we wanted to give you not just the update today, but also a higher strategic vision of the confidence and the optimism actually we have about the business and reiterate again our commitment to continue profitable growth, also increasing shareholder remuneration as we grow profits. And we are very, again -- our model has once again shown it works. And we are, again, very proud of our teams, the huge work they've done this year, and are confident that they will continue to deliver for you all and for all our stakeholders in the years ahead. Again, thank you very much.

And if anybody has any other questions, our IR team is at your disposal. Have a great day. Thank you.

Duration: 0 minutes

Call participants:

Ana Botin -- Executive Chairman

Jose Antonio Alvarez -- Vice Chairman and Chief Executive Officer

Unknown speaker

Francisco Riquel -- Chief Financial Officer

Britta Schmidt -- Autonomous Research -- Analyst

Alvaro Serrano -- Morgan Stanley -- Analyst

Sofie Peterzens -- J.P. Morgan -- Analyst

Benjamin Toms -- RBC Capital Markets --- Analyst

Ignacio Ulargui -- Exane BNP Paribas -- Analyst

Marta Sanchez Romero -- Bank of America Merrill Lynch -- Analyst

Daragh Quinn -- KBW -- Analyst

Mario Ropero -- Bestinver Securities -- Analyst

Andrea Filtri -- Mediobanca -- Analyst

Benjie Creelan-Sandford -- Jefferies -- Analyst

Fernando Gil de Santivanes -- Barclays -- Analyst

Pamela Zuluaga -- Credit Suisse -- Analyst

Stefan Nedialkov -- Citi -- Analyst

Carlos Cobo Catena -- Societe Generale -- Analyst

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