Erste Group Bank Ag S/Adr

Welcome to the third quarter 2024 results conference call of ERSTI Group. My name is Sergey and I'll be your coordinator today. Throughout today's recorded presentation, all participants will be in a listen-only mode. Later, we will conduct a Q&A session. You may register for questions at any time by pressing star 1 on your telephone keypad. At this time, I'd like to hand the call over to Mr. Thomas Samarala. Please go ahead, sir.

Thank you very much, Sergei, and good morning to everybody who is listening in from Vienna. Today's call will be hosted, as usual, by Peter Bossek, CEO of Erste Group, Stefan Dörfler, CFO of Erste Group, and Alexandra Habela-Trabek, CRO of Erste Group. They will lead you through a brief presentation, highlighting the achievements of the past quarter, after which they are ready to take your questions. Before handing over to Peter, my usual pinpointing of the disclaimer on page two. Management will make forward-looking statements, of course, during this presentation, and the disclaimer applies to these statements, as usual. And with this, I hand over to Peter.

Good morning, ladies and gentlemen. Welcome again to our quarterly call. Our financial performance in the third quarter was nothing short of outstanding. I am on page 4 of the presentation. Revenues grew across the board, with record NII and fee prints being the most impressive achievements in the past quarter. Costs were very well behaved. Risk costs were somewhat higher than in the second quarter, but well inside our guidance, and return on tangible equity hit almost 20%. All of this without any material one-offs. This quarterly performance, together with the strong first half, puts us firmly on track to go on better this year than in 2023, which I'm sure I don't need to remind anyone was by a long shot our most profitable year ever. If we look at the year-to-date performance, trends were very similar as in the third quarter, as in the first half. Net interest income held up well, particularly in our Central and Eastern European operations, while Austria had to give back some of the strong gains posted over the past two years. Fee income was strong throughout the year, and the third quarter was no different. Cost inflation, in addition to cost discipline, was helped by lower deposit insurance contributions, and risk costs continued to be very moderate, driven by the exceptional strong performance across CEE. In terms of net profit, we already surpassed 2.5 billion euros in the first nine months of 2024, which is an equivalent to a return of tangible equity of almost 18%. It will therefore not come as a big surprise that we are once again improving our financial guidance for 2024. I am on slide 5 in the meantime. On the back of a broadly stable net interest margin year-to-date, we are again upgrading our 2024 NII outlook. We now expect this key revenue line to grow by more than 2% as opposed to remain flat versus 2023. We confirm our cost growth guidance at about 5%. Based on the brighter revenue outlook, the cost-income ratio should come in better at about 48% or less compared to our previous guidance of less than 50%. And consequently, we now expect return on tangible equity to top 16% rather than previously guiding it to 15%. When it comes to balance sheet trends, I'm now on page 6. I reported to you a quarter ago that we saw a first peak up in core business volume growth. This trend slowly improved in the third quarter, particularly driven by better loan growth in CEE, and in terms of business segments, supported by somewhat better retail demand. In Austria, loan demand also improved in the third quarter, especially at Erste Bank Österreich. but still came in somewhat weaker than expected, mainly due to a slightly weaker economic performance in Austria. Despite this, and assuming that current trends continue into the fourth quarter, we will come close to reaching our 5% long growth target for 2024, so no guidance change in this respect. When we look at customer deposits, the third quarter was uneventful. We maintained a strong deposit base and were quite successful in passing on lower interest rates to depositors across our franchise. Stefan will give you more details on the latest deposit trends. In terms of other balance sheet developments on the liability side, the volume of outstanding debt securities increased as we already completed the full year funding plan while the volume of interbank deposits declined due to the almost completed retirement of TLTIO funds. We talk about 6 billion euros here. On the asset side, central bank cash was in part redeployed into interbank lending but also reduced by the already mentioned TLTO retirement. Moving to our key balance sheet indicators on slide 7, as a result of our overall strong business performance, all parameters continued to be excellent. Our loan-to-deposit ratio remained in the customary 85% to 90% range, reflecting balanced loan and deposit growth as already mentioned. Asset quality continued to be very satisfactory with the MPL ratio unchanged quarter on quarter at 2.4%, and only slightly up year-to-date. MPL inflows were again registered primarily in the Austrian segment as the economic performance for 2024 was revised downwards. Defaults in our CE operations continued to be at very low levels. MPL coverage excluding collaterals slipped slightly in the third quarter, mainly on the back of further releases of FLI industry overlays. Our capital generation also remained healthy in the first nine months of 2024, despite the performance CTO-1 ratio hardly moving year-to-date, which is simply explained by business growth and distributions, compromising our pro rata dividend allocations and full deduction of the current share buyback in the amount of 500 million euros. Let us now turn to the operating environment. I'm on slide 9 now. The only minor change in economic forecast since we last reported three months ago was related to Austria. where our economies now project a shallow recession of 2023 to continue into 2024. For the CEE countries, the GDP growth projections for 2024 and 2025 were broadly maintained. Inflation is expected to remain the low to single-digit area across our footprint. Against this backdrop, we expect interest rates to decline further across our region in the next 12 to 18 months. Our economic metrics, such as unemployment, fiscal and external balances, are forecasted to remain in good shape or improve in most of our markets. All of this should support organic growth as we progress into 2025. Talking about organic growth, let's quickly review how the retail business fared over the past quarter. I'm on page 10 in the meantime. The good news is that the moderate recovery in volume growth, and it's true for both housing and consumer loans, Continued in the third quarter, the bad news, if one wants to call it bad news, is that we would have hoped for a more forceful housing loan recovery, but clearly we had some headwinds of the economic front, especially in Austria, which at least partially offset by the positive effect of lower interest rates. Nonetheless, consolidated new business volume in housing loans reached a two-year high, while consumer loan demand also remained healthy. On the liability side, our retail deposit base also increased quarter on quarter. The shift from current accounts to term deposits that played out over the past couple of quarters has almost stopped, with current accounts accounting for approximately 52% of retail deposits. We now have a situation where we see balanced growth among all categories of retail deposits. Our success story in promoting retail security savings plans as means of building long-term wealth also continued. The stock of such savings plans got close to 1.4 million, supporting long-term fee growth in our asset management business. And our market-leading digital retail platform continued to be instrumental for producing efficient growth with 70% of consumer loans and 85% of term deposits already sold digitally. Looking at the developments in the corporate and market business on page 11, loan volume trends were subdued with the third quarter. This was true for both the large corporates as well as the SME segment. A recovery in corporate loan demand would clearly be helped by a more robust economic performance of Germany. On the liability side, deposits in the corporate business remained by a large stable quarter-on-quarter as well as year-to-date. The market business continued to do well, although tracking somewhat below the exceptional strong performance of the previous year. We were involved in the issuance of €123 billion worth of bonds and 198 book-running mandates, generating healthy income in the security business. Asset management built on a good start to the year, with assets under management reaching an all-time high of €83.9 billion, supported in particular by strong net sales in the Czech Republic. And with this, I hand over to Stefan for the presentation of the quarterly operating trends.

Thank you very much. Good morning, everyone. Let me take you to page 13 to add some country-specific remarks on loan volumes, this time focusing on our three biggest countries. In the Czech Republic, the recovery in loan growth continued as housing loan demand, as expressed by new business volume, increased further, and growth was also registered in the corporate business, driven mainly by higher lending volume in the large corporate business. In Romania, consumer loan placements continued on a high level, even though not matching the record level seen in the previous quarter. The Austrian loan demand improved somewhat in the third quarter, but a more forceful recovery was hampered by the weaker economy backdrop, as already mentioned by Peter. Overall, this resulted in a loan growth of 1% quarter on quarter, and with this, the annual run rate is tracking at 3.5%. The loan growth ambition of 5% for 2024 is within reach, contingent on further demand improvement in Austria in Q4 and on CEFX backdrop at year-end 2024. As for deposits, and I'm on page 14 already, the quarter was uneventful. We maintained a stable overall deposit base, while at the same time growing our core deposits, which includes deposits held at our retail, SME and savings banks business lines, and which account for about 80% of our total customer deposits, by 0.7% and 3.7% quarter-on-quarter and year-on-year respectively. The year-on-year as well as quarter-on-quarter decline in the other Austria deposit base is attributable to lower levels of financial institutions business as you may have assumed. The structural shift in our retail deposit base from current accounts to term deposits that we observed ever since interest rates moved up seems to have come to an end, with rates coming down again. In concrete numbers, this means that the share of current account retail deposits was almost stable, quarter on quarter at 51.7%, and absolute retail current account volumes rose for the second quarter in a row. Now let me come to net interest income on page 15. To cut a long story short, NII continues to perform better than expected at the start of the year. In fact, the third quarter of 2024, we posted a record print of 1.9 billion euros. Now what are the reasons? We continued to see positive contributions from the client business, with deposit repricing more quickly in the third quarter than loans. and loans benefiting to a certain degree from a natural offset of fixed-rate loans repricing higher in some jurisdictions. Lower wholesale funding costs also helped as a good part of our own issues is swapped into 3 months Euribor. We also continue to enjoy tailwinds from the bond portfolio. All of this more than offset lower interest income from central bank placements. These developments were more or less prevalent in individual segments and, for instance, explained the good performance of the savings banks in the past quarter. Overall, consolidated NII was not impacted by any material one-offs, as a positive of 18 million euros in the Czech Republic was offset by a negative of 9 million euros in the Austrian segments. Looking into the fourth quarter, we expect, very much in line with our plateau forecast, a somewhat lower NRI print. As some of the effects that played in our favor, this quarter will likely adjust, and the accumulation of rate cuts in the Eurozone will also show some impact. This notwithstanding, we are upgrading our 2024 NRI guidance. We now expect NRI to grow by more than 2%. Let me turn to the big question that for sure you all have on mind about the NRI 2025. While we do not give an exact quantitative guidance today, we of course have a view which I am happy to share. In principle, we believe that our plateau assumption is still valid. There are quite a few moving parts here, which include all aspects of the client business, deposits, loan repricing, volume growth, margins and general interest rate levels. These could balance each other out. We continue to expect tailwinds from the bond portfolio. On the flip side, we of course expect lower income from central bank placements. We are also undertaking a lot of efforts to decrease interest rate sensitivity as measured by an immediate 100 basis points downward shock. This used to be, you remember, 350 then 300 million euros and now stand about 250 million with potential for a further reduction. Happy to answer questions in this respect in the Q&A. Now, if you add all of this up, our best guesstimate for 2025 NI is that it will stay very much at comparable levels as we were in 2023 and are expecting for 2024. With this, we move on to page 16 on fee income. After a quarter of consolidation fees were back in full growth mode in the third quarter, up almost 11% year-on-year and more than 3% sequentially. This year-on-year growth drivers were unchanged in the past quarter. We saw increased payment services fees thanks to inflation adjustments, higher transaction volumes and increased card revenues. Higher fees from securities business and asset management also made strong contributions on the back of higher asset management volumes and strong new sales, particularly in the Czech Republic. And not to forget, our fees from insurance brokerage also posted very good growth. With this year-to-date performance, we are confirming our 2024 fee outlook of a plus of approximately 10%. Also here, I want to talk a little bit about 2025 outlook. Again, we haven't put all the pieces of the puzzle together yet for 2025 planning. Still, I see promising further growth ahead. Of course, please adjust it for the substantially lower inflation when it comes to annual percentage growth. Let me turn to operating expenses on slide 17 now. Quarter-on-quarter costs were stable, and that's pretty much true for all categories of expenses. The reasons for year-on-year cost updrift are well known and are also evident from the right-hand chart. The main driver, of course, being a higher wage bill due to significant inflation adjustments, particularly in Austria. Needless to say that we also saw increase in IT and other administrative expenses. With the year-to-date cost inflation standing at 3.7%, we are therefore confident to deliver on our promise to restrict cost growth to about 5% in 2024. Let's flip to page 18. With quarterly revenues hitting a new all-time high, supported by strong core revenue performance and costs remaining under control, we posted a new record operating result in Q3 2024. In terms of geographic split, our CE operations made a particularly strong contribution, while Austria held up quite well after the exceptional year 2023. Consequently, the performance of the first nine months give us enough confidence to upgrade our full year 2024 efficiency outlook. We now expect the cost-income ratio for the full year 2024 to come in at or below 48%, pretty much in line with our record 2023 print. Or, in other words, positive chores are still not very likely, but can't be ruled out anymore. Maybe more interesting for you is what we currently think about the operational efficiency and cost-income ratio going forward. Without providing a concrete guidance at this point in time, I'd still there to indicate that the 50-ish area that the consensus is circulating around might not be a bad idea to start with. And with this, I hand over to Alexandra for the risk update.

Thank you, Stefan. Good morning, everyone. I continue on page 19. As Peter has already mentioned, our risk performance continued to be very good in the third quarter. Risk costs came in at 16 basis points. Year-to-date risk costs equaled 13 basis points, so comfortably inside our full-year guidance. We released primarily FLI provisions in the amount of approximately 100 million euros in Q3, and with this our remaining FLI and industry overlays amount to 565 million euros. As is visible on the left-hand chart of this slide, risk costs are almost exclusively an Austrian topic for some quarters now, and the third quarter was no different. The reason for this has also not changed. In line with our expectations, we continue to see some new defaults in the Austrian real estate sector. These defaults affected both Erste Bank Österreich as well as the savings banks. In addition, we booked some portfolio provisions for potential flood-related losses in Austria and the Czech Republic in the amount of 23 million euros in total. If you look at risk costs related to Central and Eastern Europe, I can once again only repeat what I've been saying for a couple of quarters now. The risk performance there continues to be excellent. We continue to post net releases or saw only minor top-ups in provisions. Looking towards year end 2024, we are therefore comfortable with our risk-cost guidance of less than 20 basis points. And, as also Stefan indicated several times today, while we do not provide an exact outlook for 2025 today, we expect risk-costs to remain at moderate levels also in 2025. Let's now turn to asset quality on page 20. The consolidated NPL and NPL coverage ratios stayed at very good levels. Segments that experienced higher NPL inflows in the past quarters, such as already mentioned Erste Bank Österreich or the savings banks, unsurprisingly reported increases in the NPL ratio over the past quarter as well, while coverage stayed broadly stable. But even in these segments, NPL ratios remained at solid levels. When evaluating the asset quality performance of our CE operations, the only noteworthy development is, as with risk costs, that the asset quality continues to be outstanding. So no further comments there. I already mentioned that we released some further FLI and overlay provisions and that we created a small amount of provisions for potential flood-related losses in the Czech Republic and Austria. The latter mainly expressed itself in a temporary quarter-on-quarter decline in Stage 2 coverage. Furthermore, the minor decline in Stage 3 coverage is attributable to new NPL inflows being supported by real estate collateral. This is a trend that we have observed also the previous quarters, and I've commented on several times also in our calls. Looking towards year-end 2024, we expect that the group MPL ratio will stay more or less at current levels, as should coverage. And our first assessment for year-end 2025 is that asset quality metrics will likely stay stable. And with this, I hand back to Stefan.

We are on page 21 now. Other results, which includes other operating results as well as gains and losses from financial assets, in the third quarter of 2024 was broadly comparable to a year ago, but significantly improved quarter on quarter. This was due to the fact that we booked a significant one-off provision in the second quarter, as you certainly remember. In terms of individual segment highlights, the quarterly other result booking in Hungary was higher on account of higher banking levies, while we incurred selling losses on bonds primarily in the Czech Republic. But these were almost fully offset by some positive items. In terms of expectation management, you should expect a weaker other result in the fourth quarter of 2024. Okay, I heard that we were dropping out. Can you give me an indication when we lost the connection, guys? When did you lose the connection? When I started, we lost it?

Please proceed. Your line is reconnected.

Yeah, I understand, but I would like to understand when we dropped out. Therefore, I was asking. Okay, so I go back to the point when Alexandra handed it back over to me. I hope this is the right point, so we apologize for that. So, again, we are now jumping to page 21, and if I repeat something, that's better twice than not at all. Other results, which include other operating results, as well as gains and losses from financial assets in the third quarter of 2024 was broadly comparable to a year ago, but significantly improved quarter on quarter. This was due to the fact that we booked a significant one-off provision in the second quarter, as you certainly remember. In terms of individual segment highlights, the quarterly other result booking in Hungary was higher on account of higher banking levies, while we incurred selling losses on bonds primarily in the Czech Republic, but these were almost fully offset by some positive items. In terms of expectation management, you should expect a weaker other result in the fourth quarter of 2024 in line with historical patterns, as we may further optimize our portfolio. However, having checked all foreseeable items, a smaller effect than in quarter four of 2023 is our forecast. This also contributes to our conviction that that lifting the return on tangible equity guidance to above 16% is absolutely justified. You see the charts for the last five quarters on page 22. In concrete terms, the third quarter 2024 brought the second best quarterly net profit ever. Only in the second quarter of 2023, it was slightly higher but of much lower quality. With a net profit north of 2.5 billion for the first nine months, we have achieved a return on tangible equity of almost 18%, was already mentioned by Peter too. Looking forward to 2025, we have the aspiration to yield attractive return on capital again and hence give a first return on tangible equity guidance of about 15%. Before Peter will conclude with the summary of guidance and outlook, let's spend a few minutes on wholesale funding and capital, starting on page 24. Hosts and funding volumes were broadly stable year-to-date as the increased debt securities was offset by a decline in interbank deposits. While the stock of debt securities was pushed up primarily by issuance of covered bonds and certificates of deposit, interbank term deposit declined and on the back of regular TLTRO maturities. The group will redeem the last 150 million euros of TLTRO in the fourth quarter to close this episode. Overall, of course, our strong funding profile continued to be primarily built on highly granular and geographically well-diversified retail deposit base, which, as already mentioned, grew further in the third quarter. Looking at our long-term wholesale funding on page 25, I'm happy to report that we have already fully completed our 2024 funding plan. The highlights include a number of benchmark transactions, ranging from covered bond area to senior preferred bonds to an 81 transaction. In fact, we have already started the pre-funding for 2025 by re-entering the Tier 2 market after an absence of two years. And very successfully so, if I may say. A 750 million Euro benchmark deal was done early in October. For 2025, we expect a similar mix in terms of volume and seniority as was the case in 2024. The plans are being finalized as we speak. Turning to page 26 and looking at the development of regulatory capital and risk-weighted assets, in the third quarter we see some familiar patterns. Total capital stayed flat quarter on quarter, as third quarter retained earnings were not included. The year-on-year as well as year-to-date increases were mostly a function of strong profitability as well as issuance activity. The Tier 2 issuance I just mentioned is not yet included in the figures as it already took place in the fourth quarter. Conversely, risk-weighted assets grew irrespective of the comparison timeframe. On the one hand, this was due to business growth, but year-on-year as well as year-to-date also driven by higher operational risk on the back of the regular annual severity recalibration as well as increased market risk reflecting interest rate risks. Since you might be interested in an update on Basel IV impact, let me mention that the overall effect on Erste Group consolidated over the full introduction can be called a sort of nothing burger. Still, please be aware that due to the postponement of FRDB to 2026, you'll see an RAA relief first in 2025 and the potential counterbalancing effect, updrift of market risk later. So finally, for my part, let's flip to page 27. As a result of the capital and risk-weighted asset developments just presented, and including third-quarter profits, as well as the pro rata dividend deduction, we posted a pro forma fully loaded CET1 ratio of 15.6% as per end of September. This is unchanged compared to year-end 2023, as the current share buyback of 500 million euros is already fully deducted. The year-to-date C81 waterfall shows the key drivers of the ratio development. We don't expect any major surprises for the fourth quarter. The final C81 print end of December will naturally also depend on FX rates a little bit. Any further decision in respect of capital distribution will be forthcoming by the end of February 2025 at the latest when we publish our full year preliminary results. And with this I hand back to Peter. Thank you, Alexandra.

Thank you, Stefan. I'm concluding this presentation with a recap of our improved financial outlook for 2024 on page 29 and the first preview of 2025. Based on our strong year-to-date operating performance, supported primarily by higher revenues, we are now projecting Net interest income to grow north of 2% rather than staying flat. At the same time, we confirm our cost guidance at about plus 5%. Consequently, our cost income ratio should be around 48% or lower. Previously, we expected it below 50%. And with better operating profit, clearly bottom line profitability is measured by return on tangible equity should also improve. We now forecast a routine to surpass 16% rather than 15% as previously guided. You may ask why we are not even more optimistic, but here I would like to remind everybody of the usual fourth quarter seasonality, which typically comes with higher costs and sometimes with minor year-end one-offs. Leaving this aside, focusing on underlying operating performance, we continue to be optimistic for the fourth quarter. With the numbers we have presented today, another question you should ask is, can things get better from here in 2025? And while we do not offer a detailed guidance, as mentioned several times, for fiscal 2025 today, I'm happy to share with you our current thinking on the topic. The shared version being, maybe performance will not get much better, but we also don't see it getting much worse. Of course, there are many moving parts here, which we are regularly discussing with you, but our principle, due to 2025, is a positive one. We are constructive on NII end fees, we see continued moderate risk costs, and we expect operating expenses to remain under control. And with this, we should again deliver mid-term return on tangible equity in 2025. We will publish our line-by-line financial outlook with the publication of full-year financials at the end of February 2025. And this, ladies and gentlemen, concludes our presentation remarks. Thank you very much for your attention, and we are now happy to take your questions.

Thank you, sir. Ladies and gentlemen, as a reminder, to ask a question at this time, please signal by pressing star 1. If you find that your question has already been answered, you may remove yourself from the queue by pressing star 2. And please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. Again, please press star 1 to ask a question. And our first question comes from Gabor Kemeny from Autonomous Research. Please go ahead, sir.

Hi, Tim. Thank you for the presentation and your thoughts on the 2025 outlook. A few clarifications on NII, please. So when you say clattish 2025, were you referring to 23 or 24 NII? That's a quick first question, please.

Thank you, Gabor. I would say your question is the answer. I was referring to 23 and 24, right? So in other words, we don't know exactly yet where 24 will land. We said it's greater than 2% up from 2021. Three, which in concrete words means something towards the area of 7.4, right? And then anchoring the 2025 thoughts, and I repeated it a couple of times, that we are in the final making of our budgeting. You know that if you look at over the year 2024, how things have been shifting up and down in terms of expectations, both on your end and on our side, this deviation of 100 to 200 million euros is quite a reasonable way of describing a plateau. So, in other words, we will give a concrete guidance, as Thomas and Peter were saying, in February. And for now, for time being, I would say a flattish indication over the last couple of quarters is a very good idea to approach D&I.

Yeah, thank you, Stefan. Just a few clarifications then here. Firstly, can you help us quantify the tailwind you see from retricing the fixed rate loans in 2025 and the securities books? That's the first one. Second one, you mentioned the NII sensitivity of 250 million. Can you please break that out by markets like Euro, Czech and the others? And can you give us an update on what share is coming from the savings banks? I think the latest was something like 40% of your euro sensitivity. And just finally, a question on buybacks. I believe you are coming to the close of the current share buyback scheme. How do you think about the capacity to launch a new program and the timing of that? Thank you.

Thanks, Gabor. So I try to be as concrete and concise as possible. So let's start with the fixed rate. I think what is important, you didn't ask it, but I want to mention it to give you an idea of what part has been swapped, because this was a quite significant, what part of our funding has been swapped, quite significant good contribution with Euribo coming down. So we're talking about 15 to 20 billion depending on over the year and whether you include the CE currency. So I just wanted to mention that because it's been a very good driver also in terms of improving our NI, Q2 over Q4, this was around 30 million. Now on the fixed rate, I think you know that we were talking about crossing the 1.5 billion to the upside in terms of the bond portfolio in 2024. We can confirm this now. We are assuming to kind of finish the year there around 1.6 billion. And we should trend higher by another... 5% to 10% from there. So I think it's fair to assume it will be clearly north of 1.6%, probably north of 1.7% for the year 2025. That's what you can assume for the bond portfolio. And you definitely know exactly where we come from. So this is a significant positive. contribution. Share buyback. Yeah, you're right. We are already north of 400 million. So we assume that our original timeline given to end of November, beginning of December seems to hold. And we will take it from there. I mean, we have to distinguish between the capacity and what we really want to want to consider in the share buyback. I think Peter has been very clear that if we see attractive acquisitions potentially available, we will definitely also have a clear priority on let me say, reviewing those. So any kind of numbers or ranges are too early for that point in time, but a consideration will be discussed in the forthcoming months, and we will communicate as soon as we can and are allowed. Thank you.

Very clear.

Thank you.

Thank you. We will now move to our next question from Jeremy C.G. from BNP Paribas. Please go ahead.

Thank you. Could I just ask a couple more questions on net interest income? One would be looking at your slide on the margins by segment. I just wondered if you could make a comment on, just picking a couple of them, the two big ones, so Erste Bank, Austria, and Czech, where you see margins going next year in those two segments. And then my second question was, could you talk a bit more about You know, you've talked about hopes of volume pickup in Austria and perhaps other places. Could you just talk a little bit about where you're seeing those early signs of improvement that give you that confidence?

So first of all, I have to apologize. And I'm sure, Jeremy, you're also very interested in that. I forgot to answer the sensitivity question that Gabo was raising. So I get back to this one. So in total, we have roundabout, yeah, I would say 60% of the 250 million overall euro sensitivity comes from savings banks. So that's for you as an equity investor, this is, of course, a a positive information because this is a part which in the minorities is deducted. The rest is very, I would say, very equally spread over the Austrian entities that are directly in the ownership of ERSTE and the Euro components in the other countries, Slovakia, Croatia, and also the Euro parts of the balance sheets in Czech Republic and Romania. So that's for the Euro part. And I think I also mentioned a couple of times that we are on the positive side on lower rates in Czech currency. Here we're talking about 70 million roundabout at this point in time, which also explains the excellent performance on top of the good business performance in our Czech entity. On margins overall, I think most of you will remember that we talked about the 250 NIM as kind of the topish area, and we are very happy that we can, so to say, hover around those levels. And to cut the thing short, I would say that for pretty much all the segments. We have, of course, a slightly decreasing NIM in Austria with the peak in 2023. But overall, in terms of segments and business areas, we really see a flat development. I've been talking to all the business colleagues. Not too much moving there in terms of business spreads. Thank you.

And volumes where you're seeing the early signs of growing demand?

We see a strong push in the Czech Republic when it comes to mortgage lending. We are also doing great in consumer lending in Romania and Slovakia. Also, as mentioned in the presentation, there is also an updrift in the Austrian mortgage business, not as strong as compared to the other countries, but when you look compared to the first half of the year, it's also getting better in Austria when it comes to mortgages. In corporate lending, we are doing quite okay in the Czech Republic. We are definitely lagging behind in Austria, which is very clearly given the overall recession. We see now the second year in this country. So for us, it's a little bit hard to predict when corporate lending will pick up here. But we are much more positive on the retail side.

Great. Thank you. Thank you. We will now move to our next question from Mehmet Sevin from JP Morgan. Please go ahead. Good morning.

Thanks very much for your time. I have three questions, please. One, Stefan, thank you so much for sharing your early thoughts on 2025 NII, which is really helpful. Just one clarification from my side would be growth dynamics with them still being relatively muted, although with early signs. Can I ask what level of volume growth does this plateauing NII take into account or maybe actually rely on? And could next year be the year where we actually finally see, you know, going back to the early days or previous days of Airstream when it comes to growth? The second question is on upcoming investments. I'm wondering if you see any appetite to increase the pace of investments you're doing as we're entering this arguably multi-year growth period in the region. All banks want to grow. There's quite a lot of excess capital. Competition is high. And with the geographic breadth of S, how do you see yourself positioned in terms of the past investments but also future IT investments and spend? And finally, if you could also comment if you're coming any closer to any big M&A deal, coming back to your earlier comments there too, or do you for now simply retain the view of being open to any when they come? Thanks very much.

Thanks very much, Mehmet, for the questions we just aligned. I will take the first question on growth dynamics briefly and then hand over to Peter for the two strategic questions. Look, it's the most tricky one, obviously, estimating precisely the growth developments, not only that we have the macroelement in, As you know from the last couple of years, this was the area where we had deviations from our guidance in both directions, to the upper and to the lower side, just as an intro to my answer. We believe that mid-single-digit, again, is a reasonable assumption, and we believe that the likelihood that we will get there and maybe even overshoot is higher than in 2024. Since most of our countries, and please look at the guidance, the one update we made was that instead of saying around about 2%, we defined the range 0 to 4. Of course, not meaning that we don't know where we will land, but simply indicating strongly and also as pointing to the fact that there is significant growth difference. in our countries. We have basically, let me say, no growth or even a slight recession, shallow recession here in Austria. And then the further you go south and east, the better it gets. And really, it gets to very, very significant levels. And I think that you need to translate to the growth expectations as for now. So my best estimate would be mid-single digit. And we will come up with a precise description of what we expect in February.

When it comes to a question about investments, and especially when it comes to IT investments, this was exactly a topic we dealt quite a lot over the last weeks, especially when it comes to our budget for 2025. Because you're absolutely right, there's a lot of competition going on, and we are working on our strategy where it's very clear that we would like to increase, so to say, the capital light business, especially when it comes to asset management. and we also would like to achieve in the retail area using new technology that we increase our share of wallet when it comes to our clients. Yes, you are right, there are investments necessary, but the way how we look at it is that the development of IT costs over the last two years was already quite a challenge given the high inflation and so to say external IT vendors increasing prices for service quite a lot. So what we tried to achieve is, although there will be a slight increase of course in costs, we also tried to shift between existing IT portfolios not to increase costs on a level which we would not be happy with it and you definitely also not. So there will be a cost increase, but it will not be a dramatic one. We will take a step-by-step approach and we are deeply convinced that this will also support our business growth, definitely. I mean, so far we are not in a situation that we are able to mention any kind of seal name. We are very closely monitoring markets, but it's more or less the same as we communicated with the half-year result. we would be interested to grow, to enter new markets in our region, the eastern part of the European Union, but only if it really makes its value to our shareholders and somehow is not a transaction which is increasing complexity to the group, because in general we are extremely happy how we are set up right now. I think, again, our third quarter results are a very strong sign of that this group is really built up for success. So we are in a very luxury situation that if there is something interesting for us, we will definitely look at it, but we are not in a situation where we desperately have to run for a transaction. So to be very clear, if nothing comes on the market which is, from our perspective, attractive for us, we are super happy how we are doing right now, and we are definitely convinced that there is still a lot of room for improvement within our existing markets.

That's very helpful. Thanks very much. Thank you. We'll now move to our next question from Nate Nemes from UBS. Please go ahead.

Yes, good morning, and thank you for the presentation. I have a couple of questions, please. The first one is just following up on M&A and potential consolidation in Central Eastern Europe. So it sounds like there's nothing large in terms of opportunities imminently. I was just wondering if you could take us through your thought process come February next year. Are you willing to hold out and perhaps carry somewhat more excess capital to be prepared for when the opportunity emerges, or we can reliably expect a meaningful distribution and you getting closer to the 14 percent CET1 target? That's the first question. The second question would be on risk costs. I think, Alexandra, you mentioned that 2025 will be still at moderate levels. Does that mean, you know, similarly a 20 basis point, 25 basis point level? And I'm just wondering if you could perhaps update us on your thinking, what the normalized through the cycle risk cost is that you see for Forrest at the moment. Thank you.

Yeah, so I think since Peter was answering the strategic element of the M&A question already before, let me take a couple of comments on how we look at the capital position. My personal opinion is that you shouldn't set the management target and then say actually you live at a completely different level from quarter to quarter. This should answer your first question, meaning It's not a long-term concept to have a management target at 14 or around about 14, and then you run your capital at 16 or 16.5 percentage points. That's absolutely not our intention. Of course, your thought is absolutely valid. If we have something really in front of us, which is increasing in likelihood, And we can really consider or let's say have a certain likelihood within six to nine months. I think everyone in the market will understand that we will keep the powder dry and go for it, but nothing beyond the year or so. So I think that's the logic how we discuss these matters. And this is also what you will hear in the beginning of next year from us. Either there is something concrete, something where we are in a potential due diligence, where we are really talking to a certain target. If this is not the case, we will have different ways of making use of our excess capital. Thank you.

Let me also say I was informed that while I was speaking, the line was also already interrupted. So apologies also for this. Yeah, for 2025, the expectation at moderate levels is... The number that you mentioned, the current levels of 20 to some 25, is a reasonable assumption. However, guidance will follow at a later stage. But this year's level and the one or other basis points up. When it comes to the long-term normalized risk costs through the cycle, You know that when we look in the past, the range through the cycle was something between 30 and 50 basis points. And I think already one, one and a half years ago, I was indicating that going forward, given the strong improvement of our lending standards for more than 10 years, that going forward, my expectation is below that. lower range of this, the lower band of this range. So something in the 20-ish area also going forward.

That's very helpful. Thank you.

Thank you. We'll now move to our next question from Riccardo Rodere from Mediobanca. Please go ahead.

Thanks a lot for taking my questions. I have three, if I may, one for Stefan, one for Alexandra, and I will leave the last one for Peter. Stefan, I think there are two numbers in these presentations that should be looked at. You stated that the switch to saving and term deposit should be more or less over. you stated that roughly 50% of your deposit base is current accounts. And you also say that 45% of your book is floating rate. So the two numbers, current accounts and floating rate book, are more or less the same. But the deposit base is definitely larger than the loan book. And he kept saying that part of the fixed loan book is being repriced. And we see this in this set of numbers. So considering that current accounts should be rather easy to reprice down, of course, it's completely stupid to say that at least for the start of 2025, margins could actually widen for ERTE, rather than going down? This is my first question. The second question I have is for Alexandra. You sounded relaxed for asset quality 24. You sounded fairly relaxed also in 24, 25, although you have not provided guidance, fine. What about the automotive sector? Is this something that is a matter of concern to you at the moment? Do you see issues in that sector, given that a big part of the car production in Europe is made out of Slovakia, Hungary, and so on? And the third question I have is for Peter. Do you feel a sense of urgency in reducing the capital back closer, at least closer, to the 14%? target now that you're running at 16.6 and you keep generating, you know, this quarter is almost 900 million of profits. The buyback is already deducted from the capital. So you state, I don't have the feeling, the sensation that you are in a situation where you could buy anything to, let's say, to wipe out the more than 150 business point of buffer that you have. So I was wondering if you feel a sense of urgency in, let's say, in fixing it.

Should I start? Yes, sure, you start. Hi, Ricardo. I start with your questions on risk. So you call it relaxed, I would call it confident when it comes to asset quality and to our current and also future performance. And when asking on automotive, yes, definitely. I mean, this is a strategic question for Europe overall. We all know the transition to electrification and we all see and hear the political discussions and also what's going on in Germany, and certainly we are aware of the importance of this industry for our region. But what are we talking about in numbers? So we are talking for automotive 2% of our group exposure, it's roughly 8 billion, and 50% of this exposure is distributed between OEMs and OESs. Larger ones, so also mainly Tier 1, where we have also on the medium term really No to hardly any concern. Smaller suppliers, smaller tier two, but also tier three, of course, and car dealers, the situation has always been more difficult, and we have been observing these portfolios for a very long time now. And so far, we do not signs of deterioration, also not in the area of the smaller ones that I've been mentioning. But definitely, this is an industry we have under very, very close monitoring, not only recently, but for some time. But we do not see yet any increase in quantitative heart early warning signals. So overall, also when it comes to this industry, not disregarding the importance and the issues that this sector overall has, also here I'm confident.

So Ricardo, unsurprisingly you were perfectly describing not only the situation but also the way we discuss the matters around the dynamics on the loans and deposits. You were quoting correctly the the share of current accounts as well as the the floating note i think the the one thing uh so we are positive also going forward i think it was clearly mentioned that uh that we have a a couple of very good um indicators in terms of the the overall uh developments on on deposit repricing and loan repricing so i take this box for you that's that's completely fine please don't forget that Central bank depositing is really, really a churn on our returns there. It's significant. We have no reward anymore in Euroland, in the Czech Republic for a while, as you know. They have been doubling the minimum reserve requirements from Czech national bank side. So these things you have to build into the model, of course, and I'm sure you do. Generally speaking, margins are going to be reasonably stable for time being, I believe, and we have identified the range, say, just around two, a little bit below two in terms of key rates, up to 5%. as the sweet spot where we can have these repricings, because you must not forget that the repricing on the deposit side has its limitations. Not only that we saw in the negative rate environment that, of course, zero is a floor for anything that is retail, but also the repricing on the deposit side has its limitations once you get in the area of 1, 1.5%. So that's something we have to be aware of. So should the ECB, which we all don't know, go beyond the 2% level that's currently expected in the rate cut cycle. We might have a certain deterioration of margins there, but it's far away from today's perspective. So for the time being, we're optimistic on the margins. And overall, please take with you, flat is a good assumption. Thank you.

Of share buyback and sense of urgency, I mean, I think it's pretty much unchanged what we also communicated compared to half your results, that we are very much driven by funding organic growth, which, of course, in these days is relatively easy. And then we are sticking, of course, to our dividend policy of a payout ratio of 40% to 50%. But we fully get where you are coming from. It's very clear that this is a topic of very high interest for you. But again, we are still running our share buyback at the moment, as Stefan mentioned already. And we will come back to you again end of February 2025 talking about these topics.

Thanks. Fair enough. A quick follow-up, if I may, with Stefan. Would you be in the position to give us an idea of what's the average duration of the fixed rate loan book, two years, three years, four years? So I know it by heart for the security books. Here we are

to four and a half. And also in regards to yields, I can give you an indication. We have currently round about just a little bit below 3% average yield on the investment book. And on the loan book, let me just flip through some pages. Okay, I think a good indication is probably a three-year duration. It's a little bit different from market to market. Let me say the usances are a little bit different. We have just been repricing a lot in Slovakia and Czech Republic. Austria is a little bit longer. Yeah, three years is a very, very good assumption. And here we are, of course, a little bit higher in terms of the average yield. Think about it as three and a quarter to three and a half as an average.

Okay, so four and a half, because the line was a bit... So once again, I repeat it very quickly.

Four and a half years for the securities book. with an average yield of just below 3% at the moment, of course repricing still, and around about three years for the fixed rates in average, fixed rate loan book, with an average, depending on the market, but overall roughly summing up to three and a quarter to three and a half average fixed rate loan levels at the moment.

Very clear. Thank you very much. Thank you. We will now move to our next question from Johannes Tormund from HSBC. Please go ahead.

Morning, everybody. Some follow-up questions on my side. First of all, on risk costs, what are the other sectors troubling you besides Austrian real estate and the autos to get up to 2025 bids again? And then probably also on the FLI release, could you give us an update what you still expect to come in Q4 and in the next year? Secondly, just is the current tax rate a good run rate for the next year? Does this include the Slovak effect? And last but not least, we have now seen four out of five quarters with narrow GE above 17%. What stops you from guiding for that level in the midterm? Thank you.

Okay, then I start with your questions on risk, Johannes. You for sure will recall that for the full year we guided that we expect a release out of FLI and Stage 2 overlays of roughly 200 million. Now when you look on our today's presentation and add up what we already released this year and that we expect another 50 million release in Q4, which will be a mix out also of FLI updates and the review of our cyclical overlays that we have been on our books for some time, then you will come up to a figure of roughly 220, maybe 230 overall release for the full year 2024. In 2025, we so far expected and also communicated to have the same number roughly of 200. So what we will see this year, a little bit slightly up, maybe for next year a little bit less than this 200. But we are still in the final phase of our planning. We have already discussed automotive, and you have been asking what other industries or what could be. What the current drivers that we are expecting for 2025 is still some continuation on the Austrian real estate sector. And let me remind, we are talking about residential real estate, not commercial real estate overall. So office, shopping center, also logistics, They are all doing very well not only in CEE, but also in Austria, but still some residential real estate. You also know the macroeconomic outlook for Austria, which is weaker than for Central and Eastern Europe. and also this we expect to have some implications. So from the trend of the last quarters that CEE is extremely, with an extremely high, in a positive sense, risk profile, and Austria a little bit worse than the long-term average, this trend we would expect also going forward for 2025. but no additional specific industry that should contribute considerably to a risk cost allocation in 2025.

Tax ratio, Johannes, in anticipation of this question, I checked with my colleagues in detail ahead of the call. Nothing that you should expect in the fourth quarter to deviate from what we have now. Of course, there's always plus minus half a percentage point possible in the fine-tuning of the end of the year, but no significant shifts expected. I know you were referring, and rightly so, to what is going on in Slovakia and here, left and right, But the number that we have been using here now, 20.5%, is a good assumption for the full year. And the other question I didn't 100% understand, but I think you were asking why we are not more specific on the Rote for 2024. Look, it's very simple. If you play around a little bit with a VIX and adjust for the denominator, you can easily jump by half a percentage point in the Rote, and then someone would say, why did you give percentage points higher and lower? Look, currently we would rather expect a little bit above 17, yes, but if you have a little bit of a change in the denominator, you immediately back down to 16.5. Therefore, we were saying, okay, 16 and more is an indication which will certainly hold. That's the simple reason. Nothing more than that.

Stefan, thank you. it was more about the midterm outlook uh why this is still i think we previously had yes thought about 15 and then there has been no update on it no we say i think we said 15 right uh and i think 15 is our is our guidance even it's a concrete guidance we remember we last year we also

took the coup three call as the opportunity to give you a first guidance on rota which anyway you can derive a lot of the things and i indicated many of them today so yes this is our ambition and as we go we will then we will then be more specific it depends really on both it returns on our results and the equity volume i know that some colleagues of other of other players are using, so to say, a route to the target, we don't do that. We are reporting the traditional number, which you can rely on, and that's where we expect around about 50-inch area. If we then turn out better in the first couple of weeks and months in the new year, we will be more than happy to upgrade. No worries.

Thank you. We'll now move to our next question from Dieter Hain from Alphavalue. Please go ahead.

Good morning. I have questions on two items. Sorry, coming back to your NII indication for 2025. Two questions. What are your assumptions for rate cuts of central bank in the last quarter this year and in 2025? Secondly, part of your NII margin hedged. And the second item is you announced last week your intention to cooperate with German Baader Bank. Can you outline your targets regarding this cooperation a little bit? And secondly, again, is Germany a potential target market for ESDEM?

All right, here we go. First of all, what do we expect at this point in time? Of course, subject to a small little election that's coming up that might maybe influence one or the other thing going forward. So ECB, our end of year expectation is one more cut of 25 basis points. Nothing spectacular. And we think that the ECB will keep on cutting in a 25 basis points mode. Around about two, two and a quarter is what we expect from today, but I think you will agree it's very hard to predict, especially if around the U.S. interest rates we might see some different developments. Not going into the details in the interest of time. There were some talks by Czech National Bank representatives about, you know, with stronger, stronger, so to say, inflation here and there, we might have to reconsider. We still believe that they will go to 4%, so another cut for this year and then further on to the area of 350 in the year 2025. But definitely a slowdown in the Czech economy. so to say, cutting. And I think there's nothing too much to say about the other countries. Romania will hold probably until the end of the year and then cut further in next year. Hungary is on their slower path of cutting, and I think that's about it. Net interest margins. So I think you had one question regarding hedging. Very simple. We are hedging a little bit of, so to say, the downside risk in terms of, you know, doing a little bit of swapping short term. But in principle, please be aware, we are not the ones who are hedging big time with derivatives, our overall, so to say, balance sheet position. To the contrary, we are steering it via the model deposits versus our fixed rate loans and securities. As we discussed already in today's call as well. So don't assume that we are going out there and, you know, hedging individually two-year, one-year, three-year derivatives as some of our colleagues are doing. This is not the way we model the balance sheet. We are running it basically from the core business. So that's on that end. And I think the third question was about... I think Germany is easy to answer. Ah, Baader Bank cooperation. Peter, sorry. So Baader Bank is very simple. We have started with this cooperation in Ingo's team. I think we are very optimistic on this. It's a pure cooperation for distribution. We are using, so to say, each other's research. And we're keeping the full value chain of our activities in the equity sales business. And we are very much looking forward, so to say, to conquer a couple of markets we haven't been, so to say, selling ourselves. That's it. We keep our own production, our own research, and our own equity coverage.

And we are not planning to enter Germany.

This has nothing to do with entering Germany.

Okay, great. Thank you. Thank you. We will now move to our next question from Krishendra Dubey from Barclays. Please go ahead.

Thanks. Thanks for taking my question. I have just two questions, I think. You have been kind on guiding on the NIA, I think. On the fee side, I just wanted to understand the growth in the payment services that you're seeing in the fee side. I think that is typically 40 to 45 percent of your fees, and that has been growing well. And if I look at growth from 2019 to 2024, it implies an 8 percent CAGR, whereas consensus is at like 5 to 6 percent CAGR. So what do you think would be a correct kind of a guideline to look at the fee growth for next two years? And the second question is on the RWAs, I think. I guess you were guiding to some relief initially from the Basel impact and then a relief. So could you quantify those numbers for me? Thank you.

Thanks very much. Fees. I think I kind of indicated that from today's perspective, the likelihood of having a guidance then later on in February around the mid single digit area is the highest one. All our assumptions will cross the 3 billion total fee income in 2025. So we are very optimistic that we grow further. What I said with regards to especially payments but also some other fees is that you have to adjust, of course, for much lower inflation around everywhere. So everything that's indexed and so on will grow less than in the previous years. So that's the point. Maybe if you look at the year-on-year and also quarter-on-quarter developments, you see that... asset management and bank assurance, the areas where we can really influence things, where we will work with our partners and are really out there at the client. Those are really promising growth areas where we also believe we can maintain the levels in payments. It will probably slow down simply for the indexation reasons. RWAs, yes, you got it perfectly right. The background is as follows. We will have a relief in credit risk as from January 1st, 2025. That's what we always communicate. We'll have a certain updrift in operation risk, but not as much as the relief in credit risk. And then originally, everyone was expecting that 1st of January 2025 will also be the introduction of FRDB, which would have been leveling out everything. Now, this was postponed for time being until 26. Let's see how it will go. develop further. And only this market risk would have been, so to say, leveling out the Basel IV effect to zero. So, yes, you're right. In 2025, we will get a certain relief. Not huge, but a couple of billion of risk-weighted assets.

Thank you. Thank you. As a reminder, to ask a question, please signal by pressing star 1. And the next question comes from Jovan Sikkimic from RBI. Please go ahead.

Yes, hello. Good morning. Thanks for the call. Many questions were already answered. I would have a minor one. And actually, I don't see specific guidance on dividends for 2024, unlike the case after the second quarter. But you keep accruing right in the capital at least. 40% payout. I just wanted to ask whether maybe I missed something or what's the reason for not guiding the dividend?

You were exactly describing the situation. And that's it. So we haven't changed anything. The deduction is correct. The percentage is correct. That's all to say about this.

Okay, perfect. And maybe a minor one. It's not, of course, changing a lot, I think, on the guidance. But where do you see in Hungary the windfall taxation next year? It's still, I think, not published yet. We are awaiting some proposals from the government. But what's the idea? How do you think about this for next year? It should be, again, a significant one.

Look, now I'm taking the first and only time ever, I think, the way to politically answer, not answer your question, but give you a different answer, if I may say so. So we have no clue, very simple. And we have all kinds of taxation in Hungary, as you are well aware of. We have the financial transaction tax, we have the windfall, we have a sector tax, and probably I forgot a couple of others. So look, it's very simple. We have a very positive outlook for Hungary as well in terms of profitability for 2025. The guys have been managing the situation extremely well. The business is going well. The securities business is going well. The lending business could be better. but but uh in terms of uh so the average in the hungarian markets we are okay so nothing spectacular to be expected that would harm our overall expectations maybe one remark and that's why i said i will answer it differently please be aware that when it comes to the financial transaction tax this is a little bit awkward in in hungary we are collecting fees there if you look precisely to the fee uh development hungary is doing really very well but it looks even a little bit better than than it really is because the income from these ftts in the uh in in the in the in the fee income whereas the costs for it uh that we that we are that we have as a burden uh is uh i think in the other operating result yeah so that's a little bit awkward We are happy to specify. It's not changing the needle, neither in Hungary, but even less in the group. Total, just worth mentioning. That was the opportunity to answer that one. But for the other developments, frankly, if you can tell me what happens there in the next couple of quarters, then let me know.

Okay, agreed. Okay, thanks. Thank you very much.

Thank you. We will now move to our next question from Simon Nellis from Citibank. Please go ahead.

Oh, hi. Thanks for the opportunity. Quick one from me. I think you mentioned a 250 million euro sensitivity for the euro linked books, right? For every 100 basis points of rate cut, 60% of the savings banks. But you also provided some guidance for the Czech banks.

interest rate sensitivity but i wasn't sure if i got that could you just clarify the the rate sensitivity of the check nii to to check rate moves yeah sure simon 70 million seven zero at the moment for a hundred percent immediate parallel shift in check and the 250 you got perfectly right and i added that around 60 of that is in the savings banks if you want to build that in as well

But I guess rates have been coming down in the Czech Republic, but your margins are expanding, so... Yep. It doesn't seem to be working quite the way the sensitivity is...

No, sure. I mean, we both know that the sensitivity is not constant, right? So meaning, if you think about the next, I don't personally, I do not think that the checks will cut beyond another 100 basis points, my personal opinion. But what you are referring to is maybe the next 200 of a total of 200 basis points. most likely it will not be as much then. But for the moment, we are at 70, minimum 50, and it depends on the 12-month overall basis. So that's it. At the moment, still, we are very much supported by the rate cuts that are happening.

Just the last one, the other division, the corporate centre, had a 30% increase quarter-on-quarter in NII. What was driving that?

Look, this is very simplified, right? Very simplified is the fact that we have a long position in terms of bond position. I'm a bond trader by heart, so I have to be aware of that. So when interest rates come down, our ALM book is benefiting because there we have the fixed rate securities and so on, and they are balancing out. It's basically in the holding probably where you observed that, right? In the other Austria, correct? Yeah. Yeah, yeah, perfectly.

No, actually in the other results. Yeah, and that's it.

That's it. And then another element, of course, as I mentioned in the other operating result, is then the sale of the bonds and all these things. But that goes into the nitty-gritty part. Yeah. Got it. Okay.

Thank you. Thank you. As a final reminder, to ask a question, signal by pressing star 1. We'll now take a follow-up question from Riccardo Rovere from Mediobanca. Please go ahead.

Thanks for taking my follow-up. A couple, if I may. The first one is, you, Stefan, mentioned that asset management, insurance operations are areas where you're doing well, you're growing. Now, correct me if I'm wrong, Airsta is not a financial conglomerate as far as I remember. And if I am right, would you ever consider to become a financial conglomerate, buy some insurance operations? and then eventually exploit the beauty of the Danish compromise whenever it comes, you know, to fund further acquisitions in the wealth management space through insurance operations. This is the first question. The other question I have is European Commission has put out a paper trying to, let's say, exploring the possibility of using more frequently synthetic securitizations. I just wonder whether you have been active on this. I don't think so, but I'm not sure about what I'm saying. Have you ever exploited it? Have you ever looked at the possibility of synthetic securitizations? Or maybe you give up too much NII, too much revenue, so you're not interested in that. Thanks.

Okay, I will take the suggestion, then say a couple of words about your Danish compromise topic. This has become a fashion now in the market, I understand, and then hand over to Peter for the strategic part of the first question. I hope it will not surprise you. We have been doing security stations over time, over a couple of years. SMEs, auto leasing and all kinds of things. Not hugely, but it's a tool we have. We have it in our toolkit. We are doing it in some countries and we are going on doing that. We also have a little bit of a client business there in Ingo's area, which is quite successful. But it's not something that we talk about too much because, as you know, given our strong capital position, it's not something that we are anywhere depending on. But we are doing it ongoingly and we have a plan for a couple of small securitizations. also in the year 2025. That's number one. Number two, as far as I understand, looking over to Peter, there is absolutely no plan to include, so to say, in terms of a consolidation, any kind of bank assurance business. We have a very strong partner, WEIG, who we work with, and we are distributing their products. We have an agreement, a cooperation agreement, a strategic agreement across all the countries where we operate, and that we definitely want to deepen and enlarge But no further plans in that respect. And asset management, I think, Peter, if you want to say a couple of strategic words about what we plan, there is always on the agenda.

Yeah. When it comes to Danish compromise and sort of the insurance business, I fully agree with David. I have not had one investor meeting where I was not asked if we don't make up our mind about using the Danish compromise and start to build up our own insurance. the way how I look at it, I was sitting for many, many years in different kinds of supervisory boards of insurance companies, I think, or I have the strong belief, that it's very tough to be able to understand the correlation of banking risks and insurance risks. And we know that these kind of different parts of the business of financial service industry have very different dynamics. So if you would start to build up an insurance company right now, this would take ages that you have kind of reasonable contribution to our financial performance. On the other hand, if you would merge with an existing insurance business, I think complexity would be overwhelming. So from a risk point of view, I would definitely not touch upon this. And if I'm informed correctly, even the role model of bank insurance in terms of KBC, they are even not using Danish compromise for underlying. So we are very happy with our cooperation partner with VIG, and also from a business model point of view, I think it makes very much sense that we get fees for distribution, but don't have the burden of production in the insurance business. When it comes to asset management, you know, this was always an area where we had a lot of focus on it. and I think it was a fundamental part of our equity story in the past that we would like to bring asset management products to our region. And when you look at our numbers these days, you see that this is really working out very, very well. We still have a strong asset management business in Austria, but we are doing even better in the Czech Republic, Hungary, Slovakia is picking up. And the number, so the usual way how we attract retail clients being new to this asset management business is on these monthly saving plans or investment plans as we call them. And so you have, for example, in Austria we have around about 140,000 of these saving plans in Austria. you have four times the number in the Czech Republic, just to give you a kind of feeling. So therefore we are very, very positive when it comes to asset management over the next years to come. And this is also very much related to the demographic situation in our countries where pension related products and asset management products will be much more important than they have been in the past. So therefore, we are willing to invest in this area, not only in the IT side, but also in terms of business proposition overall.

That's very clear. Thank you very much. Thanks.

Thank you. It appears there are currently no further questions at this time. With this, I'd like to hand the call back over to our host, Mr. Peter Boszik, for any additional or closing remarks. Over to you, sir.

Thank you so much for listening to us. What I would like to mention, we will come back to you with the full year pre-reliminary resize 2024 on the 28th of February 2025. Thank you so much.

Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.