Otp Bank S/Adr R

Dear ladies and gentlemen, welcome to the OTP Bank Third Quarter 2023 conference call. This conference will be recorded. As a reminder, during the presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Laszlo Bencik, Chief Strategic and Financial Officer. Laszlo, please go ahead.

Thank you. Good morning or good afternoon, depending when you are. And thank you very much for joining us today and expressing interest in OTP Group's 2023 third quarter interim results presentation. As usual, I will try to be brief, but go through the presentation while we are going to show you parallel to the presentation on the screen. It's also available on the website. We just recently updated it because there was a previous version uploaded. So the ROE numbers are not exactly the same in the version what are on the website at the moment, but we are changing it. And this presentation includes the right numbers, which equal to the one which we presented in our official report. beginning of the day today. So overall, if we look at OTP's performance, maybe it's kind of worth stepping back a little bit and have a bird's eye view on the overall story of the group. And we thought that these are potentially the most important highlights of our performance. First of all, now we are building up a dominant position, not just in Hungary, but in a number of countries in the region. So OTP is number one now in five countries in terms of net loans, I mean, client loan volumes. It's Hungary, Bulgaria, Slovenia, Serbia, and Montenegro. And this is a result of a very strong and fast growth. What we have done during the last seven years, we have 11 acquisitions behind us and the loan book has grown 3.5 times. And this kind of the composition of the group has also changed quite drastically. And now more than 40% of the total loan book is in the Eurozone plus ERM two countries, which is Bulgaria, hopefully joining beginning of 25, which is now the kind of official target for the government. And then 80% is within the European Union. And obviously the share of the Hungarian bank has gone down and the share of the outside Hungary businesses has increased. quite substantially. Now, Hungary is just 30% of the total group. Now, the other important factor is strong profitability. We have always been strong in our profitability numbers and with few exceptions over the last 20 years. Last year was one of these exceptions where we had big losses coming from the war in Ukraine and also the extra policy measures and taxes which were raised on us in Hungary. But this year we recovered and we are all again back to kind of, let's say higher than PS level of profitability, 33% bottom line. But if you take out the one offs, then 30% return on equity in the first nine months. adjusted return on equity. I think that's quite a decent performance, even if you consider that the expected return, the cost of equity has also gone up during the last two years. So instead of kind of around 10%, now it's more like around 15% for the entire group. We are not just growing fast and are very profitable. but we believe that our foundations are also quite stable and strong. And these foundations are the liquidity position, the capital position, and the underlying portfolio quality. So in terms of liquidity, we still have this situation where deposits by far outweigh the loan volumes. The net loan to deposit ratio for the group is 74%. We have a relatively small wholesale debt exposure. So it's at 8% of the total balance sheet. It has started to grow, not because we need liquidity for the business, but because of the regulatory requirements in the form of MREL requirements, which is an other layer of capital requirements in Europe. And the LCR ratio where the minimum is 100% is more than 200, so 220, that's also quite high level. Our capital position is also quite solid and there are two ways to look at it. One is just a numerical of ratio so the common equity ratio 16.4 percent and this is where we ended the year last year but then it dropped down especially at the end of the first quarter after our biggest ever acquisition in slovenia so at the end of the first quarter we had a kind of local minimum of this number but it has actually very fast recovered to previous high levels. And the other way to look at this is looking at the results of the EBA stress test, which is done every second year and it was done this summer. And we came out as the fourth resilient or the fourth best bank in the list of the large banks in Europe. And this is measured in the decline in the capital ratios in case of distress scenarios. So in our case, it was the fourth kind of smallest decline in case of the stress scenario defined by EBI. So strong liquidity, strong capital position and portfolio quality, also very stable and stable. And I mean, now the stage three ratio is kind of materially below 5%. It's 4.3. It actually is slightly increased, but that's only due to the Uzbekistan Bank in particular, where we, in the early stage of our being in possession of the bank, I mean, we are getting a better grip on what the portfolio quality is and that resulted in somewhat increase. But other than that, it's basically a very stable portfolio quality across the group and therefore very low risk-cost rates. So last year we had a 75 basis point risk-cost rate in the first nine months. This year it's three basis points, so a very flat risk cost and still very conservative 2% coverage on stage one and two last. And if we kind of consider that during the last kind of seven years without the, if you take out the war induced additional provisioning last year and the COVID induced additional provisioning in 2020, then during the last seven years, the risk-cost rate was between 30 and 50 basis points. And I mean, the fact that we have 2% coverage on performing loans, it means that we have roughly four years equivalent of kind of normal level of risk costs in provisions for the performing volumes, which is, I mean, clearly more than what you would expect, I think, as a first class. And on top of fast growth, strong profitability and very kind of stable operations, we also have a strong commitment to ESG targets. It became part of our genes and part of the core strategic objectives. goals of the management and the whole operation of the group. So that was just a kind of more high level view on where we are and how we got here. And now maybe we kind of dwell into the details of the financial performance of the first nine months, including the third quarter. So, I mean, if you look at the bottom line, 858 billion, half profit after tax for the first nine months, which is 3.7 times increase compared to last year. This substantial improvement stems from two, basically two parts. is related to the so-called adjustment items or one-offs. As you can see on this slide in the right lower corner, last year, we had 207 billion HOF minus negative number after tax in the form of the one-offs. And this year, first nine months, that was 79 billion plus. Now the big, and then two, I mean, it came from basically three sources. The first one is related to acquisitions, and that's where we have a big swing compared to last year. Last year, it was minus 10 billion. This year, it's plus 145 billion related to acquisition, and that's because of the badwill, what we booked in case of our Slovenian and Uzbekistan acquisitions. In both cases, we acquired the banks at a price which was well below the net asset value, the book value. And the special taxes, primarily in Hungary, and the interest rate cap, which last year was close to 100 billion, hit on us, actually remained. Those are at a somewhat lower level, but still fundamental and quite material hit for the whole group. So this kind of close to 100 billion went down to 88. So there's some decrease, but it's still a meaningful burden, quite strong burden on our performance. And where we didn't have losses this year was the kind of direct immediate effect coming from the war in Ukraine. Last year, there was a big one of loss coming in the form of a right of goodwill and investment and also provisions for the Russian bonds, what we have in Hungary and in Bulgaria. But this year that was kind of zero. So this resulted in a, in a positive contribution from these one-off items as opposed to the very big negative one last year. Now, if we look at just the underlying performance, it improved also. So with that, one also made $779.5 billion profit after tax, which is 77% improvement. Now, this is primarily driven by improving net interest margin on group level. As you can see, it went up from 3.5 to 3.8. This is primarily driven by the euro-related books, since in Hungary, the half-related book name declined. I mean, I'm going to talk about this later on, but basically this group level improvement is driven by related to the outside Hungary margin improvement, typically in the sea countries, which are linked to Europe, but also in countries like Moldova or Ukraine, where the rate environment increased and we benefited from that. We also seen improvement. The other factor, which is not on this page, but very material, is the risk-cost rate. As I mentioned, it went down. from 75 basis points last year to three basis points this year. So these are really the two factors which have kind of driven the improvement in the kind of underlying business performance in the group. And as a result of increasing net interest margin, we have an improvement in the cost of income ratio. If you look at the P&L lines as such, the next slide, We can see that, I mean, without acquisitions and FX adjusted, so without the impact of exchange rate movements within the group, income went up 26% and expenses 17. And that means operating profit 33% plus. Again, this is without acquisition. So that's a very, very solid kind of underlying performance. Given that actually loan growth was rather muted, especially during this year, the performing loan growth without acquisitions FX suggested was 4%. So that kind of 33% operating profit improvement is coupled with a relatively modest growth. volume growth, especially long growth. The year-on-year growth was 5%, so it's actually not so much more than the year-to-date growth. Okay, so what happened in Hungary? In Hungary, as you can see, okay, most of this one-off is actually manifested in Hungary. Therefore, last year we had negative growth. Actually, I mean, the profit was loss. I mean, last year we had a negative profit in the first nine months. But if you take out all these one-offs, which manifested in Hungary, and then we look at the kind of adjusted profit after tax performance, it's minus 2% year on year. And that's basically due to the lower NIM, as you can see on this slide. Now, here the good news is that we reached the bottom of the NIM cycle in the first quarter. It was 1.9%. And the third quarter was actually 2.2. So this kind of 2.1%, which is on this slide for the first nine months, is coming from this kind of, low point in the first quarter at 1.9%, and then already improved level at 2.2% in the third quarter. If all goes well, it should continue to improve. There will be a detailed slide on this. I mean, the reasons behind this NIM contractions, but they are basically the reserve requirements, which changed. They went up from 2% to 10% in Hungary, and they only paid less than 10%. On them, the reference rate was 18%. There was a decline in deposit volumes, retail deposit volumes of 5% year on year, which contributed to a lower NIM because, I mean, by far the highest margin product in this period was the retail deposits where we don't pay much interest. And then there were two other factors, which are very specific to OTP. The two acquisitions, when we do an acquisition from OTP Hungary, the whole group is owned by the Hungarian bank. Then we pay out cash and instead we book the investment. Now the cash, we have a return on that. especially when the reference rate is 18% and close to 18% in the investment, it's a non-interest bearing asset. So when we do an acquisition, it always has a negative impact on the net interest margin in Hungary. Obviously, from kind of other perspective, these are very meaningful and worth to do acquisitions. And then The fourth element which decreased the margin was the MREL loans. We had to issue these MREL bonds, which are very expensive and we don't need them for kind of liquidity or business purposes. The only purpose they serve is regulatory, but it's a kind of very expensive exercise. And especially this year, it affected primarily the Hungarian margin because we are only passing on these loans within the SPE kind of strategic framework, resolution framework to the subsidiaries at the end of this year. So most of this burden of those expensive bonds has been on the so far on the Hungarian operation. Now, so that's about Hungary. And now looking at the group, kind of the composition of the earnings, as you can see, I mean, up until a few years ago, Hungary tended to be kind of two-third of the group profit. And also in terms of kind of business volumes, especially in deposits, it was more than 50%, closer to 60%. Now this changed, and this changed due to this very dynamic growth, what we have done during the last seven years, and the composition of the growth, which was partially driven by acquisitions outside Hungary, and therefore the size of the non-Hungarian businesses has grown. And now it's kind of 70%. And this is actually reflected in the distribution of the earnings as well for the whole group. As you can see this year, the outside, the non-Hungarian entities contribution to the group profit increased to 66%. The third. This is something that we welcome. I mean, strategically, we believe this is a much better, much more diversified and much stable and better growth platform what we have now than what we used to have a few years ago, where the exposure was kind of very dominant, the Hungarian exposure. Now this is lesser, so we have a much more better diversified footprint and portfolio of businesses. Looking at the individual performance of the countries, so far it has been an excellent year. As you can see, for all entities we have, we see improvement. I mean, nominally, obviously, it's the Bulgarian operation, which has always been the the largest continues to be the largest nominally and it kind of doubled its profit compared to the first nine months of last year. But if you look at the kind of percentage improvement and that is not Bulgaria, which is leading, it's Slovenia, obviously, where we have a new entity joining us and KPM and with the combination of the two banks, It's close to 90 billion half profit in the first nine months. There is a strong, there's good improvement in Croatia, Serbia, Albania. I mean, Montenegro more than tripled its profit over the year. Russia also tripling. Last year was difficult. Ukraine, amazingly good performance, I think, given the very difficult situation in the country. I mean, last year, they made losses and this year, strong profitability, in fact, the strongest in the group. So they made 50% return on equity in the first nine months. Obviously, the expected return, the cost of capital is also quite high there. So we have to put it into perspective. But even then, it is at least two times cost of equity or expected return what they achieved this year. Romania, very, very decent performance, especially compared to the loss since they made last year. Still not among the best in terms of ROE in the group, but promising performance. And Moldova doubled its annual, its nine months contribution as well. So across the board, we have very strong numbers. where we don't have yet a strong number. It's our new acquisition in Uzbekistan, Ipoteka, where the third quarter result was zero due to basically provisioning. I mean, it seems that the portfolio quality of the bank is somewhat worse than we expected and that partially was reflected in the PPA, in the bed wheel. We adjusted down the bed wheel, what we created in the second quarter. Just to remind you, this is a normal accounting procedure according to the IFRS standards. After the acquisition, you have one year to continue to adjust the bed wheel. So the purchase price allocation process actually continues for one year and it's perfectly fine from an accounting perspective to make changes on that should be evidence that retrospectively it was warranted to change the valuation at the time of taking over the assets. So we partially did that. And we also provisioned for the third quarter quite heavily on primary on corporate, exposures which started to not perform. We still don't fully understand whether it's intrinsic change in their conditions or just the new ownership of the bank or some other factors, but it's clear that corporate portfolio quality started to decline. in a quite meaningful way. Now, we have to take into consideration that this was somewhat reflected in the price. I mean, we brought this asset much lower than book value. And we believe that it's even with these difficulties in the portfolio quality, it was in a way priced in. we did not know exactly how it would manifest, but we certainly included in the pricing quite a big buffer for this type of potential problems. So we still believe that even with these kind of deteriorations, it was a quite meaningful deal. And we believe in the strong potential of the bank and of the country And hopefully we can get through these problems during the course of this year. Now, just a few highlights about the situation in Russia and Ukraine. I mean, as we saw on the previous slide, in both cases, nominal profits and profitability are excellent. In terms of kind of volume dynamics. In Russia, we continue not giving any corporate loans, so that volume continues to phase out. While in actually retail loans and in POS loans and cash loans and credit cards, we see some improvement in the market. And actually, in the third quarter this year, the consumer loan growth was 11%. So it seems that after losing quite some volumes during the course, during last year, this year should be better. We also seem to see some improvement in Ukraine, while kind of year on year comparison, we are still quite negative, almost 30% down in terms of performing loan volumes. the last quarter there was some improvements so there's some some hopefully light at the end of the tunnel now and then then not just profitability but also business activity can somewhat normalize in terms of provisioning especially in ukraine previously we talked about potentially going up to 30% total provision coverage on gross loans. And we kind of did that in the first half of the year. We went up to almost 25%, but to be frank, portfolio quality is exceedingly good. So what you can see that actually the stage three ratio started to decline And the stage two ratio started to decline. So some loans were really structured right after the war last year, kept them paying perfectly. So we are kind of going through this process where we continue to monitor the portfolio and classify the portfolio according to performance. And that performance is actually very solid, much more solid than we originally expected. So what I'm trying to say here that it's unlikely that we are going to increase further the provision coverage on the total loan portfolio. It's rather going somewhat lower as you can see on this slide. That is, some of you might be interested in these numbers, the potential kind of impact on the capital ratio. Should there be a complete deconsolidation of these activities? It is actually quite moderate, especially if you compare it to the 16.4% carbon equity ratio of the group. So we are talking about now 14 basis point potential impact in Russia and 13 basis point potential impact in Ukraine. Not that we are expecting these scenarios to manifest. It's quite the opposite. We believe that these are very, very low probability events. Okay, so going into the P&L lines, a kind of cross-section among the countries. NII. I mean, group level improved, FX adjusted without acquisitions, 21%. And also on a quarterly basis, there was a 4% improvement. A year on year, Hungary is still negative 10%, but quarterly, there's 10% improvement. So again, and the name as well started to improve. So we see the the kind of benefits coming through from the lower decreasing rate environment in hungary and the kind of late the the fresh news is that in year on year inflation dropped below 10 that's the data from today so october inflation was less than 10 this is better than expected so the does this inflation seem to be even faster than expected? Our expectation is that it's by year-end, we will see around 7.5% year-on-year inflation levels. And that creates quite a big room for rate cuts. I mean, with this less than 10% inflation and the reference rate standing at 12.25, there's already a very kind of big gap kind of positive difference between the rate and the inflation. So that's a positive rear rate and quite a big one. And then as inflation is expected to decline fast, this is probably is going to increase. There's one element here which is more technical in case of Romania. There was a reclassification of swap results from other income to net interest income. And that's kind of one of negative 10 billion negative in NII and a similar positive number in other income in Bulgaria. So that was kind of one of technical impact on the NII in the third quarter. Net interest margin, I mean, we kind of talked about this, but third quarter, the group level went up to 4%. As you can see here, there's this improvement in Hungary, 2.24. Again, comparing that to the first quarter, low number of 1.9. There's some improvement in all the other countries, basically improving compared to last year, especially the CE countries. And in Russia and Ukraine, it's kind of more stable. The only place where we have lower margin than last year, it's Moldova, where the rate has been cut from 20% last year to 5% this year. So there has been an enormous kind of precipitous drop in the rate environment. And that obviously reflects into in our name and the law name in Romania, again, this is not something kind of business driven. This is just a one-off, this adjustment of, I mean, reclassification here, which temporarily, technically reduced the name there. Okay. So then, I mean, this slide, which some of you like the, After when we did the second quarter result presentation, we just updated that with the current third quarter numbers, but the overall picture didn't change. As you can see, the NIM decline in Hungary was induced by the mandatory reserves, the retail deposit decline, especially acquisitions, the MRAL bonds. And in general, the fundamental impact of the interest rate environment on the NII was pretty much marginal. And that's due to the fact that we did not have much interest rate risk when this kind of very steep rate hike started. So we had more or less fully hashed position and that we did not benefit from this. We have not benefited from this rate hike that's what happened and obviously there were pluses as well on the other side which kind of partially counterweight weighted the negatives okay some details about the volume numbers and I think what interesting to see is that the kind of strong dynamics in consumer lending in Hungary despite high inflation high rates and and high uh aprs for consumer loans we just in one quarter we had four percent growth but slovenia was quite strong seven percent bulgaria four percent and extremely i mean and then russia started to grow fast and this is what i told before and then um and then what Interesting to see is actually Ipoteka, Uzbekistan. As you can see, there was an incredibly fast growth in consumer loans. Partially, this was in the form of car loans. And that's just intrinsic demand growing fast. And at the same time, the corporate volumes decline. I mean, that decline is not actual decline in volumes. It's the decline in performing volumes. volumes. So unfortunately, we had to classify to stage three, quite large percentage of the corporate book and that shows up here as decline in the performing volumes. If you look at the year to date numbers, again, I think quite a positive surprise is the Hungarian consumer loan gross at 12%. And Likewise, the Hungarian mortgage growth, that's 3%. This is just year-to-date growth. So these numbers are not annualized. And all the corporate growth was negative in Hungary. Now, again, given that the country has been in recession now for four quarters for a year and the magnitude of kind of decline in the housing market and in consumption, I think in that comparison, these are very, very decent numbers. But Bulgaria was strong. I mean, continues to be strong and Croatia is strong. And in some countries like Albania, we had some negative and also in Slovenia, some negative. And if you look at the whole year in Ukraine, it was still The overall picture is negative, but again, the kind of last quarter was already positive. Deposits, I mean, very good news that the third quarter was 4% up for the whole group and Hungary was 3% up. Still, retail deposits in Hungary were negative, but the decline, the rate of the decline is less and less. So we see improvement. And if all goes well, the trend can reach the bottom of the pit somewhere now around November. And hopefully we see a trend change by the end of the year. So far, what we have seen is a very tangible slowdown in the erosion of the of the retail deposits in Hungary. Year to date, deposit growth numbers. I mean, again, in Hungary, it was like 4% negative in retail and overall negative. But if you look at the other numbers, they tend to be positive across the board. So it's actually a quite favorable picture. And looking at fee income, 14% year-on-year growth and 4% growth in one quarter. I mean, usually the third quarter is strong in fees because we have countries like Croatia where tourism-generated fee revenues are an important part of the earnings. So there we had a kind of seasonal peak. The other kind of... Positive development is the Hungarian fund management fee income growth. I mean, more than doubled in one year. And that's the other side of the coin. So when we complain about the decline of the retail deposit volumes in Hungary in general on the market and in our case as well, Then at the same time, the asset under management in our fund management company in Hungary increased substantially and the revenue is more than doubled. So that's why we have this positive growth number here. Other income. I think there are two important factors here. Similar to the second quarter, I mean, each quarter we do the fair value adjustment, the fair value assessment of the subsidized retail structures in Hungary. It's the Csok and Babaváró and the baby shower loan and the subsidized housing loan, where the subsidies, where the are kind of linked to the government bonds multiplied by 1.3. So it's not the benchmark, it's not just the bond rate, but a multiple of that. And therefore we have to market these volumes. And last year, when the rate environment increased and the discount rate on these bonds volumes increased we had negative fair value adjustment and this year we have positive fair value adjustment so in the second quarter specifically we had 37 billion positive fair value adjustment and in the third quarter we also had 25 billion positive fair value adjustment so these numbers are boosting the other income line and I mean they are not recurring in a sense that the value depends each month or each quarter on the movement of the yield curve. So if the yield curve goes up, then this is negative. If the yield curve goes down, these numbers tend to be positive. The other factor here, which happened in case of Romania, I already mentioned that, that there was this reclassification from other income in a kind of negative item, FX swap negative result was reclassified from other income to NII and therefore the other income line went up. Okay, so moving to operational costs. I mean, overall, I mean, year on year, 14% increased, FX adjusted, sorry, 17% increase, FX adjusted and with that acquisitions. And in there, there are some numbers which are optically big. One is Hungary, 20%. I mean, in Hungary, we, I mean, inflation, I mean, year on year it's down to now kind of below 10%, but the average inflation will be around kind of 19% for the whole year. In that peak, the year on year inflation was 26. So Hungary has gone through an extremely high inflationary period and that somewhat reflects into the wages. I mean, we had to increase wages quite significantly in order to kind of remained competitive and all other costs went up. So in Hungary, we have a 20% year-on-year increase. The other country where we have a rather big increase in Bulgaria, but part of it is technical. I mean, this is the first year when we had to book the entire supervisory kind of fees and charges for the whole year. Last year and previous years, it was kind of spread evenly across the year. Now, without this kind of methodology change, the increase would have been only 12%. And then Albania here where we kind of included, that includes the impact of the acquisitions which were made last year. So the part of the base last year did not include the new bank when we acquired. So this kind of big increases due to that, the new acquisition. Okay, risk cost. I mean, risk cost is close to zero for the whole year. The third quarter was quite kind of meaningful in terms of Uzbekistan. As you can see, we booked 26 billion negative. So they all kind of this first nine months, It's close to zero risk cost, including the 26 billion negative, which we booked in in Uzbekistan. So, I mean, generally, again, portfolio qualities are quite solid. We don't see deterioration and also volume growth, performing volume growth is relatively modest. So therefore we don't have to provision so much. for the newly dispersed volumes either. So, I mean, those two factors together kind of resulted in this kind of low risk cost situation. And the other factor here, your kind of risk cost is the kind of high reserve levels. So on following page, you can see that we continue to have this relatively high coverage level for stage one and two loans, which is, again, it's like four times the typical risk-cost rate level what we have had for the last couple of years. And we have this kind of declining trend of the stage three ratio. I mean, the year end last year was 4.9%. Second quarter, we were at 4.2 and only the kind of, uh, you put the acquisition and the, the aftermath of that resulted in a slight, uh, increase in the ratio. But I think from, from here on this trend should, should continue be rather downward than, than, than upward. Uh, a few words about capital. This is the capital adequacy ratio based on the, kind of supervisory or regulatory consolidation, consolidated groups. So these are the actual regulatory numbers we have to comply with. So it's 16.4% back where we were at the end of last year, and you can see here the decomposition. So really kind of strong profitability in the first nine months. kind of increased the ratio by 2.3 percentage point in that there were different factors which decreased it. The biggest two were the acquisitions, the NKBM and Impoteca acquisitions, and also the regulatory changes. At the beginning of the year, we were phasing out some of the transitional adjustments. Plus there was an increase in the sovereign risk weights And these together actually contributed to a quite hefty capital requirements increase 80 basis points. If you look at the ratios themselves, again, kind of historically, 16, that's where we are. I mean, the 16.4, you have to compare to the 11.1, basically. That's the tier one requirement at the moment. MREL has become a key focus of our activities. So we have been very active on the capital markets recently. We issued many bonds, including this year. We did a tier two at the beginning of the year and then two senior preferred. And in the third quarter we did, or kind of rather in October, we did another kind of private placement in RON. Now, this resulted in a, I mean, the reported kind of number for the end of September for the AMRA ratio was 23.51, but this doesn't include these two issuances. So if we include the 650 million euro bond and the 170 million ron bond, or then actually the pro forma ratio at the end of the third quarter was 24.78, which is much higher than the current requirement. The current requirement is 20.52, but this requirement is going to go up first quarter next year. The current official requirement for next year is 24.13, but in our best understanding, this is going to be somewhat lower when we receive the official requirement, new requirement for next year, which is expected to happen in the next week. So once we receive that, we obviously will immediately announce it in the form of a special announcement. But, I mean, if you take the pro forma third quarter numbers of the MRI ratio, number of the MRI ratio, it was already above the next year requirement. Okay, so, I mean, here, next page, you can see the bonds that we issued recently. in the kind of maturity profile, but more importantly, the call date profile, which is still quite kind of modest despite the recent activity. And that's due to the fact that despite these bonds being issued to the market and kind of force it back to total asset ratio is at 8%, which is quite low, especially if you compare to ourselves before the financial crisis in 2008, this was actually 25%. And the kind of loan-to-deposit ratio was well above 100%. Now the loan-to-deposit ratio is low, and we only do these bonds in order to fulfill these mentioned MRA requirements. Maybe just a few details, a few more details about Hungary and the Hungarian performance. Mortgage loan demand dropped, so applications are less than 50% of last year. But despite of this, we still managed to increase the portfolio 3% in the first nine months. Our market share is increasing from new production and also from the stock. Likewise, in consumer loans, which is dominated by cash loans, we have an increasing market share, which is now well above 40%. And I think it's very important that despite kind of decline in retail deposits in Hungary, our market share in retail bank deposits continue to increase. So the decline is less in our portfolio for the whole market. A quick glance at the corporate kind of market shares and volume dynamics. So large corporate volumes declined and micro small corporate volumes continued to increase. despite this relatively difficult environment in terms of the macro and muted low-end demand, we still managed to continue to grow our micro small volumes by 8% here today. Now, overall, due to the kind of drop in large corporate volumes, the market share did not increase during the course of this year. There was a slight decrease, but nevertheless, I think if looking at the kind of previous long-term trend is still kind of very decent position to be at that level. This is our kind of usual slide about ESG just to keep it in your mind that we kind of consider it very important. There has been, again, some improvement in our rating in case of sustainable analytics this year. And we continue to focus kind of proactively and positively, especially on environmental and climate risk. And we have quite ambitious targets to increase our green landing activity. And we have this stated target of 1.5 trillion, half equivalent of of green loans by 2025. In terms of macro, I mean, after the drop this year, we, across all the countries, we expect improvement next year, which is a good news. Operating environment, we expect to be better next year than this year, and we are quite hopeful that this is going to reflect in low demand and increasing business activity, especially in Hungary, where again, we have had recession for a year now. And the expectation is that that negative situation can change hopefully this quarter. So hopefully this quarter, last quarter will be positive, but definitely for next year we expect positive GDP growth. My personal expectation is actually more than 2%. So this is our research department, which they might be right. I think my personal view is that the growth might be even higher than 2% in Hungary. But nevertheless, in Hungary and in Generally, in the other countries as well, we expect improvement in the environment. So finally, kind of some adjustments to the management guidance. The performing loan growth was 4% in the first nine months. So we think that it's likely that the overall annual loan growth will be more than 5%. And also given the kind of 30% adjusted return on equity in the first nine months, we felt that maybe the previous wording of the expectation that it may be more than last year was not ambitious enough. So we now have another expectation kind of updates on the ROE guidance. It probably remains conservative, but now we say that it may exceed 25%. Again, that's not a very ambitious guidance compared to the 30% in the first sign-offs. So that was it. That was the presentation. We have the usual disclaimers. Please read them. And then I'm sure many of you have very good questions. So I would like to ask my colleagues to open the floor for questions.

Thank you, ladies and gentlemen. We will now begin our question and answer sessions. If you have a question for our speaker, please click on the raise hand icon to indicate or press star nine on your phone's dial pad. The first question is from Gábor Kemény Autonomous Research.