Otp Bank S/Adr R

Dear ladies and gentlemen, welcome to the OTP Bank Force 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 Financial and Strategic Officer. Laszlo, please go ahead.

Thank you. Good morning or good afternoon, depending where you are. Thank you for joining us today on OTP Group's 2023 full year results presentation. As usual, the presentation, what I'm going to use is available on the website for you to download, but we are also kind of projecting it parallel to the discussion where we have on my presentation. As usual, we go through. First, I try to go through rather quickly this presentation, which is in the kind of usual structure. And then we can have Q&A. So the highlights of the group. We had a good year last year. in Hungary and outside Hungary. And in general, I mean, this is probably not a surprise because most of the banks had a quite good year in 23. But nevertheless, in terms of OTP history, I think this is a kind of major milestone. What we reached, we exceeded 100 billion euro balance sheet and exceeded 2.5 billion euro profit after tax. And we kind of solidified our position in the region as one of the dominant multinational banking groups. And certainly we have a unique position in a sense that we are pretty much the only one of the banking groups across the region who actually originated from the region, come from the region. So we have strong positions in five countries, which was strengthened last year, especially with the acquisition in Slovenia, our second acquisition, and we entered a new country in case of Uzbekistan. And not last year, but at the end of January, early February this year, we signed an agreement to sell our Romanian businesses, which is also kind of, it hasn't been a big part of the group, but strategically, it was a kind of difficult decision to make, but I think we made the right decision. And certainly the financial impact of that decision has already been reflected in the 23 Profitability was quite good, I think, 27% all in compared to the around 14, 15% expected return level and somewhat declining expected return level given the, especially in half rates, there has been a strong decline. in the risk free rates. There's some normalization in the cost of capital as well. And very stable kind of foundations in terms of liquidity, in terms of capital, both of these positions strengthened considerably last year. Liquidity coverage ratio, around 250%. That's 2.5 times higher than the requirement. And we managed to strengthen our capital position despite doing these two rather sizable acquisitions in Slovenia and Uzbekistan. So the year-end common equity to our ratio was 16.6%. And that means 20 bps improvement year on year, including the acquisitions that we have made. And we managed to meet and somewhat exceed the MRAL requirements as well. So the year-end ratio was 25.1%. And from January 1st, the new increased requirement was or has been 24%. So this has been a quite costly exercise because we had to issue a lot of bonds, which we didn't need for our kind of normal business activities or from a liquidity point of view, but only for this purpose to meet these new type of capital requirements when we have met them. And Pro40 quality remained quite stable with decent coverage levels and low risk costs. So I think overall, this is a pretty strong picture and we remain committed strategically to ESG targets. Now let's look at a bit into the numbers themselves in the group level. First of all, if you just look at the bottom line, headline number 990 billion of after-tax profit, that's almost three times as much as in 2022. Now on this page on the right lower corner, you can see the so-called adjustments. And these items changed a lot from one year to another, whereas in 22, we had like minus 245, 23, it was minus 18. So the big difference in these so-called adjustments contributed most of the difference between the two years, or it was a major contribution, it wasn't most, but there was a major contributor to the difference. And if you go line by line, the effect of acquisitions was positive in 23, and that's coming from the NKBM and Ipoteka acquisition bed wheels, which were both positive, and the Romanian bank sale, which had a negative impact on our acquisition. P&L, we kind of reported this when we signed the deal early February. So the impact here is minus 29.5 billion, and that's included in this 64.9 billion positive number on the acquisition line. The bank taxes, primarily in Hungary, declined. And that's a good thing. And then we expect further decline next year. Sorry, this year in 24. Interest rate cap was extended into the end of June this year for variable mortgages until the end of March for SMEs. So that ever still these extensions cost us including the last one in the fourth quarter last year. Not just Hungary, but the Serbian cap was also accounted for. And the other line where there's a considerable change year on year is the effect of the Russian-Ukraine war. In 22, we had big losses here and in 23, it was close to zero. And on the other line, we had a positive number, and that's this last year, 15 billion. Most of this, like 10 billion, was related to the reversal of the provisions that we made due to the kind of reversal of the losses that we had, what we booked in 22 due to the Sberbank default and the subsequent resolution actions, we booked the loss in 22 and we reversed that in 23 because it did not manifest at the end. Now, if you look at the kind of bid at one of, with that adjustment items numbers on the left lower corner, it's still quite a strong growth, 70% year on year growth, which was while driven by various factors. Number one, we included the P&L contribution of the two acquisitions, what we made last year, and their combined contribution was 74 billion. 96 was positive, was NKPM, and minus 22 was IPOTECA. And overall, if you look at the ratios, And then in the rest margin improved from 3.5 to almost 4%. And that came primarily from outside Hungary countries, especially those in the Eurozone or quasi Eurozone countries. And we clearly benefited from the higher EUR rates, whereas we did not benefit. It's quite contrary. The extremely, extremely high rates in Hungary actually were negative marginally for us in Hungary. And the credit risk-cost rate was quite low in general, but especially compared to 22. 22 was the year when the war started and we provisioned kind of excessively, especially in Russia and Ukraine, but in all the other countries as well, because we had to increase coverage ratios for the other countries as well, given the worsening economic expectations. So that resulted in 178 billion risk costs in 22. And these factors did not manifest in 23. In fact, the whole risk cost was 39 billion negative. And that included the 22, sorry, the 52 billion risk cost, what we booked during the second half of the year in Uzbekistan in an input take. I'm going to talk about this in more detail later. Looking at the consolidated P&L, I think maybe if you I mean, if you highlight the 28% without acquisitions and FX adjusted, full income growth, I think that's that's quite good, growing organically 28%. And that resulted in actually 37% growth in operating profits. So in just in one year, we grew operating profits more than one-third organically. And maybe the quarter-on-quarter comparison, I think, is the net interest income growth, which is quite prominent and important. Looking at the lower growth trend on page five, We love this chart, apparently. It keeps coming back, but I think this is important and it keeps reminding us how much we have grown over the kind of last period, the last seven years. We tripled the size of the group in terms of total assets and in terms of loan volumes, it was even higher growth. And we kind of reached this above 100 billion euro level. put it in this into another context 10 years ago in 2003 uh the group was 10 billion euro all together so it's like 10 times growth in 20 years any other very important change in the structure of the group that now kind of two-thirds of the the group is coming from outside hungary uh both in terms of profits and in terms of exposures. On page six, we start few pages detailing the Hungarian performance. Again, if you just look at the bottom line number, then it is kind of 10 times improvement compared to 22. And here, I think it's safe to say that most of the changes come from this so-called adjustment So just going through them one by one. The windfall tax, the extra profit tax declined, as you can see here. The special bank tax increased. That keeps increasing. By the way, this is the tax which have been with us since 2010. So you could argue why we put it into the adjustments and the one-offs, and we are kind of reconsidering this and just to I don't want to scare you but starting from 24 we are going to substantially reduce this one of these adjustment items and we will reserve this category all into items which are related to the actual buying or selling of of of assets of banks or other assets and everything else will go into the normal kind of profit. So we are not going to show this as special items, but more about this when we present the first quarter. So the kind of special bank tax, which this is the one which was introduced in 2010, that keeps increasing because this is, here the tax base is related to the sub consolidated Hungarian assets, what we have. And since those are growing, this number is growing and will continue to grow in the future. For this year, we expect around kind of close to 30 billion. Whereas for the windfall tax, which was introduced in 22, and already decreased from the 22 level to this 36 billion in 23, it is going to decrease, and this is in the legislation actually, further down to possibly around 6.5, 6 billion off, assuming that we are going to buy the necessary government bonds, and we intend to reduce it down to this level. Now the interest rate cap appeared, we talked about that. There was no effect coming, negative effect coming from the Russian war or the Ukrainian war, the war in Ukraine, between Russia and Ukraine. But on the other hand, in the others line, we had a big plus. Now this is somewhat confusing because this is actually, these are items which don't appear typically on the consolidated level. 80 billion of this is specific to the standalone view of the Hungarian bank. And this is related to the investments into the subsidiaries and the value of these investments and the impairment reversals on these investments into subsidiaries, including the reverser of impairment on the or the kind of revaluation impact on the Romanian bank. So when, I mean, on the consolidated level, the sale of the Romanian bank had a negative P&L impact because we sold it at 0.7 time book, local book, right? And the value below the local book, which we, book value what we had in Romania. in the Hungarian books, the book value, the asset, the value of investment of the Romanian subsidiary was much less, was already impaired compared to the book value of the Romanian bank. So actually, and therefore, the sales price was actually higher than the value of the Romanian bank in our books in Hungary. So actually we had to book on the Hungarian standalone level, bank level 37 billion plus. And there were other impairment reversals on investments to subsidiaries, including our Serbian bank, 21 billion. So all these together added up to 80 billion plus. which only appears on the Hungarian numbers and not in the consolidated ones. So that's somewhat confusing, but I hope it was clear. And there's another kind of technical element, which we talk about when we detail the other income development in the group. but maybe it's worth talking about here. The accounting treatment of the subsidized retail structures like the baby shower loan and the subsidized mortgage structure is such that we have to fair value adjust them. So when there are kind of strong movements in the in the rate environment and or they change the uh subsidy structure of the new newly issued learns we have to revalue the existing book and the existing book is quite big so this revaluation positive revaluation last year was 87 billion half and uh After tax, it was 79. So out of this 303 billion half adjusted profit in Hungary, which grew 18% compared to 22, actually that was 79 billion related to this. So that was a kind of one of boost. This is not unique to OTP. I mean, Erste Bank a few days ago, published their numbers and they reported that they booked 43 billion plus due to this fair value adjustment evaluation of subsidized loans. So just these two banks together, OTP and Airsta in Hungary, booked 130 billion of subsidized loans. kind of one-off accounting policy related positive number. So we estimate that maybe the whole banking sector might have booked around 200 billion positive last year. And this is actually a very substantial boost to the earnings of the Hungarian banking sector. Bernhard Neum?rker- And this is, I mean obviously i'm unlikely to be repeated put it this way, this year. Bernhard Neum?rker- On a more kind of fundamental level, the improvement. compared to 22 happened in our case, in basically in the kind of yearly, if you look at the quarterly development of the NIM, there's a strong improvement here. Year on year, the NIM actually declined because in this very high rate environment, this is not what we optimize our balance sheet for. And you can see that after the rate, the environment started to fall, starting from the second quarter in 23, there has been a strong, I mean, reasonably strong improvement in the net interest margin. Part of the improvement in the fourth quarter was technical. We also talk about this in this presentation later on. So basically 26 basis point out of this 60 basis point improvement in the fourth quarter was related to kind of one of technicals. But even if you exclude them, the net interest margin in one quarter improves from 2.2 to 2.55%. And this improvement is structural. So this is going to stay with us. it's not going to go away. So I think this was the kind of most exciting part of the fourth quarter result in Hungary. This is one of the two, three most exciting developments that really the Hungarian net interest margin started to react positively to the changing rate environment. A few more words about Hungary, volumes and and kind of business trends on page seven. Looking at the mortgage market, there was a big decline in overall disbursements. So the overall, on a market level, disbursements declined by 50%. They went down from 1.2 trillion and a half to 600 billion and a half in 23. And our newly disbursed volumes also declined, but only by 31%. So the decline in our case was much less than the decline on the market. Therefore, not surprisingly, our market share in new production has grown, did grow last year. And our kind of volume growth, stock volume growth, in our case of 4% compared to the market growth of 1.3. So we kind of outgrew the market last year. Now there's even bigger outperformance of the market of OTP last year as in consumer loans. So if you look at cash loan disbursement, our market share has increased even more considerably. And by the end of the year, in the fourth quarter, we reached 45% market share, which is quite in this kind of not subsidized market-based cash loan annuity disbursement. And in terms of volume growth overall, stock volume growth grew 16%, whereas the market was growing by 7%. Now, the other kind of exciting retail segment, the retail deposits. This was quite problematic last year and very painful for us actually, because current account volumes on the entire market declined by 1 trillion half in the first 10 months. And this was given our kind of above 40% market share in retail current accounts. This was and particularly hurting our profitability. And this was one of the reasons why our margins went so low in the first half of the year. And the good news is that in the last two months, in November and December, there was 500 billion increase. So this decrease in retail current account volume stirred around at the end of the year. And that was one of the kind of reasons behind the improving net interest margin in Hungary next to the lower interest rate environment. Now, this was, again, a specific market situation in Hungary. There was a very strong reallocation of funds by retail clients and retail government bonds. and mutual funds increased considerably while bank deposits declined. But nevertheless, in this kind of declining retail deposit market, we managed to increase our market share year on year last year slightly. Corporate story is somewhat different in our case. Our corporate volumes, in fact, declined last year. But if you... have a closer look at previous year's growth. So in 22, we grew 32%. And most of this growth was in the second half of 22. The market in 22 grew by 15. So our growth rate was more than twice more than the market. So what happened was that basically our clients pre-financed their loan demands. And we were willing to do that. So we provided them with the loans that they demanded. And therefore, there's a kind of timing of these loans. Much more was done in the later part of 22 than on the market level. And therefore, less was left for 23. And obviously the GDP decline and the high rate environment contributed to the overall kind of slow growth of the market. And this is clearly an item where we expect improvement this year. So we are very much hopeful that long growth is going to come back. And this is what we prepare for in terms of corporate. Despite the overall decline in volumes in our case, we have been quite active in distributing the subsidized structures, which kept existing. So we had kind of more than 40% market share in the disbursement of subsidized volumes. The next page is our kind of usual decomposition of the and NII and net interest margin development. There's no new item here. So that's basically just an update on the information, what we shared in the previous two quarters. I don't think there's much to say about this here. On page 10, we have details about the performance of part of the group, which is outside Hungary. And that was really a success story last year. With the exception of hypotheca new acquisition, all these banks were contributing quite strongly to overall profitability, you can see the ROE numbers and the nominal kind of volumes as well. I think quite impressive, especially Bulgaria, exceeding the 200 billion Half profit after tax level, very good improvement year and year. Slovenia with NKBM on board, 130 billion. And Serbia was also very strong. A few years ago, Serbia was tiny, right, in our case. But having done these successful acquisitions, it's one of the strongest contributions to our overall group of profits. And And Russia, Ukraine, after the less good performance in 22, both of these countries were strong profit contributors in 23. In case of Ukraine, actually a 50% corporate tax was introduced at the end of the year. So the fourth quarter was, loss-making because it was retrospectively applied. So we had to pay taxes 50% on profits for the whole year. And we had to account for these additional taxes for the entire year in the first quarter. But even after this 50% corporate tax, the profit after tax remained 45 billion half, which is, I think, quite remarkable given the situation, the war. in the country. Now, the good news is that this 50% is not going to stay with us. In 24, it's going to be 25%. So this was a kind of one-off high rate. I mean, we are usually quite critical of these bank levies and additional bank taxes. But if there's, I think, ever a situation where Extra bank tax is warranted. It's the case of Ukraine. I think it is quite understandable that they tax the banks somewhat higher in these difficult times. And then maybe I talk a bit about the situation in Uzbekistan. So we have two slides detailing that. Now we are learning this country and the banks. So we, quarter by quarter, we have more information. So hopefully we can give you better and better picture of what is going on and maybe more intelligent answers to your questions. So where we stand now, just... showing you the performance of the second half of last year. So in terms of volumes, corporate volumes declined by 38% in six months. This was due to the fact that the migration to stage three. So these are performing loans. Performing stage one and two loan volumes declined by 38%. due to migration to state three, and obviously due to the fact that we really, I mean, we seriously kind of strengthened and made more conservative the lending standards as well. So not much new lending was done in corporate. Now quite in contrast to that, in retail, we were going quite fast. Mortgages grew 15% in six months and consumer loans by 120, more than doubled. I mean, these are not annualized growth rates. This is actual period-on-period growth in six months. And And that's actually the core of our strategy in the country. Just to remind you, the reason we brought this bank was not to grow so much in corporate, but we wanted to capture the opportunity in the retail segment in Uzbekistan. That's why we brought Ipoteka Banka. Ipoteka actually means mortgage. So it's a primary mortgage bank. And they have like 20 plus market share, 25-ish percentage. market share in the country. So the core focus of our strategy or the real focus of our strategy, the retail segment was actually growing quite fast. And it continues to be, I mean, from the levels, from the volume levels, what we have there, potential quality demand is, is almost unlimited and continues to grow. The only limitation to growth is really local currency liquidity. Unfortunately, the monetary policy environment is extremely tight. I mean, the base rate is 15%, the inflation is much lower than 10, and there's just not enough. There's a very tight local currency liquidity level in the system. And that's the biggest impediment to growth. And swap markets are not available in the local currency. Not that we would want to do that, but it's not quite possible to finance any local currency growth from injecting liquidity into the country. The only kind of limitation to growth on the retail loan side is really the deposit development. And the good news is that we actually managed to grow deposits relatively strongly in the second half of last year. So corporate deposits grew 23% and household deposits 15%. Again, these numbers are not annualized. These are just end of period growth rates. So, I mean, what's happening here? I mean, we are obviously improving the activities and the sales techniques and tools of the bank. and there's very strong digital share of the new flow. For instance, out of the consumer loan sales, so the cash loan is worth when, as you can see, in the fourth quarter, we actually sold 77% of the cash loans digitally. And when we brought the bank in the second quarter, it was only 40%. So a much larger volume was sold and a much larger share of those were actually sold through digital channels. And this is without actually replacing the app, what they originally had. We made some tweaks and quick fixes, but a big kind of step up in the quality of the digital services what we provide will come when we completely replace the current digital front end and that's going to happen somewhere at the end of this year. So this is kind of even working progress on the developments. Now, what happened in the corporate portfolio and quality? First of all, it's clear that the state's overall increase was coming from or was the result of the corporate portfolio deterioration. The retail portfolio remained quite stable as you can see on this chart. So the retail stage three ratio hardly changed or even kind of declined. But the big increase was it was corporate and micro small. Now on this slide, you can actually see the industry split. So most of the state's three ratios. So that's of the state's three loans. So this is like the most, more than half of these loans, which defaulted, are in the cotton textile industry segment. There's another big share in fisheries and in the agro sector. And actually the others are quite small. Now, what happened? I mean, apparently cotton prices collapsed. I mean, if you compare the peak in 22 second quarter to the low in second quarter 23, then the price difference was actually not 30%, but 50. So cotton prices fall by 50% in one year. And on top of that, they had a very cold winter. The winter of 22, 23 was the coldest in the last 50 years in Uzbekistan. And this situation was exacerbated by the fact that there was not enough gas supply and gas subsidies were reduced. So they could not eat these kind of fish lakes or ponds where they grow the fishes and they could not eat the kind of these greenhouse, these where they grow fruits and vegetables and things like that. So the weather and the kind of limited supply of gas and more expensive gas and therefore no possibility to provide the right heating for what they needed in the fisheries and the agro sector and the cotton prices and also the weather conditions in the cotton industry resulted in unprecedented losses. So in a way, it turns out that we seem to be unlucky with the timing of this acquisition, because we just managed to buy this bank in a best in the worst kind of external conditions here. So now and our understanding is improving day by day of what's happening exactly with these clients and what and And this is where we are at the moment. So these are probably the strongest drivers. Now, the other side of the coin, obviously, is that if we look at the bank's ability to monitor and collect and do work out of corporate loans, and we compare that to the levels that we have in the other parts of the group, there's a huge difference. So there's an enormous improvement opportunity and potential in kind of basic risk management and portfolio management practices of the bank. And we have started to do that improvement since we took over the bank, but it takes some time. So we are making progress on that side and hopefully there will be visible results of these improvements in the policies, procedures, people, everything basically related to managing existing problematic portfolios, but it takes some time. And unfortunately, the relatively low level of this preparedness during last year and these negative external environmental factors resulted in this iteration. Now, if you look at coverage ratios, what you can see, the reported ones are not fully providing they don't provide you the full picture because when we buy something, we have to net provisions to gross loans. So the beginning balance sheet, the opening balance sheet at the end of the second quarter last year, In that, provisions were already netted out. So what you can see in the balance sheet of the bank is the kind of net amount of these non-performing loans. And therefore, the previously created provisions disappeared. Therefore, there's a difference between the reported netted out coverage level and the actual coverage which compares the provisions to the kind of gross total provisions on the loan to the total exposure of the loan. And the latter one is adjusted is higher. So in fact, provisioning level is 56% on these stage three corporate loans, which is in line with the kind of other levels in the group. And if all goes well, we are actually hopeful that there might be some revisions or provisions later on from these, if all goes well. Okay, so that was about Uzbekistan and Ipoteka. Now, maybe a few thoughts, but not much about kind of the P&I Alliance in a cross-section view. So NII, I already talked about this. I already talked about the one-off technical Francesco D' items in in the in the half in in Hungary in the fourth quarter, which kind of was part of this, the story of this fight grow strong quarter and quarter gross in an eye eye. Francesco D' In in a particular we had a reclassification which caused the decline on a quarter on quarter basis in an eye eye without this reclassification actually. the NII would have improved by 3%. Net interest margins, next page, 14, reflect the same story. Again, part of this large improvement in Hungary was related to one-offs, but even without one-offs, it was strong. And otherwise, across other frontiers, typically improvement in margins due to the rate environment. Page 15 quarter on quarter long growth. I mean, the kind of previous momentum was was kept to 1%. And if you look at the year on year growth, 6% organic and 20% including acquisitions. I think the most remarkable number said a number here is Bulgaria 20% growth. And especially mortgages, 23% growth. And this is not just OTP Hungary. So overall, the market is growing fast. And that's coming from two factors. One is that the country is doing well. Actually, three. The country is doing well. Penetration ratios are low. But there's an interesting third factor, and this is something we could learn from in other countries. In Bulgaria, interestingly, retail loans are all variable. But the benchmark of these variable retail loans is a benchmark which is officially published by the central bank, and it is the average rate of the retail deposits. And this structure, industrial structure there resulted in an interesting situation that, okay, deposit beta was close to zero. So the deposit rates did not increase despite the much higher rate environment. Therefore, the variable stock rates, consumer and mortgage did not increase. and also the new production rates did not increase. So probably we have one of the lowest mortgage rates in Bulgaria across Europe. And the margins are quite strong and we are not, we don't have to be afraid that if deposit pricing happens, then we lose margins or lose NII because the the the the the benchmark of the variable retailers is the average deposit rate retail deposit rate on the bulgarian market so i think this is a kind kind of i'm not sure whether this was designed with purpose but it has been served for quite a long time for last 10 15 years and and basically all the banks have this these structures and this specific uh feature actually resulted in much higher growth in Bulgaria, which is a quasi Eurozone country, right? They are joining the Eurozone January next year. They are already in ERM2. So it's basically interest rate-wise. It's just a kind of Euro rate environment. Well, that's just a kind of small flavor on the situation there. Deposits. Again, there was a very, very important development in the force on a quarter on quarter numbers. And as the Hungarian retail deposits, they went up by 2%. The previous three quarters last year, they were negative. And that for us, that was extremely painful. So that's a very welcome development. I hope this is going to continue. Otherwise, we're now kind of year on year Change level, next page, 18. Sorry, 17. I'm sorry. No, 18. Yeah, 18. Yeah. Overall growth was 7% without acquisitions. So kind of higher growth rate than loans. And therefore, actually, loan to depositation group level slightly declined. and kind of general strong growth, except Hungary. And as you can see, on a yearly comparison basis, the retail growth in Hungary was, deposits was negative, despite the fact that in the fourth quarter, there was 2% increase. For income, despite low volume growth in Hungary in loans, and then the and also negative deposit growth, retail deposit growth, and actually declining GDP. We had 11% growth in fee income and that's due to inflation. So, I mean, obviously despite a recession and declining GDP, nominal GDP obviously increased, and fee income tend to grow with nominal GDP growth. The other two, I mean, growth, strong growth rates in Russia, that's related to the deposit volume increase. And in Hungarian fund management, a huge increase happened in assets under management. where retail deposits were negatively affected by the very high rate environment and the very high yield on the retail government bonds and money market funds. Obviously, fund management and fund managers benefited a lot. A lot of retail savings moved from bank deposits to mutual funds, and therefore, our fund management company, which is largest in the country, had a pretty good year. Other income. Again, on this other income line, you see this strong growth in case of Hungary, 74 billion year-on-year growth. As you can see, as we wrote it down in the comment section here on this page, and I already talked about this, In 23, we had 87 billion plus revaluation result related to these loans, fair value adjustment. And yeah, and in Russia, the conversions kind of revenue was strong. So that was strong for the future as well. Operating costs. I mean, unfortunately not just revenues increase, but costs as well. quite considerably. And not surprisingly, Hungary was quite high in terms of operating expenses growth, driven primarily by personal expenses, 30% year on year growth. That was due to the high inflation and high wage inflation. I mean, we had to keep pace with the with a very tight job market last year. There seem to be, from our perspective, some improvements. I think this very tight labor market is getting a bit relaxed, and hopefully we can much better control in the future the increase of personal expenses, especially in Hungary. The Albanian strong growth year on year is due to the new acquisitions that includes the acquisition. Risk cost. Typically positive or small negative numbers, writebacks, except hypotheca. I already talked about that when I talked about the bank there. So that was due to this corporate deterioration, stage three growth. Overall portfolio quality, page 23. Again, I mean, pretty stable year on year, actually strong improvement in terms of the stage three ratio and the growth in the second half, Actually, that's due to Uzbekistan and in particular states ratio going up quite a lot. And we keep our kind of general high provision levels we kept last year. Capital kind of decomposition of the change of the common equity tier one ratio. Again, it increased last year by 20 bps. and there was a strong positive contribution from earnings and 1.3 percentage point was used for the acquisitions. In fact, here you have a negative kind of number for the Romanian bank, but once we actually close the transaction, the all-in number will be positive on a common equity deal, one of those 43 bps and the kind of capital adequacy ratio that was 52. In terms of capital adequacy ratios, I mean, again, quite much higher than requirements, page 25, maybe we can go, yes. There's nothing new here. Page 26 shows the MREL requirement and the year end number. So we met the requirements. And in order to meet the requirements, we obviously issued a lot of bonds and did some bilateral deals, as you can see on page 27. So more than 2 billion euro equivalent was issued last year, including the the bilateral deals. And the coupons, what we see here, I mean, these are decent and good levels compared to the market and the market environment, but from our kind of internal management point of view, these are very high rates and very high costs of funds. So this whole MREL exercise is really expensive for us and hurting us actually a lot because our cost of funding related the MREL instruments is probably higher than some of the Western European banks. Page 28, I mean, there's not much change on this page, improving ratings, continuously improving ratings on ESG. dimension, which is in line with our strategy. Now a few words about what we expect for this year. Now obviously, in most of the countries where we operate, we expect a better operating environment. In fact, we expect a better operating environment everywhere. It's just that the growth rate might slow down somewhere in certain countries like Montenegro or Ukraine, Russia, but marginally they are also improving. But in the kind of biggest countries from our perspective, especially in Hungary, where after the recession last year, we expect GDP growth to come back. Our expectation is like 2.5%. The government expects, I think more than 4%. they are right then there's a big upside risk here but bulgaria strong slovenia accelerating croatia extremely strong the last quarter last year was very promising so i think there's some upside potential in that growth rate serbia doing very well albania extremely well i mean montenegro good uzbekistan about five percent growth and in russia ukraine in in our forecast we we We did not expect much change in the operating environment. If we are lucky, we can, or I hope that the war ends sooner than later, and then if that happens, or at least freezes the actual military activity, and then we could expect a much, much higher growth, especially in Ukraine than this. Romania improving, but that's hardly, more relevant for us given that we sell the bank. We expect the transaction to close actually quite soon. The buyer is Bank of Transylvania and they seem to be strongly supported by the local supervisors. We don't expect any and we expect a quite swift closing of this transaction. Moldova speeding up. It's amazing how fast they brought down inflation from an extremely high level and also the rate environment, how it collapsed. So that's in itself a very interesting story. So before going into the expectations of this year just a quick look at what we uh indicated for last year i mean we all we we kind of delivered what we indicated so all these uh points which were included in our guidance last year developed according to the guidance so that's good and then looking at what we uh indicate for this year. Low volume growth. I mean, given that the whole operating environment improves, GDP growth improves in most of the countries where we operate. We expect a lower rate environment, much lower in Hungary than last year. And certainly, especially in the second half of the year, a decreasing rate environment in the Eurozone and Eurozone-related countries, lower inflation. So we are hopeful that this is going to translate into somewhat higher loan demand. I think it's unlikely that we return in one year to the kind of 21, 22 levels, or the 21 level, So it will take probably more than one year to do that, but hopefully we can improve on the last year growth rate, which was 6%. Now interest margin, we indicated here, maybe flat compared to last year. And this is the line where there's considerable positive risk. So there's an upside potential in this, given that rates seem to, kind of stays somewhat higher, somewhat longer, and also the very favorable developments in the Hungarian retail deposit current account numbers. So there might be some upside here, but we remain cautious with the guidance, I mean, to be around last year. Cost-to-income ratio of 45%, around 45%. Portfolio risk profile similar to last year. So here I think that we are reasonably convinced is that the operating environment improves and the the current quality of the portfolio is quite stable and good. So if there's further improvement, we don't see why the underlying portfolio quality should deteriorate. And overall in Uzbekistan, we also expect improvement. The exact risk-cost rate is more difficult to kind of project. It might be somewhat higher than last year, but the important factor is that the underlying portfolio quality, we don't expect it to be different from what we have had recently, and that's quite a strong performance. Now, as we keep on accumulating earnings and increase Bernhard Neum?rker & capital, the leverage is going to be lower this year than last year and that's going to have a negative impact on our ways, maybe our ways really are we will be lower some of them last year dividends. Bernhard Neum?rker & The current indication is hundred and 50 billion, and this is the likely number, which is going to be decided on the board on the 20th of March and then. suggested to the general management meeting. We already started to buy back our own shares. Early February, the National Bank approved a program of 60 billion, half equivalent of share purchase, share buyback. So far we have done, I mean, by the end of yesterday, we brought back less than 6 billion. So there's kind of 90% of this is still coming and we are doing this gradually. So I think when you look at the return to shareholders this year, you probably want to kind of add the two together, the 150 and the 60. And I mean, I cannot exclude and I don't want to exclude the probability that there will be other phases of this share buyback. So our internal decision was on this 60 billion and we received approval for 60 billion. But once we buy back this stock, we will obviously kind of revisit the capital situation of the group and make a decision accordingly on potential future buybacks. There are some future MREL, at least, I mean, we did one MREL, additional MREL bond in late January this year, already 600 million. And probably there will be one more and maybe two more during the year that also depends on our kind of volume growth in new loans. So that was pretty much the presentation I wanted to make. The disclaimers are also important, so please have a look at them. And then I would like to open the floor for questions, so please ask your questions.

Thank you, ladies and gentlemen. We will now begin our question and answer session. If you have a question for our speaker, please click on the raise hand icon to indicate or press star 9 on your phone's dial pad. The first question is from the analyst of Goldman Sachs, Mikhail Butkov.

Good day. Thank you very much for the presentation. I have a couple of questions. First was on the risk profile of the portfolio you mentioned in the outlook you expected to be broadly unchanged in 2024. But just to clarify, it's not connected to the cost of risk outlook itself because it was quite, it was strong in 2023 with 16 basis points. What could speak for stable cost of risk maybe or the increase for the next year? Then the question is also on Uzbekistan. You described quite in detail the challenges, the weather challenges last year. Assuming that these challenges will not continue into 2024, would you expect cost of risk and provisions to be at more of the normalized level in that business? Or there are some additional internal surprises which you identified and can result in somewhat similar hikes at some point during the other year? And the final question is on dividends. Yeah, you have commented your vision on the dividend payments previously and on the capital allocation policy as well. But is there any change so far, given that you made progress on MRL? And are there maybe any inorganic growth opportunities which you see currently? So yeah, thank you.

The risk-cost rate, I mean, the 16 basis point last year, that's quite low, right? But for a number of years, we had like 20, 30 basis point levels, except in 2020 when we had the COVID-related additional provisioning, and in 22 when we had the war related provisioning. So in 18, we had 23 basis points, in 19, 28, in 21, 30, and then 23, 16. So I think 16 is a kind of lower end, but I think it's likely that it's going to be higher than 16. but exactly where it depends on again i think where where we are pretty confident is that we don't expect portfolio quality to behave differently than last year which was quite a good kind of behavior except in uzbekistan where we do expect improvement so we uh i mean it it i mean The last year in the second half, we had like 6% viscose, sorry, 10% viscose rate in Ipoteka. The first quarter will be considerably less than that. And then for the remaining quarters, there will be further gradual improvement. That's what our expectation. And during the course of this year, we should reach a kind of normal normal level, which is closer to the group average than 10%, much closer. But this takes time because we really have to establish the whole kind of risk management process in the bank. There might be positive surprising as this coming from Uzbekistan during the second half of the year in terms of portfolio quality, because my personal view is that maybe some of these state street loans might recover and we might find solutions together with other banks and the government to address this problem. So Uzbekistan is kind of special in this sense, The rest of the group, again, with a high probability, we expect similar portfolio quality development. The risk-cost rate on top of that depends on two factors. One is growth. So the higher the volume grows, the higher the risk-cost, because for the new volumes that we produce, you have to create provisions for the performing loans. And the other one is forward expectations regarding the economic environment. So the actual coverage rate provision coverage and performing loans, which will be probably the strongest diver of the risk-cost rate this year will depend on the expectation and the end of this year on primary GDP growth trajectories for 25 and 26. And those can move the risk-cost rate couple of tens of basis points, right? Up and down. So that's much more difficult to actually forecast. So it's kind of difficult and I would not, I don't want to give a kind of point estimate of the risk or strain. I think what we can say is that again, the portfolio is what we said that the kind of risk profile of the portfolio will be similar. I think it's quite unlikely that we're going to have less than 16 basis points. So it will probably somewhat more, but how much, honestly, I don't think it makes a lot of sense to give a very precise point estimate. Okay, so that was the riskless question. The second question was regarding Uzbekistan and the risk was there. I already talked about this. And the third question, dividends in organic opportunities. I mean, as usual, we keep our eyes open and we look into every meaningful opportunity what comes up in the countries where we are interested. And then we will see. I mean, we are not going to buy something just in order to buy something, that's for sure. And It's pretty much impossible to tell when the next acquisition is going to be. There's nothing in the pipeline which would be as advanced that something could be expected immediately. But even today, we are looking into some opportunities. It may take years to buy another bank. It may be actually within this year. I don't know. So that's quite hard to tell. we remain to be strongly motivated to continue the growth strategy what we have executed so far. So the management is quite motivated to continue acquisitions. We have capital to do that. We, I think, demonstrated that we have skills and experience to do acquisitions and to successfully include those new acquisitions into the group, especially given our track record during the last seven years. So the intention, the ability, the skills, the capital is there. It just depends on the opportunities and the opportunities don't depend on us. So it's hard to tell, but nothing immediate, I would say.

Okay, thank you very much for...

the answers thank you thank you thank you the next question is from gabor kemi autonomous research uh hello thanks for the presentation uh first question is on your roe guidance please and the way you phrase uh the the roe guidance i think you say that roe may decline driven by the decline in leverage. Now, let me take this as that you do not expect profits to decline significantly. Would that be a fair interpretation? And then moving to the expected decline in leverage, or in other words, how do you think about capital distribution from here? The question I would have here is at what stage would you decide, would you make a decision on doing another share buyback? A slightly technical question I have is whether you are planning to cancel the shares you buy back. And then I will have a final question a little later. Thank you.

Yeah, your interpretation of our guidance is a potential interpretation regarding the ROEs. I mean, we carefully phrase these questions to leave some room open for analysts to kind of shine and add value here. So we don't, I mean, but I think it makes sense what you said. In terms of capital distribution, potential other share buybacks, I mean, as I mentioned, once we conclude with this 60 billion buyback, we will reassess the situation, our capital situation, potential acquisition opportunities. And as I said, it is possible that there will be another phase. So we kind of chose this gradual transition progress in buybacks. One of the reasons is that we have to deduct the entire amount. So once we got an approval for a certain amount to be brought back on that day, we have to deduct the entire amount from the regulatory capital. And that immediately increases the MREL issuance requirements, right? I mean, if you look at our capital adequacy ratio, tier one ratio, common equity tier one ratio, we are very comfortably above regulatory requirements. We are above regulatory requirements in terms of MREL requirements. But in order to remain at that level, we will have to continue to issue MREL eligible bonds, which, as I explained, we consider extremely expensive. So every share buyback we do, we have to substitute that with with newly issued MRL bonds or vice versa. The less we buy back, the less we have to issue in terms of bonds. So that's one consideration as well. Obviously, cost of capital is much higher than the cost of these MRL bonds. So from your perspective, from a kind of equity investor perspective, it's obvious what we should do. And we understand that and we We respect that and act accordingly. But it's not cost free, so to say, right? To do more buybacks. And then canceling the shares is the same. First, we have to buy them back. And then we will... I mean, make a decision on this internally what we're going to do. We have not addressed that question yet, but once we conclude with one batch of buybacks, we will consider the question of potentially cancelling them. That's another long process. You need regulatory approval. You actually need AGM approval for cancelling shares. So whereas we can We have an AGM decision which gives the board the opportunity to buy back more shares. For cancelling shares, there has to be an AGM shareholders meeting decision to do that. So management is not entitled to decide on that.

All clear. Thank you, Laszlo. And just a quick one on Hungary and NII and the outlook here. So if we exclude the one of you indicated in Q4, I think that would annualize, Q4 would annualize on a clean basis just above 500 million. And if we put on that this kind of quicker growth you indicate for this year for the group, maybe somewhere on the high single digits, Would that be a fair outlook for your Hungarian NII, in your view?

Yeah, I mean, I think that's a good approach. I mean, you didn't ask, but you have not yet. I'm sure there will be these questions coming, but I preempt them, right? So the NII sensitivity or the interstate sensitivity. I think now we have a, especially in half, the yield curve is steeply kind of declining. And we, so I think the right question is, what is the expected NII development year on year, assuming the current yield curve, right? And that means that by year end, in half, we get to, in terms of the three months interbank benchmark, to go down to around 5.1%, and in terms of euro rate, to go down to 265, the three months Euribor kind of current implied expectation in the yield curves. So if the rate environment develops according to the current expectations implicit in the current yield curves of half and the euro, then half NII, ceteris paribus, is expected to increase year on year by 30%. And the euro and NII is expected to increase by 4% and the two together by 13%. So if nothing happens, no volume growth, nothing else, just the rate environment changes according to the expectations implicit in the yield curve, we expect on the group level around 13% improvement year on year in NII. And in half, this is much better, much more, it's actually a 30%. And that is partially reflected in the full score number. Now on top of that, obviously there's another level of interest rate sensitivity, right? What happens if there's a further shift in the yield curve? So what if the year end, three months benchmark in half will not be kind of 5.1%, but one percentage more or one percentage less. So that's another question, right? And the answer to that is that in half, it doesn't matter much. So actually, our interest rate sensitivity to changes in the expectation So I'm not talking about the expected development, but changes compared to the expected development are relatively marginal and small. So if the kind of year end reference rate, three months blue board will be, I don't know, 5.5 instead of 5.1, then we, or kind of 4.8, it doesn't really matter we expect the same growth in annual NII, right? There will be marginal difference. Whereas in Euro, there's a big difference. So any additional movement in the rate environment, so let's say by year end, the three months Euribor is going to be lower than 2.65, what is implied in the current yield curve, then actually we lose 16 million euro per 10 basis points. So if it's like 255, then it's 16 million less. And then the gross is obviously less in the euro related. So we still have quite a strong sensitivity to the euro rate development. But if the euro rate develops according to the expectations implicit in the current yield curve, then the year-on-year NII, euro-based NII, will still continue to grow year-on-year by 4%. I'm not sure. Was that clear?

I mean, I don't... Yes, I thought it's, yeah. Okay, good. Extremely helpful clarification. Thank you.

Thank you. The next question is from the analyst of JPMorgan Securities, Mehmet Sevim.

Good afternoon. Thanks very much for your time. Actually, it wasn't that clear to me. I think that was a bit smarter than me. So if I may just follow up on that. So basically, if I understand it correctly, what you're saying is no matter what happens to three-month bull bore in Hungary, we will see NII 30% up this year, excluding volume impact. Is that correct?

Not in Hungary, but half-related NIR.

Half-related, yes.

It's only part of the Hungarian NIR, right?

Yes, of course. If you then add volume growth to that, then basically we're looking at a higher level, essentially, overall. Yes. Okay, great. Thank you very much for the clarification. So if I may ask a couple of questions on Uzbekistan, you talked about the really interesting growth trends there and how that's limited by local currency liquidity. What you know so far and taking into account all the limitations there, what kind of growth volumes should we expect there for the next few years? Maybe, you know, at a subsidiary level there. um and secondly adjustment items you made an interesting comment that you may move those back to recurring lines now um could you give us some more information on that so would that be for 2024 is that in the ROE, I assume reported ROE guidance and maybe separately, what kind of one-offs would you see this year and how would you expect that to evolve in 2024 versus 2023? Thank you.

I mean, regarding Uzbekistan, as I try to explain, we see almost unlimited growth potential, quality growth potential in retail lending, especially in consumer loans. Now where the problem is and the limitation to this growth is the availability of local currency liquidity, which is very tight on the market due to very tight monetary policy. So, Basically, our growth in retail lending is limited by our ability to grow local currency deposits and potential sources of local currency wholesale funding. And here we are talking to IFIs. But again, I mean, there's just not enough local currency in circulation. therefore that's a that's a clear limit so really it depends on the monetary policy and the central bank how much we can grow but I mean ultimately for a longer kind of time Horizon is is huge right I mean multiples of the current retail loan volumes can be especially in in consumer lending can be can be generated uh in in the next couple of years easily So it is a high potential environment. Regarding the structure adjustments, and again, we have received different feedback related to how we present the numbers. We have had a certain approach so far, And then we are going to try some different approach starting from 24, starting from the first quarter this year in presenting the numbers. So we are going to have less kind of adjustment numbers. So we will save the adjustments for really acquisition related. So bed wheels, one-off risk costs at the time of acquisition or results from selling an asset. Everything else will be in the kind of normal profit line, so to say. So there will be, and the expectation for these type of one-offs is zero. So we don't, again, as I said, at the moment, we don't have any process, any acquisition process in a stage that we could say that for sure we are going to have an acquisition this year. And that's also true for selling other than the Romanian bank, which we already included in terms of the financial impact on the P&L. So in this sense, in the new structure, we don't expect actually one-off. So there will be the adjusted and the and the non-adjusted number will be the same. If we talk about the content on the adjustments, what we did last year and how we expect them to develop this year, then on that, I can maybe share some views. So the, I mean, one, I think I mentioned this, but obviously the Hungarian taxes are the big one-off items or adjustments items we have been showing in the current structure or the last year structure. So the windfall tax is going to drop down potentially to 6 billion after tax. So from 36 billion, what you can see on page six of this presentation, maybe it's worth going there, with the slides, page six, as you can see. Yeah, so the windfall tax last year was 36 billion after tax. We expect this line to go down to 6 billion. That's in the legislation. I mean, in the first quarter, we have to book 12 after tax. And then if you buy enough government bonds to fulfill the requirement, which we will, which we intend to, then once we do that, we can reduce the tax burden from 12 to 6 billion. So by year end, on this line, we expect 6 billion as opposed to 36 in 2023. the kind of quote to quote normal bank tax is going to increase because here the tax base is the total assets of our Hungarian operations and that keeps increasing. So this we expect to be close to 30 billion as opposed to 24. Rate caps, the two rate caps, the SME rate cap, and that expires at the end of March this year, and we don't expect further extension of the SME rate cap. It basically loses its relevance. The cap level is 7.7%, and the current base rate is 9%, and by Bertrand de La Chapelle, April, we expect it to be actually April, May lower than by end of May will the base rate the reference rate definitely will be lower than the cap, so it is going to lose its relevance and we don't expect it to be extended. Bertrand de La Chapelle, However, kind of retail mortgage it, I mean variable mortgage cap. that the cap on the benchmark is at 2%. So that 2% benchmark cap is going to be relevant in the second half of the year. Because the benchmark, again, by the end of the year, we expect the BUBOR benchmark to go down to five, between five and 5.5%, right? and therefore it remains relevant. If you assume, and there's some probability, I must admit that it will be extended till the end of the year without a six months theory, the variable mortgage cap, then the cost of that would be kind of 6 billion after tax, 6.5 billion after tax. So in this interest rate cap extension line, instead of the 24, kind of bad case scenario is 6 billion. The good scenario is zero. And then you have to weigh the probabilities of those two. In fact, I mean, and I'm and then the other two lines are probably not so much relevant on this slide but we might go to page three right where we have the uh kind of consolidated uh numbers uh so we had uh uh adjustments yeah 18 uh In fact, so in fact of acquisitions, the expectation here is that, I mean, it's just the normal cost of the continuing merger projects. And that's basically Slovenia, where we expect the merger to happen somewhere end of the summer, maybe early September. So this should be a kind of low negative number. Then bank tax rate cap, I talked about. Russian war, in fact, We don't expect much. I mean, what we included here in 22 was the kind of Russian sovereign bond related provisions what we made. We slightly increased these provisions in case of the overdue bonds. And that is the 2.8 what you see here. I think my best estimate is that there will not be further changes in the provisioning levels going forward. And the others, on the others line, I don't expect much because 23, the 15 billion plus was coming primarily from this, again, as I said, the reversal of the loss what we booked in 22 regarding the spare bank default in Hungary. Yeah, so that was the expectations regarding the adjustment items in the structures, what we have been using and what we still use in this presentation, right?

That's super. Thank you, Laszlo. If I may very quickly go back to the NII sensitivity comments that you made. Again, you mentioned if the current yield curve doesn't change, then the group level NII would grow 13% without volume growth. So that obviously would imply that NIMs would go up further. So how should we reconcile this with your Flattish and NIM guidance for the group for this year? What different assumptions do you have there, in addition to this, that basically keep NIMs flat at the group level?

Yeah, but the problem is that the NIM is not, that's over total assets. And there's a lot of noise there.

Okay, so not directly comparable, I assume, but we should expect at least 13% NII growth.

Yeah, that's what I suggested. I also said that there might be some positive risk in the guidance related to the NIM.

That's super helpful. Thanks very much.

Okay.

Thank you. The next question is from Máté Dudás on behalf of Airsta Asset Management.

Hello. My first question is regarding the Hypotheca Bank. As we have already passed two months of this year, do you see already further drawdown needs for Hypotheca, or do you think that you are ready with the write-downs? And the other question would be, do you already use somewhere artificial intelligence or do you plan to use it anywhere? That's it.

Thanks. The normalization of the risk cost in Uzbekistan will be gradual. So we expect a step down in the risk-cost rate compared to the 10% last second half of last year. We expect the first quarter to be much better than that. And then further improvements should happen in the second quarter. And according to what we see, we will get to a kind of normalized level by the second half of the year. So this cost will be somewhat more elevated than the normalized expectations in the first quarter. AI, yes. I mean, there's a very exciting development. We actually develop our in-house kind of language model. So we do a kind of in-house chat GPT type of solution. We have a, certainly in Hungary, but probably in all Central Eastern Europe, we have one of the very few supercomputers and definitely the strongest in Hungary by far. So that's quite a big initiative. So if all goes well, quite soon we are going to have our own proprietary AI solution. Because the problem with this open source solution is that bank security is harder we protect it, right? If you want to use these language models in your actual banking services, providing banking services, you get to a bank security data protection question immediately, which is very difficult to fix. So we hope that we are going to actually quite soon and develop a solution which we can broadly use in our services. So yes, quite heavily in AI capabilities, yes.

Okay, thank you very much.

Thank you. If you have a question for our speaker, please click on the raise hand icon or press star nine on your phone's dial pad. Yes, there is a question from Simon Ellis. The next question is from Simon Nellis, Citigroup.

Hi, sorry, I was on mute. Thanks, Laszlo, for taking my question. I just have one last one, and that's on the sharp rise in stage two loans over the quarter. If you could elaborate on that and if that's of any concern, or is it mostly because of methodology changes? I think I saw that was the case, particularly in Bulgaria. Thank you.

Yes. It's mostly methodology plus Uzbekistan.

It's quite a large rise in Croatia, though, as well. Was there anything that we should be concerned about there?

Not that I'm aware of.

Okay. Thank you. That's it from me.

Thank you. The next question is from an attendee joined via phone. I open the line, you will receive an automatic message about it. Please press star six to unmute.

Hello, good afternoon, everyone. Can you hear me?

Yes.

Thanks for the presentation and congratulations on the results. I'm sorry, I'm returning back again to the topic of NII in Hungary specifically. Could you please provide us more color on the quite substantial quarterly increase in the NII in Hungary already excluding the one that you described in the report I'm mostly interested whether this was coming from the deposit side. You alluded to an increase in overnight deposits in the retail, I believe, segment in Hungary, or whether that was coming from the repricing of subsidized loans, which I believe is ongoing and should also lead next year to a lift up in the NII court. or whether there were any other factors at play, which as I understand these factors would be sustainable going forward later into this year. Thank you.

What we have additionally is the deposit cap. They're all different caps. policy interventions into our pricing, but there's a corporate deposit cap as well, a policy cap. And that started to be effective by November, December. I don't know how long it's going to be effective, but that was another kind of boost. But maybe, but other than that, it's just the factors what you explained.

All right. Thank you.

Thank you. The next question is from Ulle Adamson, Tiro Price.

Hi. Can I ask, do you plan any issuance at the subsidiary level in the Eurobond market? So, for example, either in Uzbekistan to finance growth or in Slovenia for MREL requirements? Thank you.

Yes, Slovenia and KBM is going to probably issue more. Uzbekistan, we will see there's a bond which matures next year. I'm sure we will try to renew that. And again, we are trying to figure out potential ways to get local currency wholesale funding even in Uzbekistan. But that's difficult. We don't so much need dollar, right? Because we don't want to grow so much in dollar lending. Retail lending is a local currency and it should continue to be a local currency. So, are kind of liquidity needs in Uzbekistan, our primary local currency. And that's not an international market, right? So it has to be some special solution with IFIs or I don't know, with the government. This is kind of work in progress. But the existing bond, when it matures, I think it will be next year, it will be likely that we will do a reissuance. and try to renew that.

Very clear. Thank you. Thank you.

Thank you. If you have a question for our speaker, please click on raise hand icon or spam or press star nine on your phone's dial pad. As there are no further questions, I hand back to the speaker.

Thank you very much for listening to the presentation and thank you very much for your very good questions. I think the next Stock Exchange Report will come out on the 10th of May. So I hope you will join us for that occasion as well. And till then, all the best and goodbye.

Thank you for your participation. The fourth quarter 2023 conference call is closed now.