Raiffeisen Bk Intl Ag Ord

Good afternoon, ladies and gentlemen, and welcome to the full year 2021 conference call of Reifeisen Bank International. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Johann Strobl, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Welcome to all of you on this 2nd February 2022 at 2 o'clock. You see, I appreciate the favor my colleagues did to me. Sometimes we find numbers which we love, and I hope that you will also love the numbers what we report to you. It's our full year, still preliminary result, but what you see from the numbers is we have changed our processes, so we are definitely faster than what we had been before. In the past, and I'm very happy that we also achieved that. The numbers 1.372 billion. This is above the pre-pandemic result. And what we see is after a slow first quarter, we are encouraged by the progress shown every quarter in lending in revenues and in customer acquisition. and more importantly, the strong fourth quarter confirms the strong trends from Q3 and gives us a great momentum heading into 2022. The net interest income increased by 7% year on year, reflecting not only the better rate environment, but also a very strong demand for loans in both corporate and retail. We're also very pleased that with another record quarter in fee and commission income, which was 561 million and this was driven by an excellent business trend. A very good core revenues growth has brought our cost income ratio down to 53.5%. While we have some exceptional integration costs in 2022 relating to the acquisitions we made in 21, we continue to focus on scale and efficiency across the organization. Our loans to customer grew by 15% last year with strong organic growth in all our key markets. And this includes also the acquisition of Equibank. We expect the strong loan growth to continue in 2022, although perhaps not at such a high rate. Our CT1 ratio stands at 13.1% and the consolidated return on equity is 10.9%. Just below our midterm target of 11. I now move to the next slide, number five. And in light of these good results, but also in consideration of the good growth prospects for the coming year, the board will propose a dividend of 1.15 euros per share at the upcoming shareholder meeting. This represents a payout of 28% on the Consolidated Profits Since our last investor call, we have announced the sale of our Bulgarian bank and expect it to close towards mid-year. This was not an easy decision. And we are very proud of the work done by our Bulgarian colleagues to build one of the best banking franchises in the country. We believe that we fully realize the value of our subsidiary in Bulgaria and the capital generated by this transaction will allow us to accelerate our growth in other key markets. I would also like to highlight the very good progress we have made in retail and specifically in driving the digital transition across our markets. We have reached or exceeded our 2021 target and have now set ourselves further ambitious targets for 2023. We have over 7 million digitally active customers Many of which are active on mobile and we now aim to reach 10 million by 2023. Mobile penetration is in line with our target and more importantly we have significantly increased the mobile penetration in our lowest scoring market. Our share of digitally initiated sales has continued to improve throughout 2021 and more than half of our personal loans are initiated online by the customers. As we look ahead, we will focus on fully end-to-end digital sales across all core retail products. Finally, in 2021, we have signed the United Nations Principles for Responsible Banking. This is an important first step towards integrating ESG into our steering and risk framework. We have performed the impact analysis of our portfolio and we have chosen to focus on climate change and resource efficiency as these are the impact areas most relevant to RBI. Next, we will set our targets in line with the science-based targets in 2022. We will, of course, update you on our progress in this regard. I'll now move to the next slide. And here, We have the traditional quarter on quarter results. And I think what I should rather than talk a little bit more in detail on the next slide is on the net interest income and the net fee commission income. What you also have seen here is a substantial increase of OPEX. This comes from some staff increases. But also quite a lot of marketing expenses in some of our markets, TV and online marketing. And of course, we had higher consultancy fees given our M&A activities than what you usually have in the head office. If I may move now to the next slide, then here I have to focus your attention on the Fantastic NRI in the quarter, but you have to be aware that after a detailed discussion what we have within our finance division, we came to the conclusion that our preferred approach, so to account the bonus what we get from the TLTRO over the full period might not hold in any Thank you very much. Thank you. In the fourth quarter, everyone has to be aware that in addition to that, we had some positive impacts like FX this time was positive on the NII from Rugal and from the Krivna. We had a significant loan growth, which adds more than 20 million. And of course, the rate increases were also contributing Well above 30 million to the overall improvement. The other thing what we like very much is also the NFCI. You can see that we are well above the pre-COVID level as Q1 2020 was still a year without a quarter without COVID. And so we are very happy that in all the areas we were able to improve substantially. Moving to the next slide, here I have to report on the exposures what we have which are related to the geopolitical tensions what we face. I think this in a very, very, very positive environment is, let's say, the focus point which might somehow have a negative impact in the near-term future. We'll see. It's mainly about the sanctions. If they will come and if they will come and in which way they will come. So you are aware that we have over the years unfortunately got quite a lot of experience how to deal with sanctions operationally, technically. Currently we We can only monitor the sanction language, what we see from the US and the Europeans. And on the other hand, of course, we closely monitor what's going on in the countries itself. Just as an update for you, we have a loan portfolio in Russia, which is 11.6 billion. And you see in the lower part of slide number eight, How it splits, so we have a considerable volume in households in the SME. We have half of it in the corporate private sector. And if we follow the sanction language of international community, then you see that we also have some exposure with potential targeted legal entities in Russia. Our own exposure, so RBI direct exposure is, as the bank in the country is fully funded, is mainly the capital, which is equity plus some additional tier one and subordinated, it's 2.4 billion. The bank in Ukraine is substantially smaller with a loan portfolio of 2.2 billion. Our equity exposure is 320 million, but here you have to be aware that 30%, which is not included here, is owned by EBRD. Both banks, you know this from the numbers already, both banks have been doing very well in the recent years, and especially last year, contributing substantially to the overall consolidated profit of the group. If we move to the next slide, then There is the second pain point, what we have in our portfolio, which is the Swiss franc mortgage portfolio in Poland. Here the current situation is, and many of you are well aware of it, so the exposure is around 2 billion in Euro terms. It's close to 29,000 loans with an amortization of about 100 million a year, so a long-term portfolio. The litigation got quite a lot of attention. The law firms and the funding units for these litigations are well organized, which leads to more than 7,000 cases already at court at the end of December. And we see a strong inflow also for the coming This huge inflow and some changes also in the rulings at court made us change our assumptions what we use. So we have a model and of course input factors have to be adjusted from time to time. So we did it by the year end. and this led to a substantial increase of the litigation provisions by another 133 million in Q4. So the current exposure is now, so that the current litigation provisions, the stock is now 364 million. When this is a substantial burden in the BNL, but also if we consider the provisions, Thank you very much for your attention. If we now move to the next slide, number 10, you see that also in the last quarter loans to customers grew by another 4% and this was the positive impact I have been mentioning already before. What you see is a continuous improvement in the long-term corporate loan demand. What we face here is indeed more investments, but also, at least anecdotally, the one or the other who considers the high inflation and rather wants to have a little bit more of leverage because of that reason. There is a very good and stable development in retail, unsecured and mortgage loans. At relatively stable levels and historically also relatively high. It's a couple of quarters statement and where I have nothing to add that the liquidity situation is very good. Moving to the next slide, you can see here our capital ratios. Given the very good loan demand, the CET1 ratio is at 13.1. Biller 2 requirement as of February 1st is 2.2. And the Biller 2 guidance of 1.25 now is solely covered by the CET1. I do not go into detail for the combined buffer regime. It's more for the reading. If you look at the waterfall to the capital, you see a very balanced approach. We had this nice growth. In the loan portfolio, we had a couple of offsetting activities like securitization, which you probably know quite well, and retained earnings helped us to be above the 13%. Moving to slide 13, here is an outlook what we expect in our issuing activities. You know that we are now in the process to build the MREL requirements. So what we plan to do in 2022, you see the five countries here, Czech Republic, Slovakia, Hungary, Croatia, Romania. and also the quality what we have what we want to do and Romania could also be denominated in RON and of course also in head office function we will have some some further activities in the lower part again just for reading you see the current MREL ratio requirements moving to the next slide 14 Here we share with you our current expectations on the loan growth in the markets, which is somewhere around 7-9% in the core markets, which gives us a quite positive outlook also for this year. Next slide, this loan growth is based on a solid GDP development and here I do not even have to go into the details as more or less all the countries in Central Europe and South Europe are in the range of 4-5% and the East Europe is back to the growth potential at around 1.5%. Belarus suffering a little bit from the sanctions what we have already and hopefully Ukraine will do fine. Moving to the next slide, we decided because of this special impact to differentiate between 2022 guidance and the medium term targets. In 2022, we expect that also the NII will grow by high single-digit percent and the net fee and commission income. We still believe that the mid-single-digit percent is possible. I already mentioned the loan growth, which will be in the range between 7% to 9%. We face pressure on OPEX for a couple of reasons. But for sure, wage pressure, also some digital investments, what we still continue. And in addition to this high single-digit percent OPEX growth, you have to be aware that because of the integration of Equa Integrity Agricultural Serbia entity by additional 100 million, and so we expect that If we would exclude the one-off integration costs, our cost-income ratio could be again back to the 55%. Talking about risk costs, Hannes will talk in more detail about it here just to be complete. We expect around 40 basis points. And this would mean that if we consider also the sale that proceeds from the Bulgarian sale, the ROE might be or should be above the 11% and to see the one ratio will be again around or above the 13%. And if we then move to my last slide, Thank you, Johann. Good afternoon, ladies and gentlemen. From my side as well, let me wish you a well-worn welcome. And thank you for joining us today.

I hope you're healthy and I know that you are looking forward to the end of this pandemic as much as I am. As usual, you know, I would like to start with giving you an overview where we are and when reflecting on 2021. Risk cost amounted to 295 million euros in 2021 and this would translate itself to provisioning ratio of 30 basis points. Stage 3. Thank you very much. Looking at 2021, we also have increased our precautionary provisions for sanctions and geopolitical risk in Eastern Europe by 73 million years. In addition, we have added another 81 million years when it comes to potential COVID-19 effects. What is now important for me, if you look at it, we have now an accumulated stock of 450 million years of provisions, including 150 million years for sanctions and geopolitical risk. and 250 million euros for non-retail book. You know it, but just to re-emphasize it, the quality of our portfolio remains very strong, measured posed by the record low MP ratio of 1.6% and the very prudent state three coverage ratio of above 60%, having a very strong and low BD of our portfolio. As you have heard from our CEO, we have grown our loan book nicely this year and I'm satisfied that this has been done without any compromise to our underwriting statements and standards. Since I may assume that anyway there will be the one other question when talking about Russia and Ukraine, maybe I could already cover the one of these questions up front. And let us remind ourselves, and you know it very well, those who are following us closely, we always And we did so to manage our overall exposure to Eastern Europe in a way which is consistent with our risk appetite in terms of capital allocated, liquidity, and risk management approaches. Secondly, in both Russia and Ukraine, we started the year with an excellent portfolio quality, again measured by VDs in our long portfolio, and as well as you can see, with a very low MP ratio and with a good coverage ratio. Throughout the second half of the last year, we have increased our FX hatching to protect our CD1 ratio from the FX volatility. It goes without saying that in situations like this, you beef up your liquidity and business contingency measures are being introduced and executed. I have mentioned the additional provisions we already have taken for sanctioned geopolitical risk. And of course, we do regularly review our assumptions for the risk-cost sensitivity 3DB. Just to remind, in total we have now a stock of 150 million euros in this specific bucket. Lastly, I would also like to give you a hint on what we have done since 2018. We have included in our loan documentation all the sanction clauses, which would allow either not to further provide financing or even to accelerate the repayment. Moving on to the credit outlook and listening to our CEO and to macro forecast, I can confirm the very positive trends I have shared with you last time. When talking to our custom corporate customer and also looking of course to industry surveys, we see continuous and good filled order books. Also strong confidence. Supply chain disruption seems to have lower impact from time to time going on. When thinking about our retail portfolio, employment is back on the pre-pandemic level and in some countries we are nearly at full employment. Consumers are spending and we expect to build up savings to continue to support demand in the coming years. Those without saying, and I have to do this, let me make you aware also of the wild cards.

Inflation, energy prices, and geopolitical tensions.

Last word on the risk of guidance of these 40 basis points. They are being inspired and derived based on this very strong economic development. We do not I would now move on to the next page I'm now on page 20 and talking and spending a couple of words when talking about ESG What you may assume and expect from a bank in our size, that we have, of course, deeply analyzed our portfolio when it comes to ESG. And I can confirm that we have done an ESG scoring on the total portfolio level. You noticed four different quadrants when it is about brown assets, transition assets, and green assets. This is what we have done. This is available. And this is being rolled out towards the entire RBI group. Last year, my colleagues convinced me that it's good if we are a first mover calculating our finest emissions. It was a tough and a bumpy exercise, but we succeeded. We deployed and employed the new methodology for 2022, and you will find more when we are talking about our sustainability report. Also, as announced, We have signed and commit to the principles of responsible banking. Let me move on to page 21 and talking about the exposure. We have currently an exposure of 232 billion euros, demonstrating a nice growth momentum of plus 14.5%. I will not walk you through the details because you anyway have already looked at them by yourself. Let me spend a couple more words when it comes to the RWA development. Of course, consistent with the strong and solid loan demand, of course, also RWA have increased. In addition, please consider that with the acquisition of ECWA, which we are very happy about, also 1.4 billion euros of RWA came in. At the same time, in Q4, A securitization was conducted, bringing us a relief of 1.5 billion euros. OPRIS got up the race, being very much moved and motivated by the increased provisions we have done in this restricting Zloty situation. Market risk is stable, and also on the FX side because of the strengthening of Ruble, US Dollar, and Grifner has experienced an increase. IFRS 9 provisions in Q4 and also the full year. Stage one, stage two, given this very strong economic environment have experienced an uplift and a migration up concluding to releases of provision year to date of 32 million euros quarter on quarter by minus 39 million euros. I was talking about the sanction risk bucket. We have added In Q4, 46 million euros. In the full year, it would sum up to 73 million euros. And now you can ask yourself, hey, why is this guy talking about the 150 million euros? And of course, you know that we already have done something in 2019 when it comes to the sanction risk. On the bucket, when it comes to special risk factors and post-model adjustments, year-to-date We would reflect 81 million years. State 3 I was talking about 173 million years. And on the Q4, we have seen the single default I always was talking about when talking to you and guiding. I was flagging that maybe we could see one up to three cases which would not yet be on our agenda. On the COVID post-model adjustment, I think the affected industries we have well-flecked to you is the hotel sector and some of the car suppliers. My final page, before taking your questions, is well-known to you. It's the MP ratio and MP coverage ratio. I would just repeat 1.6% of MP ratio, all-time low, and a very solid coverage ratio of 62.5%. We are now more than happy to take your questions.

Thank you, gentlemen. Ladies and gentlemen, we may now start the Q&A session. If you wish to ask a question today, you will need to press star 1 on your telephone keypad. Please ensure the mute function on your telephone is turned off or you will not receive your signal. Once again, if you wish to ask a question, you will need to press star 1. If for any reason you need to remove yourself from the queue, you can do so by pressing star 2. We will pause for a brief moment in order to Allow a queue to assemble. Our first question comes from Mehmet Salim of JP Morgan. Please go ahead.

Good afternoon. Thanks very much for the presentation and congratulations on the strong results. I have a question on NII, please. Can you please walk us through the assumptions behind your high single digit percent growth guidance for 2022? And I'm asking because it does look a little conservative. Thank you for the question.

Yeah, the starting point is a very positive one. So here we fully aligned the two of us. And yeah, I mean, the cool question is, how will the, I mean, of course, the loan growth per se, what I have mentioned, and if we assume A NIM of 2% or so should support us nicely and what you are also referring to is some tailwind from the not fully covered in the Q4 results from other rate increases. On the other hand, I have to assume that in a couple of countries The central bank rates are relatively high and liquidity will be maybe an issue over time. Thank you very much for your time. Maybe you're right that at the end of the year it will look a little bit conservative what we have said now. But I mean, if you just take Q4, then of course you have a couple of special impacts what you already deducted as well. So, yeah. There is some upside, there is some upside and maybe as you said it's conservative from today's perspective depending also a little bit on the competition what we will see in the markets I have mentioned.

Okay great, thanks very much. And maybe just one follow up on Bulgaria and your comments earlier. Do you have any specific plans on how to utilize the excess capital and are you still Looking at any M&A opportunities across the region or would that be more an idea of deploying this on an organic basis with your current franchise that you have?

As you have seen the loan growth in the last year and also the good outlook so I think it's relatively simply to use it organically nevertheless if If in one of the, let's say, two or three markets, what we always explored for M&A, a target would be available within, let's say, the next six to nine months, we would be ready to do so and to look at it. It depends also on the competition because consolidation now is in the interest or is a core focus of many competitors as well. So maybe it's also... Thank you for your very helpful comments. Thank you.

And our next question is from Isabel de Brieva of Morgan Stanley. Please go ahead.

Hello. Thank you very much for taking my questions. Firstly, I wanted to ask you a follow-up question on NII and how you're thinking about the deposit pieces or the deposit pass-through of the higher rates onto the depositors. Because at the moment, the forward rate Outlook is a little bit mixed in that there is an overshoot of the policy rates over 2022 and then it kind of comes down back again. So how do you think that's going to drive the competitive behavior in the deposit beta? Is it likely that the deposit beta might stay low as a result because the banks are expecting that the kind of policy rate overshoot is not really sustainable? So that's the first question. Then on the fees, so it's similar to the earlier question on AI in that if you sort of annualize the fees very simply, you end up with a growth rate which is much higher than the mid-single digits that you have guided us through. So could you walk us through your expectations by product fee stream and how you expect those to develop as we sort of normalize into 2022 after a very strong growth year? And then the final question I had was, you know, to follow up on the M&A. So you mentioned the countries where you would consider doing deals, but I wanted to ask you, are there any regions where you are open to disposals? Thank you.

Thank you for your questions, starting with your first one to the NIAs. Maybe we have to differentiate and my rule of thumb is that what's going to happen is first there is a new structure on the liability side which will appear. So in the last couple of quarters most of the departments Most of the money was at the current accounts because it's everywhere zero. And what we see now is that the rate increases, take check, but take also some others. It now gets more attractive for the customers to move into deposits and saving accounts. and of course in the deposits at some point you're back in the normalized way where you can keep a certain margin but you have to adjust whenever then there is a further rate hike because you know it's risk-free, it's attractive to deposit whatever you collect at the central bank. It does not have a risk weight, you can keep some margin, you fight for your customers And as long as you don't have too long maturities and customers here, what I see, except six months, 12 months, then you can afford it to pay what's required. And this is why the sensitivity now is back in some of the markets. And I have mentioned already Czech Republic, Russia, Ukraine. and probably in Ukraine and Russia also that given the overall environment and the central bank policy then there is no over liquidity but it's rather a healthy normal competition what we have in these markets. So I still as I confirmed before maybe the Andrii Assumption is conservative, but on the other hand, don't expect too much anymore because of the competition in the larger countries, what I have said. When talking about the fees, then what we have to be aware is that there is seasonality in these numbers. The starting point, given our regional footprint, but also the way Private individuals as well as corporate act is the first month in the year is slow. It's a slow start usually. And the second one is this element what we have from the fees from the loan business. It doesn't always work that you link it fully together. One-to-one to the loan growth, you always have some fees from early repayments. Given the higher rates, I don't expect so much early repayments anymore. So I think this pattern will change as well. I'm still positive on the funds business. I mean, of course, under the assumption that equity markets hold up as we all hope for. In the FX part, which is an important element, we will see, but I assume it can hold. Of course, the 5%, if I make it very simple, could mean a 2.1 billion of fee income. And your final question was, would we be also ready to sell? I mean, this is a quite natural question. After we were ready to divest in Bulgaria, we never excluded it. We always said, if in some markets we get an offer and now the The level is rather high what we achieved in Bulgaria. If we get a decent offer, it's our obligation to the shareholder that we have a serious look at it. And as I explained in Bulgaria, it's always what is the potential of the market, what is our position in the market, and what is the competition. And in Bulgaria, for example, we came to the conclusion that probably We would not be the one who is the consolidator in that market. And if we are not the one, then probably there is little left for us in the midterm future. And if you take these thoughts to a couple of markets, then probably you might identify the one or the other, which I would not exclude. But nothing is at the table, so I cannot elaborate in more detail. Thank you.

Next question is by Alan Webburn of Society General. Please go ahead.

Oh, hi. Thanks for the call today. A couple of questions, if I may. Firstly, your target for sort of 22 ROE is to be, I think, above your 11% mid-term target. And you say it's as a result of the one-off that you're making from the sale of Bulgaria. Would you be above 11% X that? And can you tell us how much that gain should be? I know you've given it in terms of risk-weighted assets, but I'd be interested to see how confident you are on the current earnings in terms of your return for 2022. That was the first question. The second question, I think you've guided that you think your CET1 will be sort of flattish Thank you very much. Piotr Czajkowski Subtitles by the Amara.org community One or two exceptional elements in terms of the NII in 4Q. But presumably in the markets where there are, we've seen further rate rises towards the year end, and I'm thinking of the Czech Republic in particular. Presumably you're expecting to see higher margins versus the Q4 level as we go through into 2022. Thank you.

Thank you for your questions. It's very helpful, I think, for clarification. So, I think if we start with your ROI question, it will be without Bulgaria, I do not assume that we would be above the 11%. Reason for that is, and I had to indicate it, that The OPEX pressure, where I said a high single digit is the first element which creates pressure. Let me explain on that. We built up in the IT area more headcounts over the last couple of quarters. I'm I tend to say that probably we, to a large extent, we have now hired what we need. Maybe in one or the other area we still need to hire something more, a number of people more. But overall, we have developed very well. And these people are highly paid, and you've got a first sense in Q4 for them. And the reason for that is simple, that of course we... We like to talk about digital developments. We like to talk about new services for our customer. But yeah, it needs quite a lot of investment there. And definitely, and probably if you look at 2019, sorry, 2020 and 21, you see that if you add up all the numbers that in terms of branch reduction, and reduction in the back office of people. We achieved quite a lot, but these people are more expensive. So this is the one. The second is that we are also developing a pure digital bank, which is built on a new technical infrastructure. It's in the setup phase. It's not earning, so there are no revenues on it. And the third element is that compared to the cost base of two years ago, the investments in cybersecurity are increasing tremendously. So we are now in the mid... Double-digit million amount what we are investing. And if you add this all together, and if you then, because we might also have, we probably also have throughout the year higher capital base after the sale of Bulgaria, and some slightly back to normal, not full yet in the risk cost, then probably without Bulgaria, it's rather... 10 to 10.5 ROE what we should expect than the 11. So this was your first. The second, which anyhow relates very much to that, is to walk you through the CET1 ratio. And probably I was not very much in detail, but what you can assume is maybe it's 20 basis points higher than what we have now. Where would it come from? And this is rather a back of the envelope calculation than any precise number. But to give you an idea, you might add 90 basis points, as you said. Let's start with retained earnings. This could be 90 basis points from all what I have said. If you just take the gain from the sale of Bulgaria, so now I split the 90 basis points, 50 you might add as a capital build-up, you have to deduct Krediagrikol and some others, so if I add up these numbers, this could be 130 basis points, but then if we assume just a 7% RWA growth, which then... The long growth, 7-9%, this might be 7 billion RWA, which is 100 basis points. And then I think we discussed several times that there are some inorganic effects as well. You know, the regulatory requirement for structural hedges has changed. There is this IRP repair program and some other elements which might cost us 30 pips, and then there is another RWA requirement from the Polish litigations, which is also another maybe 30 basis points. Yeah, the RWA, what we have to consolidate from Kredi Agrikol On the other hand, you have the deconsolidation impact from Bulgaria, which will be 40 basis points as we have 3.3 billion of RWAs. We intend to have some securitizations. Overall, if we net this up, we have 110 from these many RWA impacts. This in detail or in total is then plus 20. It will be a buff. It can even be that in the first quarter with this inorganic effect we will be even below the 13% for one quarter, but this is not a headache for us. And maybe also in the ROE discussion I did not mention that probably the story in Poland is not fully over. So we added 270 million This year, for the last year, but probably also capital-wise, we are well covered. BnL-wise, it still might have a negative impact. And your final question was the dividends. Thoughts on dividends, you said as well. Yeah. As it... with the 1.15 we feel pretty fine and and of course here it depends you see that that we are rather cautious so of course we we should have a stable dividend over the coming years and and as soon as we we see you know that at some point there is this this as I said before we have reached the level of IT development sources what we need so this should stabilize the investment should move into revenues as well and on the other hand the one-time consolidation cost should disappear so in the long run this should give us over the time more potential if you talk about several years now so for sure We aim for higher than the 1.15. But this is also well reflected in the rather broad range what we have as a payout ratio. And you have one more, which is Q4, this increasing rates in the Czech Republic. Probably the more we see another NIMH, Improvement by 10 to 15 basis points. We'll see what we can get in Russia from this rate hike, not too much, maybe 20 basis points. Hungary, yeah, another 20 basis points. Ukraine, maybe a little bit more than these 20 basis points. There's nim improvements. That's very helpful.

Thank you.

Next question is by Mate Nemes of UBS. Please go ahead.

Yes, good afternoon and congratulations. There's a strong set of results. I had three questions, please. First is on cost inflation or a follow-up on cost inflation. You mentioned the reasons for the strong growth and strong expected growth in costs, namely salary inflation, digital investments, and cybersecurity. If I recall correctly, at the time of the Q3 conference call, you expected the cost inflation on an underlying basis of around 5-6% at that time. So I'm just wondering what has changed since then. Presumably, you were fully aware of the digital investment needs and in cybersecurity. So I'm just wondering, is the delta essentially coming from higher than expected wage growth, or is there anything else beyond that as well? And related to the cost side, I see the 16 million increase in costs quarter and quarter in Russia. Apologies if I missed anything but if you could provide some color on that pickup. The second question is on Poland. Could you perhaps help us understand if the current provisions that you've set aside now do cover the expected inflow of new cases? I think you mentioned 300 cases per month expected in 2022. Or if that is the case, you would still have some sort of baseline provisions set aside per month or per quarter? And finally, just a qualitative question. I think in the second half of last year, we were talking a lot about the nature of new lending on the corporate side in CEE and Eastern Europe. Mainly those loans were related to working capital financing and in shorter term in nature. I'm just wondering if you're seeing a change in that environment or the nature of the demand Are we seeing more investment type of loans? If you could comment on that, that would be really helpful. Thank you.

Yeah, thank you for your questions. Indeed, what we had hoped for, what we said in Q3 is the 100 million, I think this is what we confirm for the integration of the two entities, ECWA and and Kretiak Rikol, Serbia. So this has not changed. At that time the 5-6% growth on the OPEX was... What we see two things is the one is in some areas like IT In some countries, it's above the 6%. So the average what we had built in all the countries, so the 5% to 6% was an average over the cost base of all the wages. We see in all the countries some more pressure, which makes us now more cautious. And it's rather about 8% than the 6%. So this is additional pressure, what we feel in these days. And the pressure is coming from almost all of the markets. So in most of the markets we are rather at the upper end of the range what we had in the Q3 call or maybe even above that. and another example is Russia which is when you ask where did this huge increase come from several issues so the one is in Russia we usually have or maybe this time more in the group as well quite a lot of seasonality and just to give you one number the Russians increase their www.patreon.com Andrii Serhiyovych About 300 or so. And that's what I meant is I now assume, see what the market requires, but I now assume that these people, that in terms of headcount, we should be there. And what comes in the future is probably more about additional wage pressure. But these were the, and as I said, one element, so not both, neither the marketing nor the additional edit people would explain everything. So obviously also there was a seasonality in the licenses they have to pay. It seemed that they waited rather till the year end with paying. So this is something which is seasonality and you do not expect it every quarter. So this was Russia and the huge increase and when talking about Poland I said before the the model what we have assumes over the it's somehow forward-looking and it assumes an Two or three elements. The one is the number of new cases. We have stated that it's about 300 what we expect per month. And then there is some adjustments in the ruling what we have seen so far. So currently it's that the ruling in the first instance is rather negative for banks. And And also it goes more into the direction of annulment. There is quite a lot of uncertainty what finally would mean annulment, but it's reflected in the higher provision litigations. And then there was the nature of corporate loans. Yeah, Hannes will give you a flavor on that.

Well, if you're talking about Russia, we see it split in two parts. Part of it, a substantial part of it, was especially in the Q4, rather short-term, and the remaining part would go in a little bit longer term. But definitely, we have been willing to also provide longer-term financing, but what we have seen, especially in the Q4, is very much dominated by short-term loans.

And I understood your question was broader reflecting also to my presentation. And if you talk at the overall group where you have seen the significant rise in long term. So I think here this reflects a positive sentiment of our customers. Many of them now are again in an investment process. Some of them probably start to pick up. I mean, that's not systematically what I say now, but anecdotically I can share that some customers who rather would not need long-term funding They see some inflation pressure and for them to go rather long term instead of short term is one way to make use of this inflation as their asset base is rather positively contributing in such an inflation environment.

Thank you very much.

This is very helpful, Conor.

The next question is by Kebara Kemeny of Autonomous. Please go ahead.

Hi. A few follow-up questions from me, please. Firstly, on Polish FX mortgages. Yeah, if you could provide some color on this up to 3 billion RWA uplift, which is quite substantial and I guess a large part of why you are not expecting meaningful capital this year. What actions can you take to mitigate this RWA uplift? And by my very quick calculations, it would mean that you would end up allocating at least one and a half billion euros of capital to a portfolio of two billion, which is not profitable at all. So I guess not idea from a shareholder perspective, what actions can you take here? Have you considered potentially writing off some of this portfolio? and the second one is on the macro overlay provisions if you could remind us how much do you have and what kind of releases do you assume in the 40 basis point provisioning guidance and just a final clarification on NII you talked about deposit repricing potentially I think in Russia, Ukraine and Czechia on the retail side have you actually repriced Thank you very much.

It's a triple counting. It's not just a double whammy, it's a triple counting. So we have these high underlying risk weights of 150% for the Swiss franc mortgage portfolio. If you would be in a standardized approach, this would amount up to 35%. The second thing is that we had to edit these legal provisions so financially they can care about potential future legal claims. Because we are doing this, we are creating op-risks. If it's then exactly the 1.5 billion euros that is outlined by our CEO, you have seen what we already have allocated today, and we deemed it necessary to flag that because of these increased provisionings we have allocated, of course we will also have an increase in op-risks. Believe me, at this time I would not like to give you any further insight, but of course it's on top of our agenda that we keep on working how we could further mitigate this strong dynamic on this part of the portfolio. On the BMA, what is very important, and you raised the flag on the BMA, let me reiterate what is currently at hand. So we have 253 million euros on the non-retail side, 80 million euros on the retail side, and some 140, 150 in total amount as the sanctioned stock, you could say sanctioned geopolitical stock. What is now important is that in our guidance of these 40 basis points, this would be cross-figures. So they would assume that we would not make use of these PMAs. Some of the retail allocated BMAs of these 80 million euros, some of them are self-consuming. What is the background of these 80 million euros? It has two main reasons. The one is in Hungary we again had also last year another round of moratoria and therefore we have allocated some BMAs So to say, let's see how these clients, which then already would be for a very long period of time in a moratorium-like situation, if there might be the need of having provisions allocated. At the same time, given this very good employment rate, this loan growth and the salary growth, also maybe here we could see that some of these provisions even could be released. But the 253 million euros Allocated to the non-retail and the 140 million euros we would only consume in the case and the guidance we have shared with you is gross. So this would be if there would be no consumption of any BMA. I hope it helps.

And to your other question, Gabor, the deposit repricing. Indeed, there was a repricing already, so In the Czech Republic, in saving accounts to take just one product, there was already an increase by 90 basis points. And we expect already in this month another 100 basis point hike here. I mean, this is not probably the biggest portfolio, and there might be some caps. Even more sensitive are term deposits, which have already had a 200 basis point rate increase. So Czech customers now really get rates again. And when talking about Russia, 200 basis point increases in the saving accounts area There are even products which are tied to Moss Prime, although this is not a huge number, but just to give you a flavor of what's going on in the market. Term deposits are relatively sensitive, so of course here it depends on the customer segment as well, but this is the reason why I said that. There are limits after some central band to great hikes where it to a large extent goes to the customers and maybe you benefit in timing a little bit but not that huge.

Thank you. I still owe you one more answer to your question. This is the overlay on the non-retail would sum up to 29 million euros.

Got it. Thank you. Just a small clarification. Did you mention that in Czechia on term deposits you raised rates by 280 points?

Yes.

Okay. Understood. Thank you.

And our next question is by Alexey Logoshev of Bank of America. Please go ahead.

Hello. Thank you very much for the call and for a very good quote. Three questions from me, if I may. My first question is about your issuance plans. You mentioned that after Q1 you will think about issuing subordinated debts. I was talking about additional Tier 1, given the call date in December, or do you also consider adding some Tier 2 capital? The second question is about group corporates and markets, the division fee and commissions through the year grew very substantially, 28%. So I was wondering what drove that. Are there any Big One also is something like new normal. And my third question, you just mentioned that many cases in Poland are resolved unfavorably for banks. So how unfavorable are those resolutions? Is it like forgiveness of principle and interest or is it retractive conversion into Polish law of both interest and principle with

Thank you. I probably will ask you then once again for a second question. Maybe I was a little bit distracted when we were starting already thinking about the first question, but let me answer first the first question. 81, of course, given what we see from the sale of Bulgaria, probably is in these days maybe not an urgent issue, I have to say, but I can't say more. It's not fully out of consideration, but but maybe not in the near term. Tier 2 there is something which is running off so this might be considered but as I said in my presentation the focus is or what you for sure can expect is senior and covered funding. So this is the one. The third question I also got is this was the outcomes and the Polish courts. I think here the The real uncertainty what we have is that there are some courts who are deciding and I hope people in Poland forgive me when I say it like this, but sometimes it looks like an automated decision. So it comes It's a very quick process and it ends with against the bank. This is something which if you look at the rulings over the last three to four years has changed significantly and this is a big concern for us because this raises a couple of more questions. I think the issue what we have is that these six principal questions which have been Advertisement Advertisement legal terminology one might say no enrichment by customers because they might have used the capital over 15 years or so they have bank would have suffered from the inflation and whatever you have customers would have profited from the real estate is inflation Neutral or even inflation positive. So a couple of really substantial questions have to be answered by the European Court of Justice as well as by the Supreme Court in Poland. And so that's a broad range and quite a lot of uncertainty what we face in these days. And now I come to your second question where I have to say I was distracted. So maybe you could repeat it.

Yes, yes, of course. So in the corporate essential segment, you have a very large increase in net fees and commissions year on year, like 28% for the full year 2021. So I was wondering, are there some one-offs in that segment, or is it sustainable that... You will be earning that much, like north of 500 million in season commissions, just in new corporates and markets?

Yeah, we had a... Let me look it up. We had a very positive issuance activities with... Green Bonds, and a couple of others. So this was substantially good, but also in the guarantee business we had done exceptionally well. Yeah, I think what one also has to consider is we had some reclassifications in the business. I hope this This answers at least partly your question. Give me one second. And what I should also mention is that we had a couple of repayments, which there are then some fees which we collect. As soon as early repayment happens. Usually the fees are amortized over the lifetime of the loan. But this is an accounting issue. It's paid anyhow at the inception of the loan or when you contract it. But if there is early repayment, then of course it's accounted for Thank you very much.

It helps a lot. Very good follow-up on the issue. You mentioned that covered and the senior preferred, so you are not planning any senior non-preferred for 2022?

Not on head office level. Okay.

Good. Thank you very much.

Our next question comes from Andrea Barcelona, BNP Exim. Please go ahead.

Good afternoon. Two questions on my side. The first one is just a clarification on the restructuring charge of 100 million. I just wanted to make sure that that is purely a restructuring charge and not a restructuring charge plus the extra cost of Credit Agricole Serbia. And regardless of what the answer is, can you remind us what cost savings do you plan to unlock in future years because of this restructuring charge? 100 million to me is quite a lot, given that these two businesses are not gigantic, let's say. And then a second question, I just want you to go back to the operational risk linked to Swiss Franc Mortgages in Poland. You already have some. You flag that there are 3 billion more RWAs coming. Can you just explain us a little bit the mechanics? How long do they stay on your balance sheet? Because it's a lot. So this is a very long tail portfolio. So is it 3 billion forever? Or when does it start to fall off? Because it does make quite a bit of a difference.

So let me start with the integration costs. So the 100 million are to understand the total impact in 2022. And if we look at it in detail, then it's about 58 million, which is related to ECWA. And you have to be and you are aware that in ECWA, we consolidated half year. And so you have to add an additional 28 million running costs. And the difference to the 58, so 30 million, these are one-time integration costs, mainly IT, but also some costs for layoffs. So 28 additional running costs. And if we talk about Serbia, then it's okay, they come in newly. It's about 30 million running costs. And I think you have considered this as well. and you have 12 million of integration costs in Serbia. So if I may add up for the two banks, you add 58 million in total as running costs and you have this 42 million one-time integration costs. And what you save on the running it's about... 30-40% of what we have from the smaller cost base usually. I think here you can work with the basic assumption what you usually have up to 50% in most of the integrations as a rule of thumb and we will report on that of course ongoingly. And op risk, I mean it's... It's a tough question. I mean, here I would assume that it definitely will not stay forever. Now having our own interests for the bank, I hope it falls off as soon as we have solved the issue, because if you say, It's a very specific element, which is Swiss franc mortgages, which is gone. I mean, I don't hope that anyone comes with an idea and says, guys, this is unrelated to any activity and this is just because you exist or so, not to be cynical. But I would assume there is a fair chance that as soon as we have solved this issue, then it's also taken off.

And just to be added, besides that, because it's very specific on this portfolio, and of course it would not be representative to the remaining of the RBI portfolio, as you know, many other Swiss franc issues have been sorted out. And Latest with the introduction of the new Basel IV rules, we believe that there is a new method and a new approach to be conducted, and here we would expect changes on how these cases need to be reflected. As I said, for me it's a triple counting. In the underlying, having high risk weights, then doing the provisions, and then being also scrutinized on having these elevated op risks to be allocated.

Is it as simple as to say that if the rules don't change, as long as you have those Swiss franc loans, the extra risk-weighted assets stay, or it's not as simple as that?

I mean, that's not a good thing, but I assume it's not as simple as they stay. Probably regulator at some point will acknowledge that the risk is gone and then it's adjusted. But clear, as long as you neither have a ruling nor... But at some point I also assume that... To make it very simple, my basic assumption is that at the end of the day it will be perceived as Thank you very much.

Thank you.

Next question is by Johannes Dorman of HSBC. Please go ahead.

Good afternoon. Just some follow-up questions on my side. First of all, on the Polish provisions, if we take a simple calculation, this is a coverage ratio of 18% of the portfolio, which seems low compared to some of your peers at least, which have double the coverage ratio. And listen to your remarks about those court verdicts all going against you, or going against the banks at least. Do you still feel comfortable with such a low ratio, or do we have to expect something like the same burden we've seen this year as Polish FX provisions of 287 million also in the next year? And secondly, on your payout ratio, Do you rather go for stable dividends and stable payout ratio or could you also envisage an acceleration of the payout ratio to come to the upper end of your payout range? Thank you.

Talking about Poland, I think the difference is that some of the banks with a higher coverage ratio, they offer settlement agreements to a broad base of customers. We only do it for some customers where we also already have pending court cases. So this is the big difference. Could it be or will it be? I don't know. But could it be that maybe not at the same level? I don't hope so. But could it be that also in the next two years we need further litigation provisions Yes, in answering my question also, the potential ROE, why not better, that was somehow included, that if there is not a substantial change in ruling and what we see is a further inflow of new court cases, then we have to expect maybe over the next two years Thank you very much. If we change the approach, then we would also have different litigation provisions. But currently, we keep what we have. And the reason I mentioned earlier is that we try to do some settlements, but we don't feel that any settlement, even if customers agree, will give us legal certainty what we're aiming for. So, I mean, different to others, we would like to get a different legal framework in Poland before we come with a broad settlement proposal to customers. And for your payout ratio, I mean, here, as long as we have... Good growth opportunities. I think we want to keep that range. I mean, if you look at midterm planning and you say that the loan growth, because we are moving back then to a less exciting world with maybe loan growth rather 5% than what we see now, so a little potential. This would mean that we could increase the payout ratio as well. As long as we feel that we can create value by growing the loan portfolio, and this is in essence what we try to do. We sold Bulgaria because we think adding more loans and business to the current infrastructure in some of the markets is also a way to scale up our business and should be value-accretive. But this is the range of thinking.

Our next question is by Robert Skozova of PKO BP Securities. Please go ahead.

Good afternoon everyone and thank you for the presentation. I have just one question as most of other issues have been answered so far. This is on the potential sanctions against Russia regarding the cutting off the Russian banks from the SWIFT transferring system. Can you provide us with an estimate roughly what percentage of transfers and possibly Thank you. Yeah.

Well, let me start there, and it's a far-reaching topic anyway. And I'm sure you all know that SWIFT by itself is a messaging system. And as we always claimed, of course, the financial institutions are being an integral part of the economic dynamics and interactions. And SWIFT is a very helpful and well-established messaging system. It's not a payment system. So I think we could differentiate between three different circles of payment. The one is within the country, and I'm sure you're aware of that the Russian Central Bank was introducing a payment system for the Russian market, first thing. Second thing is when it comes to standardized payment orders between RBI and Raiffeisen Bank Russia, Thank you very much. The industry is using SWIFT for this. So when talking about alternatives, I was flagging two of them within the country and when thinking about our own network bank, our own subsidiary. But of course, I think it would cause a tremendous impact to the financial world if you would go very, very, very broad on the SWIFT topic.

What is roughly the share of the Russian-related business overall in transfer? Approximate figure, is it like 20-30% of your total? Higher?

I do not fully get it. So what I have to confirm what Hannes said is That, of course, Raiffeisen Bank Russia is fully integrated in the Russian payment system and messenger system. And, yeah, in that way, they could deal with it. And I don't expect any big issues. Maybe in the days, they'll all the customers switch to it. But this is like any system change what you have. I think what Hannes indicated is it's more about the cross-border payments where it would take probably weeks to build the new systems if it all can work. But this would really be an issue. So for For a huge number of transactions, maybe the smaller amounts, there will be delays. The operations are set up in a different way that important big ones you can deliver much easier. And also within the group, there are some alternative ways. Not for mass, but there are. So to some extent, we are prepared. But not in a way that we switch from one messaging system to another overnight and one would not feel any delay or disturbances or problems. I mean, if that would be the case, then probably no one would talk about sanctions at all. So here probably this is the powerful part of it, that it will create problems.

And then the FX business, of course, it depends, you know, if it's within... RBI and Reference Bank Crusher, or if it would also include and impact data banks. So I think the topic by itself would create all this hassle and these topics we have mentioned. So the impact on the single FX business, I think, is not the most dominant and important factor.

Okay, thank you very much.

Next question is by Ricardo Rivera, Mediobanker. Please go ahead.

Thanks and good afternoon to everybody. Getting back one second to the last topic, maybe this is a question for Hannes. If you had to throw a ballpark on Russia and Ukraine, and if I asked you, What would be the worst case from a risk management perspective? What would be the case? Just wiping away the whole equity you have in Russia and Ukraine? Because at the end of the day, maybe this is the way the market approaches. Just to find out what the... or the worst case might be, and then eventually attaching probabilities to events. But if you could share some thoughts on this. Second question I have is, in the previous presentation, you provided a useful table with NII sensitivities to rates in Q3, which I haven't seen in this presentation. I might have missed it, but I haven't seen it. The numbers that you provided in Q3, are those still kind of valid? I would imagine so, but I want to hear that from you. Another question I have is on specific clarification. When you provided the 40 basis point risk-cost guidance for 2022, I understood that this does not include any Post-modal adjustments, the allocation, the use allocation or eventually release of post-modal adjustments that you charged in mostly in 2020. I just want to be sure I understood it correctly. And if this is the case, I remember once I read in one of your reports, maybe it was full year 2020, that according to your policy, those post-modal adjustments should stay there for... Maximum a couple of years. So I was wondering whether this is the case and can those be rolled over into 2023 and eventually even beyond 2023? The other question I have is on just reconnecting to a previous question I think was from Isabel when she was trying to You get a sense whether you consider your C-income guidance for 2022 as kind of conservative. You state that there is some level of conservatism in your NII guidance. It's not clear to me whether you consider the guidance you gave us on C-income embedding some level of cautiousness too. And the last thing I wanted to ask you is on the Bulgarian capital gain that you will book at some point, what is more or less the amount and would it be tax-free, tax deductible? Thanks.

Riccardo, you gave us a nice list of deep questions. And if I would start, and believe me, I know that many people are currently eager to explore this worst case estimate. For me, the worst case would be if people, human beings, would be physically impacted by this very, very challenging situation. Coming to the financials. This was one of the reasons why we have added again and reminding ourselves what is the current equity position and the things what we are demonstrating here is summing up the core capital, the AT1 and the tier 2 to Russia, those 2.4 billion euros. This is one part of the equation. And there's a good research out there also of course saying, well, if this worst case come in, You would not just maybe lose this 2.4 billion euros in CAD1 terms, but at the same time, of course, also your RAAs would be gone. And what we did not talk too much about today, and I was indicating it in my introduction, of course, we have also heavily increased our hedging over the last couple of weeks. and here we are now on the size of 1.4 billion euros. So this is, you know, if somebody starts playing around with this worst case assumption, please bear in mind the one is the equity, the other one is sizable hedging amount we have developed and established. Also, RWA would be gone. And in addition, you could, of course, ask, you know, how much of cross-border financing are you doing? and in this specific case I would believe you know it is really just about those loans which are being provided from head office or from Vienna to Russia to the country and here we are talking low triple digit numbers when it comes also to the to the cross border on the on the corporate side so for me this is the The maximum loss scenario if you try to explore on this one. And if you allow me, I would also take the next one on this 40 basis point risk-cost use of BMAs. How long can we keep them? Yes, you're right. And I'm very happy that you're so careful in reading our material. And of course, you're right that usually the Auditor would say, guys, listen, if there is a specific risk factor, what you would like to employ, where you say, hey, it's not yet in your model, then you have two possibilities. Either you include it into your model or it materializes. But I think given this current very specific environment and when we talked last time, I think nobody was thinking, at least not hoping, that we could see Another lockdown in Q4 that we have now a virus with Omicron, which is causing high infection numbers. So we found straight and easy agreement with our auditor that I think we would be well advised still keeping also part of this BMAs. And the second big part of this BMA is going with the supply chain topic. And also here we are not yet done. So the one to two years, this was when we were reflecting this in our notes, saying usually we shall not have them longer than one or two years. But I think given these circumstances which we are facing in, all stakeholders are well advised that we can still keep them. As soon as we see that the underlying factors are mitigated, Meaning we would see that there is a good booking order on hotels. Believe me, I'm happy being one of the first one having here the release here and there. So again, the 40 basis points would be the gross amount. Part of the BMAs, mainly on the retail side, I was flagging them, these 18 million euros, part of these BMAs would be self-consuming. because you know if moratoria clients which are currently still under moratoria would not default I would have to and I can and I shall release these BMAs and as we also have done already once in Czechia we were allocating some BMA because of the strong increasing yields you know that we are financing on a fixed rate basis and usually we do mortgages on the first five years on a fixed rate basis so you could say one-fifth of the portfolio is running off our each and every year and of course given this new interest rate environment we also have higher monthly installments what is the mitigation higher salaries and you know on the portfolio level we have allocated here a little bit of these bmas so as soon As the clients have this new rate and they are performing, I also have to release this BMA over the next two to three years. This would be my answers to this worst case estimate and the 40 basis points of risk costs, Johann.

Okay, thank you, Hannes. I take the other questions. One was the NRI sensitivity. We talked about already that in a couple of products quite a lot of these rate increases will be passed on to customers. I mean as a rule of thumb one might say that if you have a 50 basis point increase then probably the least pass through is and some of the retail accounts, the current accounts where you might assume maybe 25 to 50% whereas for corporate it's maybe 50 or more what you have to pass on in the other products as I said before so deposits and term deposits it's rather significant part what you have to pass on and And similar to Romania, so let's assume if you have a 50 basis point increase, then quite a lot of this will be passed on as well. So this is why I was rather cautious when talking about what you might see as conservative. It depends on the Thank you very much. I should be more careful. If we assume we have a 500 in the Q4, so this would then be 2 billion. And if we then add up to 5%, then it's significant given that maybe the repayment fees what we had in the corporate loan area, what we discussed before, which probably Thank you very much. It does not have a direct impact on that. So this will also improve this year our tax ratio.

Okay, so basically on the capital gain, the capital gain will allow you to use DTAs, if I get it right. So DTAs also on the capital side should go down, the deduction, the related tax plus carry forward. Do I get it right?

More or less, yes. I think here probably we take the time in the aftermath you talk to our experts here, to John, and to really have a longer conversation than what we usually do here as this goes in detail, but to a large extent, yes.

Okay, that's fine. That's fine, that's fine. Okay, thank you very much. Very, very clear. Thanks.

Our next question is by Hugo Cruz of KBW. Please go ahead.

Hi, thank you for the time. So three quick questions. One, you guys are trading at below book value despite a very good ROTE. Why would you not prioritize buybacks instead of the dividend or at least have some buyback Thank you very much. Thank you. Can you give some numbers on the amount of the investment and when could we see a decline in the cost base as this investment runs out? If not a decline in the cost base in absolute terms, at least a decline in the growth rate of the cost base would be helpful to know. Thank you.

Yeah, as long as we believe that we have a good loan growth which is supporting our development to an ROE of 11% or above, buybacks is probably not on our agenda. If that growth would stall, then this could be an alternative. It's not discussed now. If you would ask me, would you have technically something in the drawer? I would say yes. Is it strategically on our list? Then I say no. In terms of settlement in Poland, timing and financial impact, as I tried to explain before, we would consider a settlement if If the legal certainty is created, which currently is not at all the case, that's my view, but also the view of our company. So even if you settle now, you have to, if whatever happens then in the future, which customers might receive again is negative, then they find ways to reopen it. We had the assumption that with a couple of adjustments which we added to the annexes of the contracts when we adjusted the contracts to new legal developments as well as agreements with the customer. So here we did this and under the assumption of course that then it's a safe environment and nobody would discuss it. Nevertheless, we are back to To the very beginning that people say, whatever we agreed in the past, if at the very beginning of the origination of the loan, the clause at that time, where you now have agreed that it's not any more relevant, if at that time it was unfair, then the borrower still can go for annulment and this is not... We try to reduce the workload and also the time limitation is an issue. You probably are aware. If you have a very specific situation that after three years After a case is brought to the court, if a decision or not, time limitation is reached, you either act or without knowing what the outcome from the legal proceeding would be, you have to act. And offering a settlement is one way to do so. Talking about financial impact, as I said, it's only possible if we get clarity either by the Supreme Court or something similar so that we have a clear direction. Digital bank, this is a double-digit amount what we are going to invest. This is like a startup, one might say. It usually takes five years to break even. What I wanted to say is we have investments in two areas. One is the digital bank, which comes in addition to what we do there. But in the other areas, the benefit in the OPEX We see over time already now, not when talking about the digital bank, but when talking about other investments, which is the core of our investments, we see it gradually coming in as well. And if you look at some of our countries where we have reduced already the The people in the back office by 30-40%. So here we see when you talk about number of branches, we have considerably reduced it and this process will go on further. So I think we are on a good track and it's this combination of some new investments and this consolidation of others. But as I said, Already next year, we assume that we are back on the 55 level, so cost-income ratio, and over the next two, three years, it should go lower than this.

Okay, thank you.

The next question is by Morad Baral of MCH. Please go ahead.

Hello, and thank you for the presentation. So my question was more related to The potential contingency plan related to the sanction within the Swiss Bank messaging system. But I guess you answered most of them. But maybe another one, then it's more on the presentation you made on page 8, were related to exposures to Russia. So you mentioned a total exposure of more than 22 billion euros. With sanction risk representing only 9% potentially, can you maybe give us more clarity exactly on this point? Maybe I misunderstand, but I want to have maybe more insight and information about what it represents exactly and what are the main sources of sanction and the potential impact on this site.

Well, let me start with the first part of the question and the SWIFT suspension. I think what I was sharing with you and I think the reason why there is so much discussion about the SWIFT is that it will cause a big headache for the international market. If not, it would not qualify itself for any of the sanctions. So I was flagging to you two or three of them. The one is, and this of course depends very much who would be impacted by this swift suspension. Is it a single counterpart in the country? Is it a consistent cohort of counterparts within the country? Or is it the full industry? Depending on which scenario you would like to bend, of course, the contingency plan looks different. By all means, It will create a big hassle and challenge to all participating in order to execute payments which are being needed in order to reflect real economic good transfers. So why is there a payment? There is a payment because there was a delivery of goods and suddenly this payment cannot be executed. So as long as the counterpart Thank you very much. Thank you. Then there is a local payment system in Russia. But there are no means. Those two thoughts I was now sharing with you will mitigate all the swift messages which are flying around there on a daily basis. This is what I can share, more or less reiterating what I was telling beforehand. And when talking about this one page, When it comes to the exposure to Russia and sanctions like counterparts. So what was our motivation to look at this one and how did we derive to this number? The way how we have derived this number is you know that on the US side, on the US administration side, there are some frambling lists running around where you could say, okay, These are the names which are named on this Kremlin list. If you look and listen to the Congress, what are the proposals? This is where we have super short-term business outstanding. This is the reason why we call them up to 3%. The 22.8 billion euros, this is very important. This is our local asset base, comprising also to a big part towards our retail portfolio, and also to our corporate portfolio. But would we believe as of today that also the National Bank or Central Bank, which is our last lender to store liquidity, is on the blades or is also on the sanction list? No, we would not. So just talking about pure corporates, this is what we have in mind when talking about this 3%. Rikado, are you still in the call?

My experts told me I was even too pessimistic when telling that we use up some of the losses carried forward. Obviously, the tax structure what we have is that the gain is totally tax-free. So let me confirm that. Thank you.

Okay, thank you.

As there are no further questions at this time, we will now conclude today's conference call. Thank you for your participation.

Thank you all of you. It was a nice day with you. Thank you for the many questions. Have a good afternoon. Stay healthy. All the best. Bye.