Raiffeisen Bk Intl Ag Ord

Good afternoon, ladies and gentlemen, and welcome to the Q3 2024 results conference call of Refison Bank International. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Johan Strobel, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good afternoon, ladies and gentlemen. Thank you for joining us today for our third quarter results call. For the first nine months of 2024, we can report consolidated profit, excluding Russia and Belarus, 156 million euros for an ROE of 8.6%. With decent earnings in the quota and stable RWAs, the CD1 ratio for the group on the worst-case scenario in Russia improves to 15.3%. This is a nice sprint, of course, but our guidance for the full year remains in the 14.7 area. I will touch on this in more detail in just a minute. On slide five. Loans to customers were pretty much flat in the quarter with some loan growth in our networks and a very wide third quarter for GC&M. Revenues are broadly stable with NRI decreasing albeit not as fast as we had expected, and fee income is holding up well despite the very slow lending activity. Operating expenses are up 6% versus the first nine months of 2023, and the cost-income ratio for the period just under 51%. Before we look at these trends in closer detail, allow me to update you on the progress we are making in Russia. Last quarter, we shared with you the key measures we have taken to accelerate the reduction of our business there. These measures have now been fully implemented and we are already seeing tangible results. Loans to customer decreased 23% in the quarter. With very few exceptions, we're not landing. Our loan book will shrink according to the maturities in our portfolio. Some of the drop that you see in these results is of weaker ruble in the quarter. Nevertheless, I'm satisfied that even in ruble terms, our long book reduction is ahead of schedule. Current accounts have also decreased significantly in the quarter. Some of the outflows may be linked to restrictions on payments, which took effect in September, and I cannot guarantee that deposits will continue to decrease at the current pace. We will continue to exercise what levers we have to reduce deposits, including pricing at 0% and maintenance fees where possible. Terms deposits have already nearly run off and we are not accepting new ones. We have implemented a near-blanket ban on outgoing payments in foreign currencies and our volumes have collapsed accordingly. We're still working our way through a very small list of customers with whom we may do business going forward. Again, this will be large internationally active customers and for each of these, we will complete a new individualized compliance statement. We continue to explore ways to exit, partially or fully, and until we do, This accelerated business reduction is our central scenario. At the end of the summer, we made an announcement regarding the court proceedings, which have led to a ban on the transfer of Reichsweisen Bank Russia shares. The only comment I can make is that these proceedings will add further delays to our exit timeline. There is nothing more I can add at this stage. One last comment on this slide and the RWA development in Russia. As we discussed last time, the shift of excess liquidity to the CBR came with higher risk weightings compared to where we had placed our excess liquidity previously. The shift is largely completed and going forward, there is not a big difference between the risk weighting in our loan portfolio and on deposits with CBR. This means that as the loan portfolio amortizes and liquidity is moved to CBR, we do not expect significant upward pressure on our WAS. Moving to our next slide, core revenues in the quota are slightly down. Net interest income excluding Russia and Belarus is down 1% and the trend is clear. With that being said, net interest income this year has not decreased nearly as much as we initially feared, and specifically the two businesses where we feared the biggest drops, GCNM and Hungary, the decline has been more benign than expected. For the full year, our guidance is confirmed around 4.1 billion euros. Fees? are broadly stable in the quarter for the group excluding Russia and Belarus. All main products are stable in the quarter and in the first nine months of the year. We've also confirmed our guidance here at around 1.8 billion euros for 2024. On my next slide, let's take a look at the balance sheet development in the quarter. As I mentioned earlier, loan growth this quarter was very muted. Romania was the bright spot this quarter, where the corporate book was up 5% and the retail book up 3%. In our other network units, growth was modest. In head office, however, new business origination was very weak, which combined with scheduled maturities led to a net decrease in the quarter. Looking at it by product, New mortgage and personal allowance origination again showed signs of life and confirming the positive trends already seen in Q2. New corporate origination was down in the quarter largely in head office, as just mentioned, and in Hungary as well. On the deposit side, while we do see a drop in the quarter excluding Russia and Belarus, upon closer look we see that for the most part this is coming from non-retail deposits. The drop in corporate deposits was primarily in head office, Ukraine and Hungary. Corporate deposits are usually more price sensitive and the excellent liquidity across the group means that we do not necessarily have to compete to retain these deposits. More importantly, deposits from households were up 4% in the quota in Euro terms and 1% excluding the effects conversion. Which leads us to my next slide and an overview of liquidity across the group, which is very stable in the third quarter. Liquidity coverage ratios for the group, key network units, and head office are all stable in the quarter at very comfortable levels. Let's now look at the capital slide, starting with the CD1 development in the quarter, which is stable at 17.8% for the fully consolidated group. In this 17.8%, we have accrued a dividend based on the regulatory guidelines using the payout of the previous year. This is no indication for our dividend plans for the fiscal year 2024. And like in previous years, we will make a proposal with our preliminary Q4 results, which is based on our C to 1 ratio, excluding Russia. By year end, we expect to be around 17.3%. This drop is largely coming from the yearly recalculation of operational RWAs and to some extent higher market risk RWAs. We do assume some loan growth in Q4 as well. Let's move to slide 12, an RCD1 ratio in a scenario where the Russian subsidiary is lost. From 14.7% in Q2, we now stand at 15.3% and an MDA buffer of 344 basis points. RWAs were down in the quarter, which combined with decent retained earnings explains the increase. In Q4, the recalculation of operational RWAs and assumed long growth that I have just mentioned will also impact this X-Russia-C, the one ratio. This is why we can already guide for a reversal to around 14.7% at year-end. Moving to slide 13. current capital ratios and requirements. Only one comment from me here. From January, the OCI buffer increases by 25 basis points, bringing our combined buffer requirements to 588 basis points. I won't bore you with the details, simply that this relates to a temporary cap on additional buffer requirements introduced in 2022, which has now been removed. On slide 14, our MREL ratio, which like last quarter is comfortably above its requirement. All of our local resolution groups are also comfortably above their requirements. 2024 has been a busy year for us in capital markets with senior issuance. This is out of the Czech Republic, Slovakia and Hungary. Three senior bonds placed out of head office. including our first two non-preferred seniors and more recently a very successful Tier 2 placement. Looking to the year ahead, we expect another three senior benchmarks out of Vienna with the split between preferred and non-preferred still in discussion. Moving to the macro slide, here is the update of our Raiffeisen research which I think to a large extent is a confirmation of what we have seen in recent months. Of course, with some adjustments and these adjustments, I will not go through it. We see improvements in 2025 in almost all the markets. We see some impact, at least the way I read it from the Weak development in Germany for countries which have a close link to Germany. Western Balkans with a different economy structure are better, of course. And on the inflation and key rate forecasts, we have seen the decline in inflation in all the countries. This will continue at a lower pace in most of the markets. In some, there will be even an increase potentially. probably to a large extent driven by tax increases. And derived from that, you find also our key rate forecast for the most important markets for our network banks. And now to my final slide, our updated outlook for the full year 2024. NII is confirmed at €4.1 billion, even after the adjustment to the treatment of intra-group transactions, which we announced two weeks ago. On a like-for-like basis, this confirms the positive development in the NII, which throughout 2024 has proven to be more resilient than we expected at the start of the year. Fees are confirmed around €1.8 billion, as are OPEX at 3.3 billion. Risk costs might be up to 35 basis points. The return on equity is revised down to 7.5%, driven by the risk of further provisions in Poland and an expected windfall tax in Ukraine in Q4. And with this, I hand over to Hannes.

Thank you, Johan. Good afternoon, ladies and gentlemen. Allow me a few words to summarize the developments this quarter. First of all, the operating environment remains fragile. The economic recovery is still on track, as you see from the macro forecast that Johan just shared with you. Inflation appears contained, and the lower interest rate environment should also provide some relief. At the same time, corporate balance sheets have exhausted many of the buffers which were built up during the pandemic and in the brief recovery that followed. And closer to home, both Austria's and Germany's macroeconomic indicators continue to disappoint. On the positive side, employment and consumer demand have supported the recovery. Besides the economic weakness in our region, geopolitical tension can flare up at any time with consequences on energy prices and supply chains, among others. With that being said, the quality of our portfolio, as measured by internal ratings and default probabilities, has remained remarkably stable over the past 12 months, and I remain confident in our underwriting standards. Risk costs remain around 30 basis points here to date, and we can guide for no more than 35 basis points for the full year of 2024. In this environment, looking ahead to 2025 is no simple exercise. But I know that you anyway will ask, and so my best guess for risk cost next year would be in the range of 40 to 50 basis points, excluding Russia and Belarus. This will bring us close to our normalized level of risk costs before any usage of potential management overlays. Mentioning overlays, excluding Russia and Belarus, we have over 490 million euros, which is around a worn year's worth of normalized risk costs. This number was stable in the quarter, with slight releases coming from lower interest rates in Hungary, as well as a small amount allocated to actual defaults in Croatia. You will have also noticed the decrease in overlays in Russia and Belarus, which is simply a function of the accelerated decrease in credit exposure. We are making good progress on our business reduction plan, and as this progresses, we have to expect continue to release further of these Russian-specific overlays. Reading through the first round of research notes, I agree. Poland remains a painful topic for us this year, and I fear that we will need to take further provisions in 2025 and perhaps even 2026. You will have seen in the following risks like the breakdown of our cases. For the active Swiss-ranked part of the portfolio, we have taken substantial provisions and already assumed that almost every case ends up in court. For this part, I would venture to say that we are well covered. Our model-based provisions already capture over 90% of the cases, and for each of these, the model assumes a near 100% loss. The uncertainty going forward comes from the rebate Swiss franc portfolio as well as the Euro denominated mortgages. For these, we have still only seen a very few court cases and therefore our forward-looking models contain a higher degree of uncertainty. Furthermore, the trends in court have stabilized. Inflow of active Swiss franc cases have declined. Rebate Swiss francs are stable at the very low level and Euro cases are, for now, very viewed. Finally, there may be some relief from our settlement program. We are now rolling it out to more and more customers. The benefits go beyond the sole amount cost and include savings on the court fees, legal bills, and penalty interest rates. Dear all, before we take your questions, let me touch on RWA development going forward. First of all, as Johan mentioned, we will see an increase in op-risk-related RWAs in Q4 of up to 2.5, 2.6 billion euros. This is simply because under the standard model, op-risk RWAs are a function of operating income averaged over a three-year period. As a reminder, Russian operating income is still fully considered in this model, and in the coming months, 2024 will replace 2021 in the three-year average. Russian operating income through the op risk model currently consumes around 65 basis points, and this will increase to around 80 basis points at year end. Finally, from January, CRR3 will become binding for all European banks. For RDI in its current form, this actually means a day one RWA relief of around about 4.2 billion euros. and about 3.7 billion euros for the group without Russia and Belarus. As the transitional features roll off, the fully-loaded impact will still provide a net RWA relief in the range of Euro 2.3 billion euros for the group ex-Russia. Main positive drivers of the CRR3 relief in credit risk includes removal of the IRB scaling factor, the reduced unsecured LGDs, and reduced credit conversion factors. Ladies and gentlemen, this is my brief risk update for Q3, and we are now eager to take your questions.

Thank you, gentlemen. Ladies and gentlemen, we will 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 that the mute function on your telephone is turned off, or we 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 moment in order to allow a queue to assemble. Our first question comes from the line of Gabor Kemeny with Autonomous Research.

Hi. Thank you for the presentation. A couple of questions from me. First one is on Polish FX, which, yeah, I mean, you mentioned this remains a significant drag on your profitability, I think something like up to six percentage points of core ROE this year. Can you help us scale how you think about the charges going into 2025 and to what extent shall we expect the charges to drop next year? I mean, besides the repaid borrowers, it would be interesting to hear your thoughts on that. I understand some borrowers are being slow with repaying the principal in case of the NAR court cases. Any thoughts on that would be helpful. My other question is on Russia. I mean, yeah, looks like sale is not going to be possible in the foreseeable future. I guess, how do you think about your options here? What would need to happen for you to consider a full write-off, I suppose, walking away from the country? Thank you.

Gabor, thank you for your question. I think giving a strong guidance for you guys, I think I would be very shy on doing so. our way of thinking. And this is what I'm being willing to share with you. As I said, I think we are pretty confident that we have well covered the bill of what we demonstrate here and shown here as an active clients with a very high coverage ratio and also assuming a certain loss assumption that goes up to 100%. Well, there's still We do pillars which are a little bit more difficult to assess. This is the rebate pillar. And the other one is, of course, we also will be now more pronounced on the settlement program. The best guidance I would be willing to give you at this time that in 2023 and 2024, we have been surprised to the upside of our initial thoughts. So hopefully next year, 2025, we will come in below 2024 numbers. Johan? Thank you, Hannes.

To your question on Russia, what are our options? As I said in my speech, what's currently happening at court is of course delaying our progress in trying to find a proper exit. And you remember, we always have been speaking about the sale at least of the majority or maybe even 100%, probably a little bit less likely than the 60%. So this is delaying. I mean, I understand your question. What about walking away, which would simply realize the zero scenario I see your point that not receiving any dividend and just having a negative impact on the group is to be considered, which we do. We are not there yet to walk away without any compensation, but I can only repeat and confirm we are significantly reducing our business activities in the bank in Russia, which from our perspective means that we are significantly also reducing, and this is the reason why we do it, any spillover risk, any sanction risk whatsoever. Thank you.

Thank you, Johan. Just a small technical question, please, on the Russian NIAI. The increase here, is this a function of Raiffeisen getting more compensation on the balances placed with the CBR? And if so, shall we assume further increases here as rates have been increasing?

Yes, Gabor, indeed, you are right. This is part of our, let's call it, de-risking and also implementation of some of the ECP requirements, which meant that we move all the excess liquidity from the various places where we parked it, being it financial institutions or the MOECs especially. We bring it to Russia, to the central bank in Russia, And this had a significant impact just from the structural part, bringing all these assets to a higher interest rate level. And yeah, we will see how this will develop as we assume that with deposits outflowing Of course, the surplus liquidity over time will be reduced. But indeed, what you see in Q3 is exactly that impact. As it also, as I said, is the increase from the RWAs, which comes from that as well.

Thanks very much.

Our next question is by Lee Street with Citigroup.

Hello, good afternoon, and thanks for taking my questions. I have three, please. Firstly, just in terms of the core proceedings for the Russian entity, which is embargoes and shares, are there any timings or next steps that you're able to just give us some context on when we might hear some news? Secondly, did I understand you correctly that as your Russian loan book shrinks and you put more cash at the Russian central bank, that essentially the Russian risk-weighted assets are going to stay roughly around the same level from here as we look out? So our Russian RBA is going to stay about flat. And then finally, obviously, you've looked in the past for any comments on your additional tier one. Obviously, the market's rather delighted in terms of your thoughts there of potentially looking to do something with your existing deal and do an exchange or tender, et cetera, et cetera. Thank you.

Yeah, thank you for your questions. Yeah. My understanding is today there is another court session on Strabag issues where unfortunately we believe for the wrong reasons we are involved there. We made our position clear. We'll see how it will be dealt with today. So this is the one which actually is ongoing on the transfer ban of our shares. There is a second instance at court early of December as it's currently scheduled. And then the RWAs in Russia, what you were saying, this comes from the 100% risk weight of the CBR, whereas banks and corporates, where we placed it before, or the morgues, they rather had around 20% or whatsoever RWA. So if you think about looking forward, I think if the repayments of the loan book is considered where we have on an average of maybe 80 or close to CBR, so from that there will not be a big impact anymore. And I would assume that the liabilities, which is the core of the RWA and the excess liquidity is, of course, reducing. For a while, I guess that the bank will still have a nice earnings. And so as we don't get dividends, this, of course, contributes to the liquidity and to the RWAs. and our thoughts on 81 if i got your question correctly for us it's important to replace the existing non-code instruments and provide investors with new instruments and i can add very little to that at this point thank you thank you very much

We'll go next to Benoit Petrarch with Kepler.

Yes, good morning. It's Benoit from Kepler Chevreux. So the first question is on the net interest income. Just wondering if you could update us on the NI sensitivity as we expect a drop in interest rate next year. And also, you know, how should we think about 25 NI interest? Taking into account the movement of interest rates, we will see loan growth. I think also you mentioned some pickup in retail loan growth. Given all that, we should think about 2025 and probably 4.1 billion could be a bit on the challenging side, but I just wanted to check that with you. Second question is actually on the drop of NI in the group corporate and market division in the quarter. Just wondering here what it relates to, whether it's a timing issue and funding costs will also come down at a later stage. So that's the second one. And the third one, maybe on the cost of risk, your guidance of up to 35 bps implies probably 150, 170 million cost of risk for the fourth quarter, which is a quite high figure. And is that seasonality or just also deterioration of asset quality expected in the fourth quarter? Thank you very much.

So thank you for your questions. Let me start with the sensitivity. And as I think it's standard with this question, at least the way I understand it, we're talking about a shock event and the impact on NII over the next 12 months. yeah you give you the sensitivity here and as we're talking about the decreasing environment i speak about the minus hundred basis points in local currencies as well as in euros and and you might then do your your assumptions on the total drop of the rates so if we exclude Russia and Belarus on total, we would expect 150 million negative impact from drops in the various markets. And the 100 basis points, I tell you the biggest one. So it's Czechia, the bigger part here. So some 25 or so, around 20 would come from the local currency. slightly less in Hungary with 40% Euro, 60% local currency. Slovakia higher, more sensitive, so 27 to 30. Croatia around 10, 11. Romania 28 with the bigger part, so around 20 in the local currency. Serbia also sensitive, €10, €16 in local currency, and Ukraine around €5 and €11 in the local currency. I don't know if you still have Russia on your card as well. Yeah, of course, as we don't pay... Interest on the liability part, it goes one to one. And so we have a sensitivity of around 75 million out of the Russian business. So this was the sensitivity. And I think this will help you also in guiding or having your own calculus on the business. NII guidance also for 2025. So if you add up your expectations and some asset development, one can say that it will be lower than what we see for this year. We have had in the forecast, in the guidance, so below the $4 billion one might for sure expect. And then there was a question from you on what are the causes of the drop in NII in the GC and M. I hear you have margin pressure in the corporate loan book. And of course, also you have to consider the lower volume in this area. And I would say the other impact, which covers two-thirds of what you see in the decline and the other is internal allocation of capital benefits or some others, but you also have to get the full picture on that. And I hand over to Hannes for the guidance in the risk area.

Well, cost of risk guidance, of course, you're right. You could say and you could sum it up to seasonality. But what is the way of our thinking? The one is you always must keep in mind the single default event. Then you have the normal run rates on the retail side. And we might be tempted to increase here and there maybe a management overlay, but also to increase here and there maybe the coverage ratio. And please always keep in mind that we are still having an operating bank in Ukraine, and, of course, also here event risk could drive risk costs. Thank you.

Thank you very much.

Our next question is by Ricardo Rivera with Mediobanka.

Good afternoon, everybody. Thanks for taking my questions. I have a couple, if I may. The first one is, the first one is again, sorry, on Russia. The loan book now is fairly small, it's less than 5 billions and deposit is 11 billions in Euro and you chop them by 25% in a quarter. Now, would the ECB be okay with let's say only with zero so zero loans zero deposits zero everything and the day you have you get to zero deposits and zero and eventually zero loans it will take a while maybe but let's assume it happened tomorrow what would it happen you would be left only with the local equity local buildings then you would need to to charge or structure in charges for the employees or what would happen if you all of a sudden when all the balance sheet became kind of zero aside from the buildings and the equity? Thanks.

Yeah, Riccardo, this is a rather difficult question speculating on on when the ECB will be satisfied finally, but I guess... I guess they... I guess... I should not guess. I assume currently they are... They are okay that we implement what we have so far. And it will take a couple of years till the... The full land book is running off, of course. We are now in a very high-rate environment, and there is no reason for customers to refinance at this high-rate environment. We have acquired most of these lands quite a while ago when the rates had been significantly lower. So I think what you usually assume is... uh, prepayment behavior. This is, is not visible today and will not be there for a while. Um, I mean, what, uh, I mean, yeah, at some point we would then, then also deal with, with other topics difficult to say, uh, to which level the deposits will drop. But, um, if, if, um, If you now say the requirements to shrink the loans by 55%, what I think was also part of your question, this was for a period of five quarters. So this was not the end of the story, but based on Q3 23 long book, this was the assumption of the runoff and this we might achieve. So it will take some time to be at zero. And of course, everyone who might ask, What kind of bank is this which offers a very, very limited services, a very limited bank operation in a run-down mode? This I have to confirm.

If you arrive to zero, let's assume you get to zero, then what happens? Then you would need to close down the operations because Let's say you have 9,000 employees more or less in Russia, if I remember correctly. You must have buildings in Russia. That is what you would be left with, plus the equity, of course. But then you would need just to shut down the whole thing, no? I'm just guessing, just thinking, because the deposit went down significantly in a quarter.

Now, here I would say Look, the bank has 5 to 6 billion of equity now. This alone in these days brings quite a lot of revenue. The reduction in the operation will come step by step. What we have developed so far is that we As we do not offer quite a lot of services like new loans for retail customers, we, quarter on quarter, we have reduced the number of employees. We still have to work on the assumption that we have a bank which is decoupled from all international IT systems. So there we have quite a lot. But yeah, maybe at the end we... I don't know. I don't know when this will be, but it takes longer, as I said before, a couple of more years till the loan book is done. And we'll see if then in Russia some retail customers might stay with us and then keep an account with some payments whatsoever. But yeah, not interesting. And yeah, at the end, let's say in In a reasonable period of time, everyone will ask the one question, what kind of bank is this, and, and, and. But it's too early. I should not speculate too much, I would say. But we will consider that.

Fair enough. Fair enough. I appreciate your thoughts. Thank you very much.

Our next question is by Joseph Kilwada with NPR. WIL Asset Management.

Good afternoon, everyone. Thanks for letting me on. Two quick questions. The first one, since this partial divestiture in Russia is obviously not going to happen in the foreseeable future, I'm just wondering by when do we have to apply for the 23 dividend as our competitors have already done for That's the first question. The second one is on the replicating portfolio. If you could please let us know what the duration is of the replicating portfolio, as well as what kind of impact you're expecting for the years to come, 2025, 2026. Competitors have already disclosed that. The impact of the replicating portfolio on the P&L of the bank. Thank you.

Do your first question. So the partial divestment is currently not happening. In this current situation, we see no or very little probability that we get an approval for a dividend. My understanding was that you have to commit not only to stay for a longer period of time, but also to commit to a certain business, which you continue to do. I mean, also, as I said before, we are doing some business. We are not there that I could assume that we are close to any And in near-term dividends, so a dividend still this year, I think is out of reach, being aware that we had observed that competitors, European competitors in Russia have received a dividend.

I just wondered, you know, when you say you have to do a certain kind of business, does it actually imply that we are overdoing it in terms to our competitors, in terms of rundowns? without coming up with any names? Are we doing more than our Italian friends? Do they offer more business?

This I cannot comment. Everything what I know is quite anecdotal and this does not make sense to Here you probably need to ask our competitors. I cannot say anything. You had another question, unless your topics on Russia are exhausted.

Basically, you're not applying for a dividend. You're not applying for a dividend for 23, is that correct?

That's not exactly correct. So we, as I said, we have been discussing this.

Is there a final cut-off date by when you have to apply? Is that the 21st?

No, there is no cut-off dates in the sense as you see from the numbers, we make profit So nobody should be concerned that there is in the near term a year without profit if this is the part of your question. And I mean, in an application, you can also refer, that's my understanding, to previous years as well.

So the dividend potentially is there. You could even go back to 22 then, theoretically speaking.

Look, I... I mean, we can add up all these numbers. At the end of the day, it's like in all the countries we are active in. At the end, it's the regulator who approves or does not approve a dividend. And in the Russian regime, as I said, in the near term, I do not expect a dividend. Okay. Perfect. And to your question to the replication portfolio, what is the... What is the impact on it? Of course, we also have replication portfolios. I mean, replication portfolios are built on the sensitivity of your deposits. That's clear. But what I can say is that in the retail, one can see a range of positive impact of some around 50 to 100%. million of additional positive NII. The corporate replication portfolios are repricing quite fast. Here you shouldn't expect too much. The net impact is probably in our situation not that much.

But that's already reflected in your Numbers or not? Or would that be on top, those 5,200?

In the sensitivity and then the outlook, this is reflected. Okay.

And the duration? Could you also make a quick comment on that?

Let's say overall four years.

Okay. Okay, perfect. Thank you.

Our next question comes from the line of Maddy Nemes with UBS.

Yes, good afternoon, and thanks for your presentation. I have a couple of questions, please. The first one would be going back to Poland and foreign currency litigation. I think you mentioned earlier in the call that your current provisions cover over 90% of active customers litigating or settling. I just wanted to confirm that that is exactly what you said and whether that is correct. And secondly, could you comment on what percentage or what portion of prepaid customers are covered by the current provisions? The second question would be on loanless provisions. I think Stage 3 provisions were over $100 million, and this was driven by the head office mainly. Coach, could you talk about the developments here? What drove this? Any particular sector or any particular concern that you're seeing that would be appreciated? And lastly, staying with the head office, are you seeing any positive improvements, any turnaround in volume development in the fourth quarter in corporate lending balances? or this is probably too early, you're still seeing quite weak macro data, particularly coming out of Germany. Is that the most significant driver that could eventually improve and drive also the volumes here? Thank you.

Mate, if I may start taking your questions. Yes, you understood right that on the biller, of the current outstanding, of the actual outstanding loans, we have built up a coverage of over 90%. So that's very important. So, you know, we show here four pillars. The one is what we believe that we can do on the settlement side, rebate loans and actual outstanding loans. On the actual outstanding loans, we have already, based on our model input, here an implicit cover of over 90%. This is what I said, assuming a close to 100% loss assumption on the specific cases. The other one is risk costs in headquarter in Q3. Let me be here very mindful. You know, usually I'm not talking about seeing a client event, but you could do it to the larger sector of trading. And of course, you know, given the interest rate environment, given the refinancing costs, this has been the main argument and the main reason why we had to create here risk costs on the head office. For me, it was one of the things what I have indicated when talking about you, the audience, through my way of thinking and saying, well, on the one hand side, we have this economic weakness, we have this geopolitical tension, but also we see that for some of the balance sheets have been exhausted and still being impacted by these higher interest rates So this default can be clearly allocated to higher cost of funding. Yes, this would be my two answers when it comes to the Poland into the risks of CO1.

Yeah, and to the question of long growth in the GCNM, I mean, as I somehow indicated in the RWA and CD1 to the year end, from this, I think you could assume that there is some expectations. Maybe what we have built in the RWAs might not fully materialize. So it's improving, but... Yeah, still weak as we are in an area which is challenged.

Thank you.

Thank you for all your questions. If you have any more, please remember to press star 1 on your telephone keypad to place your question. The mute function on your telephone needs to be turned off so we can get your signal. As there are no further questions at this time, we will now conclude today's conference call. Thank you for your participation.

Thank you for your participation. Have a good afternoon. Thank you, operator. Bye.

This does conclude today's conference call. You may now disconnect.