Raiffeisen Bk Intl Ag Ord

Please stand by. We're about to begin. Good afternoon, ladies and gentlemen, and welcome to the Q2 2025 conference call of Fison 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 taking time out. If you're a day to join us for our Q2 update. We can report a consolidated profit of 567 million euro for the first half of the year in the core of the group excluding Russia. This translates to a return of equity of 8.1%. Our CD1 ratio excluding Russia stands at 15.7%. if we were to have to deconsolidate Russia at the end of June with a zero recovery on the equity. In the figures above, you can see the impact of the claim to recognition in Russia in the second quarter announced last week, which I will touch upon shortly. The consolidated RE for the group here is annualized, with this claim to recognition considered in the first half year only. Loans to customers continue to grow, and the first half of the year has been successful with good volumes in retail for personal loans and mortgages, with corporate business showing signs of life. Main revenues are stable in the comparable period, while fee income continues to show positive developments. OPEX inflation, on the other hand, is visible year on year, resulting in a cost-to-income ratio of 53.7% for the core group, mainly driven by staff expenses. Moving to our slide on Russia and starting with the business rundown, which continues as expected. Our loan book in Russia has shrunk by 9% in ruble terms since the beginning of the year, and I can confirm that we are ahead of schedule here. Deposits have also started to shrink, also down 9% in ruble terms due to date. you will recall the ruble appreciation in Q1, which distorted the graph on the left-hand side of the page. With a stable currency development in Q2, you now see the reduction in euro terms has resumed. Let me now briefly address the statement which we put out last week and which refers to the claim we have faced in Russia and our options to seek damages in Austria. You will recall that in Q4 2024, we booked a single provision, which was the net amount of the claim for damages to be paid in Russia, and the expected proceeds from the enforcement of our legal claim in Austria. Unfortunately, the strict IFRS criteria for recognizing the value of our Austrian claim are no longer met, so we have to recognize it in Q2. A few important points. First of all, this has no impact on the core of the group, meaning that neither our price book zero C to one ratio nor our ROE guidance is affected. Second, the strength of our legal recourse claim and our own expectations of success and recovery are unchanged. Our legal strategy is unaffected by this accounting change. Please understand there is little more that I can say here today, in particular with regards to our next steps and our litigation strategy. We will communicate in a timely manner when necessary. Let's move now to the following slide, looking at the main revenues in the second quarter. NI was stable compared to last quarter, despite headwinds from rate cuts in Euro and the Czech Koruna. Beta volumes were supportive, particularly in non-euro countries. NI in Hungary was affected by minus 22 million due to an adjustment in the reporting of interest rate differential on hedging instruments, which explains the decrease you can see here in the quarterly view. Our NI guidance for the full year remains unchanged. Fee income in the second quarter rebounded up 8% quarter on quarter for the core group, from the seasonally first quarter, which is usually a little bit weaker, mostly stemming from clearing settlement and payment services. Also, our fee income guidance for the end of the year remains unchanged. Next up are the developments on loans and deposits, which we show in slide 8. The Euro 1.4 billion increase in loans to customers in the second quarter was driven by continued expansion in CE, especially in Czechia and Slovakia, and partly in SCE countries. We can also confirm our loan guidance of around 6% to 7% expected by the end of the year, with the new corporate loans picking up more dynamically in the second half. As seen here on the liability side, we observe continued retail deposit inflows as in the previous quarter, especially in Czechia. Coming to the next slide. We now want to show the liquidity ratios for the core of the group. One could think that high liquidity in Russia might skew the ratios very much in the positive direction, but here you can see that even without Russia, the LCR stands at a comfortable 150%. Over the last quarter, our corporate deposit base continues to decrease slightly, which means we are close to our targeted levels of deposits. Across the countries and, of course, in head office, we can report, as usual, high liquidity. On slide 10, we now show also the CET1 ratio development quarter over quarter, excluding Russia, assuming the price book zero scenario. Out of the credit risk bucket, Thirty-nine basis point impact is exposure growth. And on the other hand, of course, we see a positive impact of 24 basis points from retained earnings on minimal FX effects. You are by now familiar with the price book zero scenario on the following slide, where we again show the CT1 ratio for the group under the assumption that the Russian business has been deconsolidated with a full loss to the equity. As flagged in the previous quarter for the rest of the year, the Russian operational risk component was capped at $2.8 billion, equal to 57 basis points. We keep the outlook for this and expect the ratio to land at around 15.2% at year-end 2025. So moving to our core group, we see the one ratio outlook on slide 12. The moving parts behind this, notably the expected increase in credit RWAs with the upcoming loan growth and naturally the positive impact of retained earnings for the second half of the year. Quickly covering also our capital ratios for the entire group sit very well above the requirements, which leads to ample buffers even after the recognition in Russia in the second quarter. On slide 14, we will note We note our MREL ratios for the Austrian and the other resolution groups are very satisfactory. We issued a senior preferred note in February, and we still aim to issue a senior non-preferred this year. Our resolution group in CE was already flagged here with the MREL needs for 2026. Coming to slide 15, we outlined the macro outlook for this and the following year. The growth you can see across our markets is driven by rising consumption and an increase of investments. However, the picture is different for some countries where the growth is still sluggish. It's worth mentioning here that the GDP forecast in the table already includes assumptions on imposed U.S. tariffs. Jumping to slide 16, one can observe that inflation rates have stabilized on elevated levels in CE, while in EUR rates, are on levels close to the targets. Our key rate forecasts expect that rate cuts in Czechia, Hungary, and Romania are on hold for the rest of this year. Finally, on the last slide, we show our outlook. As you can see, it is broadly unchanged with the only tweak made to the risk-cost guidance, which is now reduced to around 35 basis points for the full year 2021. over to Hannes. Thank you.

Good afternoon, ladies and gentlemen. Allow me to run you through a few key elements of our second quarter result. Starting with risk costs, we can report 62 million euros of provisions equal to 23 basis points and broadly in line with the 20 basis points which we reported in the first quarter. This is, of course, a very satisfactory level and it allows us to revise our guidance for the full year 2025 down to 35 basis points. Our stage one and stage two provisions were up, mainly as a function of our portfolio development, as well as some minor adaptations to our retail post model adjustments. We released a small amount of our overlays and still hold around 439 million euros for the group, excluding Russia. As I mentioned to you in the first quarter, we have been running reviews, internal stress tests, in fact, on our portfolio sensitivity to tariffs. Based on our analysis so far, there was no need to create additional overlays. With that being said, there are some parts of the book which, of course, we keep a very close eye on. We did see a big cap in Stage 3 provisions in the quarter, also from extremely low level in the previous quarter. Asset quality, continues to improve overall with TMP ratio for the group excluding Russia down to 1.8%. Following some recoveries and our coverage ratio has slightly improved to 48%. We all of course, I know that some of you will ask why our guidance is at 35 basis points with only 20 basis points halfway through the year. And I can simply refer you to the persistent high uncertainty, both in economic terms and also looking at the geopolitics. Let me move on to Poland. We booked a further €167 million of provisions for litigation in Poland. And by this, we leave our guidance for the full year 2025 unchanged at around €300 million. In the second half, we do not expect significant model updates. Furthermore, as the law to accelerate the resolution of these cases is introduced, this should reduce penalty interest in court fees, which are part of our provision numbers. Before we take your questions, let me finish on a positive note. As you know, the 2025 EVA stress test results will be published this Friday afternoon. Let me use this opportunity to say a big thank you to the whole risk team. And I'm satisfied with our result, which will not contain any big surprises for you. With that, let's open up the floor to some questions. Thank you.

Thank you, gentlemen. At this time, we may start the Q&A session. If you wish to ask a question today, you will need to press the Start key on your telephone keypad, followed by the digit 1. 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 will come from Gabor Kemeny from Autonomous.

Hello, thank you for the presentation. I have a couple of questions. The first one is on the dividend outlook. I mean, I understand that this Russian claim, the recognition would not impact your ROTE, your TBV, but I'd be interested to hear as to what extent Russian results might impact your dividend payment capacity in the sense of that driving further provisions potentially or losses in Russia. Could that impact the dividends? That is the first question. Second one, you are mentioning, I understand you have limited capacity to comment on Russian litigation, but you mentioned in the report this arbitration case with, I believe, a $1 billion penalty claimed from RBI. Can you comment on the moving part there and possibly the likelihood of that being bugged? Thank you. That's it from me.

Thank you, Gabor. To your first question, dividend outlook with this negative impact what we had in the second quarter. I mean, you are aware that in our capital planning, what we have and in the numbers, in the outlook on the C to 1 ratio, we have the core of our attention is also the core group. And here we use the regulatory requirements, what we have, which on a full year basis would be around 1.6%. euros per share. And so half of it is of course already considered in the numbers we report. So at the end of the day, it's a decision considering all developments, what you have there, but our decision And this is my full understanding is based and was always based in the last three years on the performance of the core group. And so I think the outlook what we have given is a strong understanding of the potential of the group. Now to the second question, the arbitration case. Indeed, what happened is that The Rasperia brought an anti-suit injunction against this case. There are a couple of moving parts. So the first session of the court, which was mainly procedural, has happened. And the next session, where it will be a material discussion, is end of September. In the arbitration court, Three, if I may say so, three groups have participated initially, two have already withdrawn, so we will see what else can happen. As you see from the provisioning part, we don't have any reason to assume that we will have to provision that, but of course we will update you on the further developments.

Thank you. Thank you.

Our next question will come from Nate Nemes from UBS.

Good afternoon. Good afternoon, and thank you for the presentation. I have three questions, please. The first one would be on your consolidated ROE guidance for the full year, the 10%. In the first half, you achieved 8.1%. So I'm just wondering, what do you expect to improve the full year number to 10%? What would change in the second half drastically? Is that materially lower provisioning in Poland? Is that fair value gains perhaps? Or any other effects? And also, are there any changes expected in the core equity base ex-Russia that would increase ROEs? That's the first question. The second question would be on provisioning. Another good provisioning trend in the second quarter, it seems to have come entirely from Stage 3 provisions. If, Hannes, you could talk a little bit about the nature of these defaults, also any industries, any geographies in particular. And related to that, the third question, the uplift from 20 basis points cost of risk in the first half to 35 at full year, are there particular industries, geographies, or any other drivers that you have in mind that you assume will deteriorate that will drive this uplift? Thank you.

Thank you for the questions. Let me start with the ROE outlook. I think the positive elements are that the loan growth is expected to be good. So from our perspective, this should more than compensate or at least compensate all what we see on Yeah, negative impacts from the rate cuts, what we have seen so far, or if there might come in addition. But most of the cases, as you see from our macro forecast, we now assume a stable rate environment. So this is the one. The second is that... The net trading income is always a moving part, but we expect rather stabilization compared to the first quarter of this year. And the third element I would touch here is litigation provisions. What we have in Poland, so we already have a high number in our forecast. We had earlier of around 300 million euro for the full year so this gives us this gives us a good good good support on the other hand we have had wins as well so there there is a banking tax in austria which came as a negative surprise and uh and yeah we have pressure on OPEC as well and what in this in this forecast is not taken into consideration, which might be also a headwind, is of course a potential wind vortex in Ukraine, what we have seen in the last two years. So it's a mixed picture, I would say, but enough comforting factors that we gave this outlook. I understand Hannes would... talk now to the risk costs as well.

Yes, Martin, thanks for the question, sir. So when reflecting back on the Q1 first half year, what was the nature of the defaults in the industries, I think there is maybe not the perfect clear pattern. The one was a bigger case, which was out of a restructuring case where we hope that they are going to make the turnaround. And seemingly this was out of the packaging industry. They faced troubles given the current microeconomic environment, the economic interaction. So here the turnaround was not progressing and proceeding as we have hoped for. And the other one was the one or other increase in coverage out of the commercial real estate. But on the commercial real estate, I have also to share with you, this was a mixed impression because for some we had to slightly increase our coverage and for some other older cases we have now found settlement with a full repayment more or less. So this is what I can talk about when reflecting on the first half year. Hopefully this is sufficient clear for you Marta. And the second one is if I look at the second half to come and why we as an RBI Board have considered on the one hand side, reducing the risk cost guidance down from 50 basis points down to 35 basis points, but at the same time, leaving it up at this level. You all know, those who give us company for a long period of time, that Q4 is always good for the one other surprise. The second thing is we must not forget, and I know if I look at some parts of the markets, could believe that the market forgot. We are still facing a situation with elevated geopolitical risks. We see also some leveraged finance transactions who have been structured in a bullet loan structure that there is now the time to be refinanced. And I'm still looking to the FI and sovereign part of the portfolio. If you look, for instance, how many more issues are being to be placed in the market, This is my way of thinking when looking about the second half year geopolitics rolling over and refinancing sensitive structures. And let's see how the commercial real estate and geopolitics are also finding their way to the FI balance sheets. Hopefully this helps as a guidance, Mate.

Absolutely. Thank you very much.

Thank you.

We'll hear next from Benoit Petricu from Kepler.

So the first one is on the net interest income. You've kept your guidance on NI despite the reclassification of roughly 50 million analyzed to the other income. So, you know, is that correct to think that your outlook on NI is slightly improving versus where you were before? Are you more positive? You know, you mentioned the rate cuts, which probably not going to happen in H2. So just wanted to talk about your NI outlook for H2. It seems that your guidance implies a sequential improvement of NI quarter after quarter Q2, Q4. So just wanted to confirm that. Second point is on the loan growth 6%, 6%, 7% guidance. This is 2% realized. Sounds like a very big acceleration of loan growth. I wanted to check with you how confident you are on that pace of acceleration. And then final question is on Russia. I think, you know, you are getting to a point with this deleveraging and de-risking where, you know, we could get close to the, scenario where you could think about an exit from russia is that something you have in mind for 26 for example so a situation where your loan book is small enough to to just give the keys to the russian authorities thank you thank you i can confirm your first question yes despite the hungarian classification we

We believe that we will achieve this. Of course, we have seen quite a lot of rate cuts. If we compare average rates, and I take here as a proxy the key interest rates, they have been significantly, like in Czechia, 160 basis points, Hungary, 120, and also in the Euro area. But nevertheless, what we see is that part of this is hedged, of course. So these adjustments do not immediately come through. And second, as I mentioned before, the loan book is developing good. And what we can say is also from the forecast to the markets where we are in, the overall development seems very good. And the performance, what we see now in our organization, is also quite optimistic. I think even if one might assume that one or the other regulator might put in some measures which make it less easy to borrow because of a concern of overheating in one or the other market segment, I think this part in retail is working nicely. What we see now, so the new volumes in unsecured as well as in the mortgage business is very good. And we can believe from what we see that this keeps going for a while. And in corporate, which, yeah, the first quarter was not so good. We saw much improvement now in the second quarter already. And with this pipeline, I think it will materialize also in the balance sheet. So here we are confident. And then talking about the de-risking scenario, I mean, here I can only repeat that, of course, any exit needs – quite a lot of improvements by various authorities, of course the Europeans, the US, to find the right buyer, but also from the Russian side, the administration as well as the central bank. We keep continuing this route, and I personally still hope that we will show some success, but given the setbacks, what we makes us cautious. But yeah, we would love to make some announcement here as well. But when talking about giving the keys back, yeah, we'll see how the geopolitical and especially the Russian environment is developing. Currently, we think rather on other routes. Thank you.

Thank you very much.

We'll move next to Ricardo Rovere from MedicoBanca.

Thank you. Thank you very much for taking my questions and good afternoon, everybody. A couple, if I may. The first one is, Ioan, right at the beginning of the call, if I'm not mistaken, you mentioned that the direction in Russia is going according to plan or maybe even faster than expected. When you say something like that, are you referring to what you have agreed with the regulators, with the ECB, or eventually to what kind of plan you are referring to? The second question I have is, a risk cost, this is true, that comes better than expected in the quarter, but it's really, really scattered across the division. So some divisions are experiencing a reversal. So some ADAS, like a large corporate one, is running on 65 or 70 basis points, something like that. So it's heavily elevated, I would say. Now, especially in the large corporates, is there anything you think is one-off in the risk cost that you've seen so far in the semester? And last but not least, from time to time, you were used to provide us with some sort of sensitivity by country, and here I'm referring especially to the Czech Republic now that the rate cut seems to have kind of accelerated, and the euro area given that the easing cycle may be close to an end. Thanks.

Thank you for your questions, Riccardo. The first question I can answer with a clear yes, I was referring to the plan. which was, let's be more precise. So we had some requests from ECB and this, well, then there had been some assumptions by ECB as well as by us. And of course, as we see, this runs better now than expected. So yes, according to ECB.

Well, if I can take the second question, Ricardo, partly it refers back to Marte. so as you rightly spotted there have been some countries e.g hungary where we have really seen uh even right backs in the risk costs uh perspective uh and these have been some seasoned uh commercial real estate workout cases which turned out positive for rpi group so the 60 basis points you're referring to on the corporate and large corporate division uh you know there were no New defaults are, you know, in a scale above 5 million euros of risk costs to be added. So it was, the one was a turnaround case based in the packaging industry where the turnaround suffered and we had to allocate a little bit more of risk costs. And the second thing, and I'm sure you have this anyway on top of your mind, Ricardo, in the first quarter, we have added some 60, 65 million euros as overlays in the segment of group corporates. So if you look at the state three, it's not as pronounced as if you look at the overall risk costs. So this is the main reason for the large corporates here in Vienna. We have allocated in the Q1 some overlays of 60, 70 million euros. And furthermore, last argument, if you look at page 23, you also can clearly see that we have increased our coverage ratio. out of season than the existing default cases. Hopefully this gives you some guidance. Thank you, Ricardo.

Ricardo, I'm back to answer your third question, which is about NRI sensitivity by country, and you were especially mentioning the Czech Republic, and there are activities there. So let me start with what we usually share with you is this very simple NII sensitivity with 100 basis point shocks with all the assumption on stability in the books and some others. And here I can say, and I only use numbers without Russia, of course, because probably all of you are less interested in that sensitivity. So this would be in total around 120 million, evenly split more or less between Euro and the local currencies what we have. When we now go to Czechia to add a little bit more detail, so here the assumption is that it will be slightly above 30 million, the biggest part, so let's say 80%, or more, 85% coming from the local currency. How come to that? Of course, current accounts will not be priced negative, so this leads to a margin drop. We have built up quite a lot of deposits, which of course have room for adjustments. The question is, what are the reactions of competition if it falls, but if we assume it cannot be fully passed on. So a bigger part comes there as well. And what I said to the current accounts, this is evenly split. Part of this is compensated by the positive contributions, what we have from our model or hedging books, however you might call it, And this, given the size of the checkbook, this is significantly big one. So, of course, this is actively managed, but it's between 10 to 12 billion with a duration of slightly above four years. So, that's, I would say, it's a good hedge. Beware, it's a combination of bonds, fixed rate bonds, and of receiver of interest rate swaps. This is where I have been mainly interested. Of course, Slovakia has to the Euro, another big sensitivity. I would say also in a similar size, slightly less, so maybe 25 million. And then of course, Serbia is meanwhile also a significant country. So here I would also say around 25 million. The others are then filling up the rest to the 120.

Okay, thanks. And clearly, when you were mentioning 25 in Slovakia and 13 Czech Republic, you are always referring to a 100 basis point change in policy rate, of course.

Exactly. Assuming that is the standard for you to then make your own conclusions.

That's fine. Thank you very much.

We'll hear next from Simon Nellis from Citibank.

Oh, hi. Thanks a lot for the opportunity. Just on the NIM again, particularly on the group corporates and markets division, I saw there's a bit of an increase in NIM. Can you just give us some color on, you know, where you see NIM there? Is it going to remain stable at that level in that particular division? Because I think it saw some of the highest NIM contraction. That would be my first question. Second, I saw a large increase in fee income in Romania. If you could comment on to what extent that's a one-off. And then last, I was just a bit confused on dividend accrual. So I think you said that the full-year dividend you're guiding for something like €1.60, but what was actually the dividend accrual for the first half?

Thank you. Yeah, thank you. So the The question to the corporate center, I mean, this is mainly driven by a business which is very, with very narrow margins and... No, sorry, I was talking about the group corporates and markets division, not the corporate center, the group market. Ah, sorry, yeah, yeah. Sorry, I was... Yeah. Indeed, indeed, you're right. But this is... It depends simply on the business, what you have, and the structure of the business. So it's bringing in slightly better-priced products helps a little bit. So this is, I would say, here the main topic. And we will see, you know, we have moving more and more, or there is some intention to move from the very short-term business market to slightly better priced higher margins. So this is a trend. Yeah, it's an ambition to improve it here a little bit. We have suffered quite a lot if you look in the longer term from the rates which come down. Do your second question in Romania... In Romania, what we have is a combination of a very nice new business building up in some of the fee business, but like in some other markets, we have, you might call it a seasonality impact on some fee business. from our partners like credit cards or wherever, where we get them incentive driven, driven pay then which comes one or twice a year. And if I remember correctly, this was a higher single digit number in Romania from that. So this probably explains the, Sort of one of, I would rather call it, it's a seasonality number, which, okay, distorts then the quoting, which happens. And then to your third, indeed, so we took half of it, so which is 80 cents per share, which was deducted when calculating the C to 1 ratio. to half of the 160.

Thanks very much.

We'll move next to Robert Broja from PKO BP Securities.

Hello, everyone. Thanks for taking up my question. I'm a little bit confused, perhaps, if you could elaborate more on the ROE guidance. Namely, you maintain your around 10%, but this is the consolidated return. Are you also providing core guidance for ROE? I mean, I would be imagining that the core ROE guidance given the better cost of risk outlook and the fact that the better known interest income has been related to a reclass from the interest income could be trending up for the second half of the year and then does this around 10 consolidated roe guidance does it already include this additional chart in russia thank you i'm i'm not sure if i really now understood

So I was referring to the core group. So this is without Russia. This is important. What I did not mention, obviously, is that in the first quarter, we always have to book this meeting. special regulatory requirements. So the bigger part of it comes at the very beginning of the year. So therefore the first quarter is also a little bit distorted and most of it is booked already. If you look at the various components and for the rest of the year, this is little. So this is a very positive development and we expect it also for this year. Second, as I said, it's in the core group. There is the big expectation that we can keep the 300 million negative impact from Poland, from the Swiss franc, and meanwhile also the Eurobook. So these are the two main components where we have to say this is front-loaded in the first half of the year, and this supports, of course, the second half. Now, the non-interest income, what you see usually there is one element where the first half year, the first quarter was already negative influenced, was impacted, was our own credit spread. So part of our liabilities, which comes from the from a special business part where we have to value parts of our liabilities from the certificates business where we have mark-to-market and have to use our own credit spread. So this is under the assumption that this is normalized, gives also some tailwind information compared to what we have. Now, to your question, what is the impact on Russia? And now we're talking about the full group. The assumption here on the full group is that we have only this one-time write-down of $1.2 billion. So there is nothing built in further lawsuits or whatever negative impacts. One cannot exclude it. But what we want to say is in the core group, this does not have any negative impact. So all this is within the consolidated part. Of course, we have in the core group also a very small amount of value for the Russian entity, but this would only occur if we have to fully deconsolidate them. This would also happen. on the AGE and negative impact not on the consolidated group. There is what you have seen. I hope this answers your questions.

Maybe just one final word here, if I may, because I'm seeing that essentially against the guidance of 13% core group ROE, you didn't change this figure, although you are talking about sort of tailwinds if I understand correctly, NII, liability, certificate evaluation, and the risk cost. So why then didn't you change upwardly the core ROE guidance for the group? Or are there any other factors that sort of stopped you from doing that?

Now, this is a very simplified approach, what you see here. And this explains what is the negative impact from the Swiss franc topics, what we see in Poland currently. So if you would add to what we expect, some 300 or a little bit more of maybe additional cost, what you have from Poland, then you would move up from this 10% to around... 12.8 if you have it very exactly calculated. So around 13 given all this uncertainty is what we have. So the difference between the 10, what is our outlook and the graph where we see the current underlying strength of the business, this is then this gap of 3% from this part of Poland.

Right. I'm also actually referring to the time difference. You're talking 13% as of today, and a quarter ago, you were also talking about 13%. So, essentially, I don't see any upward impact on the ROE from the positives, which include the risk cost and other elements, but I understand maybe this is more sort of complicated than this. Thank you.

Here maybe as we have such great people in our investors' relation, I propose that they give you a call and run with you through the last two or three quarters to the various numbers and explain where have been the improvements from the risk costs and the negative developments and the relative improvements also from Poland and how they were compensated And as you are rightfully saying, there are a couple of other things like extra taxes and then that. So I think it's worth to take 15 minutes in detail with my colleagues to run through it. And they welcome such a call. Thank you. Thank you very much.

We'll move next to Ben Maher from KBW.

Hi. Thank you for taking my question. I've just got a couple of quick ones. You've seen some very strong fee performance tracking ahead of guidance. I'm just interested if you expect momentum to slow in the second half of this year and the reasons for that. That's my first question. The second one is on the legal claim that you were guiding to make in second quarter in Austria. Are you able to give a bit more about when you expect to file this claim and now and the reason for the previous delay? And then just the final question. is on the geopolitics. Just interested if you have any thoughts as we look ahead to the Czech elections, which is scheduled for October. Thank you.

Yeah, thank you. So let me outline the numbers. So the fee for Q2, and then you can see what you would expect also in the next quarter. So let me dissect a little bit. So if you look at the cross numbers and we have to say that Hungary is usually distorted because of their special bank transaction tax, what they have. And if you have a year-on-year comparison, then this has an impact some 24 million. So this is what has to be considered. Of course, it depends on this transaction tax regime as well as on the transaction volumes, what we have seen. But one has to also say that the transactional activities, especially in debit cards, has improved. I have already mentioned that we have done some payments out of the incentive schemes, which are only calculated once or sometimes twice, and this also had quite a positive impact. But on the other hand, I can also say that the underlying business is also good. So probably it would not be – I would not advise to use – The Q2 has the new pace of a run rate, but I think if you just look at the six quarters or so, then five, six quarters, then you see a nice improvement independent of this special effect. Now, to the claim in Austria, as I said, we believe that the strength of the claim is is not disturbed at all, and this was not the reason why we made the adjustment in the IFRS. So it's only that the requirements for IFRS are quite strict in this special case, and therefore we adjusted. Now, I do not like to comment on our, at this point in time, on our tactics and the strategy, but as this is moving as well, but as I said, let me confirm the strength of our case is there. First, second, we will update you in due time when we have new developments. And to your third question, the Czech elections, maybe Hannes wants to comment. Usually I do not comment on elections.

Well, me neither. So honestly, what I would have to say, Ben, is that we would not see any material impact foreseen from our side. Listening to our researchers on the market side, They are currently having some 2% plus minus as a cross potential on top of their mind. And we see a super solid employment locally in Czech Republic. And we truly believe that also the general fiscal measures could also support the Czech economy even further. Thanks for the question.

Ladies and gentlemen, as a final reminder, that is star one if you have a question or a comment. Again, star one. We'll take a follow-up from Ricardo Rovere from Mediobanca.

Thanks for taking my quick follow-up. With regard to overlays, I understand the amount you have related to Russia. I understand the amount you have for Ukraine. I'm a bit more surprised by the fact that you still have 350, if I'm not mistaken, to 340 median of overlays related to the rest of the group, which more or less accounts for 35 basis points of the loan book. So, that would cover more or less a full year of your underlying of your risk-cost guidance. And I was wondering what is going to happen to that. Do you think, considering the GDP, the Euro area has come out a little bit better than expected, same story for the U.S. in the second quarter, So I was wondering why, what's the reason of continuing to have this amount of overlays? And should we expect you to take a decision here at ERN? What kind of discussions do you have with your auditors with regard to these 340? Thank you.

Riccardo, I truly appreciate the question because, you know, this is anyway in the room. So give me the opportunity to talk about this. Well, you know, we must not forget the day as of the 30th of July. We feel or we sense that we are again in a decent environment. But if you look, for instance, at uncertainty indices after the 2nd or the 3rd or 4th of April, they have been jumping upside down. And our main part of the allocated overlays has currently two or three main pillars. The one is, as I indicated in the Q1 call, the entire leveraged finance sector. the entire leveraged finance part of the portfolio. Some of these refinancing will to be rolled over this year or next year. And I was talking about politically and geopolitically uncertainty. So let's see whether or not all of these rollovers will go just super smoothly. part of the whole story. The second one, what of course we also had on top of our mind, was the discussion round about tariffs. And we have done a stress test. I was sharing this stress test with you that only for 2% of our clientele, they would have a 3% impact. But this is a first order impact only. And the first order impact anyway we would have covered in our models. But I would like to see how the second round or third round effect are playing out. But you're completely right. You know, if none of those things would materialize, so neither the refinancing risk nor the geopolitical stuff, we will be challenged. And for good reasons, why we keep the level of overlays in the amount what you can see currently. Hopefully this gives sufficient guidance and way of thinking.

Yes, yes, yes and no. Just to be clear here, are you basically saying, Annes, that at the moment these 340 million have been, if I may say, rebranded under the name of tariff uncertainty? It was COVID, then became Russia, then became inflation, and now, Those have been kind of rebranded tariff, because we don't live in a stable world. We have never lived in a stable world. There will always be a reason to keep these overlays. You know, this time it's tariff, it was inflation, then Russia, then COVID. I mean, is this the way, the new way of, let's say, of accounting for something that the model just cannot capture? Because models look at the past, they don't see the future. So it's just wondering to understand whether that is capital or not, or is there to stay forever.

Would you like to move to the next caller? Hello, we'll move to the next caller, Joseph Kolwatov with Will Asset Management. Please go ahead.

Hi, good afternoon. Thanks for letting me on. Just a quick clarification. In case the arbitration case in Amsterdam gets withdrawn or thrown out altogether and RBI prevails at the Austrian court system with the damage claim of 2 billion plus, is there from April this year onwards the Austrian commercial interest rate of 8% applicable?

Please stand by, Mr. Kawada. One moment. Sure. Ladies and gentlemen, please remain on the line as we are experiencing interruption in today's conference. Please stand by. In the queue, we do have Joseph Kelwada with Will Asset Management. Please go ahead.

Okay. Hi, good afternoon. Thanks for letting me on. Just a quick clarification. In case this arbitration case in Amsterdam gets thrown out or withdrawn and RBI prevails at the Austrian court system with a damage claim of $2 billion plus, Is there from April this year on the Austrian commercial interest rate of 8% applicable?

Good question, which I have to say I cannot answer now.

Okay. Now, maybe you won't be prepared for the next call, you know.

Yeah, yeah, I will do so.

You just let me know. I'll let you know.

We know how to thank you.

Yeah, yeah, sure, no problem. In the beginning of the call, you pointed out that two have withdrawn the holdout. Is that the foundation in the Amsterdam arbitration court?

I said two have withdrawn and... the foundation is still in.

Okay, okay. Okay, perfect. Thank you.

Operator, I would still like to answer the question to Ricardo because seemingly our line here in the conference room was not working. Ricardo, so my answer and my colleagues are already smiling at me because I was telling it to myself already three times in a row, so now I have sufficient time to practice. So the reason why we still have some 300 million euros of overlays booked is on the one hand side, of course, given the current geopolitical environment. Secondly, we would like to see how the role of refinancing for leveraged finance is working out. And we must not forget that in some of our countries, we still have, compared to through the psyche, slightly elevated interest rates. So if all those three things would normalize, rollover working out, geopolitics coming down, and industry in interest rates being back on long-term averages, I think we would then rework and review our overlays. Thank you very much for the question.

Excellent. At this time, we'll take your final question. We'll move to Christiane Dubé from Barclays. Please go ahead.

Hey, thanks for taking my question. I guess I just had one question, sorry, on the medium-term ROE guidance, I guess. I look at your guidance. You've been guiding for more than 13% for next two years. You guide for more than 13%, even this for an underlying basis. When I look at consensus, I guess it still remains below 10%. What is that consensus missing in terms of is it the revenue growth or is it cost is too high or are we modeling in too much of provisioning or other things which you think is being not modeled right, I guess, in your view? Thanks.

Yeah. I'm very sorry to create with this presentation such confusion. So what we wanted to show is that the impact from our Polish Swiss franc and Euro mortgage business was very negative. So this is a very simple graph which And now I try to find my page. Sorry, give me one second so that I can guide you then on the right page. It's the page 17. I guess you are referring to that. And if you look then at our numbers, what you can see is that the litigation provision in – so what we took here is – we have taken out for comparison the contribution what over the years we had from Russia and Belarus. So it's like for like. Then what you might remember or what you could look up is that it started negatively significantly in 2022, the Swiss franc provisioning in Poland. And this increased in 23 and in 24 significantly. You see the gap of around 600 basis points. So we had provisions of 800, 600 to 800 million in all these years. And this explains the difference. Now in 25, we assume still a negative impact, P&L impact of around 300 million. which then would explain again, very simplified in the presentation, would explain the 300 basis points difference. Now, the question is when will be, and the expectation is that maybe over the next one, two years, we will see if we are done already or if there is a smaller impact. But sooner than later, we will move in this direction. In this area, in this time phase where we don't have, where Poland, the mortgages are fully provisioned and settled hopefully to a large extent, and then you will have no negative impact anymore. And therefore, we then believe that, and I call this the underlying business of the core group, is then from today's perspective, 13% ROE. And of course, we have to work to improve that as well. But this is what we see currently in our midterm plan and in our strategy. I hope I could reduce the confusion I created. In case it was not fully possible, then again, I would also refer you to my colleagues from the Investors' Relations. Because they could then refer to the historic numbers and explain where the difference is. And then probably it's much easier to understand the underlying thoughts from this graph. Thank you for the question. And please don't hesitate to call the colleagues. Thank you.

Thank you. 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, operator. Thank all participants. As this is summertime, I hope reporting season ends soon for you, and you will enjoy your holidays as we plan to do. Thank you.