Raiffeisen Bk In Unsp/Adr

Good afternoon, ladies and gentlemen. Very warm welcome. Thank you for joining the call today. Talking about first quarter, profit was up 22% year on year, driven to a large extent by lower risk costs. On the revenue side, net interest income was stable compared to the fourth quarter in 2020, and net fee and commission income has now almost recovered to the Q1 level of 2022. We are seeing positive signals in some of our markets as yield curves begin to steepen. While this is unlikely to have a major impact in 2021, it is nevertheless a step in the right direction. Loans to customer grew by 1.3% in the first quarter with some support by FX movements. In retail, loan growth was primarily driven by mortgage loans and to a lesser extent by personal loans. In corporate, New lending was mainly short-term. We expect loan growth to remain modest in the first half of 2021, but for the growth rate to increase in the second half of the year. This assumes primarily organic growth, and there could also be some additional support from exchange rates. This does account for the consolidation of Equibank. With respect to the acquisition, we still expect the transaction to close in the second or third quarter, pending on regulatory approval. The ING transaction in the Czech Republic is also proceeding according to plan with over 75,000 customers recontracted to date. We issued green bonds during the quarter and continuing to do so. You are aware that Slovakia came with 300 million Euro Green Senior Preferred Bond in April and today we had an inaugural Green Senior Preferred Bond in Romania, in RON, if you're also interested in that currency. And we expect more from our Czech entity as well throughout this year. When moving to the next slide, you see a little bit more details to the P&L. I already have mentioned the net interest and fee and commission income. I think I can refer to the costs as overall in a positive development, but here be aware that we have also a new definition of the cost-income ratio. Overall, this leads to an improvement of the operating results on a year-on-year, quarter-on-quarter basis, and a minus 18% on a year-on-year. And to the risk costs, which are substantially improved, Hannes Mersenbacher will give you later on more details. When looking at slide six, some more insights to the core revenue trends. I have mentioned previously that we believe that net interest income has now brought them out, and you see this in the numbers of the last three quarters. The first quarter was somehow impacted by maturing hedges and their repricing. But now most of the structural interest rate positions have been repriced and their contribution to the NII is expected to be stable in the coming quarters. And the rate hikes, what we have seen in Russia and Ukraine, should be supportive. We saw a positive trend in the NI and Net Fee and Commission income in the last weeks of the quarter and this makes us quite optimistic for the rest of the year. You have in the lower right-hand box also a detailed overview of the fee income. You are aware of the seasonality which we have at the end by some of the commissions by card partners being paid always in the fourth quarter of the year when comparing first quarter this year with first quarter last year and considering the substantial restrictions what we still have in movements if we compare the two I think that the number is good and gives room for positive optimism in the course of this year When moving to the next slide, and here before we move, I should say that, and you have heard this also in the last couple of calls, in these days, The net interest margin is not that informative as it usually had been. You know, we are flooded with liquidity and also the central bank supportive measures make their way to our balance sheet and by thus diluting a little bit the net interest margin. When looking at the segments, Yeah, what you see here, as I mentioned already, decrease in the net interest margin in most of our segments. As I said, this comes from the high liquidity in these countries.

Loan growth.

you see is in all the markets somehow visible, but as I said, modest at the beginning of the first quarter, but it's visible now. Now, quite a lot of contact with customers, quite a lot of interest. Maybe there's still more discussion than real drawing on investment loans, but we believe a pickup will come also in the unsecured loan in the second half of next year. You still see on slide eight, you see the volatility in the various loan products. You see the stabilizing in the retail area. and the volatility in the long-term corporate spot. Moving to slide number nine, we have almost stable CET1 ratio. You see that the ratios in comparison to the requirements, a very stable picture on slide nine. And the impacts of the development of the first quarter is visible on slide 10. So minus 18 basis points impact from the credit risk. Some additional impact from market and operational risk effects not visible and retained earnings are compensating for that so that we almost end just seven basis points below what we had at year end. You are aware that the dividend was paid out in, so not had been reflected and is not relevant the way we handle it for the CD1 ratio. The 48 cents had been paid out on the 30th of April and we keep the intended dividend of 19 for the business year 19 still in the profit carried forward so that this gives us another opportunity maybe by the end of the year in the fourth quarter for another dividend payment when talking about liquidity you see that the on slide 11 you see that the Huge liquidity, this enormous liquidity is dominating everything in our balance sheet. And of course, the offer from the TLTRO finds its way also in the balance sheet. Currently, we have drawn around $8 billion, $5 billion on head office level, and Tatra Panka took another $3 billion. If we move then to the next slide, which is Poland, and I'm aware that currently there is a communication by the Supreme Court, the Senate of Seven Judges, on the question of statute of limitation and the theory of two convictions. Here I rather give and I cannot in detail comment on that. We will have to look it up. We also had a ruling by the European Court of Justice on the 29th of April to request of the PPH case. I find this ruling very informative, very clear. After our Tupiak case, the direction for legal experts was set rather clear. For non-legal experts like me, it still was difficult to fully understand the intention and the ruling of the European Court of Justice. I think the The very good thing of this ruling now is that it's very clear stating that indexation is not something which is unfair or abusive or whatever. It's one way to create the Swiss franc loan. We also understood that there is a clear declaration that invalidation of contract is only the last resort to resolve case. But the main goal should always be the reestablishment of a balance between the consumer and the bank. And even more so that it's not up to the customer's wish to decide whether a contract shall be invalidated or not, but it's an objective court decision. depending on which parts of a contract might be ruled as unfair. It was again a strong statement that for the consumer there is some support by the court, or putting it in other words, the court has the obligation to inform the customer in detail about the consequences. Following the public discussion, I think it's also important to read in that resolution that invalidation of a contract cannot constitute a sanction against the bank, but it's just, as I said at the very beginning, the last resort to resolve the issues. Personally, I'm I also think that the statement on the blue pencil roll might also create quite a lot of certainty for all this. What does it mean for us? We have a portfolio, just an update for you, of around 2 billion euros in Swiss francs, 31,000 loans. Amortization in the range of 100 to 110 million, so very long-term. High RWA weightings of 118%. Huge number of cases pending at courts, more than 4,700. Recently, we had an inflow of 250 to 300 cases per month. We will see if the ruling what we have seen today in combination with the ECJ ruling, and there's another one announced by the full, by the Supreme Court and the full civil chamber to the six questions which had been asked by the president. And then we will see if this changes anything in the inflow. Coming to the future. Macro outlook, of course, this is on slide 13. It had been, of course, adjusted quite frequently depending on the restrictions from the pandemic. The overall picture is very optimistic. I think everyone is seeing now that vaccination, which compared at least to our expectations probably, started relatively slow. Maybe we were just having too high expectations. But what we see now is that the speed is picking up substantially so that in the second quarter, I believe that many, many people in most of our countries will be vaccinated, at least those who are willing. And with that, I think normal life is back in the service industry, consumption, hotels, restaurants, and we anyhow have seen a strong growth in industry output and also in trade. We always see the headlines that many big markets were recovering very well. So we have a nice forecast for 2021 and a very strong forecast for 2022. If asked, What would it mean in terms of loan growth? We had been asked several times this question in the past, so we added an additional slide, slide number 14, where, based on Raiffeisen research, you see a split between retail and corporate forecasted loan growth in our countries in local currencies. And not to a surprise, I think what you see here is that Hungary, having a different way by the government to deal with the crisis, will keep a double-digit loan growth. Others more, but every, in all the markets, I think it's nice. It are nice growth numbers. And this year, as well as next year, only Croatia, which suffered because of the tourism impact, the structure of the industry substantially last year, and there is a question mark this year. But what we hear is that the country is getting ready to host quite many tourists. Some of the hotels are Of course, we've reduced capacity already open. Those who go there enjoy it very much. Everyone feels safe, handled in a very careful way. Our colleagues in Croatia are very kind. very optimistic and what I report about spending sometimes at the sea does not come from the Croatians, but from people coming from abroad, because tourists from abroad is very important for Croatia. So overall, a very nice picture and And of course, if it comes in the second half of the year in the NII, we will not see the full impact as this is only pro rata, of course. But we are very optimistic that it builds a nice long book until the end of the year and also in the coming years. Coming to our targets on slide 15, I can repeat what I said, modest loan growth in the first half of 2021, accelerating in the second half of the year. To the provisioning ratio, we keep the 75 basis point at the moment, as we have to understand what is the impact of expiring moratoriums and government support programs, but Hannes will talk on that in more detail. Cost income ratio, I mentioned before that we have adjusted the way of calculation. Some have asked, would you then also bring it down a little bit? Not at this point in time. So we keep the 55. Profitability confirmed again that we expect an improvement compared to 2020. We will not reach in 2021 the target of 11%. See at the one ratio, I confirm the 13%, as I mentioned before, the equity acquisition is not in the 13.6 included as of now, as the closing will only be in the second or third quarter. And I confirm also the payout ratio. And with this, I hand over to Hannes.

Thank you, Johan. Also a very good welcome from my side. Dear all, well, reflecting on the first quarter of 2021, we have seen risk costs coming in at 79 million euros with a stage three of 44 million euros only. We have seen rather low inflow on stage three loans. I will talk about this a little bit later. Given another lockdown and another lockdown, we thought it's consistent, adding a little bit of the BOS model adjustment, summing up to 26 million euros. leading to an NP ratio of 1.8% and 61% of coverage. I'm now talking about page 17, where you can see that we have seen growth by some 11.2 billion euros, mainly coming and born by the sovereign exposure increase. And also on the corporate side, we were capable to demonstrate an increase by 2.1 and on the retail side by 0.8 billion euros. I already move on to the next page, number 18, As said, we have seen very low inflow in the Stage 3 bookings, which I, of course, very much appreciated. But because of this renewed lockdowns are impacting, of course, mainly the service industry again increased our Stage 2 post-model adjustment, especially on the hodl portfolio, leading in the total sum to 79 million euros of risk costs for the first quarter. and to an N-P ratio of 1.8%. Since I would expect that there is one other question when it comes to the risk-cost guidance, I have asked the head of investors' relations already to give me two or three key words regarding the assessment. So supportive, what could bring the risk-costs lower? As said, we see currently very strong momentum in the leading industrial indicators And also now the leading indicators on the service industries are picking up. When talking to our clients, we learn from them that the order intake is at the all-time high and the support funds given by the governmental measures are not yet fully put in place. At the same time, and I'm not one of these 8 million Austrian experts when it comes to virus mutation, but still reading the news, this could be in place that we see some differences how this virus is developing. What I'm pretty sure on is we see currently a gap on the default rates compared to historical inflow. Last year in Austria, 2019 versus 2020, we have seen 30% lower inflow to defaulted and insolvent companies. And also this year, year to date, Again, comparing with 2019, which was already a very good year when it comes to default dynamics, we are now lagging behind by 50%. Assumption could be that at a certain stage in time, we see a closing of the gap versus these historic default rates. And last but not least, of course, all these very supportive contributions, which we all enjoy very much, they're also causing structural challenges. We now see that In the 100 industry, we see some shortages on goods. I'm moving on to page 19. This is more for your reference that you see that one could say we have done our homework. So the full corporate portfolio, of course, is completely reviewed. When it comes to the credit rating, 40% of them already have been reviewed two times. You see what happens to the portfolio from the beginning of 2021. to the first quarter of 2021, 39% of the customers have an unchanged rating, 34% have an experience in downgrade, and only 27% experience in upgrade. So swiftly talking about those who have experienced the dynamics, you can see on the left chart of this slide in the middle box that we have a very solid going in portfolio, a rock solid going in portfolio. And we see the shifts mainly from really minimal and excellent credit quality to a very good and sound rating quality. And the industries which have been subject to the downgrades are posted on the lower part of this chart. Let me move on to the page 20 when talking about moratoria. While at the peak, we had to report 10.7 billion euros of our exposure being subject to moratoria currently. Outstanding is 1 billion euros. It's equally distributed between households and corporates, 520 from the household side, 338 million euros being also covered by collateral and mortgages. On the corporate side, we have 206 million euros collateralized out of the 515. So how do these exposure perform? And last year on the retail side, without having the deep knowledge how this pandemic situation could develop, we were assuming that maybe some 10% may need another restructuring or support from the bank. Today, I'm happy to report that almost 93% completely resumed their regular payment. 3% were asking for further restructuring. and 3.9% of those who have consumed the moratoria unfortunately defaulted. On the corporate side, the situation and the dynamics look even more benign. 98.6% resumed completely regular payment. 0.1% of these clients have asked for further restructuring, and 1.3% of them defaulted. I'm moving on to the RAA development. I think it was covered already by Johan when he was talking about the CAD1 dynamics. And so I move on to my last page, page 22, where you can see now we have an MP ratio of 1.8%, a good coverage ratio of 61.2%. And if we would sum up as some other market participants are doing this, all stage one coverage and all stage two coverage, This would give us a full MP coverage of 96%.

Well, having said all this, we are now eager to take your questions. Thank you.

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 that the new function on your phone is turned off or we will not receive your signal. Once again, if you have 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 of questions to assemble.

Our first question comes from Anna Marshall from Goldman Sachs.

Please go ahead.

Good afternoon. Thank you for the presentation. Two questions from you, please. Firstly, in terms of NAI trajectory in the coming quarters, could you please confirm the key drivers and, if possible, quantify some of them? So to confirm, basically, it's long growth, which you expect to accelerate in the second half of the year. positive impact from hedging and rate hikes in Russia and Ukraine. Is there anything else missing in the picture? And basically, could you quantify the hedging and hikes impact? And then in terms of capital, which is my second question, on the adjusted view of capital, including interim earnings, What is the assumed dividend allocation from 2021 earnings, Q1 2021? Thank you.

Thank you for your questions as regards to the NII. I think with the steepening of the yield curve in some of the markets, we are a little bit relieved in the In the past, we were worried about an additional negative impact by this structural hedging of liabilities. So this is, as I stated before, I won't expect any further negative impact from repricing as far as the... Ruble and Krivna hikes, what we have seen so far, this could add a high single digit, low double digit, very low double digit positive impact on it. The key drivers for the NII will be the loan growth in these days and it of course the most positive impact might come from unsecured lending in the retail area the the mortgage business was doing very well but the in most of the markets the the margins are small in that so it's it's that that's less supportive What was weak is the outstanding on credit cards. In our area, this comes to a large extent also from people traveling, and with all these restrictions, this was smallish. When talking about dividends, Yeah, we usually throughout the year, we do about 20% of the profit. So in the first quarter, it was about 40 million, which was accrued for dividends and therefore not in the CT1 ratio.

Thank you.

Thank you. Our next question. comes from Olga Veselova from Bank of America. Please go ahead.

Well, thank you. Good day and thank you for the useful presentation. I have several questions. First one is about your Polish unit, your exposure to Swiss franc mortgages. After the Supreme Court rulings on the 7th and 11th of May, do you think you can consider participation in the loan conversion? or that's still not interesting for you given that the solution is not systemic. My second question is about M&A. Would you consider now emerging M&A opportunities? I'm in particular interested in potential M&A in Russia. We all know that Citibank is exiting the market, a party exiting the market. Do you think this could be an interesting opportunity asset to look at or your exposure to Russia is close to your cap in terms of risk-weighted assets. And my third question is about a page in your presentation. Let me open it. It's page 14 where you show the loan growth forecast for CE. This is a very useful outlook which you provide here. So am I right that this is for the banking sectors, not for the group? And if that's the case, how you would look in each region versus the market average? Thank you.

Thank you for your questions. I have to say the sound quality here in our room was rather bad. So please, if I do not, in my answer, if you get the impression that I probably have not understood your question, in the way you intended it, then please interrupt me and maybe ask again. What I understood is what is, depending also on the outcome of the rulings of these various courts, our willingness or our interest in participating in a systemic solution. I assume you have in mind that BKO K&F proposal. So our view is that the rulings what we have received from the European Court of Justice and the quick info what I got also from this today's, but here I have to ask that you give us two or three weeks time till we find in writing so that we do not misunderstand anything. I think the core of the question till now, is there any abusiveness at all in the Swiss franc contracts? If yes, which part of it? Can it be eliminated without challenging leading to an annulment of the total contract, has to be answered by the courts. My strong personal view is this is not the case. You have indexation, which is also what I understood from Polish courts, but even more so from the ECJ, clearly confirmed that that indexation per se is, is neither abusive nor unfair, nor anything else. Cause it was the intention of both the, the borrower and the bank to create a loan, which follows the rate environment of the Swiss franc. and with that also comes the currency movement. Um, and, um, And what I also understand is that many, many customers have changed their behavior. And instead of paying in Swati, they paid their installments in Swiss franc. And the annexes which then were necessary were created as a result of the will of the changed behavior of the customer. So there are quite a lot of arguments why unfairness exists. is not a systematic issue, but is rather something which has to be viewed in the single case if there is anything. So nothing which is systematic wrong, but there might be something wrong in the single contract. And the other reason which we also gave is that this voluntary agreement might not, as of what we know now, might not create this certainty, this legal certainty. I don't know if after the European Court of Justice ruling and maybe also after some Supreme Court rulings, we then find a way or it leads us to a way that this... legal certainty will be created, then one could consider something. But currently, I rather believe that it's to the courts to take this objective decision on every single case. When talking about M&A, you're right, we never mentioned Russia. Russia has an important... contribution to our overall P&L to our revenues to everything we we love it we like it we are proud of it in the past we we have acquired the one or the other loan portfolio from a bank Western Bank which was leaving the market this was successful we can repeat success successes of course we don't need a full M&A at full scale because here we believe our bank is big enough.

Some room we might always find.

When talking about the loan development, I think in most of the markets we We believe we can grow with the markets. It might happen if in one or the other segment the price competition is overheated. We would not fully go to our potential. So we are always price cautious. We have seen this in the past. So let's assume If the price competition is reasonable, we grow with the market. Otherwise, it would be a little bit less. Thank you for your questions.

Perfect. This answers all my questions. Thank you so much.

Our next question comes from Gabor Kemeny from Autonomous Research. Please go ahead.

Hello, I will just continue on the Polish FX situation. I understand that you expect an individual approach with the ongoing court cases as a base case. You gave us a useful estimate on the potential impact of the voluntary settlements on the last call, which I believe was 40-45% relative to the loan values potentially. Would it be possible to give us a range of the impact of the ongoing litigation. So let's say the court cases continue as you expect, like 200, 300 new cases per month. What additional provisioning may that require in the next few quarters? And another question is if you could give us an update on what kind of RWA inflation you expect for the rest of the year. Thank you.

Referring to your first question, the Swiss franc mortgages, if we end up in litigation and if we then lose a case, which happened relatively often in the recent months, I think the the loss what we then face might be around this 45%, if I remember correctly. As I said, the new cases on average 250 per month over the last four months. And yeah, the number of cases which we were losing at court was increasing in the past year. I mean, of course, I hope that over time, we more and more will come to the real question, what is at all abusive? And of course, you might say, I have a very biased view, but... The clearer the ECJ ruling is, the less I understand what it all will be abusive after this development. So this is my answer to the first question. I hope it covered it. And then the second is, so the RWA inflation probably means the inorganic or whatever you would If Hannes is not precise enough, you would re-ask, of course.

What happens to the RWA inflation? I think what you have seen in the first quarter, Gabor, are a couple of things. The one is, one could say, inorganic on the market risk side. We have done a quite pronounced hedging, over-hedging in the first quarter, expecting the dividends to be paid. That was the first thing. Of course, this is being now reduced. That's the one big thing. The other thing what we must not forget is that on the retail side, there is the expected change on changing from a point in time RWA way of calculating through the cycle way of calculating. And on the rating migration, given what I have talked to you and reported to you, My current main assumption is that we are done. So having said all this, part of the RWA uplift on the market risk side hopefully is returning back, of course, subject to the volatility first thing. On retail, please do expect that there is a certain uplift when it comes to the RWAs because of this change of methodology. This could sum up to about 1, 1.5 billion euros in total. This I would consider an organic rating migration. I was talking about this. And the rest hopefully mainly comes from the growth of our balance sheet. Hopefully this helps.

Thank you. Our next question comes from Alan Webber from Societe General.

Please go ahead.

Oh, hi. Thanks for the call today. Could you give us a little bit of an update on how you see the market progressing in Russia? Do you think that the margin will actually go back up from where it is in Q1? And clearly, retail lending is quite strong in the market. Could you just give us an idea about how 2021 has shaped up so far And also, briefly, could you do the same for Ukraine? That would be helpful. Do you think the check market has now sort of bottomed out in terms of its margin, or are there other sort of securities repricings or anything else to come that will put further pressure from where we were in Q1? Those were those two questions. And then I guess, you know, More generally, on the competitive environment, when you say you will grow in line with the market and less competition is particularly tough, is the relatively low level of growth in Q1 a function of demand or is it also a function of competition? competition in terms of there's an awful lot of liquidity around and that would be my second question.

Thanks.

When starting with Russia the start in the year was slow and the competition is negative currently on the margin so we have seen a reduction in margins in the assets as well as on the liabilities. I think it's fair to assume that with the increasing central bank rates or with the hike in the central bank rates, this will be to some extent also supportive on the margin. Yeah, I've been talking to our colleagues in Russia. They are... rather optimistic as far as the next couple of months are concerned. As I said before, the first two months were really slow in our bank in Russia, but the last two months were substantially improved. In Ukraine, I mean, our bank in Ukraine is rather small. So here it's the asset base still. I think there is room in some areas for loan growth. So here our policy is to, over the time, move a little bit from the money which is placed with the sovereign or the central bank to some more loan. But, you know, here the... It's rather the rate level which makes the difference. I would assume that in Czech Republic, The margins are at the bottom. Here and there, we see some of the competitors who it's difficult to make a forecast on competition there. In this market, it can always happen that one creates a specific attractive offer. I won't expect it in these days, but I would not exclude it until the year end. And your last question was our own long growth I understood versus the market. Is this the way I should understand it?

I guess it was sort of... Go ahead, please. What I was guessing at was that You've had a fairly slow start in general to the year. Is that being impacted by competition levels that you're not happy with, or was it simply a function of relatively slow demand at the beginning of the year?

Yeah, I think it was in our area a combination of a little bit less demand from our customer base. This I could confirm when talking about pressure. In some markets, it's also the pressure Here probably it's more the TLTRO-driven area, so wherever Euro is involved, which creates additional pressure in some of our markets.

Great, that's helpful. Next question comes from Johan Thormann from HSBC.

Please go ahead.

Good afternoon, Johannes Thormann. Two follow-up questions, please.

First of all, on the risk-cost guidance, yes, thanks for the supportive and downside comments, but still looking at the statements from yourself and the fact that we saw less risk-cost in 2020 and Q1 was probably also far below the anticipated run rate for 2021. and the very bullish or relatively bullish outlook by the CEO for the economic environment. What is really needed to get to 75 pips in the full year? What does have to happen on the corporate side, for example? And secondly, just to get a feeling for your view of the current thinking of the regulator, How likely do you think a follow-up dividend in the fourth quarter is currently?

Well, if I may start, and of course, our CEO gave me a very nice stage and intro, and I fully share this very positive economic development. The fact is, in risk management, I think what we currently see is that the industry, as we have announced last year, is exactly going is moving along this path so we see some of the parts of the industry clearly benefiting and this you know we will maybe see the one hour upgrade I'm happy about this and I'm anyway happy for all entrepreneurs if they are successful at the same time what it would need and I tried to indicate is the big curve and closing the gap versus the historical run rate when it comes to the default rates and In the end of the day, the calculus is not so difficult because I would need to have some 1 to 1.5 billion euros out of our big part of the corporate portfolio to default or to face financial troubles causing a default. Luckily enough, we did not participate in any of the bigger defaults in the short history. So this is what it would need. This is Johannes. We need two things, the pickup to the historical run rate and the other thing would be the one or other big default. And you interpreted me completely right. You know, basically we are constructive. And this was the point which I tried to make is please give me the time till Q3 to see the full, when it's true, when the support mechanisms from the governments are being implemented. lifted. We still have EG in Austria, the insolvency law being seized. So this means that by nature, there is a gap on the run rate when it comes to the defaults. And this is what we still need to see to clearly assess the full dimension. What it would need, I would need to have 1 to 1.5 billion euros of defaults on the non-retail side, that we still would be on this around 75 basis points. And hopefully we see much clearer by Q3. Hopefully this helps a little bit.

That's a lot. Thank you. That's a lot. Thank you.

To your second question, I mean, this is a very difficult one. Yes. Because if you ask me, Given this fantastic development, what we see in the recovery, the forecasts everywhere, there is no reason for a further dividend restriction. Still, when our people talk to some of the representatives of the ECB, they come back with some cautious messages. One element could be that the ongoing stress test might lead to a result which gives them additional room for calling for cautiousness. Why do I say this? I think over the years we have had many stress tests and we can compare now how it's going and how it's developing. And this time, it seems that the feedback what we get, it seems that we should expect some very painful outcomes from this stress test. Because otherwise, it wouldn't make sense the way it's handled. Is there any good reason for that? I don't know. Maybe it's the dividend. So some uncertainty remains. I don't find any macroeconomic reason why it should stay.

Thank you. Next question comes from Tobias Lucas from Kepler Chevro.

Please go ahead.

Yes, good afternoon. Thank you for the presentation. Two questions from my side as well, please. First, may I touch on the TRTRO again, please? From the notes, I understood that the total amount you've drawn is now around 8.1 billion, correct me if I'm wrong. Could you please split the impact for me again? So what is in the numbers potentially? And secondly, what is the big lump sum that we can potentially expect for this year? And then going forward, I mean, Looking at these numbers, which are more or less baked in with your competitors on a quarterly basis, what do you think about future instruments? We just had the stress test discussion. How are regulators approaching the kind of beneficial instruments ahead in the future? So how do you expect the TRTRO or different instruments to support you even beyond June 22. Thank you.

As far as your first part of the question is concerned, the TLTRO, we believe it was not confirmed that we met the requirements for the bonus by end of March. This would lead to a 22 million positive impact on RBI head office and another 6 million on our subsidiary in Slovakia. It's still an ongoing discussion when it will be recognized. So our finance people are discussing with the auditors if it's spread over three years or any other option. Maybe at the latest stage I can answer that. I think the fight for loans to get also the benefit on the next tranche will be huge. We have seen in some markets that banks pass on parts of this bonus or, I don't know, by the end of the year, everything to the corporates. So here it's... A mixed picture what I see, but maybe it needs another quarter or so to better understand how banks really behave. But as I mentioned before, currently we participate on group level by 8 billion, 5 billion on head office and another 3 billion from Tatra Bank. These are our two banks who, you know, the rest is outside the Eurozone. And the second question will be answered by Hannes.

Tobias, you know, the way I understood your question is what support mechanisms we still do expect on a broader scale. Is it from the institutions or is it also from the government? Well, I think there are a couple of things which will stay hopeful. The one is the SME support factor. When also talking to the institutions, I sense the quite big willingness also to provide a portfolio is it on the mezzanine or is it on the senior part of the structure, leaving the underwriting and the consequences of an appropriate underwriting with the bank. We did still not see the support funds really making their way to the real economy. At the same time, having said all this, we also hope that some parts of the legal framework influence, e.g. the ceasing of the insolvency law is being put back in place. And I don't know if you have read the article and the paper from the ESRB when talking about, is there a company which is viable in having a business case and a business model? So I also sense the strong political commitment that those companies now facing maybe the one out of trouble because of this specific situation and having a viable company structure that even here and there equity instruments could be considered. This discussion is not yet finished. I can report from Austria that there is a deep discussion on how these companies could be supported, either on the SME side or on the corporate side. But what I sense is that there is a very broad, common understanding. If the business model is a viable one, instruments shall be found to support the respective company. Yes, this would be my swift reflection to what is my assessment on the current support mechanisms at the same time. Hopefully also bringing back some of the normal environment to get the clear picture on the real dynamics.

Thank you very much. Following up on the RWA, if I may, if I understand you correctly, you have a 13.6% starting point. We have more or less one year of dividends still accrued, right? That's deducted. So looking ahead with the M&A, we deduct 30 bids, so we had 13.3. And with the RWA, you said it will be a billion to one and a half billion, if I understood you correctly. If we then deduct the 0.6 billion of market risk, which I understood was a kind of extraordinary in Q1, but might be disappearing in Q2, And we are around one billion without loan growth. Is that a correct assumption going forward, basically, from what we know today?

Well, you have been very fast, Tobias, I have to admit. And my colleagues from the investors are more than happy to revert. On the market risk side, please bear in mind, you know, you always have the 60 days window. So it will take a little bit longer until we can, that the now more elevated RWA is because of risk costs would not be seen anymore in the reporting. So we could see it maybe by the Q3. This would be too early. I don't know if in your SWIFT calculation, you also incorporated the year-to-date profit till the first half year. And on the many other things you quickly shared with us, I would be tempted to to agree with your statement. And please do not forget that we also, of course, have still the potential of security stations in our hand, which we also demonstrated last year and executed successfully.

Understood. Thank you. Next question is by Ricardo Robert from Mediobanker Group. Please go ahead. Yes, good afternoon to everybody. A very, very quick one.

I joined the call with a little bit of delay, so apologies to that. If you have any case, in some case, you have already answered to this question. With regard to the recent movement in rights in Russia and Ukraine, what we should expect in terms of margins in donations and NII and NII contribution in those two countries?

Yeah, the rate hike in Russia, the rate hikes in Russia and in Ukraine should be overall positive on the NII at a level of, let's say, low double high single digit.

So if I add it up, then my colleagues advise me here.

So my IR people are not happy with imprecise answers. So they say, why don't you say it might be 24?

So I make this statement, 24 in both markets together. Ricardo, any other question? No, it's not the case.

Operator, is there one more in the queue? Yes.

Next question will come from Mehmet Sevim from JP Morgan. Please go ahead.

Good afternoon, and thanks very much for the presentation. I have just two remaining questions, please. One on the cost performance, which is very solid so far. And based on the trends, how do you see costs develop in the next three quarters? And do you think it's still reasonable to expect the cost base at the level of 2020 this year? Or do you think there is room to maybe beat that ambition? And my second question You have recently announced a business, BNPL, Buy Now, Pay Later product, I think, in Austria in a partnership. Could you please give some more details on this business? So, for example, would you be taking up the credit risk and what would be the fee and interest structure? And more generally, do you think there is an opportunity to launch a similar product in other countries, given how popular it is currently elsewhere in the world?

Thanks very much. Yeah, thank you for your questions.

In terms of OPEX developments, our guidance would be that compared to last year, we see a small increase by two percentage points. We do quite a lot to get our organization much more efficient and we have identified quite a lot of of tasks for that. Some of this takes time, so end-to-end automation, the remodeling of the branch network. On the other hand, currently this goes hand-in-hand with some additional IT investments and of course IT people in all the markets are a scarce resource and they are significantly more expensive cost per head as any other bank employee. And then I understood you had a question on the Austrian... Probably this was a message we had in the news of a small cooperation with, I hope you're heading in this so that I really get your question right. We teamed up with FinTech, which is called Creditou or its product, Cashpresso. And yeah, this is a company which... In the past, I had a German bank as a partner. In our case, they will do the sourcing of loans and we will take the credit risk on that. It's, compared to our size, a small business as of today. But I think it covers some channels which we did not approach today. The reason why we partnered with them is they have solutions which are currently in place in Austria and a very small amount. Also, this is an Austrian company and in Germany. But I think they partnered with us because we see there is a potential also in CE and over time the portfolio will grow. I hope this was what you were referring to.

Yes, that was exactly. Thanks very much. Next question.

Maybe there is one operator, please excuse me. There was one from the chat, the question which I should read, which says, what are your expectations regarding Polish Supreme Court ruling which should be announced on the 11th of May? It's difficult to say. You know, it's It has been postponed for many reasons, two times already. I think that the questions so far have been phrased in a very clear way, very important questions. On the other hand, it's difficult to see if this court would also consider the ruling, which I was elaborating quite in detail. So the recent ECJ ruling, we'll see. We'll see if, I mean, of course, I would appreciate if this ruling these various elements more and more fit together. I think also the today's decision does have some impact on the overall puzzle. So sorry that I can't give you more insights for the coming decision. Thank you. And now operator, sorry for interrupting you, please.

No problem. Next question comes from Robert Brazoza from PKO BP Securities. Please go ahead.

Good afternoon, everyone. I have one follow-up question on the cost of risk during the quarter. I see that you had some releases of the post-model macro adjustments, and my question is whether these were more or less equally spread across all the geographical areas units or whether there is some perhaps country or region left behind and given that you already upgraded your macro forecast does it also imply that the potential for the further release of this macro provision is now fully I mean sort of done there is no more potential to release it and second when on provisioning level could you elaborate more on what has happened regarding the provision for sanctions in Russia because I believe there has also been some movement in this regard. Thank you.

Thank you for the question, Robert. I very much appreciate it. So it's a split back what we have seen on the non-retail side. We did not meet users currently to a large extent on the on the post port adjustment which we have created last year. What we have seen is that on the non-retail side, in fact, you're right, because also of our persistence on the workout, we were capable to collect here and there the one or other euro. At the same time, in retail, we have seen a split door. We have seen, e.g. in Hungary, that we made use of the post-model adjustment at the same time by the local regulator. It was requested that we book certain loans subject to the moratorium as a state three. So it was this post-model adjustment which was created last year was perfectly serving our purpose that we think can use it later on. If I would take your second question when it comes to the provisions for the sanction in Russia, I think the sanction game is ongoing and what we also have done is that already with the inception of IFRS 9, we clearly reflect that there is this potential risk back in 2018. But looking now at the way how the US administration is making use of the sanction, they are extremely precise. And mainly it's about the individuals which they're putting on the sanction list. And on the corporates, the administration is also extremely precise. I think the first wave of sanction has been very broad-based. So after three years, we have reconsidered how we can make use of it and reallocated it also to the corporates and to the retail partly. The money is not gone, but we relocated it because we believe that this is a very broad, unstructured approach when it comes to second sanction belongs to the past. And we would now see much more precise way of tackling the sanctioned subject or legal entity or private individual. Hopefully this helps Robert.

So it didn't affect the PNL-based provisioning, it simply was reallocated from like kind of general into more specific provisioning, thus increasing the level of loan provisioning anyway. Correct?

Yes, indeed. Yes, indeed, Robert. Thank you. That's exactly the way we did it. So we have released it from this bucket, but making use of it for other buckets.

By the way, what was the size of this adjustment in total?

Well, the Russian one was somewhere around 40 million euros, which we reallocated to other buckets. So releasing some 40 million euros on risk costs, stage two allocated to sanctions, we have reallocated them.

Okay.

Thank you very much.

You're welcome. Bye.

Next question comes from Simon Nellis from Citibank. Please go ahead.

Oh, hi. Thanks very much. Actually, most of my questions have been answered. But just one last, maybe two clarifications. So you mentioned the impact of rate hikes in Ukraine and Russia would have a 24 basis point impact on margin. I wasn't quite clear what that was.

Million euros.

Million euros.

24 million euros.

And secondly... Just to make sure I understand your provisioning policy on Polish FX mortgages, you're only creating provisions once you've lost cases. Is that right? Or is the $15 million, does that include any kind of forward-looking view on potential litigation costs for pending or future cases?

Yeah, almost nearly, I would say.

There is some element also for the inflow. So in essence, it's a model which covers the trend in the inflow for one year plus the ratio of what we are losing. And this leads to that. But the dominating element is the rate we are losing. And recently, this was rather high.

I see. So, so if the trend continues, then you're already fully provisioned for this year. That's what you're saying. As long as the loss rate doesn't change.

Yes. Um, yes. But if you say the trend continues, then, then, then, yeah, it's, um, I, I dare to say that after the ECJ ruling and hopefully a couple of other rulings, uh, the inflow gets less and less. But we will see. This we will see.

Okay. Very good. Thank you. Thank you very much. Thank you for all your questions.

If you have any more, please remember to press the star 1 on your telephone keypad. The mute function on your telephone needs to be turned off so we can get your signal.

We'll now wait for just one moment.

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

Thank you very much for your time, your very good questions, and for your ongoing interest in RBI. Thank you very much. Stay healthy. You know our financial calendar. And we are next in the market with news. And from now to that date, we have a brilliant investors relation team, which is keen to answer all your questions. And if any questions to Hannes or me, please feel free to call. Thank you. Have a good afternoon.

Bye-bye.

Bye.