AB Artea bankas (ROE1L) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Vytautas Sinius and I'm CEO of Siauliu Bankas. Very much welcome to the presentation of our new strategy and thank you for your time allocating for that and your continuous interest into Siauliu Bankas and its developing story. Today, I will not present alone. There will be the team of colleagues that has joined me to this presentation. So some colleagues will go together with me through the presentation. So that's Tomas and Laura. And other colleagues will support us in our Q&A session. So that's Donatas, [ Indra ] and [ Pelgimantos ]. So please prepare your questions, and we'll be happy to answer them during our Q&A sessions. So let's get started. Today, we're going to cover several things. So we had three goals today. Firstly, to give a better understanding of who we are and what differentiates us from the other market players. The other part is our journey ahead. Our exciting and compelling story that we're willing to share with you, and also our road map of becoming the best bank in Lithuania by 2029. And last part is about opportunity, about opportunity for investors to consider us as an option of -- to invest. So let's move on to the who we -- before we move to who we are, I want to be blunt and clear, and we want to state immediately that our aim, our ambition is to become the best bank in Lithuania by 2029. And this ambition is supported by renewed mission and vision of the bank. And we consider that Siauliu Bankas will deliver banking that truly empowers and we want to add our strong features that we used to have as Siauliu Bankas with additional ones such as being progressive, being even more customer-centric and remaining caring and close to the clients. Our vision is to be the bank you choose to grow with and that goes for the clients, that goes for the employees, that goes for the investors. The ones who want to grow and the ones who want to choose a partner to link the either business or a private financial life to help to grow. Talking about ambition, stating that to be the best bank is not enough. We decided that we will make [the ways how we'll] measure that, how we will define our success. So firstly, for the clients, we want to be -- giving the exceptional customer experience, to be the #1 in the country on the client experience through the services, through the products, through the total experience that customers can feel working with us. The other one is we want to continue our growth, and we're committed to grow faster than the market. The next one is about recognition of being top of mind for customers in Lithuania, top-of-mind player and beloved brand. And for the investors definitely to be and to continue to be interesting investment providing superior returns. And by that, I believe that we can be defined as the best bank in Lithuania, and we'll measure that during the period of our strategy. So just to remind and to give some more information for those who are not that much familiar with Siauliu Bankas, so who we are. So firstly, we are largest independently owned bank in the country, with the largest network of branches. We have 55 branches in the 36 towns with expanded team to more than -- to more than 1,000 professionals after the merger with colleagues from [ INVL ] and also, we are already, for almost 30 years listed on the exchange, currently on NASDAQ Baltic Stock Exchange. And going forward to our market capitalization close to EUR 0.5 billion. We have a diversified business model. We provide different type of services. Our historical focus is on lending products, but now we're growing and expanding our business model and becoming more and more universal. On the right-hand side, you can see key investment highlights, and I will go through them one-by-one to explain a bit more while we are [interested in] investment even today. Talking where we are, we are in Lithuania, our country where we operate, which is dynamic, robust and structurally attractive markets. I would say timely memberships into the NATO, EU, Eurozone, OECD helped us to converge and to grow faster than some other peers. And by that, we have reached a level of already developed nations. So our GDP per capita is already close to 90% of EU average. So we are Western-oriented diversified economy, and that's one of our key successes, even growing in such periods like a pandemia, like war in Ukraine. So in even those periods, we overperformed other countries in EU, and our dynamic of growth is -- remains strong. The next point is about banking, how we look among other countries. So again, we have both currently fast growth. It's approximately 15% growth over the last 5 years and also still not matured banking assets ratio to GDP that shows that our potential to grow further truly exist. And it's a question of time how and when we'll converge to the right-hand side group of countries. With that, we maintain high profitability. Lithuania is close to 11% of return on equity over the last 3 years compared to the average in EU about 5%. Quality of credit is also high. So we close to 0.8% over the last 3 years, while the EU is much higher. So even with those parameters, we show that Lithuania banking sector is strong and developing well. Our historic focus is on the lending products, as I said, and we have established strong position there. We started with SME. Now we expanded to SME and mid-cap financing and we're doing that well with a flexible, tailor-made, fast decision for the clients, and we have reached 13% market share. We added later products that are supporting private individuals and expand it into three directions. So one is the consumer financing and others are mortgages and another one is renovation projects, which rather specific product for Lithuania, where we are having a leading position. So renovation is the product where we stand at 2/3 of the market while the mortgage lending, which we started to offer recently, I would say, 6 or 7 years, we became more active. Now we reached already more than 6%. Consumer financing is another area where we feel a strong position and leading position in the market with a full coverage of consumer lending products to private individuals. We never competed on price. The price is an important element, but expertise, consultancy, fast decisions, good service, all those elements allowed us to be above the market with interest margin, and that stands approximately about 1.5% our net interest margin above the market. And with the cost of risk also quite moderate, that allow us to generate additional profitability for Siauliu Bankas compared to the peers. Another area is to demonstrate our growth about our reach scale. The scale of more than EUR 4 billion that has been reached in '22 and continues to grow, shows our potential to reach the level when we can grow our business model further and to do needed investments. We managed to combine two things. One thing is the organic growth and M&A transactions. And the last decade was very important for us to -- in that field as well. And we expanded our business during the 4 M&A transactions from 2013 to the latest, which we completed last year. And all of them were in different areas. And I would say we manage them very successfully, and they were stepping stones for our organic growth moving forward. And that is represented in our net interest income growth, which is on average about 20% and on our return on equity, which is close to 17% during the presented period of time. So that we can state the key takeaways that we've reached potential scope that we can do, as I mentioned, needed investments and to grow further on that scale. We're able to deal with M&A transactions swiftly and to use that as a growth potential for us in the future. And we demonstrated that during the long period of time, we're generating mid- to high teens of return on equity. I will not go very deep into the balance sheet analysis, but several things wanted to be mentioned that we are deposit-funded institutions. So our core liquidity comes from the deposits. And we are -- they are predominantly local deposits, but we have an infrastructure that allows us to access the European Union countries. And in case of need, we can access liquidity there but our focus and our clients in Lithuania. We have robust our capital level, even comparing with the peers. So we have a strong capability of growing further. And also strong liquidity position is also important those days. We need to have additional liquidity for the growth. And we always try to manage that to having sufficient safety and also efficiency. The current situation in Lithuania shows that the country is providing us the growth momentum and the opportunity to expand in this country through the private individual and corporate client needs. The other element which is important is that the trends in the market, in the society, the growing wealth in the country as well as demographic shifts shows that we need to focus even more on saving and investment products. So we're ready for that after the transaction with [ INVL ]. So we have, I would say, the best offer now in the market and will develop it further on the savings and investment product [palette]. The other part is important is shareholder structure and the recent change -- recent changes in their demonstrated belief in the new players, new anchor investors who've chosen to be closer to Siauliu Bankas and to invest significantly and support our bank in a growth story. I'm talking mainly about [ INVL ] who increased their stake up to 20% with the current transaction also Willgrow, Tesonet, also naming such a long-term partner as the European Bank for Construction and Development which is our investor from 2005 and not even naming the founders or early-stage investors who are even after the entrance of new investments remains and believe in Siauliu Bankas story after the period when they were more active in the bank. And the last element in our belief of the future for Siauliu Bankas' growth is that our merger with [ INVL ] which has given another stimulus for us to gain expertise in Asset Management business, also we see the operational synergies and ability to create even more competition for the major banks in Lithuania. So with that, we're starting our journey for Siauliu Bankas' strategy, new strategy for '24-'29, and let's go there. So just to remind that what I've started with is the new mission, new vision and a few things that are important for us internally to make able our journey as smooth as the -- being even more customer-centric. And I would say we have an exclusive opportunity in the market of -- looking to our routes, looking to our history of Siauliu Bankas and the proximity to the clients that we are the ones who are potentially the best understand client needs. So we will base our customer centricity on that. On the other hand, we have compliance and risk management. And for the long term, Siauliu Bankas has been able to cope with all the challenges that Lithuania and the banking sector went through, and we managed to be compliant and risk, good risk managers through support sustainable growth. And those two elements for me is like a balancing factors when we need to develop both client centricity and our practices in the compliance and risk management that would support a sustainable growth. As I mentioned earlier that talking about being the best bank in Lithuania by '29, we've chosen several stakeholder groups where we want to be the best and we want to be a bit measured since the ambition needs to be measured. It's not enough to declare that you want to be the best bank. So firstly, just to remind, as I mentioned, on a client perspective, we want to be giving the best service and best experience for the clients. So through the products, through our dealing with the clients, through our technology that the clients would have the best experience dealing with us. For the employees, which is also critical to maintain and attract new talent, to be the top three best employer in the market and giving the possibility for professional development. And we differentiate ourselves from the market the way that we -- the only bank from the larger ones in a country that provides the 100% of possibilities to develop everything here in Lithuania, whether it's product development, client service, risk management, all things are done here by the colleagues in Lithuania. From communities or social aspect, we want to be the best known and most beloved brand in Lithuania in the banking sector by 2029. That's another our aim, to be emotionally attached to this country even more and that each Lithuanian [indiscernible] personal business should be proud that the country has such a bank. And last but not least, the investor side that we want to guarantee at least two things. So one is the return on equity, which is 15% or if we say -- look at broader, we want 20% rate of return for investors and also to guarantee the growth that we want to not be only the selected client bank, but also the bank on a larger scale, both in our corporate lending, in corporate client segment, but also in the private individuals. We base our strategy with strategic priorities. During the 2023, we worked hard on several things. So one thing is the strategy development. We thought and considered what is important and what is not for us. So the strategy, the M&A transaction with [INVL], that took also our efforts to make it happen and to start the first December as a one team, what we did. And also important element, which was not communicated at that time and now we stated clear during our strategy presentation is the technological upgrade. So one of our strategic priorities, as you can see, is a new core banking platform and we consider that as a one key enabler in order for us to expand bank the way we want to do, the one -- the way we want to grow. So this is very hard to do without that. We've worked with our current system for a very long time, but we see as a limiting factor for us to make this leap. And we made some movements to that direction. The other areas like rebranding, commitment to digital, customer-centric and also compliance and ESG are other priorities that we will focus during our strategy, of course. So let's get deeper to the technology side now. And I would like to present why we need this platform. So the one thing is the growing business needs. We see the speed of development and broad coverage of the different type of products that we have. So we need the system that will be more flexible and able to be in time with the changes. Flexibility is also needed. So that's another element. Higher resilience in this unstable world is also critical to have top-notch service providers in that field. And when we added all those things during the last year's discussion about strategy, about the transaction, we've seen that to go to this direction is critical, it's important. And I know that those transformations are not easy, but we have an experience with -- from a different people in the team, we know how to do that. So our external and internal resources are prepared for this journey with a technological platform. So approximately, it will take about 2 years. We're expecting that to do in that period of time, and we are committed to this development. So there are more information about benefits that we can gain from the new platform and mentioning several so as I said, has accelerated -- accelerating the growth. So we could be much more innovative and innovative in a new way, more new products, which are critical for especially retail banking, when you want to cover all the client needs and become fully universal, faster and -- faster time to market, which is, as I mentioned already, very critical nowadays. Another part is the scalability. The company that we are decided to work with, they're able to serve clients from 500 clients up to 150 million. So the system itself, it's very able to scale. Other elements like resilience, data and IT and -- data and artificial intelligence, sorry, possibilities also there. So we also will gain a new stuff from that system. And definitely, that will be one of the key elements for our top-notch client experience. So with that system, I would say we could gain a new competitive advantage because in the region, this company has not -- do not provide any new generation solutions that we are going to acquire. So this company, as you can see, is the Temenos. So the also 30 years history in a business experience, but also innovative. So I believe that this is the right partner for us to deal with and we'll make a great franchise together of providing our clients with our service through their system. Another area which is going very close to that, at least for us, when we consider how to go forward is rebranding, And the transaction with [ INVL ]. Also the new core banking investment and the new strategy very nicely aligns to consideration of a new brand. And we believe that we can bring the one that will give us as our mission statement, the bank that empowers. So the brand would be progressive, customer-centric and caring. And we want to make a link between our brand and our current and our new clients for the future. So our goal is to develop the most beloved brand in Lithuania in banking sector by 2029. And we will work on that in a short period of time starting now. Another area which is important in a strategy is the compliance and risk management. So in the business, we're already for 32 years. And during the ups and downs in the markets, we have built a robust risk and compliance management framework. And on that, we base our decisions, our business development. Additional element is the -- our supervision by European Central Bank and Bank of Lithuania. And those two institutions put a very high bar on our risk management and compliance culture and I believe that we fully comply with all the requirements that come today and will come tomorrow. So our focus there is absolutely clear. And also other partners like Moody's, like our external auditor, KPMG and NASDAQ gives us the willingness to be at the top-notch, being very strong in that field. Talking about ESG. We have an ESG strategy, which is fully aligned with the bank's strategy and it is based on United Nations Sustainable Development. We've chosen 5 goals with 15 targets, which are listed on the screen. And the key focus is definitely these days on E and also we work very closely with European Central Bank, which puts ambitious goals for all banks, but mostly for those who are supervised directly, that we will present the best practices of ESG to our clients. So we're fully committed and in line with expectation from the regulator. But we also focused on the S-side initiatives. And just like a simple things, our physical branch network and our accessibility of services to the private individuals to the corporate clients closer to where they are in the smaller towns is paramount, and we consider that as a part of our business model. Also, we want to be practical as much as possible on our ESG side and we're driving other initiatives like our renovation projects where we are already for the 10 years, committed to that field and projects related with energy efficiency are both generating change in the country, change in the country's buildings, but also they are very important part of our business. It becomes integrated part of our offering to the clients. So being practical on renovation projects, we continuously growing with our financial engineering and our proposition to the clients with a new structure. So each year in this 10 years history has been updating our proposition and becoming more complex. And with that, we already distributed about EUR 1 billion in lending and have reached 2,700 multi-apartment buildings. So that's a huge number, but still this is a relatively small part, which is needed for Lithuania looking forward. What also worth mentioning that from a client centricity perspective, we reviewed our organizational structure, and we prepared ourselves for the strategy to be well structured internally. So we've created three client groups, so corporate, private investment, and we will -- through that, we will deliver even more value to those clients. So we'll go now deeper to each of the segments and describe both the initiatives and also the targets. So I'll start with the corporate clients. So historically, we were strong in that field, and our strengths remains to be focused on that business. So this is income generating and well positioned Siauliu Bankas in that field. As I mentioned, we started to grow to the bigger clients who are serving also mid-core clients, not only SMEs. So we're committed to our quick decisions. So that's one of the core, also tailor-made decisions for the larger clients, and that field is our -- the area where we will continue our business to strengthen. With that, we also consider growing into the additionally, new sectors like renewable energy, to become more, to gain more expertise in manufacturing agriculture, wholesale and retail business, so that would expand our portfolio and diversify even more. And to add on, there's an additional new products needed for the clients from the treasury side, the ones which are not only lending related. So that field will be also strengthened during the strategy period. And with that, we'll committed to achieve higher numbers of our clients ambitiously growing from 20,000 to 40,000 in 2029 and reaching our market share up to 20% in the country. So with that, I'll pass the word to colleague, Laura, who will describe further our ambitious growth in a private client sector.

Good afternoon, everyone. So as it was stated, Siauliu Bankas is established universal bank in Lithuania, which -- with a rich product offering and with a very great successful track record. But after the merger with [ INVL ], we even more strengthened this product offering because really competitive in investment services, pension funds, insurance services were added to the whole bunch of other products that we already had. So Siauliu Bankas became a one-stop shop for the client for all financial needs that our clients have. So when we talk about our strengths, we also want to mention that we are having really strong omnichannel presence and a deep commitment to external client services. If you are somewhere in Lithuania, I don't know, any point, choose any point, it's more than likely that you have, I don't know, maximum 70 kilometers to drive to our point of service. So that means that no other bank has so close relation to their clients. And this local presence is also coupled with our very intuitive app for the banking services, with the call center, with all the expertise that we have, and this already makes a good client experience today. Also what we are proud of is really a huge commitment of our staff for exceptional client services. What that means? That means that we are really dedicated to deliver best expertise and best experience for our clients. And actually, all the secret shoppers that we have proved that we are successful at this advantage as well. But of course, we are not stopping here. As Vytautas mentioned, we are looking at a very ambitious journey going forward. And we look at our journey in three major stages. So if we talk about first stage, that means transformation. So if we talk what was now -- then and what is now. So up until now, this group worked more in [indiscernible]. That has a good advantage and bad advantages -- bad things. Because when we work in [indiscernible], we have a very dedicated team for certain products. Every single company develops its own products, developed its own strategies for pricing, developed its own strategies for client acquisition. So this dedication ensure that we have really competitive products to offer to all our clients. On the other hand, this fragmentation actually was the obstacle to improve our client experience and to offer a seamless journey for our clients through all the banking services and through all the stages of our client lives. So this is why we entered into this transformation stage. It's already -- we are already there. At first, we divided our service -- our company into like three business lines and dedicated divisions to corporates, private and investment clients. Further, what we did, we centralized all the coordination of the sales and client acquisition and new acquisition models of retail clients across all the group. This is how we expect that we can contribute to our client experience to make this journey even more smooth and to prepare us for the next stage, which also we already started, which is maximization. Maximization is the potential that we want to explore until we are ready for growth stage because Temenos will open us possibilities to approach new clients and approach new client segments and offer them even more advanced services and IT solutions. But now, we already have 0.5 million people that already trusted our company. They already used at least 1 product. And within our company, our group of companies, and there is a huge potential to offer them next best service and next, that's product that we have. So this is mutually beneficial because clients, they get the one source provider for all or at least 2-3 potentially usable financial services. And on the other hand, we, as a company, have a potential for revenue growth in the future. So this stage will last until we complete the Temenos project, which is really very ambitious. And after we complete the Temenos project, we expect to become a financial solution center that offers clients the widest selection of the financial products. Of course, we will be combining our own products together with those of strategic partners. And also, we expect to deliver best personalized client experience through our advanced IT solutions, through flexible pricing, through a variety of different product bundles that will be tailored to distinct market segments and district market -- distinct client segments through all different stages of their life. So you might say, okay, so what's from mid for investors. So we expect that by ensuring the best customer experience, we will be capable to double our unique client base and to grow faster than the market and reach 1 million customers by the end of 2029. Yes, this strategy might seem very familiar as this is a very high-level presentation. We don't have time for more detailed presentation, but we want to stress couple of unique advantages. Yes, we are very local. We know our clients best. We understand the needs and while being local, we are capable to have quick decisions, adapt to clients' needs quickly and move fast. On the other side, we really have a global mindset and global expertise. This makes us believe that this strategy can be executed going forward. I already touched a bit on this omnichannel approach, but I want to elaborate a bit why we've chosen that. Yes, there are trends that say that digital is the future and everything is about digital. But in our opinion, the future of banking is neither digital, neither physical. Actually, it's a blend of both. And internally, we call it [ phygital ]. So [ phygital ] is the strategy that we've chosen. It's the way that we decided to go. And we commit to remain [ phygital ] bank and actually, it's not just a trend chasing or something. We decide -- we all the time do the research about the needs of our current and potential clients. And what research shows that actually for very straightforward, very simple, like daily banking or other products, they need very quick, user-friendly, interactive and easy to understand digital services. But actually for more important services like -- that influence all their life, like mortgages, pension plans, personal finance planning or other things, they actually expect to have close relation. This is the services of trust. They want to meet their consultants, get the personalized advice and only then make a decision. So this is why we are now committing to develop both areas. So digital and physical. So [ phygital ] is the future of our bank. You might say, okay, but how about costs? So let the numbers talk. So as you see, up till now, we were very, very strict on cost management, and we are sure that this is the priority that we will have going forward as well. So we think that it's possible to have strict -- while having a strict cost management to achieve results in both areas and not to compromise our P&L. So to finalize, we remain -- we've chosen the strategy to remain [ phygital ]. We are sure that this will contribute to our growth in the future, and that -- and this will help us to achieve our goals. And now I would like to introduce my colleague, Tomas Varenbergas, who is Head of Investment Management Division, and he will proceed with the presentation and introduction of our strategy. Thank you.

Thanks, Laura. Yes. So the third group of clients that we put our focus on is investment clients. And currently, actually, we are strong in debt capital solutions for SMEs in Lithuania and we are recognized as a market leader here. And going forward, you do see that we can be even more active here and to provide such kind of origination services for all the client segments. And we raised a goal to help business to raise capital in amount of EUR 0.5 billion by 2029. So currently, with the idea, doing in the area of EUR 100 million of origination transactions. So we do see that, we say we can increase 5x this amount. Our trading brokerage services, I would say, unique in the market in that sense that we do provide customer tailored repo transactions. So in that field, did you see that we can, by employing third-party solutions partners integration, so white label solutions to grow our business further. And our goal is to increase actively investing clients by 3x. And the Fed, our strong footprint in the market is that we are a leader in issuers, registration and related services, including custodian services for the mutual funds. So again, you do see potential to expand services to all the client, mutual funds segments, including open-ended funds in order to provide universal depository services. So in that sense, that could be another good push in order to increase our fee and commission income from the securities operations that we are targeting 20% compounded annual growth rate going forward. We have covered the strategy slides. The next part or the next section of our presentation is about the financials. And let's take a look how does financial projections supports the strategy that you just have here. So our key focus areas are growth, efficiency and profitability. Just to remind that the bank positions itself as a growth and profitability story. So we are going to deliver that in the future as well. We are going to grow in double-digit area. And together with that, we are going to earn a return in mid-teens area in the long term. Of course, we do see that in the coming next 2 years. Our cost-to-income and return on equity ratios will be impacted negatively, slightly negatively impacted, but that's mainly due to additional investments into our new technological platform. Nevertheless, just to remind that the bank has a dividend policy, which is a backbone document for the organization. And going forward, minimum 25% of the dividend of profit should be distributed for the investors in the form of dividends. Just summarizing what is value for the investors. So we do see that currently, the bank is a good entry point for the investors as the bank stock is trading on discount. Looking to the track record, so the bank does have, I would say, a prudent track record of creating shareholder value and the book value per share plus dividends has compounded by nearly 20% since 2015. And I would say that going forward, together with 15-plus percent of return on equity, the bank will be able to deliver 20-plus percent of return for the shareholder. So additionally to the return on equity, capital returns in the form of dividends and particularly in the share buybacks, so the instrument that the bank didn't use actively in the past is an instrument that the bank will employ very actively and looking to the valuation that the bank is trading is a very useful tool to return value for the investors. And of course, the valuation uplift is definitely, is a part of a potential return that the bank stock could return for the shareholder. So we do believe that the bank has high potential growth opportunity. And well, we believe that will deliver superior and sustainable returns going forward. I will invite Vytautas for concluding remarks before our Q&A session.

Thank you, Tomas. I hope you have a clear view for investors about our targets for the forthcoming years. So with that, I would like to give a few more comments. So firstly, is the milestones, how we see the strategy to be implemented. So the best thing is to start a bit with the past and with the current moment is that we worked hard on the preparing new strategy to making all things work together. I hope we did it well, and we see it working at least on a paper, we have a clear view of how to make the next steps. All the transactions with [ INVL ] which was a part of this new strategy development has been concluded successfully. We're working as one team after the emerging businesses on a last month of 2023. As I mentioned, the organizational structure has been prepared, and we are ready with the colleagues that already for many years with Siauliu Bankas, the ones who've joined the group very recently. So we definitely feel a strong team working together to prepare the strategy and very much willing to start working on that. And also, as I mentioned earlier, and also here that we have a Supervisory Counsel and the shareholders, [ anchor ] shareholders supports moving forward and growing bank to the bigger franchise in the country. So the next period of time when we talk about the strategy peers, so we've chosen to take 3 plus 3 years as a strategy. So totally 6 years up to 2029. But we're splitting that into to 2 periods. One is for 2 years period from '24 to end of '25 when we'll need to make some soft and hard investments into the preparation for our leap forward. So as I mentioned, the core one and the most we committed and strongly believe that, that's one often enablers for us to grow forward as a core banking platform. Another one is leading this change and other things that have been happening with the bank before is a rebranding. So we, as I mentioned, we'll work hard to make a perfect fit with our new mission and vision. And those 2 years will be -- the things that we can work as a low-hanging fruits to work on those things that are possible to do without major investments because we will be focused on several mentioned ones. But afterwards, those 4 years will be very accelerated work, both on the new product development, on the new client acquisition, on the cross-sell and upsell to the historic or new Siauliu Bankas clients. So I'm very much looking forward to this journey to continue and to see how we can perform. And definitely, I believe that Siauliu Bankas could be hub and center of the best solutions for the clients in Lithuania. And fully to wrap up our presentation, just to remind maybe those who are starting not in the beginning, what we've covered. So we've covered who we are. So just to remind that we are profitably growing Lithuanian banking franchise with an already proven track record with a growth and sustainable results. Our journey part was described as our ambition to be the best bank in Lithuania by 2029 in particular stakeholder groups and I believe that we have a unique proximity to the clients compared to the other peers. And our roots with the country truly strongly motivates us to perform and grow forward. And the opportunity, mainly as opportunity for investors to consider this momentum as a possibility to join us and to embark on our transformative journey ahead. Our current valuation, I would say, is the offers that we had an attractive moment to enter and we, as a team, we'll try to do our best to bring this great opportunity for the -- to transform that to superior and sustainable returns. So I'm welcome to become the part of this exciting journey. So with that, I would like to finish our presentation, but not to end our session since we're -- after a very short break, we'll come back to the Q&A session. So looking forward. Thank you. [Break]

Good afternoon, dear listeners. Welcome back to Siauliu Bankas Studio and I'm [ Paulius ] from NASDAQ [indiscernible], and I'm pleased to join the management of Siauliu Bankas on this very monumental day. And I'll be moderating today's Q&A session. Before starting with the questions, I'd like to remind everyone that you can submit them in the [ slido ] box at the right-hand side of the screen. And thus, let's get right into it. So let's start with the first question that talks a bit more about the economy of Lithuania and I'll ask that question to -- [indiscernible]. Lithuania slipped into recession last year. Can you please discuss the prospects for 2024?

Yes. Good afternoon, everybody. I'm really pleased to be here, and thanks for the question. Yes, definitely, we expect that Lithuanian economy has slipped to the recession last year. However, the reasons behind that are trailing in recent years because of a very good performance during the COVID crisis. Resilience against the geopolitical effects formed the base effect for the economic development and last year, our exports markets were weak due to the interest rate effect feeding into the macroeconomics of our target markets. However, this year, we expect our economy to recover to the growth path again, because first of all, the inflationary pressures are [ exceeding ] and we have programmed wage growth to [ persist ] further and to rebuild purchasing power of our consumers. So the consumption will be one of the prominent growth pillars in the beginning of the year, in the first half of the year. In the second half of the year, we believe the [indiscernible] monetary policy will affect our exports markets. And well, that will hopefully feed in through to our external demand and provide positive inputs for our exporters.

Thank you. The next question goes out to Laura. You mentioned the extensive cross-selling potential in this presentation a number of times. What are some of the specific plans and initiatives you have developed to capitalize on this potential?

Okay. Thank you for the question. What needs to be emphasized before we talk about the potential is that now, less than 30% of 0.5 million clients that we have in the group has two or more products developed by different group company. And as -- this counts about like insurance, asset management, consumer credits and the banking services and so on. So that means that we can increase this number significantly in the next 2 years. If we do some activities, of course. And these activities are investments into, I could say, four key areas. So of course, developing cross-sell upsell processes, which is very ordinary, increasing the competencies because now certain people are more dedicated to one or a couple of products. And the plan is to have extended competencies across all the group. Of course, in investing into product bundles, which is also very ordinary. And finally, of course, investing into data because we don't want to spam our clients. We want to understand their needs and offer the products that they actually need and which -- and the product that actually fits best for their needs. So this is -- the activities that we have planned for the [closed] future but of course, with Temenos, these possibilities will be largely increased.

Thank you. And now let's proceed with the next one, which goes out to [ Algemantes ]. What are the bank's risk appetite and tolerance levels currently?

[indiscernible] we apply the principle of keeping the promises to the investors to generate sufficient returns while being a safe bank and complying with all the requirements that are applicable to us. So talking about safety, I can firmly say that we have good capitalization and sound liquidity. The buffers, which include internal buffers that we need for such cases when there are unplanned adverse movements in the economy and the environment so that we did not have to suspend our ordinary activity and focus on recovering capital or liquidity on the institution but rather, we could go on. And from the risk side, I would say that we are consciously taking the risks, especially credit risk where we see that we have expertise in the market. We know our customers, especially in certain segments, and we need to have a higher growth than the general market in order to achieve our objectives and we are trying to achieve all of our risks at agreed level.

So a lot of investors are interested in dividends. We received a number of questions about them and we'll try to summarize them. In case we don't cover the key points that you want to ask, please send your questions afterwards, after the presentation. Now I'll ask Donatas about the dividends. Growing loan portfolio at the rate of 8% requires capital. How would it affect dividends? Do you plan any changes on the dividend policy during the discussed period of 5 years? Can we expect large buybacks?

Good afternoon, dear investors. So dividends is a very popular question during our quarterly webinars. And of course, I'm not in a position right now to disclose the plans for the coming year. It will be done in the due time and to all investors together. But keeping our dividend policy, which currently states that at least 25% of previous year profits will be distributed in the form of dividends, it's very important for us, and we -- promising this as a minimum. But if the situation is favorable and we see no better opportunities, we will happily share the profits with our investors. And of course, we have to keep balance between ensuring that the remaining capital will allow to grow our assets, including loan portfolio and generate further profits. But if -- to keep permanent and steady flow of dividends and other forms, such as buybacks, it's -- we'll keep that in mind. And in the coming years, the importance of buybacks will be increased. And we see that it gives a very positive impact to the market. And we think that this form of distribution of profits will be used more in the future, especially when the share price is in the low range, what we expected. That's probably a summary of topic as dividends.

Okay. Thank you, Donatas. And just to clarify and summarize the points made during the presentation, a question to Vytautas. What does it mean to be the best bank in Lithuania? How do you measure it? And becoming the best bank in Lithuania arguably implies taking market share from the bigger peers. Do you have a target on any particular bank that should be a bit wary of your strategy?

Great. Yes, thank you for the questions, very interesting ones. I would say, being the best bank in Lithuania, firstly, the mindset. It's the mindset of considering that internally in organization and externally acting the way. And that's one of the elements in a strategy that -- to have an ambition and to grow with that ambition. But we also asked ourselves when we say the best bank in Lithuania, how to evaluate that? That's why I've tried to describe that in the presentation that there are several stakeholders and several targets that we're emphasizing to ourselves in order to be treated that in the country. So firstly, it is a client perspective, as I already mentioned, so will not dig deeper to that, but it's a client experience. So in that field, we already have a good benchmark, good -- being as a good benchmark in the market, but we need to expand that and to broaden our good service culture, which is historically was to expand that to the products, technology, [ planned ] to the clients, especially in the current modern years when service happens everywhere in physical, in digital, in contact centers. So that part needs to be increased, and we focused on that. So the other area, which is also critical and important to become a strong employer to attract new talent to remain the current ones and to grow professionally for people here, and that would be the dream to work in Siauliu Bankas. So we say that we need to be in the top 3 financial institutions in that respect. Probably the hardest way of achieving the best of the bank -- best bank in Lithuania is through the top of mind, which we mentioned that we want to be top choice and beloved brand in the country. That's really an ambitious goal, but we're committed to that, and we want to move towards that. And also last but not least, as I mentioned, to remain with all this business model, interesting for investors and to generate 20-plus return. Talking about competitors. So we respect to all of them, they have their own business models and franchise in our country. But as I mentioned, we feel the uniqueness of Siauliu Bankas of being a local brand. And definitely, we see potential growing both for the new clients that emerge in a country like corporate SME clients that appear here. So to be the partner for them here. And also for private individuals, whether they are young or older, to choose local brand to deal with, receiving all the needs from financial services. That's it. Thanks.

Thank you. We've also received a number of questions about the banking platform, Temenos. I'm also going to group them, and this question as well goes out to Vytautas. Any practical examples in regards the change Temenos partnership brings compared to your current operation services. Are you going to change the current user interface? What are the key risks and expected timeline for core banking platform's change?

Summarize not to expanding too much on the answer, I would say we're moving from more local provider to the global with all benefits and risks also involved with that. But as we measure selecting the vendors, we've seen the huge potential using the platform as a competitive advantage. Not operating on the system, but giving the new features, new propositions to the clients. That system is strong in that. They have a good experience with different type of financial institutions in different geographies. So if we will bring at least part of those functionalities to the Lithuanian market, that will be really beneficial. And with the current system, it's functioning well. It's solid for more than 20 years, we have used that. But in order to make that leap in the strategy and in our growth direction, especially in the retail banking, we need a substantial upgrade. So we are aware of the risks and focus working on that type of investments. Therefore, we're already drafting the plan, how to implement it. As I mentioned, it's approximately 2 years program. I hope we'll manage to do that because sometimes it's hard to deliver in this period of time, but we -- I believe in the team. I believe in external partners where we already started our selection process and the commitment is high. So we need those investments. And as Tomas presented the figures for our projection's nearest future, those investments not that critical and not to hinder our financial results that much. So it's a good momentum, especially as we say, momentum is critical in the story.

Thank you. Now let's talk a bit about the reviewing of the strategic alternatives during the period of the strategy. Would you consider renewing it? And would you be open for any mergers and acquisitions or rather remain on an organic growth path to hit your targets, Tomas?