AB Artea bankas (ROE1L) Earnings Call Transcript & Summary

Good afternoon, dear listeners. Welcome to Siauliu Bankas' Investor Conference on the Results for the First Quarter of 2024. I'm Emilia from Nasdaq Business, and I'll be moderating today's event. [Operator Instructions] Please be informed that this webinar is being recorded and will be available on Siauliu Bankas' website and the Nasdaq Baltic YouTube channel. [Operator Instructions] With that said, I'm pleased to introduce today's presenters, the CEO of the company, Vytautas Sinius; Chief Economist, Indre Genyte-Pikciene; the CFO, Donatas Savickas; and the Head of Investment Management division, Tomas Varenbergas. Please, the floor is yours.

Dear investors, good afternoon. Hello, everyone. It's my pleasure to welcome you to Siauliu Bankas' webinar for the first quarterly results. And I really thank you for your time dedicated to Siauliu Bankas. Let's go with the highlights. So I'd like to mention that the year started firmly. We have a strong quarter of Siauliu Bankas with 70% year-on-year growth compared to 2023 first quarter and a successful period, I would say, for net interest income and net fee and commission income. So the main drivers is a continuous loan book growth, also relatively high base rate and also the merger transaction with INVL Asset, those you will see reflected on our P&L for the first quarter. We maintained pretty higher capital adequacy ratio of close to 21%. And despite that, we've demonstrated strong return on equity ratio of 17.6% and also better-than-planned cost-to-income ratio, which stands at slightly more than 42%. Continuous monitoring our asset quality and despite that, we're still living in the higher interest rates and rather turbulent markets around us, but with asset quality, situation remains good. And our cost of risk, which stands at 0.36% is better than, I would say, average of our budgeted figures in 2024. So far, so good with asset quality. Also glad to mention that the dividend policy executed as was planned, and all decision has been made and dividends were paid out. And we now, I would say, in an active mode on our buybacks. And recently, we approached the ECB regarding their decision on that, and that was publicly announced as well through the market. During the last AGM, the new governing bodies were elected. So some changes in them. We have some also international representatives attracted to the Board of Directors and also we extended our Management Board team. So I'm really glad about that as well. And we're intensively working on our strategy implementation. So definitely, it's a marathon of the sprint, and we are laying a solid background for technological uplift, and now we're working in a diagnostic phase of the project. Let's go to the next slide. And as we've presented during our strategy meeting earlier this year, we're splitting our business lines now into the corporate, private and investment lines. Therefore, we're bringing the news and key information also split in that way. So talking about corporate lending, I would say the volumes rebounded. The first quarter is pretty strong in the corporate lending. I would say after previously 2 rather moderate quarters, the new lending is up by 33% if we compare quarter-to-quarter. And it again reached more than EUR 200 million of the new agreement volumes. Talking about our investments and work on the green agenda, I would say, we rather successfully moving towards renovation. Platform replications and previous platform before was EUR 275 million. And in the first quarter, we launched the new platform of EUR 200 million together with European Investment Bank and other investors, who joined the efforts to finance the renovation projects in Lithuania. And with that, we will be able to renovate more than 300 multi-apartment buildings and more than 11,000 Lithuanian households. Also from the green agenda we have recently funded wind power plants of 16.5 megawatts, and that's one of our successful investments into Lithuania. Okay, let's move on to private individual block, and that block, I would say, is more as a preparation for our further development in the retail area. So we revamped our sales network to drive growth and with a more focus on empowering sales force of people, so just reworking how to train them, how to make them higher performance compared to the previous years. So another area is a streamlined operations. So we're moving some technical work from the salespeople to the centralized functions and also working on enhanced performance. And that is also important how we incentivize our staff on the new sales and also [indiscernible] the right metrics of [indiscernible] and et cetera. So it's a lot of proprietary work for the retail development for the next periods and next quarters. And the last block presented in the slide is the investment client block. So with that, we, I would say, also working hard on a practical stuff. So the good thing is that assets under management growth is continuing to develop upwards. So we reached EUR 1.25 billion assets under management and also working on new product areas. So it's a new alternative investment fund to be launched shortly. And on debt capital markets, I would say we're continuing on the strong momentum in this business line. So 13 DCM transactions during the first quarter shows that we continue to be the leading player in domestic markets. So thank you for that. I'll be returning shortly after colleagues.

Good afternoon, and I would like also to thank you for being with us here today. I will present a short macroeconomic snapshot of Lithuanian economy and I sincerely hope that it will help for you to keep the finger on the pulse of Lithuanian economic dynamics, and it will add a bit of clarity on future outlook. And moving forward, I would like to start with the major macroeconomic categories and looking at the dynamics of country's GDP in the context of the Baltic region, we can see that Lithuania experienced the negative phase the cycle pretty good and dealt with the challenges resiliently. Actually, it stands out in the context of other 2 Baltics as the most resilient economy [indiscernible] contraction of last year was a minor 0.3% contraction of GDP was the organic and natural cyclical effect after a very strong chapter during 2021 and 2022, given the exceptional performance of our externally oriented sectors. And now our economy is starting to prepare for the recovery given the bottoming out and improvement of the sentiments of the export markets. And actually, talking about last year's developments. And this year, we can say that our economy was somehow -- the contraction was somehow softened by the counter cyclical effects of the new structural funds, which came into the economy at a very good time and helps well to balance and counterbalance the negative cyclical effects. Looking at the labor market indicators, we can also state that labor market sustains resilience and the employment rate proceeds at the more or less sound levels. And the good news is that the number of registered unemployed is constant and stable, and we don't see any negative trends there. And the number of new vacancies are pointing out that they are recovering demand of new employees of our businesses, providing that our businesses are preparing for the launch of the new business cycle. From the consumers' perspective and from the household consumption perspective, it is good news that the monthly wages are proceeding to grow pretty swiftly, double digits and the last estimates for the first quarter of this year show that this trend will be embedded in the first half of the year because of the increase in minimum wages from the start of the year by 10%. Also the public wages have been increased significantly, and the active labor market also provides tensions, and we just proceed growing. These trends in addition to the evaporated inflationary pressures set the proper fundament -- proper stage for the consumer confidence. And as you can see, the consumer confidence is, for a number of months, the highest in the context of our target markets. And actually, it's the highest in the EU. On the other hand, we also have a pronounced inflation indicator now in the context of the EU as the inflation is way past at the moment. In March, it stood at 0.5% annually, and hopefully, and it is expected to remain well above 2%, talking about the average annual inflation indicator. And so these circumstances set a proper stage for the purchasing power recovery. It has already compensated the losses the inflation has left during last year and in 2022. And the real wages have reached the peak we see at that time. Yes. And so moving forward, we can see that this recovery of purchasing power will help our domestically oriented activities a lot, because last year, our retail trade sector fought the wave of inflation and managed to increase and register the record highs of retail trades turnover at current prices. However, this year, this inflation wave is in the low tide and the hope is that the real volumes of retail trade will start to increase soon. And recent indicators from the retail trade points to that and backs that expectation. Also looking to the construction sector, you can see that the cyclically affected and sensitive sectors residential building constructions as well as nonresidential building constructions were pretty affected by the cyclicality. However, as I mentioned before, the timely injections of the new structural funds into civil engineering structure projects, energy structures helps to balance the results of construction. And for this year, another injections of EU funds are planned. So the gross fixed capital formation pillar of GDP will perform positively. Looking at the manufacturing dynamics, we also see the slight recovery. The numbers already above 0. And that's thanks to the energy intensive sectors, which managed to recover after suffering in last year. And hopefully, in the second half of this year, to compare rebound in our key exports markets, our exporting manufacturing industries will gather momentum and add to the economic developments positively. Yes. And that's the final slide of mine, which promises to the positive developments of the economy despite that it will perform below its potential, our economy will expand by 1.8% this year and gather the pace the next year. Also, the slide promises pretty sound labor market indicators and very low inflation. These trends together will strengthen the consumption pillar of GDP performance this year. Thanks a lot. Thank you and providing [indiscernible] to my colleagues.

Great. Let's come back from macro back to Siauliu Bankas' figures. And now we can look to the financial performance highlights, like a snapshot of our P&L and some balance sheet metrics. Just to note in the presentation that we will share with you later, you'll have more information in an annex. Due to the time limit, we will not expand too much into that field, but please, you will find some more interesting information added into the annex. Well, from a P&L perspective, our net interest income continued to grow, mainly from expanding our loan portfolio. Big change in our commission income, dropped by 40% comparing quarter-to-quarter with the first quarter '23. With that, we've managed to make a growth of operating profit by 10%. And as I mentioned, cost income remained pretty low at 42% and that led to the final result of a month of EUR 22.5 million of net profit. Return on equity already mentioned 17.6%. And from balance sheet parameters, I would say that we have 4% growth in loans. Deposits followed more or less in the same speed, about 3%. The balance sheet grew at 2%. And the assets under management grew by 7%, I would say, reflecting strong investment performance and inflows. Also worth mentioning that after the merger with INVL Retail, we managed to reach our noninterest income part which now is about 30%. So historically, we were more exposed to the net interest income now this part is diminishing and the other income, which are less capital incentive starts to prevail. So let's go deeper to the portfolio. So loan portfolio dynamics, I would say, positive during the first quarter. So 4% from the beginning of the year and 13% during the last year. I would say the main driver is the corporate lending. So from EUR 113 million of additional increase in our portfolio comes to EUR 73 million to the corporate clients, others are mortgages and consumer loans. So all the sectors grew. But as I mentioned, the key driver of growth is corporate lending, which was rebound, as I mentioned, from a bit lower to the previous quarters. And it seems that loan yield has peaked already from 7.5%, slightly decreased to 7.4%. But I would say it's a minor change, and it still remains on pretty high and high levels. I would say a strong pipeline for the corporate portfolio to grow further, both from the new clients and from the current clients with additional needs. Our private individuals is less elevated compared to the corporate side, still due to the bit higher [indiscernible] expected and still the sentiments in the real estate market that potentially flatter or even could go down. But people not willing to make those decisions as fast as it was in '22 than '21 during those years. Okay. Let's drill a bit deeper to the net interest income as our main source of income, so 12% growth compared to the first quarter of '23. So last 4 quarters remain on the same level, about EUR 40 million per quarter. And despite that the growth of the portfolio continues. But as you can see in a graph, cost of funding also is catching up since we are attracting our local deposits, and we are providing really good rates for depositors, it start to grow. And our net interest margin slightly decreased compared to the fourth quarter and the third quarter of the previous years, that's natural and that was expected to be like that. So we see already the trend that interest rate for deposits started to decrease in some banks. So we also observing the situation, and we'll consider what our strategy in that field, knowing as I said, that we need to attract deposits mainly locally in the market. All right. So let's move to the net fee and commission income. So first of all, just to emphasize once again, that 40% growth year-on-year, from EUR 4.6 million to EUR 6.5 million. And also good to mention on the right side, you see some shifts between the lines. So the first thing that we have pretty strong renovation growth by 45%. And also debt market solutions also grew extremely well by 85% year-on-year. And this 40% just coming back from the bigger figures, 40% total growth of net fee and commission was strongly influenced by the asset management income after the acquisition. However, if we exclude that, still, we have a healthy 7% growth only on the historical bank's platform, so a few figures. So with current distribution of our net fee and commission, I would say we become even more resilient to the different trends in the market. As you can see on the daily banking, we have some decline, and that's mainly driven by the lower cash transactions and restrictions on some international payments that have been enforced during the year. Right, so with that, I will pass word to colleagues Donatas.

Dear investors. So talking about operating expenses, and if we compare changes over the year. So the main factor of 25% increases caused by merger with INVL Retail, therefore, we, how to say, enter a new level of average quarter. So first quarter of this year is in the range of EUR 20 million. So probably in the coming quarters, it will be a bench mark for treating whether the expenses increased or not. Of course, I could remind that previous quarter was influenced by quite significant expenses related with merger itself and, therefore, cannot be taken as a benchmark. The structure of operating expenses consist of the main source of salaries to the employees, and this will remain as it is and the other important factors which increased quite significantly is IT expenses. And as bank owns more property, tangible and intangible, therefore, depreciation and amortization expenses goes up as well. Despite growth in expenses, we maintain cost discipline, and therefore, cost income ratio stands at a very comfortable level of 42%. We can move on to the next slide and talking about funding. The key message is that the cost of funding is still going up. And colleagues already mentioned that we already reached the peak of net interest margin as the assets went under reprisal process and funding, which mainly in our bank is consist from the deposits, term and demand deposits, are still repricing and they effect our interest expenses negatively. And also, the structure between these 2 sources of funding demand and term deposits is changing and more and more term deposits, which gives depositors higher interest yield is more active for them. But also, we see the changing environment and probably it's approaching the time when this deposit ratios -- rates will be reviewed with the downward trend. And also, another factor is the wholesale funding where our borrowings from ECB and also the bonds, which is eligible and all other quite expensive, they affect our total cost of funding also in the increasing rates. And the bank maintains a well-balanced loan and deposit portfolio and loan-to-deposit ratio is 94%. And it was the reason why we were not affected by these changes in interest rates in the last few years. And therefore, we were not subject to suffer from this windfall tax. Talking about loan portfolio quality, we see stable, I'll say, trend both in absolute figures of NPE and also in percentage. Despite -- we see a small increase in absolute figures in NPE, but due to the growing loan portfolio, so this percentage expression stands at 2.8%. And when we try to forecast, it was already mentioned that first quarter, we had a slightly lower cost of risk expenses than we anticipated and probably this is the factor that these provisions that we made in the last 2 years probably or even more so despite the fact that it was no -- any visible problems with particular individual borrowers, create a [indiscernible] in case of environment deteriorates significantly, and we will use this buffer that we accumulated during the last period. And last but not least, from my section of presentation. So capital and liquidity position. We have sufficient buffer above target for capital adequacy ratio despite the fact that we distributed a significant amount for dividends. From this graph alone, it could be read it as the banks still have the capacity to share some equity with the investors. However, we should monitor not only capital adequacy ratios, but other ratios, which requires capital or similar funds. This ratio relates with INVL. And as you see from the graph in the bottom right-hand side, so increase in first quarter requirement for this ratio leaves us a little room for maneuver or to share extra capital with investors. But our target is to be slightly above the ratios and an extra capital, which is not optimal, will be used this according our plans and Tomas probably later will disclose it more. Talking about liquidity positions, we spend significantly above the target of 150%. And just to remind that this 150% is well above this minimum required by the regulator. So both capital and liquidity stands at safe level.

Hello, everyone. So I will continue our today's investor webinar. That's the last part before we will go to the Q&A session. And we will have important update on capital allocation, and we have already received several questions on that topic, so I'll try to elaborate more on this topic. So actually, shareholders at the Annual General Meeting approved new buyback procedures and extended return for share buyback execution. In April, the bank submitted an application to the ECB for a share buyback of up to EUR 11.5 million. And you do expect that the permission will be received within the third quarter of this year. And afterwards, the Management Board will be able to decide on particular term or specific details how this buyback will be executed. And actually, as we keep communicating, to maximize shareholders' returns, we believe that the bank will continue to use share buybacks as a strategic capital allocation tool going forward. Regarding the dividend, the commitment to the dividend policy is in place, record high dividends for the last year were paid last Friday. Unfortunately, due to some NASDAQ central depository error, not all financial institutions managed to credit dividends to the shareholders accounts on Friday, so we do see that early in the morning, all the financial institutions settled dividends. And so apologies for any inconvenience in this sense for our shareholders. The first full quarter, this operating asset management company delivered strong momentum and our assets under management reached a new high mark of EUR 1.27 billion at the end of the first quarter. We are glad that the increase was largely driven by the strong investment returns. Our second pillar, pension funds, delivered almost 7% return in the first quarter alone, and actually looking to performance since the last pension reform, you can see that almost 10% annual return was delivered to our clients. As the demand for the investing solutions keep increasing, we are getting ready to launch a new alternative investment fund later this quarter. And it should bring more diversification to our growing assets under management. This quarter, we also want to put more emphasis on our unique solution for renovation financing. And last quarter, we launched EUR 200 million new modernization fund that was launched together with European Investment Bank. The fund aims to finance a renovation of 300 multi-apartment buildings, and it means that living conditions for 10,000 Lithuanian households will improve. And bank, being a pioneer, of innovative financing instruments, actually is well positioned to play a key role in achieving Lithuania's aim to have most of its multi-apartment buildings renovated by 2050. Benefits for the bank by participating in such kind of issues is twofold. So value is being created that the bank as a fund manager of a servicer of a fund earns base management and performance fee from the fund's assets. And secondly, the bank invested into the platform its own funds, an amount of almost EUR 40 million. So these invested funds will generate interest income going forward. So that's it from us. We are ready to turn to the Q&A session. And well, meanwhile, please subscribe to our Investor Relations newsletter for the latest news and insights from the company.

[Operator Instructions] The first question is regarding INVL Retail. Could you please give us an update on the integration process.

Great. Thank you for the question. So the integration went smoothly, I will say the key moment was beginning of December when we've made -- we completed that transaction, so the transition went smooth and one of the indicators I would is employees that together with the business, we integrated to the one organization about 160 people. So the success, I would say, of colleagues that have joined Siauliu Bankas Group is substantial. So I would say, 96%, if I recall correctly, decided to move along with the business together and joined -- already has joined Siauliu Bankas, and we're working together as one team. So one of the success, I would say, is preparation. So we've used this time during the sign off and the closing between those 2 dates, we've used very successfully this time of working together on strategy. So the people who have joined already were becoming the part of the new strategy of the bank. Also, the integration on IT side was also smooth. And starting from December when the transaction was closed and going forward, up to date, we haven't faced any major problems on IT side, which is important those days when we talk about financial industry. And now -- as I said, we are, as a one team, working together on the strategy implementation. All the initiatives that have been presented our strategy goal and strategy presentation moving forward. So far, I'm really, really happy how we're operating as a one large team of more than 1,000 people. Yes, so that's it.

Could you please add a bit more color on the branch network transition into a sales-oriented organization. Does it imply a certain optimization of the network?

All right. Yes. So part of the change. And part of the transaction, I would say, was preparation for more active work in the retail area. And to do that. We've segregated 2 business lines, one is a corporate client and another is private. So that was one of the parts to prepare for more focus on retail as well. Since the retail is a complex business related with many processes, many products, special know-how of people who are dealing in retail area. So the first quarter was already very practical. So we worked a lot on efficiency and as I already mentioned on the -- putting the right roles or particular employees to making some career planning, some career paths for them. How to make a competitive compensation for the colleagues in the retail. So it's a lot of number of interactions, which are needed to be taken care in order to prepare for the well-functioning, smooth retail organizations. So we're working intensively on that, and we're expecting that in the nearest future, it will provide needed results in this field. Talking about branch network, it's one of our enablers, it's one of our also competitive advantages of being close to the clients. So along the technological upgrades, we want to have a close relationship with the clients also physically, and how it will end up in the future changes in a branch network. It's still a little bit early to say. So currently, we're focused on better preparation for the retail strategy, and that's our focus as of today.

It seems like deposit rates in Lithuania have peaked and might be gravitating slowly down. When do you expect your funding costs to ease?

Actually, yes, we do see signs that deposit rates have already peaked and several banks already decreased the interest rates for the term deposits. Looking to our funding cost dynamics, we do see some flattening as well. And well, we do follow our competitors steps and well, the interest rates is on our agenda going forward.

When do you expect to finish with the banking core update?

During our strategy meeting, we mentioned it's, I would say, roughly long horizon of 2 years. So talking about core banking systems, it happens, it takes even longer. But we put a tight schedule to make it happen in 2 years' time. So, so far, we working according to this plan. So most likely, the first part of '26 is our expectation to go live. And yes, we'll see how it will develop. But so far, everything goes according to the plan. And until the autumn, we're planning to finalize our diagnostic base. So when we'll better understand the system, we'll put our requirements to the -- changes with our processes and products and then will be more visible, is there any change needed for that or not in terms of time, but we are committed to do as fast as possible, and we see it's in the range of 2 years period.

Given the strong pipeline in corporate lending, which sectors would you expect to show the best lending growth?

I would say it's hard to say which are the sectors show the best way. I would say we're working pretty disbursed along the sectors. And seeing the -- some public initiatives that we've heard about EUR 1 billion investments that would come from the state to the different type of sectors that applicable to those funds we see as possibility to impact the corporate clients' development, and we see that partially, we will be a player in this field as well. So some syndicated loans or in some cofinancing, we will operate with those public funds that are coming this year. So I would say, from a sectors perspective, energy would be the one to be mentioned. We see some areas of the transportation that are performing also pretty strong. So we're working on that field as well. Still, I would say residential construction, we have a good pipeline of strong partners, strong clients in that field, and we see the continuous growth in this area, too. And then will be minor areas of industry that's showing signs of interest to grow, especially on the second half of the year, they're already projecting some new orders, new plans. And we see that second part of the year could give more energy for different type of sectors. So I would not name particular ones. But overall, I would say industries is willing to show the signs of growth later this year.

The cost of funding is still going up, putting pressure on margins. Where would you see the NIM floor for 2024? Can you defend the 300 bps level once the ECB rate cut cycle starts?

I will take this question. So -- but yes, it's related with the previous one that Tomas answered, but trying to answer directly to the question what was mentioned here. So net interest margin is low for 2024. So we believe that we will be above this 30 basis points level. And we are quite sure for that, taking into fact that this repaying of TLTRO loan to ECB will give us positive impact to net interest margin as it is right now providing lower net interest margin for this part of assets. And regarding ECB rate cut cycle, it depends how we consider it will be. So we more believe that this reduction of interest rates will be gradual and not as quick as we saw increase in this interest rates. Therefore, we could adjust. And the fact that we already mentioned several times during this presentation that we see that reduction of interest rate for deposit approaches, so it gives us more, how to say, flexibility. And therefore, we could adjust net interest margin to stay above this floor that I mentioned earlier.

Please comment on the expenses from insurance activities, which seem to be elevated. Is this due to the acquisition of INVL Life? Is the cost base expected to decrease going forward? Or will it remain at these levels?

Yes. Of course, the acquisition of INVL Life increased our exposure to insurance market. However, to decide and judge about the profitability of insurance activities just from expenses, it could be not the right option because the opposite amount are distributed in different items of profit and loss statements, namely trading activities -- because unit-linked portfolio of customers where we have a negative impact to our expenses of insurance activity. We have the opposite positive impact, but it is described in trading activities. It's quite complicated, and we used to have the questions many years that asking how to read these statements and right now, we're consulting our auditors in order to find more reader or investor-friendly approach how to show this result of insurance subsidiary. But talking in general, so we are happy with the result of insurance and subsidiary. In the first quarter, it was quite significant profit. And therefore, as I mentioned in the beginning, it would not be decided from the one expenses line.

Asset quality continues to show strength, any clouds in the horizon, and what is the biggest threat here?

I will start answering, of course, I try to elaborate in my part of our main presentation, but probably I will ask Indre to add from the macro perspective. So from my view, so when we consider and measure our loan portfolio, so we use this estimated credit loss models with different scenarios and trying to forecast how -- what kind of provision should be provided for certain exposures in our loan book. However, general environment could change from -- as I see if the macro situation would deteriorate significantly. And this is the main threat in my view. But please, Indre, if you have something to add on, please.

Yes. Thanks, Donatas. I would like to elaborate a little bit -- on this cost, especially from the corporate clients' perspective, because what we see, we see that our businesses in Lithuania will have pretty tough first half of the year. On one hand, the cost pressure remain pretty strong. On the other hand, the demand, both external and domestic, will remain sluggish and we hope and believe that in the second half of the year, this situation will change. The decreasing interest rates, which are expected to fuel our sentiments and domestic consumption as well as investments in our export markets. And so that will provide growth in the revenue, and will ease the tensions the business currently face. However, looking to the resilience factors, accumulated reserves and liquidity in the system; I think that there won't be any significant major threats to [Indiscernible].

How much operating income is attributable to the INVL acquisition? Could you elaborate on the benefits and merits of this transaction?

Yes, we say there is some short-term benefits that could be assessed up to the transaction, evaluating how much business has been accumulated into the one organization after the merger with INVL Retail. So from that perspective, I would say it's one bigger figure, so I would say, it's about 25% of net fee and commission income increase due to this transaction. But that's only one part. So the other part is a bit more long term and strategic that we're building -- have built our strategy and working on that. But with this merger, we've managed to create the full franchise of retail banking, not only having historically strong lending product set up for private individuals as consumer lending and mortgages and card business, but also strengthening very well our savings and investment part. So we see that with a strong execution of the retail strategy to reach much higher development of key growth compared to the current result that we've managed to achieve after this merger from day 1 when it was completed. So there's kind of 2 elements. One is the short term, which we expect to continue to maintain and to grow as a current business and as extra value to receive our benefits of working in more depth with our retail business.

Should we expect significant volatility in quarterly operating expenses that are directly tied to the IT and new core banking platform? Or can this Q1 OpEx level be considered stable run rate up going forward?

I'll take that question. And as I mentioned in the main part of the presentation. So this new level of operating expenses of first quarter could be taken as a benchmark. But of course, with the inflation impact that this level will go up. And also this IT and core banking platform will also add on additional expenses. Currently, we're discussing with our auditors regarding the possibility of how to show this spending that we are using in implementation of core platform, how to put into the P&L, which is the best and most prudent way. But at the end, it will affect our operational expenses negatively, and it will increase this. But this increase will be gradual and therefore, this level of Q1 expenses could be taken as the benchmark for the future projections.

What margin are you currently paying on the outstanding TLTRO facility.

I will take that question. So it seems the last question today. So we do pay the same rate that we do get from ECB from keeping our liquid assets in ECB accounts. So currently the rate is 4%. And so it's matched between what we get and what we pay. Worth to mention that actually, we're ready to repay TLTRO even today as we have already got all the amount that should be repaid in September this year as the maturity date is set on this month.

As all questions have been answered. On behalf of Siauliu Bankas, thank you, everyone. It was a pleasure being with you here today. The recording of the presentation will be available on the Siauliu Bankas website and the Nasdaq Baltic YouTube channel. Thank you again for a very informative conference. Have a great day, and goodbye.