Akbank T.A.S. (AKBNK) Earnings Call Transcript & Summary

Welcome to Akbank's 2020 Guidance and Global Analyst and Investor Day. It is a pleasure to have you here with us in the audience as well as online. Today, we will be sharing our 2020 ambitions as well as our 2020 guidance. But we have changed the format around a little bit. We do have a formal presentation. However, our CEO, Hakan Binbasgil and myself will be having a candid conversation around the presentation. And after which, if there are still any questions left, we'll be more than happy to answer them, both from here in the audience as well as online. So without further ado, I'd like to invite our CEO, Hakan Binbasgil to the stage.

Hello, everyone.

The heartbeat make me get excited.

Yes, pleasure to be here. Thank you very much for being here and on the web. This has become a tradition actually.

It's our eighth year, yes.

It's our eighth year. We try to be as transparent as possible. So don’t hold any punches. We are ready. I'm ready.

It's good to hear that. So please don't shoot the messenger in that case. So let's start off with 2019. What sort of view was it for the economy?

2019 was the year of normalization. As we all remember, it actually started with a lot of pessimism. So there are lots of forecasts about negative growth, minus 2%, minus 3% and so on. But I remember our guidance. So at that time, we were saying that it will be a positive growth. So it will be somewhere between like 0% and 1%. And that turned out to be the case. So I'm happy about this forecast. So that is the case. And also, when you look at the level of inflation, it has come down dramatically from all the way to -- from 20% to somewhere below 12%. So there were lots of rate cuts. That was also something positive. Current account deficit, which is the soft side of our economy, so there was a surplus in current account deficit. So that was also quite positive. So overall, I think it was a relatively good year compared to the past, normalizing. But of course, FDI has to, of course, improve level of investments in the country. It has to improve. Of course, there is some room for [ improvement], but there's a progress.

Yes. And on to Akbank. Obviously, we're announcing our results on Jan 31, so it's less secret. But maybe you can give some guidance regarding the fourth quarter trends.

First of all, we had some growth, a lot of growth actually, in the fourth quarter. So again, I remember our guidance about a year ago. So here, we were seeing that Turkish lira loans will be growing like 10%. So there was a lot of question mark in the audience at that time. And this is going to be the case. So Akbank will be growing more or less 10% this year. So I'm really very happy about the core profitability of the bank. So when you look at the NIM, for example, I'm really happy where we will be ending the year. So we will probably observe a NIM, which is like 5-ish, let me say. I'm not going to quote exactly, but it's a 5-ish, so it's a good NIM. And I'm also very happy with the progress on the fees side, fees and commission side. So at the end of the third quarter, the growth was 35%. So we will more or less stay at that level. So I think from the core profitability point of view, I'm really happy, cost-to-income ratio, et cetera, et cetera. On the NPL side, our guidance was like less than 6%. There will be a little deviation there. So we will be finishing the year somewhere between actually 6% to 7%, somewhere in the middle. And the reason is that there will be some proactive NPL recognition. There is one real estate file. From time to time, I was referring to that. I remember from some of my investor meetings. So we will classify that file as an NPL. So that will have some impact. On the other side, actually, as we have declared, we sold some NPL at the magnitude of TRY 700 million. And there will be also some write-offs as well, not significant, but eventually, we will end up somewhere like 6% to 7%. But I think cost of credit side is more important because we have been provisioning a lot and so on. So on the cost of credit side, our guidance was like less than 300 basis. So we will be finishing the year somewhere between 250 and 300. And this write-off, by the way, will be from the fifth category, which is the vintage category. So that is also positive.

So that actually implies a write-off and the NPL sale will probably not have a [indiscernible].

Yes. There's no actually material impact on the P&L. So some of these will cancel each other and so on. So hopefully, we will be leaving majority of the problems probably in 2019.

So 19.5% is a remarkably robust capital position. So looking back at 2019's rights issue decision. Would you have still gone through with it?

I think the answer is yes because the bank is very strong for the time being. I think it's a unique positioning in the system. And Turkey is an emerging market. It's a growth market. There will be a lot of growth in the coming years. And I think Akbank has a privileged position to fuel that growth. So we are ready. So I'm happy with the level of capital as well.

So let's move on to 2020 then. Let's start with the macro side, first of all. What will be the drivers of growth in this year as well as the inflation outlook?

Growth, in our assumptions, will be around 4%. So it will be a significant growth compared to where we are today. And this inflationary trend will still continue, but gradual. Maybe it's not as steep as what we had in 2019. Similarly, there will be probably some rate cuts. If there is this downward trend in inflation, we may also expect some rate cuts, but moderate, not again, like 2019. On the current account deficit side, I don't think that it will be a surplus anymore. So probably, it will be a deficit, but it will be manageable deficit. Probably, the magnitude would be something like anywhere between 1% to 2% of GDP. So it will be something manageable. And there will be some credit activity, I would imagine. So that's how I see 2020.

So in 2019, the bank -- actually management, addressed the denominator by strengthening the capital buffers. In 2020, the story seems to be on the numerator side, which brings us to the question, obviously, everyone has on their mind. What does Akbank's 2020 guidance look like?

First of all, we are a very numerator-focused management, by the way. We are at ROE. But as long as it is sustainable. So this is our focus, sustainable ROE. Actually, even though 2019 was a very difficult year, although the growth was something limited, still the numerator impact on our capital adequacy ratio was something significant. So when you look at the capital accumulation of the bank, around 130 basis of that until the end of the third quarter actually came from the numerator side, the profitability of the bank. So if you consider the full year, it will be more than that. So numerator is always in our focus, and it will continue to be in our focus. And for 2020, actually, I'm more optimistic about our pre-provision income, so we should actually expect something like mid-teens. And if we further divide that into different components, there will be a major contribution that will be coming from the net interest income. Why? Because there will be more growth, and we will be starting the year with a relatively good NIM. And we will try to keep that NIM, maybe not as high as where we are starting the year, but still there will be a significant NIM. So therefore, net interest income part, I think, will be somewhat very positive in the coming year. And leverage -- tier loan growth, it will be high teens. FX loan growth, low single digits. So hopefully, investment appetite, hopefully, will kick in, in the second part of the year. Our leverage today is around 7x. It's too low for the bank. So next year, we are targeting then...

This year.

This year, yes, this year. I'm sorry. 2020, we are targeting more than actually 8x. But when you look at -- in the medium term, our ambition is to actually run the bank around 9x. So that will not happen immediately because our capital adequacy ratio is somewhat close to 20% nowadays, but that is the ultimate goal. ROE then will be like mid-teens. NIM will be greater than 4. I think that's for sure, if there are no major, major surprises. Net fees, high single-digit. OpEx growth, mid-teens. Cost to income ratio, we will continue to operate actually successfully in that area. It will be less than 34%. NPL, it will start to normalize. It will be less than 6. And cost of credit, which is very important, I think it will start to normalize. So it will be around 200 basis. And when you look at the more medium term, mid-term, we are, again, will be probably back on track in terms of ROE. So our ambition is to actually, again, achieve high teens on the ROE, but not maybe immediately in 2020. But eventually, that's where we will end up with, hopefully, in the coming years.

So talking about growth, what's our game plan? Is there like any secret sauce?

We don't have a secret sauce. But of course, we have lots of ingredients. First of all, our capital adequacy ratio, which is around 20% nowadays. Our low leverage, that's another big, actually positive contributor. And on top of this, actually, we have been investing significantly on our infrastructure. So I'm really very proud of what we have done altogether. I would like to also congratulate and thank all my friends. I think this is a great infrastructure that we have today. And the talent, people and culture that we have. So all these are actually -- will be contributing to the growth.

So we just shared that we're looking for 4% GDP growth in 2020. It's going to be a growth year, and everyone wants to grow. So what about the competitive dynamics within the sector? And also, when you look at the recent reserve requirement regulations, how will that impact the overall growth?

Actually, reserve requirement is an important incentive. But having said this, we are not actually managing the bank just for the sake of fulfilling this reserve requirement incentive. But as I said before, we were forecasting like 10% local currency growth and we have achieved that. So as a result of that, we started to benefit from this reserve requirement incentive. So that is the case as of today. So looking forward, if we manage to, actually, come up with such growth in local currency and other areas and again, Akbank will be able to hit that reserve requirement target. But this is not the ultimate goal. So -- and we are bankers also. I mean, I also would like to share that growth is valuable as long as it is sustainable and profitable. But having said this, the starting point is actually pretty good for us, low leverage. Our market share is actually, in many of those products, are less than 8%. So this is actually below the capacity of the bank. So therefore, we have a lot of actually opportunity to grow the bank, still cherry-pick some customers. Still, we can keep our relatively good asset quality. And we have been, again, investing heavily in our infrastructure, all those machine learning, all those scoring systems and so on. And I think we can manage that. So actually, this year, we are planning to increase our loans. Loans is like 51% of our total assets today. So this year, we are targeting around 54%. And I think we can provide that growth in a stable, in a profitable, sustainable manner. So that is the ambition of the management.

So in the last few years, we've been reducing our wholesale borrowings and focusing on deposit-based funding. In a growth year, is there any change to our overall funding strategy?

It will be the same. So there are no major changes. So we will continue to actually focus on our deposit gathering. So today, it is like 60% of our total liabilities. So in the coming year, it will be like 63%. So there will be an increase. We were actually decreasing our wholesale funding over the last couple of years. So if you look at the last 2 years, we actually -- we have been deleveraging at the magnitude of roughly $3 billion. So we used to be around $11 billion. So we are down to roughly $8 billion nowadays. So this year, we will, of course -- if it makes sense, we will opportunistically actually tap the capital markets, if there is enough loan demand, investment demand in the country. Of course, we don't want to take any [ mismatched ] risk. So therefore, we will tap those markets. But for the time being, also we have a lot of liquidity, FX liquidity. So now in January, actually, there is this Eurobond coming, and we will be redeeming it. So it is roughly $500 million. So because we have lots of liquidity and when syndication time comes, again, we may roll below 100, but it really depends on the demand on the FX loan side. That is the plan.

Okay. So how does your growth and funding strategy reflect your NIM outlook?

So as I said, I'm very happy with the starting point, which is like 5-ish. But to be transparent enough, I think keeping that NIM at around 5%, I think it would be too ambitious. I don't think that we will be able to do this. And there are a couple of reasons for this. First of all, our loan book also is nowadays repricing, and there's a lot of competition, not only public sector banks and also coming from the private sector. So therefore, eventually, our loan yields have to come down a little bit. So that would be one factor. Still, we will be pushing our deposit costs down. But nowadays, actually, we are collecting deposits below 10%. But how much you can go down? So there's a limit to this. So eventually, I think our NIM will slightly become lower than what we have today. So that's why we cautiously say greater than 4%. And I think we will be able to achieve this, but a little bit less than what we have today. But Akbank has one great advantage, I have to mention it here. I would like to thank my friends. And we did a lot of actually activity on bond purchases this year, TL as well as FX. So we actually significantly increased our market share. So that will actually contribute to our NIM this year, 2020, because we were able to get some of these bonds at higher interest rates higher than what we have today. So that will be contributing. We have CPI linkers. And our assumption is like 9%. So that's how we will be starting the year. But over the coming months, we will make adjustments where necessary. So I'm positive on the NIM side.

So the CPI linker impact will be probably immaterial this year?

Yes, yes.

So it's interesting to also see that we expect a high single-digit fee increase in a growth year. Why is that?

Actually, it is basically because of our payment systems. And again, there are 2 reasons behind this. First of all, there's a regulation change. This regulation change puts a cap on acquiring fees. So in our institution, this has a magnitude, something like TRY 500 million. So it's a significant money. And also because of the declining interest rate environment, interchange is coming down. So these 2 factors will be affecting our payment system's commissions. But this is not specific to Akbank. So this is basically applicable for anybody else in the system. So -- but having said this, the other side, nonpayment system side, I'm very positive on that side. So we have been actually doing a lot of good job in the bank, diversifying our fee base, wealth management, bank issuance, digital banking, mobile banking, you name it, retail loans, et cetera, et cetera. So there will be a significant contribution. And I'm expecting something close to 20% actually growth in that area.

On the nonpayments side.

From the nonpayment side. But when you combine this with the payments, which will be hurting our actually fee income, the end result would be something like it's a high single-digit number.

Okay. So we've covered mostly the revenue side. Let's move on to the costs. Normally, Akbank is known to be a very lean organization. So how come we're expecting an above CPI OpEx growth this year?

There are 3 reasons for this. First of all, this is a year of growth for the bank. So there will be some marketing costs regarding the customer acquisition. So that's one reason. And the second reason is there is a change in the SDIF premium in the country. So impact of this is almost like 1%. And the third, we have been investing significantly in our infrastructure. So this is the first year of full year depreciation. So there is this roughly close to 1% impact coming from here. But over the coming years, that will also be normalizing. So this is the reason. But the bank will be benefiting from this infrastructure, technology and so on, and it will have a positive impact, and we have started seeing this already on our cost-to-income ratio and so on.

So does this mean that there is no further improvement in our best-in-class efficiency ratio?

No, this is not the case. Cost to income ratio is something that we are all very proud of. The bank actually will continue to operate below 34%. As you know, we have been doing a great transformation job over the last couple of years. And we have already declared that there is additional ambition of the management, which is another additional 2% reduction in our cost-to-income ratio. So 1/3 will be coming from the actually cost reduction and about 2/3 will be coming from the revenue side. So I'm really very optimistic about the level of digitization; the analytical part of the bank; low-cost base, which is not comparable to anybody else in the country. So cost-to-income ratio, we will continue to deliver best results.

Okay. So now on to the asset quality side. How do you plan to like balance growth while preserving your credit quality?

So as I mentioned at the beginning, actually, we had a lot of NPL recognition in 2019. So we were actually quite active -- proactive in this. Things may change, of course. But I don't think -- as I see now. So we are discussing with our friends all the time. There is no major big file that we are expecting as an NPL in the coming years. Again, things may change. But as we see right now, this is the case. Secondly, my friends, again, are doing a great job on the collection side. But collection at the end of the day, there is this legal procedures. Sometimes, it takes a lot of time...

For the big files.

For the big files, especially. So some of these legal procedures have started in 2018. Some of them have started in 2019. So hopefully, in 2020 and in the coming years, some of these legal procedures, hopefully, will finish. So that will impact our collections positively. So that is our expectation. And we have already derisked our loan portfolio. So nothing really much in our loan -- we already have a relatively smaller portfolio anyhow. So therefore, that is also something positive. And also, we shouldn't really forget about the macro environment. So when you look at the level of interest rates today, interest rates are more affordable than what we used to have before. So that is also something very positive. And last but not the least, I'm also very happy with the level of infrastructure that we have been building in the bank. So we have been working with a lot of companies from Silicon Valley, machine learning, all those advanced analytics and so on. So the bank is actually much better in terms of infrastructure and much better than anybody else probably because we have been investing a lot in all those advanced analytical infrastructure. So that -- I think that is very important in growing our especially retail portfolio in a profitable and sustainable manner. So I think we will be able to do that. And we are even using machine learning and all that stuff in even collections. So I think this all will help to make our cost of credit, NPL better than what we have today. So I'm confident. So this 200 basis, unless there are more surprises in the macro geopolitical situation and so on, how we see today, I think that seems to be achievable.

So you can confidently say that then we have reached the peak in terms of our NPL and cost of credit cycle, it looks like flat as of fourth quarter?

Hopefully, yes, this is the case, I guess.

Okay. And the final question on asset quality is...

But again, this will continue to drop. So if you look at Akbank like 2, 3 years down the road, actually we will eventually stabilize somewhere between 100 to 150 basis. So still 2020 will be a transition year for us.

So the final question that we usually get in every analyst and investor meeting basically is about LYY. There was a significant negative impact coming in from this particular loan due to -- on the provisioning side into the ROE. So looking into 2020, what is our game plan there?

We did a lot of provisioning. But again, I'm happy that the bank was able to afford this. So hopefully, it will turn out to be a positive, if we can manage to do this transaction as we are planning. And as you know, we have given a mandate to Morgan Stanley to sell the company. But this is a long process because there are many parties involved in this. So it has to be a good transition -- transaction for the country as well sustainable transaction. Government is involved in this, shareholder as well. So we have to actually coordinate this activity very well. It's a great company, by the way. I mean, it's a publicly traded company. If you look at numbers and so on, they are announcing their own results, and the company is doing very well. But we are bankers. As we have said, since day 1, we are not in other businesses. We are bankers. So eventually, we will dispose of the assets. But we have to find a proper good buyer and which is sustainable for the country as well.

This all looks great on paper, but what about the strategy behind the numbers?

So we have actually bifocal strategy. So like every bank, we try to run the bank daily operations and so on, risk/return, capital allocation, efficiency, et cetera, et cetera. So we have to do it anyhow. But what I feel -- what I think actually are, our management is especially very capable on the right-hand side as well. So we like transformations a lot. So we have been investing a lot in our infrastructure. So we try to actually deliver the best superior customer experience. So we have been striving very hard on this. So digitization, advanced analytics, there's a tremendous effort there on that area. And there has been a lot of investment on our people, infrastructure. So eventually, the right-hand side actually will differentiate Akbank in the system. So I really strongly believe in this. In 2018, we have been investing like $200 million in our infrastructure. Again, 2019 in a very difficult year, we have been investing like another $200 million. So therefore, eventually, this will make Akbank a bit different than the rest. So this is our game plan.

So now onto the driving forces. Let's start with corporate and investment banking. What are our ambitions there?

So first of all, everybody actually, be it corporate or investment banking or commercial, retail, private, whoever, it doesn't really make any difference, we all concentrate as a bank in, first of all, customer acquisition. We would like to increase our number of customers. So that's #1 area. The second area is, since we have been investing so much in our infrastructure, we have been -- we will be actually leveraging this as much as possible and differentiate Akbank. And last but not the least, we will all be using this Digital & Analytical solutions as much as possible. So these are like the differentiation areas for the bank. But CIB specifically and Levent and the friends will be more concentrating on MNCs. There will be a lot of actually focus on like trade finance, which is the growth area, actually, for Turkey, especially exports. If investments actually pick up in the second half, of course, again, project finance and so on, this is something that we will still be active in. And areas like, for example, renewables and so on. So I think -- I mean, there are lots of activities, but I think these will be standing out. I think that is the plan.

As for the commercial side, I see that we have a solid growth aspiration. What are the key focus areas there?

I think commercial is more or less the same like CIB, maybe with -- maybe smaller scale maybe. But again, maybe I can add tourism to this. Again, renewables, trade finance. There's a lot of focus on cash management. These are the key areas. Yes.

Okay. And then on the retail side, basically, what we merge the consumer as seen at the beginning of 2018 and we achieved this new holistic model of retail banking. What have we gained so far? And how do we think this is going to create a competitive advantage for the bank going forward?

I think this was an excellent move because when you look at it today compared to the previous years, there is more synergy in retail banking and also the digital part of the bank and retail, I think there's a lot of synergy in that area as well. So all those infrastructural changes, digital, mobile, analytical, things that we are doing and so on, actually, retail banking will be benefiting the most. So looking forward, I'm really very optimistic about the progress on that side. Corporate, commercial, they are also pretty good. Private banking, they are pretty good. Retail is also very good. But I think there will be lot of upside looking forward in that area.

Another area the bank has invested in heavily is wealth management. What opportunities do you see here for the bank?

This was also a very good move. So as we have shared before, we have changed our organization structure. We have also invested significantly in our infrastructure. So when you look at it today, the bank, especially private banking and affluent banking has a great synergy with our 2 companies, asset management company and investment company. And they are creating some value for the whole institution. So we have this slide here actually. And I think this is an outstanding slide. So when you look at for the last 2 years, mutual fund growth was 160%. So when you look at the market share, the market share has gone up from 16% to over 18%. So I think these are like significant achievements. And this is, I think, is attributable to this organizational change and infrastructure investment. So we will continue with this. And we did the same actually in bank issuance and other areas. So that's how we work. So there's a lot of effort in those areas. And I think it's just outstanding how it looks.

Looking at our operating model, I see that we expect a lot of contribution from our digital capabilities. So how would you compare Akbank's offering relative to our peers?

This is our operating model. We do a lot. But if we summarize everything on a single piece of slide, I think that's it. So at the center, we have the customers. So we do everything around the customer. We want to come up with the best customer experience. And we also have our own people at the center. And just around us, the inner circle, you see the artificial intelligence side. So there's a lot of investment on that part. So we try to bring intelligence to everything that we do in the bank, either internally or externally. So if you look at the outer circle, if I start with the right-hand side, integrated touch points, so what we are trying to say here. So no matter where the customer goes. It can be a mobile banking application, it can be a branch, it can be a call center, it can be an ATM, doesn't really matter. So we would like to provide the same level of service, seamless operations, the same level of service, the same look and feel, the same design. So the teams are actually working very hard on this. So it's not something very easy to manage, but this is the ultimate goal. And we have done a great progress on that area. Hence, the second gray area more on the processing side. So as you know, we have been trying to design the bank from scratch for the last -- actually, 3, 4 years, we try to make our operations as seamless as possible. So that's also adding to our cost-to-income ratio in the bank. So that's another area. The third part is the smart systems. Again, bringing intelligence to everything that we do. So -- but if you look at the foundation of that, we, of course, have the people and infrastructure. So as I always am proud of, people and infrastructure are the major 2 strengths of the bank looking forward. So I'm very proud of this. And also, I think the left-hand side is also very important, design and innovation culture. So this design focus, for the last couple of years, is something that, again, will differentiate Akbank. So everything that we design, it can be a mobile bank, it can be a branch, it can be an office. It doesn't really matter, it can be an ATM screen. So we would like to come up with a very sophisticated design which will make Akbank different than competition. So there is a great focus because we have to align ourselves in line with our customer base because people are changing, lifestyles are changing. So that's how we are trying to manage the bank. So bank is no different. So design is very, very critical looking forward.

I mean, as you just mentioned, the success of these offerings depend on the robust infrastructure and attracting the right talent. So has Akbank been proactive or reactive in these areas?

I mean, without people you cannot do anything. So I'm really very proud of our people. We have done a lot. So when you look at the profiles today, I think it's just outstanding, very young people, very dynamic people, very digital people, analytical people. Now we have like almost 10% with PhDs and so on. And the reason is we have to do a lot of analytical work, in the bank. There's a lot of like centers, like centers of excellence, like design and so on. So I think these people will really carry Akbank forward. And maybe one area that I would like to mention is more on the women participation percentage in the bank. It's more than 50%. I mean, that's relatively easy because we are in service business, but when you look at the top management, so this is something that I'm really very, very proud of. So you can see some of my friends here. So it is now 40%. So I think it's a great number.

You talked about integrated touch points. When you look at the transformation process, a significant number of branches have been completed. Are you so far happy with the results?

Pretty much so. Now we have done already like 300. So this year, we will do another 200. So altogether, 500. 500 means something like 70% of our total network. But having said this, we have this technology across the whole branch network. So 100% of our branches already are using those technologies, but I'm more referring to the architecture side. So by the end of this year, it will be like 70%. So I'm very also happy with the results, quality of service, waiting times are down by roughly 30%. So there's another 2/3 of cash transactions moving to the digital part. So this is another important development. On the revenue generation side, so I mentioned about our fee generation in the bank. So it is around 30% or so. In those branches, we were able to achieve around -- on an average, 40%. So this is far better than the rest. So therefore, on the revenue generation side, this is also something very positive because these people are using new technologies, all those smart systems, there's a lot of intelligence, iPads and so on, people are mobile. So they don't really have to sell inside the branch. They can go out, acquire customers and so on. So there's a lot of activity going on.

We have also recently redesigned our mobile app. What is the key selling point?

So this is one of my, again, favorite in the bank to design the lean style. More importantly, maybe, the intelligence behind this. This is really communicating with our customers' intuition that there's this intelligent interaction. So this is something that which already has a lot of impact on our numbers. So I think this is a little bit different. Again, we have been working on this for the last couple of years with all those design companies, global design companies and so on. And I think -- first of all, we were the first bank to adopt this mobile-first vision. So that was like several years back. And I think Akbank is doing a great job in that area, and which will help our numbers.

Well, everyone is talking about digital. So how do you measure success in this area?

So we have some key metrics. First of all, more than 60% of our customers are already using this mobile, and this migration is still actually continuing. And there are lots of metrics. But I think what is most striking on the slide is the number of visits per month. So every mobile customer is visiting this mobile, logs in 30 times a month. So can you imagine a customer visiting a branch 30 times a month. So this is a great opportunity for us, actually, to interact with the customer, understand the customer, cross-sell additional products and so on. So when you look at the cross-sell ratio of mobile customers versus a regular customer, it's twice as much. So that is really contributing significantly to our numbers.

There's been a lot of talk about fintechs and bigtechs and how they may change the competitive landscape going forward. How does Akbank plan to deal with these challenges or maybe potential disruptions within the sector in the medium term?

So as you know, we came up with this new initiative what we call Tosla. Actually, we created our own challenger in a way. So as you know, Turkey is a young country. So 50% of the population is under the age of 35. So these people actually like fun and they want social stuff and so on. This is actually catering those needs. So this is a very fun and playful, simple, fast social platform. This is actually for P2P payments. This is 7/24. And we launched this actually about like a couple of months ago. This is relatively new, but the numbers are very encouraging. So I have lots of expectations out of this, actually, our own challenger. It's very quick, very easy. Onboarding is relatively simple. It's relatively difficult to become a bank customer, but this is just with several -- couple of clicks, you become a customer. So looking forward, we will create some value out of this. I'm sure about this.

So this concludes actually our interview. But before move into the Q&A session, Hakan Binbasgil, what shall we take home from here?

So I guess, everyone -- I have 3 key messages. First of all, I'm very happy how we, as the whole team with my management team, how we positioned the bank as of today. I think it's a great positioning. And there are 3 reasons for this. First of all, the level of capital that we have, which is around 20% nowadays. The low leverage, it's a great advantage looking forward. So that is another message that I would like to share. And also, the outstanding infrastructure that we have been trying to build year after year. The same management, coherent management, the same vision, the same governance, the same shareholder structure. So I think Akbank did a much better homework. So I think the bank will benefit out of this. My second message is more on the profitability side. So 2018, 2019, we delivered some results, but cost of capital and so on, that was not really that great. I mean, I have to accept this, but the conditions were relatively difficult. But looking forward, I think there will be some improvement -- advancement on the profitability because there will be, first of all, more growth, growth is coming. And Akbank has a lot of capability of acquiring new customers. That's another reason. And third, now we have done a lot on the provisioning side and cost of credit will be normalizing starting from this 2020. My third message is this strong team, management team will continue to differentiate Akbank through all those restructuring activities. We are fully committed to build our future: first of all, people and culture part; digitization part; AI parts; design; innovation. So that's another message that I would like to share, so 3 messages.

Thank you, Hakan Binbasgil. Before moving on to the Q&A session, I'd like to invite our CFO, Türker Tunali, to the stage.

Thank you. [indiscernible]

[indiscernible]

Help us with the questions.

Now we can rest.

Oh, what a surprise. Sam has the first question. If we can get a microphone? Microphone?

I've got a question on asset quality because you have spoken a lot about the proactive steps taken last year, but also you focus quite a lot on cost of credit normalization. What sort of levels are you thinking about for mid-term normalized levels of cost of risk? And is that the key determinant of the high-teens ROE? So effectively, is it cost of risk which is moving us from mid-teens to high teens? And then despite the fact that you have had proactive asset NPL recognition last year, what are the sort of the watch files looking like as we go into 2020? Are there any sensitive areas or segments or sectors of the economy that you continue to be mindful of?

Okay. Maybe I can start and then Hakan.

Yes, yes, go ahead.

First of all, as Hakan Binbasgil has already mentioned, the medium-term expectation for cost of risk is, we expect it to be normalized between 100 and 250 basis points. And in the Akbank case, every 10 basis points improvement in cost of credit has roughly 30 basis points of ROE impact. So actually -- as you said, actually, we may expect that this further normalization on the cost of credit side will positively impact our medium-term ROE expectation. That's the first thing. And for this year, so how are we expecting our stage 2 loans, stage 3 loans to evolve? Then we start with the nominal figures. We expect stage 2 and stage 3 loans to increase very limited in percentage points in 2020. So what does it mean? Because of our high loan growth expectation, we can say, stage 2 and stage 3 loan share to total loan book will improve by a few percentage points in 2020. And as we have expected and talked during the presentation, we expect collection performance on retail loans on SMEs, to further improve in this year. Actually, we have already seen the collection improvement trends in -- especially in the second half of this year -- of last year, sorry and expect that trend to continue in 2020. And when you look at the current low interest rate environment for affordability as well as on the growth expectations on economy, this will be supportive factors for the collection performance. The areas are always -- the segments are the ones we have always discussed. So especially real estates are sensitive sectors, again energy, although we have the majority of the portfolio in Akbank is comprising from renewable energy first. So for this year, we don't expect any big surprise, any big tickets to go into stage 2 or into stage 3.

Was your question regarding just asset quality because, obviously, the growth will also be kicking in. And obviously, the leverage will be increasing. So the NII growth will also be supporting the profitability side as well.

Yes, exactly.

And my second question was a slightly bigger picture, and it's actually on the structure of the banking sector here in Turkey. Could you perhaps give us your view on how we may see consolidation in this sector or the competitive dynamic longer term? And it's obviously relevant that there's an Italian bank currently looking to exit. That's been a sizable transaction recently, but what is your view on how the sector may evolve in terms of consolidation in the structure of the market?

Despite some of the challenges, I think that the banking system is still quite healthy because the starting point was pretty good in terms of capital adequacy, et cetera, et cetera. But over the long term, of course, margins -- this is not specific to Turkey, but I think this is the case everywhere. So whenever there is some margin squeezes and so on, of course, that makes the life a little bit more difficult. So scale is becoming more important, efficiency is becoming more important. We have to invest. I mean we have been investing like 200 million, another 200 million or so. So of course, the ones who has the capability, of course, will have more competitive advantage in the long term. But what Turkey has experienced in 2018 and '19, I don't think that, that will immediately force some consolidation in the market because of the financial structure of the banks. And the parent companies also that they are strong. So I don't see an immediate consolidation impact in the country. But like everywhere else, this margin decreases and so on. Things are difficult, not only in banking. I mean this is pretty much the same across all the industries, I would imagine.

Waleed?

A couple of questions from my side. Firstly, on leveraging capital, an area that you've talked about, you want to grow leverage in the near term and also over the medium term. If you look at your guidance for 2020, high teens Turkish lira loan growth and low single-digit FX loan growth. If we combine this, you get blended loan growth of close to 15%. And then if we take your ROE guidance, which is mid-teens as well, combining this with a very small payout, as you've historically had, that means that you will not be eating into your capital, even over the medium term, if you kind of sustain this kind of loan growth. Moreover, your leverage will gradually [ grow ]. Just want to understand what are we missing? Are you factoring in a substantial increase in payout going forward? And effectively, if the banks are not allowed to pay a dividend this year, then how does this change your leverage target for the medium term because your medium-term target is about 9x?

Yes. Our existing capital adequacy ratio is around 20%. And you are right, it's a pretty solid starting point for us. So no matter how much we actually grow in the next year, still we will be talking about some significant capital adequacy ratio. If you're asking our dividend policy, so actually, there is no deviation from our dividend policy. So we would like to pay dividends. So that's our standing as of today. And as you know, there are -- we cannot decide by ourselves. So we have to ask a permission from the regulator. And as you all probably know, there was a letter like a couple of weeks ago, and this letter was not really very encouraging. But the process has not really finished yet. So we will see how it goes. So I cannot give you a solid answer for the time being. But if there's anybody in the country who has the capability of paying dividends, probably it would be -- Akbank would be one of the leading banks in that area. So this capital -- of course, this capital usage, despite even if we pay dividends, still we will come up with a high capital adequacy ratio. And -- but that's good looking forward. I mean you cannot increase your leverage from 7 to 9x in a year. I mean if you do that, then it wouldn't be a good practice anyhow. So therefore -- we are a cautious management. So therefore, sustainability, profitability, good asset creation will always be at the focus of our management. So we are not in a hurry. But eventually, this will bring Akbank some great competitive advantage in the country. So that's the plan.

Understood. And medium term to get to about 9x leverage, what kind of loan growth do you envisage over the medium term? As well as what kind of payout would you want to be at a normalized level?

Our dividend policy is up to 40%.

40%, yes.

So there is no deviation from this. So we will stick to this. But if we can actually deploy capital where everybody can benefit from this, every investor can benefit from this, of course, we would like to do this. So if we cannot use the capital, of course, we will be hopefully -- provided that we get a permission, we will be generous. But I think, Turkey will -- I think we should all agree on this. We might be going through some challenging times and so on, but it's a growth country. It's a young country, growth country. Now this year, we are forecasting 4% growth. Hopefully, things will go in a smoother fashion in the coming years and this growth will continue. So still, there's a lot of unbanked people in the country. So all these new initiatives, like Tosla and all that stuff, will bring us new opportunities. So all those digital, actually, investments and so on. But we try to optimize this capital usage, dividend payment. We are aware of this.

Point taken.

Just one more question on cost of risk just to follow up on that. You've given very detailed guidance on this. If we look at what you've guided for during 2019, it implies that fourth quarter cost of risk will be north of 325 basis points to get to the lower end of the 250 basis point range. And then your guidance for 2020 is around 200 basis points. What I was trying to get a sense of was the fourth quarter number, how much of the difference between the 325 and let's say, the 200 basis points are the one-offs recognition versus the timing of recoveries? So what I'm trying to get to is, how much of the improvement to 200 basis points is going to be delivered by recoveries, which are absent at this moment?

Sure, we can come to later on that. So we have to look at figures.

It looks like the near-term outlook is very supportive, accelerating growth, expanding margins, normalizing credit. On the margins, at what stage do you think the net interest margin could peak? And if there is not a lot of room left for deposit repricing, how long do you think it will take to reprice your loan book to the entire loan book? That's the first question.

Actually, as Hakan Binbasgil has mentioned during his presentation, we are starting the year with a NIM around 5%. It's really very high levels. And we have mostly reflected [indiscernible] in interest rates to our deposit cost. For sure, going forward, depending on further rate cuts and further outlook, we may further readjust our deposits. But probably the improvement area will be limited. So -- but the loan repricing will go on. So we can say probably first quarter, if nothing changes, will be the period where we will see the highest net interest margin for this year. So we may see a gradual decline till the end of the year. But all we know for the full year, we feel very comfortable with our full year guidance of a net interest margin at least of 4%. And we should also not forget, actually, we are starting the year with a low leverage. We want to grow. We want to grow our loan book by high teens on TL side, but also on the fixed side, we want to grow. And we believe that this growth and the net interest income we are going to generate from that growth will more than offset the [ easening ] in net interest margin. So we're expecting an improvement -- increase in our net interest income for every quarter till the end of the year.

And the second question is on the NPL ratio. So it looks like you delivered on almost all of your 2019 targets. The NPL ratio might be a [ wobbler ]. Just in qualitative terms, what do you think are the downsides to your target of below 6% NPL ratio? Is it slower GDP growth? Is it another BRSA request, higher unemployment? What are the risks?

For 2020, below 6% NPL?

Yes, yes.

Yes. What is the risk for the below 6%? And is there any upside risk to that? Because in 2019, we were above that, basically.

I think -- geopolitical situation, I think, is the largest risk that we have in the region. But I guess we have also learned how to live with it. So things do happen almost every day, somewhere -- not in this region, but everywhere. So it's a relatively more unpredictable world. So it's not the same anymore. So I would imagine that if you take all the risks, I think that would be the thing which is beyond our control. So that might also impact the investment appetite, et cetera, et cetera. So if everything is -- if everything stays the same as of today, I'm positive about the macro, the bank and so on. I'm not terribly worried about what's going to happen. But geopolitical risk is something that we always have to keep in mind.

Alan?

Alan Webborn from Soc Gen. So where's all this loan growth coming from this year? I mean on the whole, I think there's not very much in terms of infrastructure investment. Large corporates aren't really borrowing as one understands it. So where are you actually going to get this sort of high teens TL loan growth from? I mean is it because you think your natural market share in SME is lower than it should be and you can grow there? Because in a way, the growth in the economy and loan growth are 2 of the same thing. Without one, you don't get the other. So I just wondered what you feel the situation is in terms of your major clients? What is happening? Yes, things are a little bit better. Yes, the lira has stabilized. But what's changing the company's views as to what they wish to do? And in which areas of the corporate business do you think you're going to see better loan growth? That was the first question. And secondly, it does appear that the way the state is micromanaging the economy in terms of what it's doing, in terms of almost forcing you to lend because if you don't, you'll pay higher charges, essentially saying to the state banks, lend more at very low rates. And if you get stuck, we'll help you out. How do you as a private bank manage a different approach? I mean when we see less than 1% mortgage rates a month, it looks crazy given the economic environment and given where policy rates are. So how do you manage to keep growing and -- but keep growing profitably when it does seem to be rather a change in the way the state wants to push growth for its own means? Clearly, it's different to how it was when the CGF funds were being thrown out to everybody that -- in a fairly equal way. It seems to me there's some inequality between what the state wants to achieve in terms of growth and how you as a private sector bank would actually manage your risk/reward. So that would be interesting to hear what you think about how the economy is growing.

So I again would like to repeat one of our key principles. I think I mentioned during our conversation, but I will repeat. So growth is important and valuable for us, if and only if, it is sustainable and profitable. And I can assure you that, as the management team, we will not deviate from this. We have never deviated from this in the past. Maybe we have done some mistakes, but it was not -- it was a mistake, and there are also lessons learned, like all those [ YoY ] loans, et cetera, et cetera. But the main principle is there. So this is within the DNA of the bank -- of the management. So I can assure you that. And I think we have demonstrated that in 2018 and '19, there was a lot of deleveraging in our institution. So that's why, I mean when you look at our market shares today, these are like unheard of for at something below 8%, given the strength of the institution is unheard of. So why did we do this? Because we were not really too comfortable with loan quality, et cetera, pricing, et cetera, et cetera. But now where we are today, the base is so small, so therefore, having a mid-teen growth is relatively easy for us. So that is why I use this term cherry picking. Things are, first of all, improving in the country. So we all have to agree on this. But it is relatively easy for us to pick those customers that are relatively good because our base is very small. So that will probably happen in different dimensions. It can be in the corporate banking area, it can be in the commercial banking area and it can also be in the retail area. So we have been actually also deleveraging on the retail side as well. So when you look at, for the last couple of months, so there was some growth, especially in general purpose loans and so on. And when you look at the margins and so on, I think it was profitable enough for us to make that decision. So this -- having this low leverage is giving us a lot of flexibility for growth and also managing our loan mix. So we also have this capability. And I'm also very positive about the infrastructure that we have been building on our new scoring systems, all those new technologies and so on. So that will also give us some courage, actually, doing this growth. And we are a very careful bank, also managing our mismatches and so on. So you mentioned about all those mortgage and so on. We keep on hedging ourselves. So we have been doing this for the last several years. So when we -- when interest rates started to go up in the country, we already had reduced our maturity mismatches down to almost like 30 days in the bank on the TL side, and it was basically 0 on the FX side. But we have been doing this over the last several years. So it did not happen really over time. So therefore, even if we are very competitive in certain products, I can assure you that the bank had some hedging mechanisms in somewhere else through different treasury products.

Any further questions from the audience?

[indiscernible] Sorry, let me repeat myself. I have 2 quick questions for you. One is about the leverage. Looking at the past, from time to time, do you think you have done some extra deleveraging? This is my first question. And the second one is that there has always been some dollarization in the Turkish economy. But recently -- very recently, especially since the middle of 2018, the deposit base has changed massively, in my opinion. The FX side is, for the first time, if I'm not mistaken, more than the TL deposits. So with growth kicking in 2020, with extra FX liquidity in the banks, how do you plan to -- in my opinion, there is a mismatch, how do you plan to handle this, I mean TL deposits versus FX deposit and TL loan growth?

Hakan, so maybe you can start with the leverage?

I do not exactly get the leverage...

The first question is, have we actually delevered too much in the past?

Did we delever too much?

In the past. And the second question is regarding dollarization trend?

I don't think so. I think when you look at, for example, when we announce our results, you will see that in 2019, Akbank has gained market share in the private sector, in certain areas. So this is not the case in those areas where we wanted to grow. So I think our -- maybe in 2018, maybe this is the case. In 2019, we did gain some market share in certain areas. Regarding the dollarization, yes, there was some dollarization this year. So it was like roughly $30 billion, $31 billion. So that actually makes the balance sheet structure a little bit difficult. I accept this, and there are 2 reasons. One reason is on the deposit side. And the other reason is on the demand side, and the demand is actually more coming from the TL side. So these together makes the life a little bit difficult. But there's this swap market that we are using through our treasury and that's how we manage the bank. And this is more or less the same with the rest of the system. But what I can tell, though, when you look at the percentage of FX deposits in the country, like at the beginning of -- in the second quarter of this year, it was as high as 55%. Nowadays, despite this $31 billion actually additional dollar deposits, that 55% nowadays drop down to roughly 50% -- 51%. So that's a good progress. So this will take time to normalize. So confidence in Turkish lira, how inflation behaves, et cetera. So that will take time. But now we are a little bit better than this peak time, which was like 55%. So there is this 5% improvement.

And maybe also, as you know, we have -- at Akbank, we have always been cautious in our LDR, loan-to-deposit ratio. And as you may remember, by the end of the third quarter of last year, our Turkish lira LDR was at around 140 basis points -- 140%, total was around 90% levels. When we announce our results by the end of January, you will see that we have further improved our Turkish lira LDR in the fourth quarter. So it will be -- yes. So we will continue to keep our deposit base, including TL deposit base, strong. So we don't want to solely rely on wholesale funding. So we are always very disciplined in our LDR management.

And actually, as Hakan Binbasgil mentioned earlier, we actually have been reducing the wholesale funding side anyway. So that's something that the bank has been doing over the last few years. Any further questions? Simon?

From Citi. Yes, just 2 questions. First, I was hoping you could elaborate a bit on where you see the 20% growth in nonpayment fees? And then my second question is kind of on innovation because you've been doing a lot of investment into what you call advanced analytics, digitalization. And I guess my question, banks are kind of known for implementing known solutions, not really for innovating. I think somebody said that the last innovation was the ATM machine. I'm sure that's not the case. But I think can you elaborate again on that and just convince us that you've done something different that nobody else has that's going to give you a competitive edge? Or is this just kind of doing stuff that other people will do, and the one that's been investing the most for the time being will be at the forefront for a while, but then will -- ultimately, the competitors will catch up? It's hard as an outsider to really know.

Maybe first start with the nonpayment side and the fees growing 20%? What do we -- what are the aspirations there? And then go on to the innovation side.

I am very positive on the digital side for fee generation for 2020. Areas like, again, wealth management and so on, money transfers. Because when you look at the number of transactions in the bank, that the growth is actually exponential. So I was looking at the numbers the other day, number of transactions are increasing tremendously. So that gives us an opportunity to create some fees [ there]. So it's basically digital, wealth management...

Bancassurance will probably kick in with the loan growth coming back as well.

Yes, and also with lending. So we did this roughly 30%, 35% loan growth with limited lending growth. So when lending kicks in, there will also be some contribution, especially on the retail side. So that is the fee side. Innovation, you are right. I mean we are not -- I mean we cannot actually come up with something like brand-new, like, I don't know a battery car or something or something related to the spacers. At the end of the day, we are doing finance business. But what we call innovation, it doesn't really have to be big. If there is something that we can find, which we capture the heart of our clients. If we -- it can be something small. So this, for example, mobile bank app that we do. So we constantly chat with our customers about the payments, that their needs. I mean maybe it's not a thing which is changing the world. But it adds something to our relationship with our customer. So it creates some value for the customer and for the bank. So these are the things that we call -- still, these are little stuff, but makes the bank a little bit different than the rest. So now we are -- our vision is like cashless branches, like operationless environment and so on. We are working on these. So it's not like something that will be changing the things radically. But our innovations will be more like around digital, mobile, customer experience, design. I think that should be the expectation from us.

I think the point that you mentioned earlier regarding Akbank being the first bank to go for mobile first, it shows that the bank is actually in the financial industry, at least...

In 1995. I remember this because I was running the retail at that time. For the first time, we came up with mobile lending. So it was the first time that anybody could take a personal loan from a mobile phone. That was in -- no, no, not '99, 2005. It was -- sorry, not '99, maybe there were no phones at that time, it's 2005, but still it was like 15 years ago. That one was radical. So we were also designing something like credit machine and so on. I mean we have been spending a lot of time, but innovation also has to make sense. It has to be feasible.

But even with Tosla, right now, we are the first financial institution to actually create this sort of P2P. So I think it shows the bank's vision in that area probably. Any further questions from the audience? Ovunc? Oh, sorry, I missed you. Sorry, sorry, sorry, [ John ].

Okay. So very top-down question on the GDP growth. So I remember a year ago, when we talked about potential GDP growth in 2020. The expectations were more along the lines of an L-shaped recovery rather than a V-shaped recovery. Now the expectation of a 4% GDP growth is more V-shaped rather than L-shaped. So I was wondering what went right in 2019, so that the expectation changed favorably? Or what will go right in 2020 vis-à-vis prior expectations?

So where the growth will come from? Maybe this is the question. Probably more domestic demand. Maybe some investment appetite, maybe not immediately, but hopefully, in the second part of the year, if interest rates stay like this, continue to decline -- if inflation continues to decline. And I think because there is this delayed investment. There's this delayed demand -- domestic demand in the country. So nobody has been purchasing houses, cars and everything, white goods, all that stuff. So there is this delayed demand in the country. So we all have to accept this. So therefore, I think that this will kick in -- start to kick in, in a relatively affordable interest rate environment.

And now Ovunc?

Thank you for the presentation. When do you think is interest rate cycle -- easing cycle come to an end during the year? Because when we look at TRY deposit rates at the moment, it offers like 2 -- minus 2% real rate. And last week, there was a report from IMF and they say at least 3.5% real rate is necessary for Turkey. I mean in terms of your loan-to-deposit ratio and maybe you share us your TRY deposit growth expectation in 2020, what do you think -- I mean, I think it will be a difficult year to collect TRY deposits for banks?

It depends on the level of inflation. So if inflation continues to come down, I think there is a possibility. And when you look at the also FX deposit rates, for example, you remember like several months ago, banks were paying huge rates for FX deposits. So it's not the same anymore, so when I was looking at our numbers recently, so the downward trend is very steep. So I understand your question, but what is the alternative? Also because there was quite a lot of dollarization in the country anyhow. So when you stay in dollar, that also -- that there are limitations. So it depends on the level of inflation. So if inflation continues to come down, I think there is no issue.

With regard to your question regarding deposit cost, actually, we want to keep our LDR at similar levels, so which means we want to grow our TL deposits base at a similar percentage to our TL loan book. And actually, also our net interest margin expectation for the year already contains that normalization trend in deposit costs. So we also see that the improvements on deposit costs will be limited, if any.

Should we take the last question?

Is there any further questions from the audience?

Cemal Demirtas, Ata Invest. My question is regarding the investment and while you mentioned that investment might be coming in the second half of the year, do you see any early indications regarding those investments? Because we have seen some pent-up demand on the consumer side, and it's getting better. But the corporate finance projects takes longer than maybe 6 months or more. So for any project, something might be on the table right now, at least, in the recent future. I would like to just understand how the picture is on that side?

So we would like to give the word. I guess [indiscernible], it wouldn't be an investor day without Levent speaking.

Actually, you're right.

Maybe you need microphone.

Microphone. We can bring the microphone.

Actually, you're right. We are just seeing the early signs of the investment as Hakan Binbasgil has mentioned that we're actually seeing the real investment appetite in the second half of the year, but we already started to talk with our, let's say, corporate clients into their new investments for their existing capacity as well as new opportunities. As you know, that in Turkey, the asset prices are extremely low and some of the clients are a bit squeezed on the loans, and they try to offload some of their businesses, non-core businesses. And there are a lot of potential buyers, local and international. So M&A market is quite active, yet there are really few cases that where buyer and seller has met, but they're both trying each other in order to find a common ground. And as Hakan Binbasgil has mentioned, there is a delayed or postponed investments or postponed demand in the country. Last 2 years, if you look at -- or almost last 2.5 years that none of the companies has invested into their businesses. And eventually, that there are certain machinery equipment investments as well as the capacity increase investments on the queue. And lastly, that Turkey is an emerging country, that Turkey needs to invest into their infrastructure still, even though we are talking about energy loans, problematic energy loans. At the same time, that government is planning new renewable energy tenders, especially on the solar and wind energy side. So these are the potential projects for us, especially we are expecting on the second half of the year.

Thank you very much, Levent. Ilknur, are there any questions on the web that we need to address?

Actually, we covered everything. We covered webcast questions as well with the audience questions. That's it.

Okay. Thank you. Well, there seems to be no further questions. And you know that we're all fully committed to transparency. So next week, we'll be in the U.S. and also in the U.K. traveling, which reminds me Hakan that you've been on the road for the last few years quite often. I'm sure that there are some memorable occasions that you may want to share with us. Maybe one.

I have a lot, actually. But since Simon is here, he is also laughing, so here all of us together -- Simon, you, myself, Levent here with us. I remember that we were in Boston. So it was the first snow, I guess.

Of the year.

Of the year. So we were supposed to go to New York City because at 8:00 in the morning, we had some investor meetings. So -- but we were stuck. Planes were canceled, no hotels, no trains, nothing. So what we had to do was to rent a Uber car from Boston. So we left Boston at 10:00. And it was 7:00 in the morning when we arrived to the Manhattan. So we checked in [indiscernible] and we took shower, no sleep, nothing. And 7:45, there was a car waiting for us.

Simon.

Simon. At 8:00, we were at the first meeting, so [indiscernible] this is very valuable for us. I don't know how we managed, but we managed many meetings that day. So thank you very much.

Thank you very much. Hopefully, we'll have better weather conditions this year. So this concludes our presentation. Thank you once again for being with us here both in the audience and all across the world. We hope that 2020 brings us all joy, health and prosperity. And for those guests who are here with us, we have a reception for you outside. Thank you.

Thank you very much. Bye-bye.