Banca Transilvania S.A. (TLV) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the conference call of Banca Transilvania regarding the preliminary financial results 2020. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand over to Mr. Tetik, who will lead you through this conference. Please go ahead, sir.

Hello. Good afternoon or good morning. Thank you for joining us at this call where we will try to give some guidance and clarity about our 2020 and, definitely, we'll try to answer your questions. I will not -- I don't want to enter into very deep details of macroeconomic development or banking system, unfortunately, during 2020. And for some of us, even until now, in 2021, we have been staying at home a lot and reading a lot. So I'm sure that you are following all the developments very carefully. But also, just to have a good start to our presentation, I would like to give some basic highlights about Romania. Definitely, last year was atypical year for any country, any industry, any bank for our customers and for ourselves as well. We have seen a very strong start. It was one of the best January month that we had ever in 2020. And then mid-February, we have been entering lockdowns in Romania. In most parts of Europe, business volumes, customer interactions were partially disrupted, but we are very happy to see that not only Banca Transilvania but the Romanian banking system, in general, showed good signs of resilience and very strong business continued to perform because overnight, we had to change our interactions to digital channels, and we had to establish -- we had to invent new ways of solving customers' problems. There were big waves of moratorium also being discussed and then coming. But as market leader, I think we created a good best practice, which was followed by the rest of the banks, so that it creates a positive cycle maybe in terms of economic cycle because one of the few moments in Romania, where we have seen authorities monitoring, establishing the fiscal policy, monetary policy and also the market than [indiscernible] cooperating for the wellbeing for the financial and economic health of the markets. Our measures. The priority was definitely the valuing of our staff, our customers, both in terms of health and also financially. But towards the end of the year and now also we see these days, Romania has started even outperforming some of its peers in terms of economic figures, but also in terms of COVID treatment, and now Romania as per our knowledge is in top 10 countries in the world in terms of vaccine enrollment and also numbers are quite stable. Hospitals are not under pressure. With a new [ tool pin ] -- and now we are all reading about viruses and vaccines these days. The new [ tool pin ] is coming from Brazil, South Africa, U.K. are quite under control. And I see that the Romanian authorities have a better communication also with the market, with the citizens, with the public, in general. So after almost a disastrous first quarter and second quarter, in the third quarter, with the opening of the markets, we have seen that GDP was recovering. And then in the last quarter of the year, we see the continuation of the growth trend. So although the economic decline, almost 4% in 2020, the number is well -- much better than our peers, some of the emerging markets. And also, we see the economic activity. If you look at also our traffic in our agencies, number of transactions on both payments, supply relations, factoring transactions, we see that economic activity is picking up. The new government had a big challenge. There were elections at the end of last year, but there was also interim government by the National Liberal now. In the last quarter, we have a coalition government, which, hopefully, in the retail sense of the world of coalition, they cooperate well. They have similar ideas about economic doctrine and about the market needs. So we see that public investment in their agenda is the prioritized item. Romania is trying to finalize the budget approval process and also trying to finance also the plans, the project for the attraction of European Union funds, where also the President Klaus Iohannis has committed that -- Romania will commit a reliable and also attractive plan in the next few months. Last year, one of the positive things that happened besides the good public investment program with the IMM Invest program, but also the fact that unemployment didn't change much. And we see that the savings deposits of the retail customers had been increasing. This shows resilience also in terms of the future payments the and investment prospects. And we have seen that corporate loans grew quite aggressively during 2020 by 6.4%, also supported by the government programs and European Union funds. But also in the third quarter and fourth quarter, we have seen that retail demand has been coming back. They've been recovering, although it was not at level of 2019. And the household deposits grew over 15%, which helps to create this nice-to-have problem, maybe not only for us but most of the bank by decreasing the loan-to-deposit ratio to 67%. And we think that during the first half of this year, this trend will prevail. In regard to the investments and construction, maybe public construction, I have to admit that if you hear some background noise, we are also moving to our new head office and there are some works going on. We couldn't convince the construction company to stop. So if there's a sound interruption, this is a good development that the biggest Romanian bank is investing in its new headquarters. And I would like to just mention what we have done last year. Besides definitely showing our support in terms of donations, in terms of being involved in communities and trying to support governmental efforts, we have been the main bank of SME invest program, whereas the BT had almost 40% market share. And then when it came to the European Union funds of micro grants and working capital grant, actually, over 50% of the applicants, they chose BT as their bank to work with. This confirms that we have this strong customer sympathy and image capital as being the bank for small- and medium-sized enterprises. And I'm glad that our network, our business lines of support departments managed to address the needs of the customers in time, so that we could support the relaunching of Romanian economy. We have accelerated our digitalization -- digital transformation program. We started opening accounts online. We started both through phone banking and online banking offering almost all kinds of banking services, starting to ask for how to accept loan requests from the customers also online. And our online lending activity grew 5x as compared to 2019. We have opted for different tools, including WhatsApp Banking using more chatbots and try to be present for our customers whenever and wherever they need it. It is also good to see that, maybe we have to admit that we have underestimated our customers in terms of their digital nativeness because we see better pay. Our wallet reached more than 1 million users and more than half of our customers, 1.7 million customers, they have -- they are using one of our digital channels, be it BT24, Neo or BT Pay for their banking transaction. Coming back to the financial performance that we have briefly announced last year. Therefore, the challenges of the last year with the pandemics and lockdowns is being reflected on the numbers. We have been saying that the burden, financial and economic burden of the crisis -- the pandemic will be felt in 2020 but more heavily in 2021 maybe. We are slightly more optimistic now, seeing how things have been handled and looking how we have performed, our customers have performed. So we have managed to slightly increase our preprovisions operating profit, almost 1%, although our net profit has decreased due to heavier production approach to provisioning of the loan portfolio. And our cost of risk jumped from 60 basis points to 180 basis points that -- we think that in 2021, we will not reach the level of 2020, but neither the level of 2019. So most probably, we will have a cost of risk over 100 basis points this year as well. We have delivered a good cost-to-income ratio. When our revenues were decreasing, we managed to also keep our costs under control. And there were definitely a lot of cost items. They were not planned from masks. The liquids that we use to disinfect ourselves and our spaces, extra cleaning actions, all brought -- but with remaking some of the agency structures with plexiglass and with new furniture or probably outdoor structures, establishment for customers waiting for their turn to come. Still, we managed to reach a cost-to-income ratio below 45%. Our loan book reached RON 43.5 billion with deposits over RON 88 billion, and making us the biggest lender of Romanian economy in terms of nongovernmental loans, but also governmental loans. So that's -- our gross loans-to-deposit ratio is below 50%, and our NPL ratio is 2%. Our equity, if we look at the equity side, it's a RON 9.5 billion and, if you include our profit -- our total capital ratio is 22.2%. What you can see is that although the high liquidity that we have, the high trust that we have from customers, while our deposits were exponentially increasing, helped us to invest more on the fixed income side, where the interest rate has been decreasing, and we have delivered a strong net trading income last year. Our net fee and provision income decreased below 2019, but this was also expected as we offered a lot of services for free. We moved to digital services and offered free-of-charge services in order to support our customer base. And the decreasing interest rate environment definitely puts a lot of pressure on our net interest income. Still with good management from our business lines and our trade department, we have delivered almost 3.6 -- sorry, RON 2.6 billion net interest income. And if you look at the last quarter numbers, you will see those numbers in the presentation that we are posting is -- maybe it's only posted in our website in the investor page. You see that actually our net fee and commission income, our interest income in the last quarter, they started coming back to leveling in to 2019. Net trading income is even better. While we kept the cost base, the OpEx continues to be low as compared to previous years. That actually, if you look from this perspective, in the last quarter, our pre-provision operating profit was 17% higher than 2019. Our household loans grew by 5% and, company loans, including micro, SME, mid-corporate and large corporate loans increased by 7%. We are becoming more and more active in larger ticket as well. We see that it's actually well performing and good upsell, cross-sell opportunity portfolio. Hopefully, it will increase our fee and commission income later on. And coming back to the loan quality. As I said, our PAR 90 ratio is at 2%, and our NPL coverage with the provisions, if we include also the mortgages, is at 128%. As I mentioned before, our deposits were increasing much faster, much faster than the market and also our loan growth. And from companies, we had 20% more deposits and from retail customers, 18% more deposits. Now with 3 million active customers, our retail portfolio reached RON 24 billion. And as I mentioned, we are very proud of our wallet application BT Pay, which, at the end of the year, was slightly over 1 million. And I guess, this year, we will be reaching almost 2 million customers in BT Pay. In terms of ATM and POS network, we are the largest bank in Romania. This shows how the -- this investment now pays back because we managed to offer this accessibility, availability to our customers anytime, anywhere. And because of the capacity of our ATM network, making different transactions, more transactions than cash in, cash outs, including foreign exchange, money transfers, Western Unions and so on, it helped us to maintain -- to recover part of the volumes lost in the first and second quarters through this alternative networks. In SME banking, actually, we are known as the SME bank of Romania with 350,000 active customers. And when the SME invest has been launched, on average, 2,000 employees of BT, our colleagues, have been allocated for this program. And we have also helped almost EUR 1 billion to be granted in terms of -- to be diverted in terms of grant through SME support schemes. We are growing more in factoring, we are growing more in bancassurance. So there are -- in SME banking, we see, let's say, huge opportunities ahead of us on the portfolio that we already created. And in corporate banking, we have 10,000 active customers with a focus on agriculture, health care, telecommunications, utilities. And those businesses have been performing quite well. I would like to stop the presentation here. Definitely, there are more information and numbers in the presentation that we have posted, but allocate more time to your questions as many as we can take. If we will not be able to answer any of your questions on the spot, we will make sure that we will either update the presentation or come back to you through our Investor Relations department timely to get everything cleared out. Thank you very much. So let's start the Q&A. By the way, I'm joined here by Ms. Mihaela Nadasan, our Deputy CEO, for Financial Markets and Financial Institution, Investor Relations; and also our CFO, Mr. George Calinescu. Sorry that I forgot to introduce them, but they will help me to answer the questions from now. Thank you.

[Operator Instructions] We have a first question. It's from [indiscernible].

Can you hear me?

Yes, we do. Thank you.

Okay. So thanks for the presentation. Just a couple of questions. The first one would be on OpEx. So it developed quite nicely on a year-on-year basis. And I was wondering what is a one-off? Like could you elaborate whether there were one-offs? And how much was it? And which items would be like kind of a recurring one moving forward? And my next question would be on cost of risk. Obviously, whether you have more visibility for this year, and what is your cost of risk expectation, if you have? And also my third question would be on dividend. So last year, you were amongst the few banks that saved dividends. Shall we expect the dividend to come this year as well?

Thank you very much. You have actually asked the 3 most frequently asked questions to us. So I guess we will be covering most of the Q&A from now. But thank you very much for pointing them out. So if I would recall correctly, with regard to one-offs, there is no, I would say, significant one-off in 2020, except the impact of card payment, card installment postponement, which had impacted almost 25 basis points of net interest margin for the whole year because as you may know or recall, we were the first bank announcing to the customers that they don't need to come to our network to pay their installments for 2 months when the lockdowns were announced, and we were also digitally not ready to tackle everything and plus, everybody was panicked about financing. So we wanted to have this effort. Other than that, the acquisitions we have done in the last couple of years definitely creates different changes in terms of impact on net interest income composition or recovery. But I'll say, except for moratorium, I wouldn't say that there is one-off. There is a positive one-off, maybe a high growth through SME invest program, but we see that there are new programs up to come. So this may become almost traditional. In regard to the cost of risk and provisioning, based on the numbers announced by us and by our peers, we see that [indiscernible] have chosen a highly prudential path plus. We are comfortable with it. And we think that 2020 itself is not a good benchmark and 2021 just started. We were -- last year's beginning of summer, there were discussions about enrollment of vaccines and opening of economies in 2021. We see that some countries, big European countries, are announcing their extension of the lockdowns. And Romanian economic growth depends a lot on European Union and especially those big economies. That's why -- I mean we are not as pessimistic about the economy. Actually, I will say that we are now optimistic about relaunching and repositioning of Romanian economy. But on the other hand, we expect, once things come back to normal, that once everybody will start expecting payments, these banks, fiscal registration, landlords, big companies or small ones. So there will be -- if there will become loopholes in the payment scheme, that may create a temporary, not significant, but still sizeable impact on the bank's balance sheet. That's why, as I said at the beginning of the presentation, we don't expect cost of risk to be as high as 2020. We don't see the necessity of it. But also, we don't think that we will come back to 50, 60 basis points cost of risk. So I guess we will deliver kind of a normal cost of risk around 120, 130 basis points. Just looking from the -- after the first 2 months of the year, and considering that we are doing retail banking, micro lending, SME banking, [indiscernible] finance and others, let's say, a sector that we are in, this is almost a normal rate of cost of risk. Things were too good until end of 2019, maybe. And in regards to dividends, fortunately, I'm not able to provide any clear guidance, but I can assure you that we are definitely complying without any exception with the recommendations and orders of EBA, European Central Bank and Romanian National Bank (sic) [ National Bank of Romania ]. So one, we will -- and as you know that there are postponement until 30th of September, but I think once we offer necessary comfort and we prove that our equity of the profitability are well enough to support, I'm sure, at one point, authorities will allow not only us but the banks, not only Romania but all around Europe to start dividend payments. Maybe there will be formulas, maybe there will be limitations. This we don't know yet. We are also following closely. But our first priority now is definitely continuing the good business continuity plan that we have devised to accelerate our lending this year and to prove that, I would say, all the trust of both the customers, the market, has given us big responsibility.

Okay. Just a follow up. So my first question would be -- or would have been on OpEx and not net interest income, sorry. So were there any one-offs in operating expenses?

Yes. I mean one-off, again, it depends very much on how the pandemic treatment will continue from now on. Because, yes, every one of that we put plexiglass in some -- in all the agencies, actually, and we have one of the highest branch networks. We have positive -- invested a lot in the health and security of our employees and customers. We took innovative structures that we were not ready to install. We were not -- we didn't know that we would need them. But some of those expenses have been done. These are not highly significant. Some of them may continue, maybe here to stay. But well, I would say that in OpEx, maybe partially our travel expenses have decreased. Some of our expenses decreased. But actually, we had been in the market, but also at offices. BT's branches had been almost fully operational every day as to our normal program. And the head office, now as we are moving, some of the stuff is in the previous building, but we have over 75% working in the office. And here, I would like to share the opinion of some old-school investment bankers. I don't think work from home is done -- is suitable for banks, especially for commercial banks like us. So I guess -- I mean I don't know if I managed to answer your question, but there are no [ sizes ] with one-offs in OpEx.

The next question comes from [ Christian Petri ].

[ Christian Petri ] from [indiscernible]. Just 2 questions. Coming back to the operating expenses, I see here in the individual financial statements that other operating expenses decreased in a significant manner by 27%. If you can detail a little bit there. And the second question is related to loan to deposits. I noticed that deposits do much faster than the loans, so what's your plan here? Will you see a reduction in loan to deposits on medium term? And what's the relations with the net interest margin?

I mean in general trend, I will start with the net interest and deposits or liquidity growth. I would say, we have mentioned several times in our investor conferences, but also publicly. We have been benefiting from -- it's quite [ cyclical ]. And while our deposits are growing, those customers start doing more of their transactions, more of their payments through BT. So first, it increases substantially deposits, but then it starts having a positive impact on other income item. On the other hand, more than half of our deposits are in 0 interest current accounts. And these are -- but -- and we are committed not to charge negative interest rates to our customers regardless of the situation in European market. So what are our plans? Definitely, we want to grow our loan base more aggressively. We think that we have more clarity now in front of us there to grow. And it's also regarding to the liquidity part of it, we have allocated to fixed income portfolio, which has been quite profitable for us. But also looking at the monetary policy, the explorations of several central banks, including Romanian National Bank governance, I think it will still generate decent revenues income for us. So it's -- our plans are mostly basic banking. Definitely, we want to grow our asset base, mainly by lending to the customers, to the customer profile that we know or we think we know that we feel comfortable with and also happy to increase other operational incomes, transactional income to make more cross-sell to the customers who show their trust by bringing their savings in a delicate year to be BT. And in regard to OpEx, actually, there's impact from deferred taxes and some bonds related unrealized profits. I will let George to give more clarity, our CFO.

Okay. So the biggest one-off impact in the other operating income is from deferred tax related to bond unrealized profits. Fortunately, there was a very good last quarter for the evolution of the reserves on commercial assets measured at [indiscernible] other items of comprehensive income. And in accordance with IFRS, we completed to tax on those things and that's reflected in that area. So other than that, we have kept a very growth high operating expenses and almost all areas of operating expenses should decrease in terms -- to the previous quarters.

We have a next question by Robert Brzoza.

Can you hear me?

Yes, we do.

Right. I have the question on NII and the outlook. And first is the 4Q results, the net interest income, so say a potential run rate going forward. And second, on a quarterly basis, how much of the improvement in the NII was possibly coming from the removal or expiry of those credit card payments postponements? And thirdly, given the recent rate cuts made by the Romanian National Bank, what's your expectation going forward, particularly for the second half of the year regarding the NII performance and the impact on the bank's business?

Yes. I mean the installments, payment postponement, as I said, had an impact close to 25 basis points on our net interest margin. And actually, if you participated to our previous calls or if you looked at the previous presentations, then in 2019, our net interest margin was close to 350 basis points. There were 20-plus something basis points impact from the adjustments of the portfolio that we acquired. This is actually one of the biggest challenges for us to expand because we had these 2 big acquisitions. We purchased [indiscernible]. We transferred the portfolio. We transferred them at the net asset value by decreasing the provision. So first we created the image that they were not provisions up. But also there there were adjustments, which were booked under net interest income. And starting with 2019, I mean, or starting with 2020, sorry, the impact has almost disappeared. So if you look at a normalized one, like-to-like, in 2019, our 350 basis points net interest margin would have been maybe 325, 330 basis points. And in 2020, we would have been delivering slightly over 300 basis points without the installments. So this is more or less our guidance because, as I mentioned earlier, our deposit liquidity is heavily on 0 interest-bearing current accounts. So we are placing them at definitely better rates. And our -- we expect that our loan book will grow strongly in 2021. We now understand the dynamics of the pandemic, the stance of the authorities from National Bank to the government, and we can draw a more, let's say, confident budget for ourselves. That's why our focus will be mostly generating new assets, mainly with our customers, so that we would like to maintain this 300 -- slightly over 300 basis points net interest margin. [indiscernible] You will be seeing also, until we have another question, maybe you will see a good preparation and let's say, positioning of BT in terms of sustainability. This is the -- definitely, ESG became the buzzword for all banks, but also for all companies. On the other hand, we know our role, our importance in order to finance projects, which respect environmental concerns, which help communities. And we had been, so far, leaders in granting through different international financial institutions like European Energy Efficiency Fund and others offering green loans. But also together with EBRD, we have this retail green lending programs. And we'll be coming up with more programs this year, and we want to also explain what we do more clearly because this is not something that we started doing recently. This has been in our DNA since 2009 officially, but we were not shy, but we were not explaining it very publicly. So we will be opting for new partnerships with international institutions, financial institutions in order to gain some know-how and to offer, let's say, new projects or new facilities to Romanian companies, Romanian households on this. As part of -- I'll say, besides our campaigns, our focus on local shopping or SME lending, we are definitely one of the few banks, who is available also physically in rural areas or this favorite areas. This we see as a decent and profitable customer base for us, and we will continue doing banking for them. And we want to help, we want to assume our role in increasing the financial inclusions in Romania because this is our biggest -- one of the biggest growth opportunities. Romania's financial inclusion is below 40%, and if you look at other European countries were over 100% of the GDP. There is a lot to be done, and I think we are well positioned to do that. Thank you. If there's any other questions, we are here to answer.

We have a further question from [ Alex Boulougouris ].

Could I ask regarding the moratoriums that expired on the 31st of December, what are the trends up to now? And what are you seeing there? That's my first question. My second question is regarding the other income on Page 32 of your presentation, where you have other net income of RON 439 million in 2020, a 41% increase compared to 2019, if we could get a bit more color of what entails. And a third question regarding the dividend. I understand it's too early to mention anything. But could we consider this 20% total capital ratio that you have at the moment, excluding the net profit of 2020, as the level you are comfortable? So this would imply that, if for example, there'd be a bonds there. [indiscernible] In September, you could go ahead with an EGM, for example, distribute part of the 2020 net profits that are not included in the capital, I mean?

I will start with the last one again that I still refrain to give any kind of indication. I mean, I think we have proved also in 2020 our strong solid financial stance in terms of liquidity and equity and our capacity to generate internal capital by decent profitability, I would say. Although numbers in terms of return on equity were below the traditional numbers of BT because they are much higher than our local or European peers. On that end, we wouldn't like to create a debate. We would like to cooperate with the local and international spread widely authorities on this. So a discussion on dividends, I think, it's too early. Regardless of the capitalization, there are several banks with whom capitalization in Romania are above. That's why, hopefully, I also wish that in our next investors conference, I guess, in May, we will be able to give you some better guidance on the numbers or if any changes. But until then, we will be complying with the requirement of European and the local authorities.

Regarding the moratorium.

Regarding the moratorium. At least -- as you know, in Romania, almost 18% of the customers opted for moratorium in general. For us, it was around 15% of the customers. And some of them actually, around 15% of them during the year, they gave up on the moratorium. They started making their payments. And so far, for the extension of the moratorium, which is a complex formula for a retail or SME customer to understand in terms of the limitation to 9 months, I can confirm that the extension request or new moratorium requests are less than 3% of the existing moratorium customers. We are speaking about 41,000 customers initially. So we don't see moratory itself as a business risk. And this is kind of -- a part of those very small number of customers, they may go south, but this is also being well covered by our production provisioning policy.

It was the other income related question, where the -- well, I don't have all the details for the consolidated part, but for the individual one, which is nevertheless representing the larger part of the amount, we are speaking about the fair value through comprehensive income, which means the largest amount there. Then we had some amounts related to fair value through P&L. As a minus related amounts, we have to get the contribution to the deposit fund. And then there is another figure related to some dividends, which is like really other kind of income in the P&L. Clearly, when the whole audited financial statements are going to be published, all these features are going to be very visible and very detailed [indiscernible].

Just as a follow up also, if you could give us an update on Victoriabank in Moldova, what is going on there? Is there any update compared to the previous conference call?

There are no material significant change. But on the other hand, there has been some -- there has been [indiscernible] election, present elections, then there are political changes that the issue didn't reach the court yet. And there's a lot of -- there's the internal debate going on there, we are also following. But we see more and more supportive messages from authorities, even National Bank of Moldova. The government probably went out on TV and assured, let's say that, Republic of [indiscernible] needs investors like BT, but they shouldn't be discouraged or frightened but supported. And if there is any of the facts established against the interest of Moldovian people, it should be paid by -- the people could have done that, not by a new investment. So we are following the developments very closely. But so far, there is no big change. Also, Victoriabank itself is delivering good financial performance as well. We are glad that our colleagues despite all the challenges that they have, not only the pandemics, but also official [indiscernible], they have delivered good numbers.

The next question is from Daniela Mandru.

I have 2 questions. The first one regards the lending activity. By how much do you see the net loans increasing this year? And the second one, regards the cost to income, should we expect a decreasing trend there, so below 45% this year? This is all.

Thank you, Daniela. Regarding cost-to-income ratio, I don't expect a decrease. I mean I wouldn't expect a major change in any direction because we have also now other investment, 5-year projects, new plans. So digitalization, which was seen as a cost efficiency item, now everybody is agreeing that this is actually costly to digitalize the bank. That's why I will say that for us, I would consider for BT team, it will be started to maintain it at the current level. But also, in regard to the loan growth, you may understand that we are -- we have to first approve our budget in our general shareholders [ accounting ]. We have to announce publicly. So I would avoid giving certain numbers. But we would like to -- as we have done, so far, grow faster than the market, grow faster than Romanian GDP growth. So it is very difficult to make a very healthy, detailed budget when there are so many unknowns. But at least now we know the unknowns, and we are trying to tackle them. But as I would say that we will maintain our project over the market leverage over the Romanian GDP growth. But the final numbers, you will be seeing when we will convert, and we will make the announcement for the general shareholders assembly in less than a month.

And regarding the net loans to deposits, do you have a bottom level? I don't know, something like this because they are -- decreased -- the ratio is decreasing quite aggressively.

I mean as I said, our liquidity, our deposit growth is coming heavily from current accounts, which is interest bearing. We are [ terminating ] more and more salary payments for corporate customers. So we wouldn't like to -- we didn't set a minimum or maximum target. Definitely, we won't be concerned if it will go above 75%, 80%. We like liquidity position. And we know that it's always helped us to grow both organically and through acquisitions. So we are -- it's -- I said this many times, this is a nice problem to have, and we will be tackling it mostly on the growth of landing of our loan book.

[Operator Instructions] We have a next question by Thomas Unger.

Just following up on loan growth. I understand that you can't give us a figure for 2021, an estimate yet, but maybe a bit more color would be helpful. Is it that you have a better -- much better understanding of the crisis dynamics currently? Where do you see the most potential? And what sort of product segments and so on for 2021? And then maybe I'm not sure if that was answered already, but specifically on the net interest income in Q4 on the group level. The other and similar income was very strong, and it's surprisingly strong in Q4. What was the reason for that? Is there anything sustainable in that number in Q4? And also, where do you see the asset quality going to the NPL ratio? What's the trend that's expected for 2021? And where do you see it peaking at?

I think if we -- thank you for the questions. And if you look at our -- what we have done is our strategy has been doing whatever is available and not exploited in Romanian financial system to do. So we will continue doing that. It's one -- there were organic growth in certain segments, we have done that. But there was acquisition opportunities we have done. So I would say that our focus remains the same. Definitely, [indiscernible], the micro lending, SME banking, retail lending where we think that we have bought a competitive advantage and a good experience. So this is our main competence. When we look at the larger tickets there, the loyalty of the customers decreases along with the net interest margins or the revenue. So it's very competitive, but this is something that we are also continuously active. We will be definitely taking part in public investment or we will try in public investment projects. Our focus remains health care, agribusiness, manufacturing. And also, I would say, the industry where Romania is growing, you see that some -- many existing partners here, although due to cheap supply situation, all the Romanian companies, big producers from [indiscernible] are also facing temporary squeezes. These are the industry segments that we are interested, and we are not interested necessarily in those big names, but we are interested in their ecosystem, the companies who are working with them. So I think we still have quite good potential. It will be our mistake if we will not be able to tap that and if -- other than that, there is no new segments being established in Romania. We don't see any new industry in Romania. So obviously, we will try to do more of what we have done, and hopefully, in a better and more profitable way. As regard to, I guess, your last question was related to cost of risk, but I couldn't catch exactly, if you can repeat that. And in regard to the other income and other expense situation, there has been -- we will be supplying more detailed answer. I don't want to mislead you. I think -- but there were a couple of one-offs related with the bonds portfolio with some of the subsidiaries bookings. And -- but we will update our presentation in the next day, so that you will have more details on them.

For the bank itself, we were already providing details that it was related mainly to financial assets, which were presented at fair value for that item. While at group level, there are several items coming from different subsidiaries, and details are going to follow.

Okay. Then I'll wait for that. And the other question that I asked before was not on the risk cost itself, but just the development of the asset quality, NPL ratio that you expect for 2021.

This -- again, you will see, together with our budget. But we don't expect aggressive or significant adverse change in the impaired number. This is not in the first half. So far, as I say, economic trends, numbers that we see, a number of transactions, we see the demand from our customers for borrowing for our lending is making us slightly more optimistic than we were at the end of the year and much more optimistic than we were at the same discussion just 1 year ago. Maybe we'll take one last question. And then if you have further questions, please, as usual don't hesitate to contact, Mihaela and her team. We will try to address -- answer that in time. But let's have one last question, if there is any.

[Operator Instructions] We have a next question from Robert Brzoza.

2 quick questions. One, what's approximately the volume for this year of the subsidized lending, be it either SME invest or other government-sponsored programs that you might expect? And second, can you share with us the default rate on the exposures, on the loan exposures coming out of the moratoria? Just for comparison, I think as the group reported in Romania about 2% default rate post moratoria -- on postmoratoria exposure?

Well, yes. So thank you for the questions. Well, with regard to the public -- the government program for this year, there is not yet clarity. So the government officials are still debating and deliberating and thinking about the program to be continued throughout the year. So clearly, we were going to be present there, and we have an active, let's say, counterparty in discussing how it's best to be continuous. Hopefully, we are going to see a second IMM invest program in the country. So for that one, details are going to follow once -- also the budget at county level is going to be in the final version. With regard to the default rate, for the time being, it's rather too early to be able to see any kind of change in behavior. As we were mentioning also in previous phone calls -- conference calls, we are estimating to see the real impact sometime in the second half of the year. So looking at how clients are having, let's say, their current accounts now, they are still quite enjoying some liquidity. So repayment is possible to be done in the right way. So depending on how well the economy is going to develop throughout the year, we might see that we are not going to face any kind of default rate or if, yes, the pandemic is going to continue, we might see less favorable development.

I mean looking at the low number of customers asking to continue moratorium or to extend moratorium is so low that gives us more optimistic view plus the high savings rate. I mean that was one of the biggest problems in 2008, 2009 when the loan-to-deposit ratio was over 150%. Now for the whole economy market, it is below 70%. So it gives some meat on the bone to resist -- some muscle to resist the adverse impact of the pandemic and the economic crisis. Thank you very much for joining us and listening to us. As I mentioned, if you have further questions, please send them to us, and we'll try to answer. If you have any recommendations with regard to the presentation, we'll try to update and upgrade it definitely. And we have noted that there a couple of questions that we couldn't answer now in detail, which you will soon see within the presentation in more detailed manner. Thank you very much.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect it.