Bank of Cyprus Holdings Public Limited Company (BOCH) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am [ Jota ], your Chorus Call operator. Welcome, and thank you for joining the Bank of Cyprus conference call to present and discuss the preliminary Full Year 2023 Financial Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Panicos Nicolaou, Chief Executive Officer. Mr. Nicolaou, you may now proceed.

Good morning, everyone. Thank you for joining our financial results conference call for the year ended 31st of December 2023. I am joined by Eliza Livadiotou, Executive Director of Finance; and Annita Pavlou, Manager, IR and ESG. After my introductory remarks, Eliza will go into more detail on our financial performance, and then we'll be happy to take up questions both during this conference call and afterwards. I would like to start by briefly reminding you of our powerful [indiscernible] and our core strengths on Slide #4. We are the leading financial group across banking and other financial services in Cyprus, which is a highly liquid and concentrated banking sector. And we operate in a supportive macroeconomic environment. The Cypriot economy remains strong, delivering good growth proving once again its flexible and resilient characteristics. We are one of the most liquid banks in Europe and hence, enjoyed the benefit of fast and steep interest rate rises in 2023. At the same time, we have been undertaking proactive actions to position ourselves against a more normalized rate environment in the years to come. We have strong levers under our control, our diversified business model, our ongoing focus on cost control, our robust asset quality and our strong capital position, all support us and continue to deliver shareholder value. We remain confident that under a more normalized interest rate environment of around 2% to 2.5%, will constitute a sustainable mid-teens ROTE over the medium-term. Let's now turn to Slide #5, which shows an overview of the macroeconomic environment. In an environment of weak European growth and geopolitical turbulences, the macroeconomic outlook of Cyprus continues to stand out. The economy expanded by 2.3% in the fourth quarter and for 2023 overall, delivered growth of 2.5%, outpacing the Eurozone average. Based on the latest projection of the Ministry of Finance, the economic growth is expected to be around 2.9% for 2024. Tourist activity continued to improve with arrivals for 2023 now back to the pre-COVID levels. Tourist receipts for January to November 2023 were 11% higher than the corresponding 2019 levels indicating high spending levels by tourists. The unemployment rate decreased to 6% in the third quarter and is expected to drop further to 5.8% for 2024. As in many other countries, consumer inflation continues to be tested by energy prices but has now come under control. In Cyprus, inflation stood at 2% in January 2024, and is expected to average around 2.5% for the whole year of 2024. Slide 6 highlights the Group's strong financial performance for the year, supported by the high interest rate environment. Net interest income for 2023 has more than doubled compared to prior year, benefiting from the steep rise in interest rates and our high liquidity, but I want to also draw your attention to other metrics. We have diversified sources of income and non-NII, some important revenue drivers, covering around 90% of expenses in 2023. Cost to income at 31% reflects both strong revenues and disciplined cost management. Asset quality remains strong with our NPE ratio at 3.6%, in line with our 2023 target and now our cost of risk at 62 basis points was in the middle range of our guidance range of 50 to 80 basis points. Let's now turn to Slide #7. First, the strong performance have led to accelerated shareholder value creation. Our CET ratio increased by 350 basis points to 18.7% pre-distribution or 16.5% when accruing at the total of our dividend distribution policy of 30% to 50% payout ratio in accordance with commission delegated regulation. This reflects strong organic capital generation of around 480 basis points in the year. Earnings per share was at EUR 1.09 and tangible book value increased by 34% before distribution. We reconfirm our dividend distribution policy. We are targeting a payout ratio between 30% to 50% of adjusted recurring profitability, building progressively through the years. We have begun our engagement with regard to shareholder returns for 2023 and [indiscernible] be in line with that being [indiscernible]. We will look to update our shareholders in due course when we receive the final [ regulatory ] approval. Looking now in more detail of the quarterly evolution on Slide #8. We delivered a ROTE of 25.6% in the fourth quarter; the fourth consecutive quarter of returns over 20%. It was supported by strong net interest income which grew by 3% in the fourth quarter to EUR 220 million. We believe that this now [indiscernible]. Slide 9 shows how our performance is tracking against the 2023 targets. We provided guidance for 2023 in the medium term at our 2023 investor update event in June, and I'm pleased to share with you that 2023 actual financial performance exceeded all of our targets. Our guidance was for NII to exceed EUR 650 million and delivered NII of EUR 792 million on the back of high ECB Depo rate averaging 3.3% and well managed deposit pass-through and mix. The cost-to-income ratio of [ 31% ] came ahead of our sub 40% guidance, mainly due to better revenues. As already mentioned, NPE ratio of 3.6% was in line with our target and our cost of risk at 62 basis points was in the middle range of our guidance of 50 to 80 basis points. And our ROTE of almost 25% clearly met our over 17% guidance. Moving now to the outlook for 2024 on Slide #10. We are reiterating our ROTE targets for 2024 and 2025 of over 17% and over 16% based on a 15% CET1 ratio. And most importantly, we do so while we are incorporating [indiscernible] rates normalizing around 2% to 2.5% in 2025. Starting with ECB rate environment, we expect a higher average ECB rate in 2024 of 3.4%, but now expect a faster normalization in ECB depo rate at 2.7% and 2%, by the fourth quarter of 2024 and the fourth quarter of 2025, respectively. Our guidance for 2024 is as follows: We are updating our net interest income expectations from above EUR 625 million to above EUR 670 million. Eliza will discuss in more detail the drivers on the next slide. We maintain our cost to income ratio of around 40%, and we reconfirm our ROTE guidance of over 17% on a 15% CET1 ratio. On asset quality, we expect to continue improving the NPE ratio to around 3% at year-end and in terms of risk trending towards the normalized level of 40 to 50 basis points. On capital, we expect significant CET1 ratio in the rate of 200 to 250 basis points pre distributions for 2024. Our aim to provide sustainable shareholder returns is reiterated. Dividend payments are expected to be prudently progressing over time towards the pay-out ratio in the range of 30% to 50% of the group's adjusted recurring profitability. And importantly, we will reiterate our 2025 guidance for ROTE of about 16% based on a normalized rate environment of 2.2%. The path of rate normalization seems very volatile currently, but we want to reiterate our commitment that Bank of Cyprus has sustainably delivered mid-teens ROTE at normalized rate environment of 2% to 2.5%. I will now hand over to Eliza to take you through our NII guidance for 2024 in more detail.

Thank you, Nicolaou, and good morning from me too. So starting on Slide 11, we have seen a rapid increase in interest rates in 2023 and recent market expectations have been extremely volatile in respect of the [ current ] rate cuts. 2024 is expected to be a transition year, a year marked by a declining interest rate environment. Currently, market expectation is for rates to normalize by 2025. EURIBOR has already started to move in anticipation of this move with 6-month EURIBOR expected to rise up 3.2% in 2024. As you can see on the chart on this page, the current rate outlook is more conservative compared to market expectations in November '23 at the time of our third quarter results. You can also see how it compares to our rate assumptions of our investor update event in June last year. We think this is an appropriately conservative scenario, which is how we run the bank. As a result, we would expect NII to decline in 2024 to a level above EUR 670 million, higher than our previous guidance of above EUR 625 million. We expect quarterly NII to decline during '24 and start stabilizing towards the year-end. I will explain the main drivers of this. Higher deposit costs, term deposit pass-through increased slowly during 2023 to 18% in the fourth quarter but we expect it to continue to increase to an average of 40% as deposit balances repriced to the higher fund book rates. We expect rate cuts we pass on gradually to new deposits; hence, the expect a slow and gradual repricing of the deposit back book in 2025. We continue to allow for a change in deposit mix with time and notice deposits increasing from 32% in December '23 to around 45% of the total by December '24. On the lending side, we expect single-digit loan growth in '24 and '25, supported by economic growth. Almost half of our loan book is EURIBOR linked, and this will reprice to lower rates. Wholesale funding costs will increase to reflect the full year impact of the [indiscernible] in order to meet 2024 MREL requirement. Finally, we will continue the structure of [indiscernible] to reduce the NII sensitivity. This will come at a cost in 2024, but will support future revenues. While continuing to carefully grow our fixed income portfolio to around 16% of total assets with NII benefiting also from the rollover of the portfolio to higher rates. Let me now touch on the Bank's NII sensitivity on Slide 12. As you know, we are structurally rate sensitive on the asset side. But over the last year, we have reduced this rate sensitivity, and we intend to continue to do so in '24 by converting some of our assets from variable to fixed. The NII sensitivity per 100 basis point rate drop has reduced by EUR 16 million during the year from 34% to 14% and reflects the following actions: about 1/5 of the group's loan portfolio is linked with the bank base rate, which provides enough [ hedge ] against the cost of deposits. We added more fixed rate loans by transferring around EUR 245 million of such loans. We increased the investment in fixed rate bonds by 54% to EUR 3.1 billion. We [indiscernible] EUR 400 million and finally, we entered and received fixed interest rate swaps totaling EUR 950 million. We expect to continue careful further hedging of the balance sheet in '24 to reduce the NII sensitivity by a further EUR 30 million to EUR 40 million. Specifically, we intend to add another EUR 4 billion to EUR 5 billion structural hedging position with expected average duration of 3 to 4 years depending on market conditions. These actions will have a cost on the '24 NII, but will support future revenues, and most importantly, will result in lower rate flexibility. Slide 15 shows the detailed income statement of the group. I will not go through every line here, as I will be discussing the drivers of our profitability in the following slide, but I would like to highlight profit after tax of EUR 487 million for the year, corresponding to earnings per share of EUR 1.09. Slide 16 states the main driver for the [ strong ] NII, which more than doubled in '23. 4Q NII of EUR 220 million is, we believe, the peak. As already discussed, we expect continued increase in deposit costs, while the repricing of loans will start reflecting lower EURIBOR rates. On Slide 19, you can see that deposits remained broadly flat on the prior quarter but increased by 2% year-on-year to EUR 19.3 billion. We are encouraged that the shift in deposit mix towards time and notice deposits is progressing more slowly than we expected. In Q4, it was around 32% of the total. And if you look at the breakdown of our EUR 19.3 billion deposit base, you can see on the bottom left chart, almost 80% of our deposits are from Cypriot residents. Additionally, deposit pass-through levels were well managed, facilitated by the very liquid Cypriot banking sector. This is evidenced by the evolution of our cost of deposits, which remained low at 24 basis points corresponding to a pass-through of 18% on time and notice deposits in Q4, up from 15% in Q3. We expect the cost of term deposits to continue to increase from 74 basis points in the fourth quarter as deposit balances repriced to the higher front book prices. We expect rate cuts to be passed on gradually to new deposits. Hence, we expect slow repricing of the deposit back book in 2025. Overall, we assume an average term deposit pass-through of 40% in 2024. Now let's move to new lending on Slide 20. During 2023, we granted EUR 2 billion worth of loans, driven mainly by corporate demand. The gross performing loan book remained roughly flat at EUR 9.8 billion, both Q-on-Q and year-on-year as repayments have offset new lending. Going forward, we expect some recovery on the loan book as repayments stabilized with low single-digit loan growth at Q4 '24 and '25, supported by [indiscernible] growth. Towards that goal, in December '23, we have [indiscernible] restructured loan with gross book value of EUR 58 million. Completion is expected in the first half of '24. Now turning to the fixed income portfolio on Slide 21. As of 31st December, the portfolio amounted to EUR 3.5 billion, up by 42% on the prior year, representing 14% of total assets net of TLTRO. The majority of the portfolio is measured at amortized cost and is held to maturity, hence, no fair value gains or losses are recognized in group's income statement or equity. The mark-to-market positive impact of the amortized portfolio amounts to [ EUR 3 million ] as of December 31, reflecting a reduction in bond yields. We expect to continue to carefully expand our income portfolio in '24, so that it represents around 16% of total assets. Moving now to noninterest income on Slide 22. On this slide, I would like to highlight that noninterest income is an important driver to the group's profitability, covering almost 90% of OpEx for '23. Going forward, we expect it to continue contributing significantly in the coming years at around 70% to 80% of total op. Net fee and commission income continued to grow by 6% year-on-year, driven by higher credit card commissions and transactional fees. We expect net fee and commission income to grow broadly in line with economic growth in both 2024 and '25. The net insurance result was also ahead compared to the prior year due to improved experience variances and the reduction in the loss component of the insurance recognized upfront in the life insurance business. I would also like to remind you that the FX gains are volatile profit contributors. Now moving to Slide 28, which provides an overview of operating expenses. Our cost to income ratio of 31% in 2023 was supported by strong revenue and disciplined cost management. Further OpEx rose by 5% year-on-year, driven by the termination of -- termination costs of EUR 7.5 million, variable pay of EUR 11 million and the cost of the customer reward program of EUR 2.5 million. Excluding these items, costs were slightly down by 1% year-on-year. On a quarterly basis, our cost-to-income ratio increased 32%, driven by seasonally higher expected expenses. Now let's move to Slide 30, on capital. The bank's capital position remains robust. During 2023, we saw rapid capital build up unlocking around 480 basis points of organic capital generation driving our total capital ratio and CET1 ratio to 23.7% and 18.7%, respectively, through distribution. Accruing for a dividend at the top end of dividend policy of 50%, in line with the regulatory framework, our total capital ratio stood at 21.5% and our CET1 at 16.5%. Let me remind you that this level of dividend accruals does not constitute an approval by the regulator for dividend nor a decision by the bank with respect to the 2023 dividend payment. Further details on capital requirements are set out on Slide 56. Moving now to Slide 32 on asset quality. The NPE ratio stood at 3.6% at year-end or 1% on a net basis in line with our 2023 target and our NPE coverage improved to 73%, when including tangible collaterals, NPEs are fully covered. During Q4, we recognized EUR 53 million as unlikely to pay exposure with the completion of our assessment. Most of these UTPs are not macro related and [ seem ] to present no arrears. We expect to reduce our NPE ratio to around 3% by year-end '24, and our NPE ratio target of below 3% by end 2025 is reaffirmed. Now turning to Slide 33 and cost of risk. Q4 cost of risk was broadly flat on the prior quarter at 73 basis points, averaging 62 basis points for the year. This cost of risk includes 19 basis points relating to the classification of specific customers with idiosyncratic characteristics or UTPs even though they adhere to their payment schedule and present no arrears. Going forward, cost of risk is expected to trend towards the normalized level of 40, 50 basis points in '24 and '25. Additionally, we incurred impairment and other provisions of EUR 15 million in Q4 relating mostly to REMU stock properties on specific large liquid assets. Moving on to real estate on Slide 34. REMU, as you know, is our engine, to manage the stock of properties acquired from defaulted borrowers. As you can see, REMU stock properties reduced by EUR 217 million on the prior year to EUR 862 million as of December. With balance sheet derisking completed, the inflows are expected to remain at extremely low levels, and our focus will be on delivering savings. We remain on track to achieve our 2025 target of reducing the REMU stock to around EUR 0.5 billion. And we continue to sell on average close to 90% of independently assessed open-market value or 106% of book value. The prospect for the real estate market in Cyprus remains strong. Based on data by Central Bank of Cyprus established in October, property prices rose by 7.6% year-on-year in the third quarter. It's important to note that these prices remain below their 2010 peak level. I'll now hand back to Panicos for our closing remarks.

Thank you, Eliza. Moving now to Slide 35 and 36. 2023 was a milestone year for the bank achieving strong financial and operational performance. We generated profit after tax of EUR 487 million equivalent to a ROTE of almost 25%. This facilitated rapid capital built up, reflecting accelerating shareholder value creation. Going forward, we are entering 2024, a year of potentially declining interest rate environment on a position of strength. We will continue to execute on those levers under our control, and we remain confident that we can deliver a ROTE of over 17% on 15% CET1 ratio for 2024. Under a more normalized interest rate environment of around 2% to 2.5%, we will increase our 2025 ROTE target of over 16% on a 15% CET1 ratio. This concludes our presentation. We will now open the floor for your questions.

[Operator Instructions] The first question comes from the line of Ismailou Eleni with Axia Ventures Group.

Congratulations for the strong set of results. I have 3 questions from my side. First one is on the structural hedges out of the EUR 4 billion to EUR 5 billion guidance, what percentage would be allocated to the interest rate swaps? And the second question is, as attention seeks to the net fee and commission income, if you could give us some more color on how you're planning to keep growing that part of your income statement and what are the moving parts? And then the third question would be on your CET1 target, like the guidance you provided. Could you talk a little bit more about the underlying assumptions here, especially the RWA trajectory?

Okay, let me start with the net fee and commission income. Okay. And I will -- I can reiterate that this income is strong contributor in diversification and [indiscernible] for our business model. So 2023 increased by 6%, excluding nonrecurring items. We expect this to grow in line with the equity growth. We also presented in the presentation the contribution from our insurance sector, which is growing faster and contributes around 30% of our non-NII in 2023. So insurance subsidiaries are growing and contribute to this growth. We also, for the first time, present [ Genikes ]. And we are watching actually today our marketplace and [ Genikes ] is another source, new source of non-NII in the years to come. And at the same time, again, the first quarter, we are launching our affluent banking initiative, which is a kind of a more general offering to the wealthy clients of the bank, which is also an additional initiative for non-NII contribution. Going back to [ CET1 target ] and your question on the RWAs, I think RWAs are relatively flat through the year. So organic growth will not consume much capital for the bank. And at the same time, revenue reduction will actually release capital from the bank. So I think there is a question about structural hedging, Eliza?

On structural hedging around 3/4 of hedging strategy is to [ IRS ] and the rest is covered through [indiscernible] the natural balance sheet items fixed -- long-term fixed income investment bonds.

The next question comes from the line of Alexandros Boulougouris with Euroxx Securities.

Congratulations on the numbers as well from me. A quick question on the deposit mix. You have your target that it will reach 4% to 5%. Isn't that a bit too conservative given the -- reducing -- the decline in rate environment. So are you being a bit too conservative? Or is there some data that you see -- that you think this indeed seems to be going up to this level? That's my first question. A second question regarding the fixed income portfolio, you mentioned that you target to go to 16% of assets by end of 2024 and the fixed income book has increased in 2023 as well. Should we see this trend continuing? Or is this 60% more or less you want to be? And one final question regarding loan growth, and this is something that we are gradually seeing in the Greek market. Regarding reperforming loans from all the NPLs, is it something that you would consider as well [ buying ] reperforming loans later on in 2, 3 years' time as a potential growth -- inorganic, say?

Okay. I will start with generally on deposit. Not just the mix, but also in deposit pass-through. And general comment that the Cypriot banking sector is very liquid and concentrated. So this will not change. And this was also the main driver of us having a deposit cost of just 24 basis points and over a pass-through rate of [ 60%, 80% ] on [indiscernible]. So we expect to continue some gradual repricing of the back book, which means that there will be the [indiscernible] mix as well. I remind you that the pass-through of 40% or whatever pass-through, we end up in the end does not necessarily mean that the deposit cost will go up because deposit is -- the EURIBOR rate is actually expected to drop. What is important is total cost, total deposit cost and we provided a number there in guidance, we said that every 10 basis point increase have an effect of around EUR 19 million to the NII. So we focused mostly on deposit cost rather than on pass-through and mix. Of course, we have to navigate 2024 reduction until [indiscernible] stabilization comes in 2025 in the rate. And until we start gradually seeing the rate cuts to pass back to the depositors. But all in all, pass-through mix, I mean, have been all taken into account in our ROTE guidance for 2024 and 2025 in relatively considerable rate assumption scenario. So going to the loan growth and reperforming loans, actually, as Eliza mentioned, before about the acquisition from the EUR 58 million coming from [ retail business ] kind of small [acquisitions for ] -- of reperforming loans in Cyprus. But I will say that we need to be careful on doing this because the definition of Stage 1, Stage 2 and Stage 3 based on the ECB guideline, it's much different of what the services of the [ NPE ] are actually in mind. So we'll be very, very careful and this will take some time. I don't expect this to materialize within the next 1 to 2 years. And this is not part of our plan A for loan growth, we're going to assume in our loan growth assumptions of an acquisition of reperforming loans. All these are actually in line with the growth of the economy [indiscernible]. I think there is a question also on the fixed income, Eliza.

So on the bond portfolio, this is a dynamic exercise. As you know, our 16% guidance is based on our current risk return characteristics of the portfolio versus [indiscernible] be it ECB or other options on liquidity management. It's not a [ ceiling ] but it's also not something we can guide to more specifically at this point, i.e., a higher or a different level. Our current strategy goes to the 16% level on the basis or on the back of current rate expectations and current risk return dynamics of the bond portfolio.

The next question comes from the line of Hamilton James with Numis Securities.

I just wanted to touch on the [ Genikes ] business. You've mentioned it in your presentation, it's the first time it's appeared in the slides. I was just sort of wondering if you could give us a flavor of where you feel this could land in, say, sort of 2 or 3 years' time? What are your aspirations for it? Obviously, you mentioned non-interest income, but I'm more sort of thinking about the sort of strategy, the data and analytics you might get from a sector of the bank.

Okay. Thank you, James. As I already mentioned, [ Genikes ] is a new subsidiary aiming to drive digital economy in Cyprus, to create an ecosystem-driven platform to create opportunities for all. What we initiated for the [ Genikes ] is to connect business together, B2B, which is already live. To connect customers with business B2C, which [indiscernible] we launched in February. And of course, to combine all these and support them with banking and financial products. So this is part of us investing in the digital bank value change, diversify our income. And as I already explained earlier, this will be an additional [ contributor ] of non-NII, which you know that we aim to cover most of our expenses through non-NII. So in the near future, let's say, in 3 years, we expect naturally more contribution -- tangible contribution in our NII from [ Genikes ], but we also expect no progress in the business-to-consumer part of [ Genikes ] toward a more life style platform service in Cyprus, we probably expect to have loyalty schemes, we will have personal analytics, office promotions, financial and insurance products offered to the client, service bookings, consumer communities, different ecosystem, including [indiscernible] ecosystems, green ecosystems, [indiscernible] ecosystems. So all these have to do with us developing the business-to-consumer concept of [ Genikes ] and we are very enthusiastic about [indiscernible] will see coming in 2024 onwards.

I had one other one regarding loan book growth. Could you sort of chat a little bit about how you see the dynamics of sort of the growth that you're talking about given the tough environment that we saw in 2023. Is this just as we see lower rates, you'll see fewer sort of prepayments? Or is this sort of a more active, more active process of expanding growth? Or is it just purely the macro?

Okay. I am afraid, I didn't get very well the question. But I got that hint like which is loan book growth. So I will start by saying that 2023, the [ loan book is ] actually flat because of higher repayments. I remind you that 2023 -- 2022 had a loan book growth of 3% which we expect normalized repayments to come in, in 2024 to be the case and it's line with also with the growth of the economy in Cyprus. So we do expect to return back to loan growth in line with the economy of Cyprus and over and above to support this assumption, we accelerate our international strategy for diversification, excluding [indiscernible] syndication, some corporate loans [indiscernible] we expect to start seeing more tangible results on this on the second half of this year. So of course, what we are saying that I would not change volume at [indiscernible] portfolio quality. And this is -- I mean it's very important for us actually since 2016, 99% of our new exposures are performing and have been performing through tough times in Cyprus, COVID, the war of Russia and Ukraine, the inflation, the high rates. So all these are also important for us because they define our future cost of risk.

The next question comes from the line of Cruz Hugo with KBW.

I have a few questions. First of all, on the NII, you've talked about the fixed income portfolio, but can you talk about what is the upper limit for the hedging as well? You flagged some additional hedging in 2024. So can you do more in later years? And then on OpEx, if you could tell us what's your guidance for OpEx and ideally splitting the impact of levies and other regulatory costs? And then also for provisions, if you could give us -- other provisions, if you could give us the guidance there as well, it would be very helpful.

Hugo, on hedging, the EUR 4 billion to EUR 5 billion, notably that we put in the slides or disclosed is not the actual limit. As you know, we are -- we were and continue to be a relatively rate-sensitive bank, and we will look fully hedging in 2024, an opportunity to reduce this rate sensitivity going forward and make it tend -- more predictable and more and -- planning more manageable. I mean, at the end of the day, our NII decisions, our hedging decisions all link back to our ROTE target, which is about 17% for this year at about 16% for going forward on normalized rates. So there is no [ upward ceiling ] for the EUR 4 billion to EUR 5 billion, rather is not the [ upward ceiling ], but it's what we plan to do this year.

Okay. On OpEx guidance, I will take you back to the cost accumulation of around 40%. So this covers everything. Of course, there is some room to go to invest in technology, we keep continue investing in technology. There is also some inflation to go but we should not usually forget that our focus on cost discipline in a follow-on perspective is there, that will continue. Probably you have noticed that in 2023, we have concluded as [indiscernible] about 50 people at the cost of almost EUR 8 million to EUR 9 million. So -- and I also remind you of the aggressive and rapid [ downsizing ] of our network and also our number of FTEs. So [ cost to income ] around 40%, it's a good [ project ] to have in mind. On the provisions, I think, okay again on the provisions, I don't expect any one-off provision. We do expect -- as we said the normalized cost of risk to trend towards the 14 to 15 basis points. And this is our best case scenario for the years to come.

Okay. I'm sorry, I asked as well on the levies. Do you have any kind of confirmation of what levies could be in 2024?

The bank levy is at 15 basis points because it's [indiscernible] formulaic in terms of cost.

We don't assume any additional levies and we don't assume any excessive levies to be actually canceled. So this is the main assumptions for the financial plan.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I would now turn the conference over to Mr. Nicolaou for any closing comments. Thank you.

Thank you all for your participation and questions. As always, we will be very happy to arrange one-to-one calls to take you through in more detail on our actual financial results of 2023 but also most importantly, in [indiscernible] assumptions of our 2024 and 2025 guidance. Thank you.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good day.