BAWAG Group AG (BG) Earnings Call Transcript & Summary

Good afternoon to those joining in person, and welcome to those joining online across different time zones. Let me start by introducing myself. My name is Anas Abuzaakouk, and I'm the CEO of BAWAG Group. I've been at BAWAG for over 13 years and the CEO for the last 8. I'm joined by Sat Shah and Enver Sirucic, our Deputy CEOs, who will also be presenting this afternoon. Enver is the most tenured among us with BAWAG for almost 2 decades, while Sat has been around for over a decade. This is not unique to the three of us as the Management Board and senior leadership team have been working together for quite some time, and we hope to keep it that way. For those in attendance this afternoon, you'll have a chance to meet other colleagues on the Management Board and members of the senior leadership team after the presentation and the Q&A session. Let me start by first thanking many of you, some that go back as far as our IPO almost 7.5 years ago, who have supported the company over the years, provided constructive feedback and will hopefully continue to support us in the many years ahead. We're excited to share with you the next phase of BAWAG's journey. We don't have a crystal ball to tell you the future. However, we hope to provide insights and perspective on how we run the bank and provide you with guidance as to how we see the franchise developing in the years ahead. I will present an overview of the franchise and how we run the bank. Sat will go through the evolution of our Retail and SME business, and Enver will provide an update on the financials and road map to our 2027 targets. With that, let's start on Slide 3. For those who are being introduced to BAWAG Group for the first time, we are a multi-brand and multichannel commercial bank founded in Austria serving retail, small business, corporate, real estate and public sector customers. Today, we serve over 4 million customers across our core markets spanning Austria, Germany, the Netherlands, Switzerland, Western Europe and the United States. We are about delivering results. This past year, we delivered a return on tangible equity of 26% and have averaged 18% over the last 13 years, which included 8 years of zero or negative rates and of which we have underearned as a franchise. Since 2012, we have increased EPS 23x from EUR 0.42 per share to EUR 9.60 per share, doubled our customer loans to EUR 50 billion after closing both acquisitions and extended EUR 79 billion of credit to our customers. It has been a remarkable run since 2012. Stepping back and reviewing the long arc of our transformation offers valuable insights into how we run the bank. We are in constant motion. Therefore, it's important to pause and highlight key accomplishments but equally important to explain how we run the bank as this will inform you as to the principles and approach for the years ahead. The early years were defined by rightsizing the business and setting our foundation. We invested heavily in fixing the basics: our strategy, our leadership team, our cost base and our balance sheet. After setting the foundation, we pivoted to planting the seeds for growth, which culminated in our IPO in 2017. In turn, we delivered an average RoTCE of 18% over this 13-year period, delivering one of the best return profiles across all banks. This profitability allowed us to generate significant amounts of capital, which we invested in growing our customer franchise, M&A and our digital transformation. Our success is a testimony to the merits of being patient, disciplined in making decisions with a long-term perspective. This long-term mindset has underpinned our transformation. We invested EUR 1.7 billion into the franchise with a primary focus on the Retail and SME business, transforming from a branch-heavy business with limited digital capabilities to a digital bank with a high-quality advisory network. We self-funded 14 acquisitions, expanded our footprint into 6 new markets, cultivated a great culture, built a strong leadership team with a deep bench and rewarded our shareholders with EUR 3 billion capital distributions since our IPO in 2017. However, our best years lie ahead. We are targeting a net profit of over EUR 1 billion in 2027 while also generating excess capital of over EUR 1 billion through 2027, which is incremental to the capital needed to achieve our net profit target and after accounting for a 55% dividend payout ratio. As a digital bank with a high-quality advisory network, we will be the beneficiaries of greater scale and efficiencies, greater digital engagement, a wider geographic footprint and more opportunities to pursue with a significant amount of dry powder on hand. We are set to consistently deliver a return on tangible common equity of over 20% across all cycles, an average gross capital generation of over 375 basis points. The franchise is capturing the compounding benefits of our investments over the years as well as the benefits of the two recent strategic acquisitions. Moving to Slide 4, a recap of our performance since our IPO. Since our IPO in 2017, BAWAG Group has delivered a total shareholder return of over 200%, outperforming the European bank index by over 2x. Our focus is not on short-term stock performance, but we do believe the stock price over the long term is a good measure of a company's performance. We pride ourselves on delivering consistent results year in and year out, irrespective of stock price movements in across all cycles. Since the IPO, we've grown EPS by a CAGR of 12% and DPS by a CAGR of 38%. We have distributed EUR 3 billion of capital to the shareholders in the form of EUR 2.1 billion of dividends for a cumulative DPS of EUR 25.20 per share and executed EUR 900 million of buybacks across three separate programs. Our buybacks were executed at an average price of EUR 41.60 per share. We have a strong shareholder base that has supported us over the years, and we hope to continue rewarding you for your support. As a management team, we are deeply vested in the company with a collective ownership of 4.5%. We take great pride in delivering on our commitments and acting as good stewards of the bank, knowing that so many have entrusted us with their savings, retirements and investments. On Slide 5, our core principles. The core principles of how we run the bank center around being patient and disciplined, being good stewards of capital and building a strong culture as this is our foundation. Patience and discipline means focusing on the things that you can control. This means less strategy talk and more execution. This means consistently keeping a conservative risk appetite in how we adapt to underlying market developments, be it rising interest rates, irrational pricing or deciding to stay patient and forego volume growth as underwriting standards deteriorate. This means focusing on risk-adjusted returns, not chasing volume growth or overpaying for acquisitions and making investments with a long-term view. This is not always appreciated when companies are measured quarter-to-quarter and requires a leadership team that will stay the course, stick to its principles and cut out the noise. However, such companies are rewarded over the long term as they avoid the sins of short-termism and manage the franchise with a view of years versus quarters. Being good stewards of capital means being prudent and disciplined in capital allocation. Disciplined capital allocation, and M&A in specific, is key to our strategy in how we run the bank. This holds true for our capital distribution plans and how we extend credit to our customers, make long-term investments, maintain our fortress balance sheet, invest in our team members and always being ready to capitalize on unique opportunities. Building a strong culture is the foundation of our company. Culture matters and is what we've repeatedly identified as the key difference between good companies and bad. In our experience, most companies have hard workers and committed employees. However, failure usually stems from poor culture and a failure of leadership. Building a talented team that is passionate and committed with the continuous improvement mindset and an owner-operator mentality is fundamental to our culture. This is built into our DNA and how we run the company. Moving on to Slide 6, our franchise evolution. Our strategy has been consistent since 2012. Our three strategic pillars have guided our transformation in the past and will guide us in the future. Our primary focus has and will always be on execution and doing our best to consistently deliver results. We focus on growth in our core markets, efficiency through operational excellence and maintaining a safe and secure risk profile. Although these strategic pillars are simple, they are at the core of how we run the bank, specifically the type of growth we pursue, our focus on efficiency through simplification, process reengineering and using technology as a business enabler and the conservatism that defines our risk appetite. Across all key metrics, we have delivered superior growth and returns, emphasized efficiency through operational excellence and fortified our balance sheet. Since 2012, we have grown core revenues by a CAGR of 6%, decreased our cost-income ratio by 37 points to 33% and decreased our NPL ratio by over 2/3 from 2.5% to 80 basis points. Our primary focus over the years has been growing our retail and SME franchise. After the early years rebuilding our foundation, we completed our first acquisition in 2015 with the purchase of Volksbank's Austrian leasing business and have closed 13 acquisitions since that point. We believe that the DACH/NL region, made up of Austria, Germany, the Netherlands and Switzerland, is attractive given the macroeconomic backdrop, fiscal discipline, opportunities for digital transformation, niche specialty finance space and potential for greater banking consolidation and efficiencies. The midterm goal for our franchise is to be 90% retail and SME and DACH/NL-focused and 90% secured or public sector lending with 90% of assets originating through digital nonbranch channels. We complement this broad DACH/NL regional focus with a targeted retail and SME approach in Western Europe, primarily focused on Ireland and the United States, where we have started from a smaller base and will grow through community banking platforms and leveraging group-wide operating infrastructure and capabilities. Our non-Retail and SME business is a combination of niche capabilities across real estate, corporate and public sector lending that provides earnings and geographic diversification, excellent risk-adjusted returns and, at times, unique synergies with our retail and SME franchise. Moving to Slide 7, M&A as a differentiator. The focus of our M&A strategy has been building out a Retail and SME business. This has taken many shapes and sizes from buying product factories to specialty finance companies such as PayLife credit cards, Hello bank!'s Austrian online brokerage business, a German-Swiss factoring business and an auto and equipment leasing platform. We also buy banks that need operational turnarounds, such as Sudwestbank and Bausparkasse in Austria. At times, we have also pursued wind-down opportunities with complementary asset portfolios such as Dexia and DEPFA public sector portfolios, where we use our operational platform to wind down the business while buying assets at good risk-adjusted returns. Our recent acquisitions of Knab and Barclays Consumer Bank Europe are two high-quality retail and SME franchises with digital native customers that will provide us with a large footprint to expand our business in the Netherlands and Germany. In total, we have completed 14 M&A transactions that have allowed us to bring in 2.5 million new customers, enter 4 new markets and add 6 new retail and SME products. We use our teams to do due diligence, underwrite and integrate acquisitions. We focus on the basics: enhancing the overall tech ops environment, centralizing group functions, prudent capital management, decoupling from TSAs and third parties, providing capital and liquidity for profitable growth and investments and instilling a culture of ownership and accountability. Our financial criteria for acquisitions have been consistent throughout: deploying our capital and operational capabilities and deals that meet our group return requirements of an RoTCE of greater than 20%. We've learned a great deal over the years and refined our approach, learning from our mistakes and looking to constantly improve. Day 1 requires clear and transparent communication, relaying our values and the strategic direction, not shying away from tough decisions, having an execution bias, emphasizing the merits of staying patient and disciplined, not feeling compelled to chase volume and always speaking with one voice and as one team. Looking ahead, we see a European banking landscape that is still highly fragmented, with Austria and Germany in particular representing two of the most fragmented markets. We believe consolidation is the catalyst for building stronger European banks that can address the challenges stemming from broken cost structures, overleveraged balance sheets and subpar technology. We keep an active list of potential targets that we believe would fit well with our business and we will diligently pursue such opportunities when they become available. We target both small and large transactions, but we'll always remain disciplined in our approach to M&A. Our acquisitions of Knab and Barclays Consumer Bank Europe exemplify the patient and disciplined approach we take towards M&A. Both deals were on our internal game board, with one deal being pursued for almost a decade. We were fortunate last year in having the team, infrastructure and operational know-how to pursue and ultimately buy two high-quality franchises. Our experience with M&A transactions and integrations, the remarkable commitment of our teams and the continuity of leadership allowed us to pursue these opportunities. Although we cannot dictate the timing of deals, we can ensure we are ready once they present themselves. On Slide 8, being good stewards of capital. We generate significant amounts of capital each year. Since 2012, we have averaged an RoTCE of 18% and generated significant amounts of capital, which we then used to make loans, investments, acquisitions and capital distributions in a manner that we believe was both prudent and disciplined. We took a long-term approach to building a resilient franchise that could withstand all economic cycles and serve as a source of strength for our customers and communities, employees and shareholders. We extended EUR 79 billion of credit to customers as we doubled our customer loans from EUR 25 billion to EUR 50 billion. We invested EUR 1.7 billion to our transformation, focusing on technology investments that enabled our digital bank transformation while modernizing our branch advisory network, fundamentally fixing our cost base and shoring up our balance sheet by exiting legacy assets and noncore businesses. We made 14 acquisitions that were all self-funded from organic capital generation, including the two most recent strategic acquisitions last year that will build out our retail and SME franchise and accelerate our digital transformation. We rebuilt our capital base, increasing our CET1 capital by EUR 1.8 billion from EUR 1.3 billion to EUR 3.1 billion and, in turn, significantly bolstering our CET1 ratio from 6.2% in 2012 to 13.8% on a pro forma basis today. Today, our CET1 target is 12.5% for the franchise with a solid capital base and business model that generates significant amounts of capital each year. We don't emphasize enough the transformation and risk management that took place as we rebuilt our capital base, enhanced our liquidity profile, reduced the amount of balance sheet leverage and significantly improved asset quality and business mix. And we distributed EUR 3 billion of capital to our shareholders since our IPO in the form of EUR 2.1 billion of dividends and EUR 900 million of buybacks. Moving to Slide 9, the BAWAG culture. Our success was only possible because we cultivated the right culture. This is reflected in how our team members work together and the respect that we have for each other. It is how we set priorities and the values we espouse. It is captured in our meritocratic principles valuing work ethic, character and performance. We believe in a flat organization, encouraging open dialogue, streamlined decision-making and a continuous improvement mindset. We pride ourselves on challenging the status quo, promoting the best and brightest and not shying away from change, knowing that this is the only constant. Building a talented team to a common purpose that is passionate, curious and committed to the team versus individual goals defines BAWAG Group. Our senior leadership team has worked closely together since the early days of our transformation, with an average tenure of the senior leader standing at 14 years. However, we need to ensure we guard against complacency and a false sense of entitlement. Our success is not guaranteed. The businesses that have proven to be resilient are those which proactively adapt with a sense of urgency, led by committed and passionate team members that care deeply about their company, serving their customers and invested in their communities. At BAWAG, it is okay to take risks and make mistakes. This is part of our culture, developing talent and making sure we provide opportunity for development and personal growth. We are deeply committed to meritocratic principles, promoting a diverse workforce and inclusion. This is best reflected in team members representing over 50 nationalities. Our diversity is a core strength of the group. However, this never comes at the expense of merit, work ethic, integrity and accountability. We also believe in keeping a simple and flat organization, doing our best to break silos and get rid of unnecessary hierarchies that do nothing but feed egos and create sprawling bureaucracies. We instituted a three-layer structure across the group to enforce a flat organization and encourage open and transparent dialogue. The Management Board and senior leadership team are deeply vested in the bank, serving as both fiduciaries and shareholders. Collectively, we own 4.5% of the bank, of which 75% of shares were purchased in the open market. We believe in promoting an owner-operator mindset that truly differentiates us from most companies. We measure success in years, not in quarters, as we're committed to the long-term development of the franchise. We have had multiple events that have tested our leadership over the years, which have only made the team stronger and more resilient. Earlier this year, the Supervisory Board extended the contracts of all 6 Management Board members through the end of 2029, reflecting our collective commitment to the franchise. We have also recently set up the BAWAG Group Executive Council, made up of 29 executives and the 6 Management Board members that both deepens our leadership bench and provides a forum for greater connectivity and collaboration across the group as we continue to grow. 70% of the group is made up of executives in both markets and TechOps roles, reflecting the changing contours of our business and the importance of customer-facing technology in our digital transformation. Culture matters. To be successful year in and year out, we're never falling victim to short-termism or complacency. A dynamic organization is one that constantly adapts to customer needs, regulatory changes and can capture new market opportunities. We must prepare for the future, continuously evolving and investing in our franchise. Even though our company is in great shape, we need to remain vigilant in guarding against complacency and adapt from a position of strength. Focusing on the things that we can control and embracing a continuous improvement mindset leads to long-term compounding benefits. As a management team, we have made our fair share of mistakes and surely we'll make many more. However, we will continue to learn and grow from these experiences and sharpen our capabilities. On Slide 10, a summary of our 2027 targets. Despite another record year in 2024, our best years lie ahead. The resilience of our franchise lies in our ability to deliver results across all cycles as we are built for all seasons. Our approach is consistent: focus on the things you can control, be patient and disciplined, keep a conservative risk appetite and only pursue long-term profitable growth. Our team is focused on delivering on our commitments. We're deeply committed to the long-term success of the franchise, not only our 2027 target but for many years ahead. Our target is quite simple: 1+1 in 2027. We are targeting net profit greater than EUR 1 billion in 2027 while also generating excess capital of over EUR 1 billion through 2027, which is incremental to the capital needed to achieve our net profit target and after accounting for our dividend payout policy. In aggregate, from 2025 through 2027, based on our dividend payout ratio of 55%, we plan to generate over EUR 2.7 billion of net profit, of which approximately EUR 1.5 billion we plan to distribute in the form of dividends and have more than EUR 1 billion of excess capital still to allocate based on our CET1 target of 12.5%. We hope to deploy our excess capital towards incremental organic growth, further M&A and/or capital distributions. Underpinning our targets is conservatism and an assurance that we will not overextend ourselves as we stay patient and disciplined in how we run the bank. With that, I'll turn it over to Sat.

Thanks, Anas. For those that don't know me, my name is Sat Shah. I'm Deputy CEO and the Head of the Retail and SME business. I've been with BAWAG Group for under -- or over a decade and held various leadership roles throughout the organization. Jumping into the Retail segment. Before touching on Slide 12, I wanted to give you a bit of a background. Today, our retail franchise accounts for over 80% of the group revenues, serving more than 4 million customers. We've had a strong runway of a mix of organic growth and M&A, closing 14 acquisitions to date. Most recently, we closed on Knab in the Netherlands and Barclays Consumer Bank Europe in Germany, which are transformative in nature and fit perfectly into our strategy. I'll touch on these later, but I think it's important to take a step back and reflect on our transformation. For context, in 2012, our retail franchise represented less than 50% of the group revenues, had 1.5 million customers and only operated in one market, Austria. At its core, our transformation was about fixing the basics: relooking at our strategy, changing the culture, simplifying the organization and then investing into growth. The first phase was concentrating on rightsizing the business. This was an essential step to position us for sustainable growth for the long term. During this phase, we exited noncore areas, streamlined our balance sheet, reengineered processes and began to shift to a leaner, more advisory-focused branch network. The second phase was planting seeds for growth. By fixing the basics and simplifying the organization, we were able to begin leveraging technology as an enabler for growth and achieving the next level of efficiency. From enhancing our digital customer journeys to digitizing the back-end processes, we've prioritized building frictionless experiences for our customers. The investments we've made are focused on value-driven initiatives versus creating unnecessary bells and whistles. During this period, we finalized the transition of our branch strategy of becoming an advisory-based network with 78 modern locations. In addition, since 2015, we've acquired 14 strategic businesses across our core markets. And finally today, we have transformed from a traditional retail bank to a digital bank with a high-quality advisory network. We have 4 million customers and are present in 7 geographies. In the near term, teams are busy integrating the two acquisitions; and in the midterm, we will continue to invest in technology and in growth. In 2025, we will spend greater than 30% of our total spend on technology, and this share will continue to increase over the midterm. Overall, our focus as a group is to continue growing our retail franchise and continuing to become more digital. In the midterm, we expect our retail franchise to be approximately 90% of the group revenues and 90% coming from digital originations. Moving on to Slide 13. Our strategy is fairly straightforward and has remained consistent over the past few years. We'll dive deeper into each of these pillars in the upcoming slides. But in summary, number one, we have focused heavily on becoming a digital bank with an advisory network, and this will continue to be our focus. We've streamlined our footprint and shifted a significant portion of our customer base into the digital world. The multichannel approach of banking our customers will continue to be important, but the share of the digital wallet will continue to increase as we grow. Today, the majority of our 4 million customers are digital-first, using our digital channels for their everyday financial needs. Secondly, we will continue investing to achieve both growth and efficiency. While we've made great progress, we will continue to invest to stay at the forefront. Our goal is to offer frictionless customer experiences while continuously reducing our cost to serve. Third, organic growth. With greater than 4 million customers, our focus is to continue deepening relationships with our customers. We prioritize highly engaged primary banking customers and leverage multiple channels to foster this engagement. Data analytics plays a key role in delivering the right products at the right time through the preferred channel. Furthermore, we've begun investing into artificial intelligence with notable progress around the customer service and payment transaction monitoring areas. And finally, position for M&A. Over the course of the transformation, we realized that the issues faced were not unique to BAWAG but widespread across the European banking sector. After the heavy lifting of our transformation, we started looking for franchise-enhancing deals focused on expanding our Retail and SME product offering, expanding our footprint in core markets, identifying opportunities requiring operational turnarounds while avoiding taking on credit risk and targeting deals to leverage our operational capabilities. We maintain a game board of potential opportunities. And as opportunities arise, we will be ready to act. The two most recent examples are Knab and Barclays Consumer Bank Europe. These are highly transformative for retail and will bring greater than EUR 350 million of annual PBT by 2027. Moving on to Slide 14. Here, we've laid out our portfolio of products. Over the past decade, we have consciously built out our portfolio of product offerings. We offer affordable, transparent and simple products that are easy to understand. Over time, we simplified our product offerings and continuously relook at our risk appetite and returns. Today, 85% of our book consists of secured lending such as mortgages, auto and movable leases and inventory finance. We maintain a strong rigor in our underwriting guidelines with a large majority of approvals fully automated. This not only leads to better customer experience with a quick time to yes and payout process, but also enables us to ensure consistency in underwriting across all channels. I think, Jutta, you got to go back one page. You're on the -- no? Looks like one page is gone. Yes. In addition to the lending products, we have a broad suite of fee-generating products such as current accounts, cards and advisory services ranging from securities, insurance and savings products. Today, nearly all of our products are fully digitized. Not only does this improve the customer experience but also significantly reduces our cost to serve. Our broad-based product offering enables us to offer a one-stop shop for our customers and creates a healthy mix of revenues with greater than 70% being interest income from our lending business. Moving on to the next slide, the multichannel strategy. Today, we run a multi-brand and multichannel strategy. Through the transformation, we have expanded into 6 core markets. Our expansion has been a mix of organic growth and M&A. The transformation has significantly shifted the way we do business with our customer. Our strategy consists of originating products through branch and digital channels. We have local sales organizations where sales teams are in the field, close to the customer. All the non-sales functions are centralized to leverage the BAWAG Group scale and synergies, ensuring that we run efficient operations to provide best-in-class customer service. We centrally steer our risk appetite, pricing, technology development, data and customer analytics. By centrally managing these areas, we steer where capital is deployed as markets shift, leverage technological developments across channels and overall run very efficient operations, leading to a better customer experience while maintaining disciplined pricing, a low cost base and product returns meeting our overall group targets. Starting with our branch channel. We have significantly reduced our footprint and reconfigured the organization, delayering the HQ functions and reinvesting into our sales force. Over the transformation period, we invested heavily into modernizing the footprint to become more focused on higher touch advisory. We also invested heavily into digitalization and pushed the transactional banking branch customers more and more into the digital world. By offering digital services in a customer-friendly way, we're seeing the customer behavior shift towards digital. We see a positive trend in the over-the-counter transactions, which are down 85% with customers leveraging the mobile app, Internet banking and self-service channels. In addition, we see a higher demand for in-person meetings related to a more complex advisory product. We run 78 advisory branches where talks are held in person at physical branches as well as via video advisory. By having the branches focus more on advisory interaction, we have seen an improvement in customer satisfaction and customer engagement, where our advisory appointments are up 32% year-over-year. Branches remain an important and profitable channel into the future, and we will look to see where it may make sense to expand our footprint. The second channel we focus on is originations via digital channels. This includes digital banking via mobile and Internet banking as well as via strategic partners. What sets us apart are our simple, quick and efficient processes that makes it easy to bank with us. In addition, with our low cost to serve, we can compete in fragmented spaces while meeting our targeted minimum returns. Our strategic partners are a mix of traditional names that offer -- that other financial companies play in as well as niche relationships where we gain access to consumers that other financial players cannot. Our plug-and-play digital capabilities mixed with our simple, quick and efficient processes position us to plug into those partners quickly. At times, we have exclusivity and take minority ownerships. But for all the relationships, the asset origination is strictly under our defined credit box with full operational risk and regulatory controls in place. Across our digital channels, we see significantly higher digital customer engagement with greater than 80% digitally active, greater than 75% account customers having the mobile app and, on average, us having more than 20 interactions per month with our digital customers. Today, greater than 80% of our originations will come from the digital nonbranch channel and, in the midterm, this will grow above 90%. Moving on to Slide 16. Yes, they got switched. So Slide 16. We recognize technology and data as critical enablers -- Jutta, you got to go to Slide 17. Two down, please. Yes. We recognize technology and data as critical enablers to our retail growth strategy. Since 2012, we have invested in over EUR 700 million in technology with a significant portion allocated to products and platforms. Our product investments were in simplification and digitalization to meet the evolving customer requirements during this period. On the platforms, we invested in scalability and efficiency across infrastructure, payments, data and analytics and software development, aiming to become leaders in technology overall. We are strong believers that we are a technology company with a bank. In 2012, we spent 13% of our overall spend in technology. In 2025, this will be greater than 30% of our total OpEx. And in the midterm, this will continue to increase. One standout investment is our cloud and data platform, which has been the most critical technological enabler in recent years. It has allowed us to leverage the state-of-the-art technologies such as machine learning and AI to capture value across customer service, sales, compliance and risk. Today, 100% of our applications and data are in the cloud, driving unit cost down and enabling us to launch commercial applications faster. We recently deployed our first customer-facing AI use case in under 5 months. The AI agent has a greater-than-70% resolve rate in solving first level customer service requests. This progress is made by our own in-house teams who are deploying the latest technologies in low-code platforms. They have digitized 90% of our retail and SME products, creating a better customer experience but also allowing us to reduce the time to market on launching new products by 70%. And finally, our consolidated platforms for customer service and data analytics enable us to sustain high service levels with high customer satisfaction ratings. We can handle greater than 95% of our customer requests within 48 hours. If we move back one slide, please. Okay. So moving on to the next slide. As we evolved to become a more digitally focused bank, our digital approach has been a core strength of our business and a competitive advantage. We are a data-driven organization and try to measure everything to make informed decisions to ensure we are creating franchise value. Our strategy focuses on banking our existing customer base as well as open market acquisition of new customers. With respect to the new customers, we invest significantly into performance marketing via digital channels which is targeted, measurable and dynamic. With respect to the existing customers, we focus on automated engagement via own media and frictionless product and service journeys to efficiently upsell. Both of these channels are underpinned by our advanced analytical and machine learning AI capabilities. These are focused on proprietary propensity and trigger-based modeling, AB testing and continuous optimization coupled with personalized messaging in order to drive the right product, at the right time, through the right channel. In summary, our strong ability to target the customer enables us to grow sales at a lower customer acquisition cost while improving the customer experience. Jumping on to Slide 18. Knab and Barclays Consumer Bank Europe are transformative and will be highly accretive acquisitions. We deployed EUR 600 million of capital and will generate greater than EUR 350 million of profit before tax by 2027. Knab is a leading digital bank in the Netherlands. It was founded in 2012 and, over time, became known as the leading bank for the underserved self-employed. Today, they have approximately 400,000 digital transactional banking customers. The majority of these customers use Knab as their main bank and are fee-paying current account customers. Connected to these accounts are EUR 12.7 billion of granular deposits and 80% of which are deposit-insured. In addition, Knab has EUR 12.7 billion of low-risk Dutch mortgages that were originated through the broker channels. Barclays Consumer Bank Europe is the leading revolving credit card issuer in Germany with a rich 30-plus year history. Today, they have more than 1.5 million customers with around EUR 2 billion of revolving card balances and EUR 4 billion of deposits. Both franchises are highly complementary additions with attractive strategic rationales. Number one, they expand our positioning in two of our core markets, creating scale for future organic growth and bolt-on M&A. Secondly, they add 2 million highly digital and highly bankable customers. Third, they expand our product offerings, creating opportunities across the entire BAWAG customer base. Fourth, they add strong teams with deep domain expertise that will be integrated into the group. And finally, they are highly accretive, profitable franchises with further runway for efficiency as we integrate the franchises into the group. Moving on to Slide 19. After completing and integrating 12 acquisitions across multiple geographies, we wanted to touch on the integration playbook we use. While we know this is a heavy undertaking, we've done it multiple times in the past, which brings us confidence in what we're doing. On the integration front, we normally leave the commercial functions in the field close to the customer. Our risk appetite, pricing, technology development, data and customer analytics tend to be centrally steered working closely with those commercial teams. On the disentanglement from the transitional service agreements, both parties are heavily reliant on services from their prior owners and third-party providers. As we work through simplification efforts, we bring all core items in-house, absorb tasks and eliminate reliance on third parties. This process tends to take approximately 12 months but leads to significant efficiency once the integration is completed. On systems migrations, we leverage established group platforms for data, software development and cloud infrastructure and harmonize the architecture wherever possible. Furthermore, we consolidate core product systems such as card processing, thereby simplifying the product portfolio and process landscape. As in other areas, we tend to in-source technical expertise and assume ownership across the board. The overall strategy is to simplify as much as possible, whether it's returning regulatory licenses and operating through branches, streamlining the organizational setup or reducing overhead, fundamentally reengineering end-to-end processes. We find opportunities to improve quality while creating efficiency. Finally, we relook at the focus areas and ensure the entire organization is focused on the core areas that made the franchise successful. We spend time harmonizing definitions and how to look at credit, profitability and cost and make joint decisions on potential areas to pause or exit. The goal is always to ensure teams are not spread too thin and the area that made the business so attractive is where the focus sits. Upon integrating the franchises within the BAWAG Group, we will have strong, sustainable and efficient franchises that will align to the group cost to income ratios and generate greater than EUR 350 million of PBT by 2027. And finally, connecting back to the rationale for the acquisitions. We see multiple potential upsides that are not within our plan. With the high digital engagement of the greater than 4 million customers across the group, we see an opportunity to sell products into the greater customer base. In addition, with the domain expertise we acquire and the strong platforms in two of our core markets, we also see opportunities for organic and inorganic in-market and cross-border growth. And finally, moving on to Slide 20. We have built a strong franchise that has been transformed over time. We have a solid and simple foundation to launch off. We have invested heavily and are highly digital and we have a great franchise. When you look on the right side of the page and the progress the entire BAWAG team has made, it's tremendous. We love what we do. And while we've made a lot of great progress, we're just getting started and are confident that the best years are still ahead of us. With that, I'll turn it over to Enver.

Thank you, Sat. My name is Enver Sirucic. I'm the CFO, and I've been in the role for the last 8 years. As Anas mentioned, I spent most of my life actually at BAWAG. So for the last 20 years, I've been around. What I would like to do on the next few slides is just to walk you through our assumptions and give you some details on our financial plans. I promise this is going to be the shortest part of the presentation. So we'll get some time back. Just before we go there, on Slide 22, very good, so our core principles and also how that is connected to our financial profile. So if you look at it, it's being patient, it is being disciplined. We care about efficiency and operational excellence and we do run a very low-risk profile balance sheet. So if you look at these three main pillars or principles, the first one is, if I would define it, it's not to chase the market. We look more the things from a bottom line perspective, less from a top line perspective. We do focus heavily in retail and SME, as Sat has laid out, and also that gives us high quality of earnings, more predictable, more robust in its nature. We don't care about other income, trading income, whatsoever. Everything is 100% core revenues. And if you follow these principles, what you get at is actually a significantly higher net interest margin versus the market. That's why -- that's also why we feel quite comfortable on the next couple of pages to lay out a plan that will show you a net interest margin above 300 basis points that will just go in the future. The second one, cost-income ratio as a metric for operational excellence and continuous improvement. I think everyone who has followed us knows our culture quite well. We do care about efficiency and we do care about operational excellence. And that is really our DNA. And a core principle of that is that we do everything in-house. We try to do as much as we can in-house, that is, from TechOps, to finance, to risk, to compliance function. And we try not to rely on third parties or consultants at all. And this has been really consistent. If you also look back over the last 10 years, efficiency was a core element. But it's not only about a low cost base. We also do care a lot about great customer service and also a great platform that allows us also to grow further or also integrate new businesses or build new products. And the last one is actually the low-risk profile that provides us also with quite significant dry powder. And the combination of that conservative risk appetite and disciplined underwriting has built a highly resilient, simple and low leverage balance sheet that has maintained such a low risk cost and NPL levels consistently over the long term. So if you look at our nonperforming loan ratio, we have the lowest on record right now with 80 basis points. But we feel quite confident that this will be our natural level also in the following years. We conservatively position ourselves also with excess liquidity levels. You have seen our earnings release this morning. We have 25% of our balance sheet in cash. We have right now EUR 18 billion sitting in cash. And the second element is we do have a very high capital generation. I'll talk about it in a second, but we generate more than 375 basis points of CET1 each year in the coming years. That gives us obviously a lot of dry powder to go after opportunities that may arise. And the interesting thing, all these principles are interlinked and interconnected. So it is important to have a high margin, high efficiency and low risk profile altogether, and that is really driving the outperformance of the bank versus the sector. So the next page numbers. As Anas mentioned earlier, our targets are quite simple, 1+1. I think it doesn't get any simpler than that in '27. There's a lot of work to get there, but we are very positive too about achieving these targets as we have also consistently done that in the past. We are targeting net profit over EUR 1 in '27 and generating access capital of more than EUR 1 billion through '27. In aggregate, from '25 to '27, we plan to generate over EUR 2.7 billion of net profit. We are also targeting a return on tangible common equity of greater than 20% and a cost-income ratio at group level of below 33% by '27. Earnings per share will grow above EUR 13 by '27, representing an EPS CAGR of more than 10% over the next 3 years. The important disclaimer, these numbers are prior to any excess capital distributions or any additional M&A. In a nutshell, if you look at the core drivers behind this, core revenues will grow by EUR 900 million from EUR 1.6 billion in '24 to EUR 2.5 billion in '27, representing a CAGR of more than 15%. In terms of overall P&L development, we will continue to focus on sustainable growth, which also means we assume 0 other income in our numbers and all operating income comes from core revenues. Operating expenses will grow by around EUR 250 million, but '27 we expect to be lower than '25 in terms of absolute cost. The risk cost ratio will be around 40 basis points, which reflects our new run rate after integrating both new acquisitions. On the next slide, on core revenues. So the biggest driver is the net interest income, and we target the net interest income to grow by EUR 800 million from '24 to '27 and to be above EUR 2.1 billion by end of '25. This includes our newly acquired businesses and organic growth. Based on overnight interest rates between 180 basis points that is in '25, to 200 basis points that is our assumption for '27, we expect our net interest margin to be consistently above 300 basis points through that horizon and to grow each year from '25 to '27. While we expect some deposit margin compression in '25, we do have three main supporting factors. The first one is the high asset margin mix after the two acquisitions, mostly from Barclays Consumer Bank. Second is we do assume a modest loan growth, which is 1 to 2 points above the average GDP growth of the region and also very much in line with our disciplined lending approach. And finally, a positive contribution from the deposit hedge roll-off that will contribute over the next couple of years. On net commission income, we expect an annual growth rate of greater than 3% and to be above EUR 300 million -- EUR 380 million by 2027. The main driver of growth next to our two acquisitions, which will support our payments and credit card income, is a continued strong underlying trend in our retail and SME franchise with more focus on advisory business. Next slide, 25, operating expenses. So we will continue to focus on cost efficiency and target a net cost-out of 1 to 2 percentage points per year of operating expenses of below EUR 800 million by '27. This will get us back to a normalized cost-income ratio level of low 33%. Key cost-out drivers will be on the integration front. We will heavily focus on the disentanglement from the existing transitional service agreements. Both parties have a significant reliance on third parties and also services from prior owners. On system migrations, we'll consolidate core product system like the credit card processing system and leverage also our group platform for data, software development and cloud infrastructure and also harmonize the overall architecture. And finally, very simple, the strategy is to simplify as much as possible and to eliminate any unnecessary bureaucracy across the group. All these initiatives will drive our continuous improvement approach while we also continue to invest in advisory, tech infrastructure and data assets. Disciplined growth and efficiency are key elements of our DNA and a culture of continuous self-assessment, yielding incremental improvements every year. We believe competition evolves around cost to acquire and cost to serve our customers. Our simplicity is derived from our basic business model. We do not have investment banking, prop trading, asset management or other businesses that introduce operational complexity, greater risk and, ultimately, heavy cost burden. We focus on faster time to yes, faster time to funding, simple products, underpinned by ease of use, branches to support high-touch and high-quality advisory meetings and digital tools to support transactional banking. Risk costs. Overall, we improved our risk profile reflecting changing asset mix, net asset growth, economic outlook and positive asset quality trends. Risk cost stability and low volatility is really a reflection of the conservative underwriting, the stable regions we operate in and stable asset mix of secured lending. We target 80% of customer loans comprised of collateralized lending and public sector over the medium term. From a risk perspective, we are in stable economies and expect more of the same positive dynamics to continue over the next years. As we look forward, the combination of our continued mix shift, our underwriting actions that will continue to benefit us in the future, we expect to be at 35 to 40 basis points risk cost for the next few years. In terms of asset developments, there are two key trends we expect for the next years to continue. The first one is customer lending will continue to grow further while our securities portfolio we assume will remain stable. That means that more than 90% of our total interest-bearing assets will be from customer lending and less than 10% will be from securities. And the second trend, we will see more retail lending. We expect net asset growth mostly from retail and SME loans. And the reason for that is the expansion that has taken place into new markets, also with new products that allows us to grow more into the retail and SME space. And finally, the last page, what is not in the numbers? So what are the opportunities and maybe also uncertainties that we have not captured? So we will be generating over 375 basis points of CET1 on average in our 3-year plan, leaving us with more than EUR 1 billion of excess capital. Our plans do not assume any M&A, any portfolio purchases or any platform investments. We will look to acquire or invest in platforms or banks in DACH/NL region, Western Europe or the United States. Focus would be on retail and SME. All M&A investments would be underwritten to an RoTCE of over a minimum 20% return levels along the lines of our overall group targets. Having a strong customer funding is the second one, which was always one of our key strengths of the franchise, and it only grew stronger over time. Today, as I mentioned before, we sit on a record EUR 18 billion of cash reserves or 25% of our balance sheet that we would like to deploy. For example, if you look at the securities portfolio today, we reported it's only 5% of our interest-bearing assets. If you go back in time, it was as high as 20% of our interest-bearing assets. So we see potential to deploy more cash into securities if the spread levels come back to the average means that we have seen in the past. Right now, we don't think it would be smart to deploy. On the uncertainty side, the first one, rate environment. I mean, we have seen a lot of volatility over the last couple of years. Right now, we assume the terminal rate of around 200 basis points in our plan. And to put it in context, in '24, we delivered an RoTCE of greater than 25%, assuming the rate level that we have seen in '25. If we do the same and assume that rates would drop further and even drop below 100 basis points, we would still stick to our RoTCE target of greater than 20% because we know we can deliver these targets even if rates drop below 100. Why? We have seen in a no or negative rate environment when rates were for 8 years, 0 or negative, we delivered over 15% return on tangible common equity. So we feel quite good about it. The second one, credit cycle. Talked about asset quality, low risk profile. But having said that, we are still most exposed to a significant economic downturn and a sharp increase in unemployment rates, which would impact our unsecured consumer business. And the third and last, political environment. I mean, we have seen a lot of volatility in the recent days and weeks. In general, any negative implications from political actions, regulatory changes or taxes with the exception of the new Austrian banking levy that was announced at least, that is fully baked into the numbers that we presented today. But overall, we feel very good about 2027 and we see more upside than downside in our numbers. Thank you.

Thanks, Enver. In closing, today, BAWAG Group stands as one of the most best-performing European banks, an achievement that has been years in the making and a tremendous source of pride for all of our team members. I want to thank our customers for placing their trust in us, our shareholders for their continued support and our committed team members for their passion and commitment. We're going to take a 15-minute break to set up for the Q&A session, and we'll be joined by the rest of the Management Board on stage. Thank you.

Okay. Well, welcome back, everyone. I think we will enter the Q&A portion of the Investor Day. I will be the emcee, so I will take the questions and try to allocate amongst my colleagues. What am I doing? Oh, we're doing questions in the room? Okay. I'm looking at my -- it would be good for somebody to tell me that. Vishal, go ahead.

Congratulations on the results. So...

Vishal, I think maybe taking the mic here, yes.

So congratulations on the results. So two questions really from me. The first one is on the two deals that you have closed. Clearly, you're getting a sizable customer base from those deals. Can you just tell us how you plan to expand your product offering? How much of that is baked into your revenue growth assumptions? And on the flip side, how do you plan to sort of manage the loss of customers through the integration? And the second one is probably the most important one. I think your last slide, which is probably a very exceptional slide, which talks about how you can make a 20% plus RoTCE even in a less than 100 bps rate environment and 25% plus in the current rate environment. So if you could elaborate a bit more on the building blocks of that. What gives you confidence that level of super profitability can be maintained?

Why don't we start? Enver, why don't you take the rate development, and then we'll go to Sat on the customer development.

I would just say two things on the -- I think an element of that is rate sensitivity, right? What we have seen, the ECB rate going pretty much from 400, now expected going to 200, we said we feel not relaxed about it. But we have seen that the NIM is holding up in that kind of reduction during that rate reduction. What we are saying going below 150 basis points, it will start to hurt because that eats into your natural deposit margin. But having said that, if you put it then in context, that's why we laid it out on the page. Structurally, we'll still be making more than 20% even if it dropped to 100 bps. So there are two components. One is more technical in a particular year. The other one is structural through the cycle. And that's why we thought it is valuable to say that. Yes. And it also shows you that we don't rely as much in comparison to other banks. We are deposit funded and we have a high sensitivity, but overall we care more about asset margins than the deposit margin itself.

All right. Sat, the...

Yes. So moving on to the acquisition. So let me hit both of them individually. So Knab, Knab has -- there's three main components, right? It has the 400,000 transactional banking customers. Those customers, they bring along the EUR 13 billion of deposits as well. So that's kind of one piece of the puzzle. Then there's EUR 13 billion of mortgages. Those are disconnected. They are originated on the brokerage platforms throughout the Dutch market. So the products right now, Knab is a very monoline product effectively. It's just that transactional banking account. They have a few other adders that they do sell. For us, what we will do is we're going to bring -- we're going to introduce working capital facilities. So if you think about, these are self-employed individuals. They need certain types of lending. And in that transactional banking account, you can introduce new products within there. So I think that's one that could be introduced rather quickly in general. But I think the focus will be, in the next 12 to 18 months, is really doing that integration. And then after that, we'll also bring on other types of products, leasing and bolt-on products that we can introduce through our overall product portfolio that we have. On the -- then let me hit Barclays and then I'll come back on the overall integration and the customer piece. Barclays effectively also is just the credit card issuer. They have two types of customers. They have the full payer credit card individuals. So those are the individuals that use a credit card during the month and then pay off the full balance at the end of the month. And then they have the revolving credit card piece, which is the very attractive portion that we focus on. They also have EUR 4 billion of deposits. Between both deals, the customer base is very engaged on the mobile apps that they leverage. And so they do have a history of being able to cross-sell or sell other products into the customer base. So on the Barclays side also, we'll probably introduce a few types of maybe installment lending or certain other products. But I think they have a very strong foothold of what they're doing and the product offering. So you got to watch out and not cannibalizing as well on the features that are being offered. On the integration in general, look, what I would say is we have done 12 integrations. We've done -- on the Barclays side, there will be a systems migration to an extent. On the Knab side, it's mostly taken out the overhead costs and the TSAs that we spoke about earlier. So there's not a major impact to the front end of the organization. So there might be some friction as we do the stuff with the customers, but I don't really -- I don't really see it being a major disruption. So I think what we're going to see is both businesses have a very good trajectory. They're growing their customer base. They play in an underserved area. I think we're going to continue to see that growth overall. You might see it slow depending on what happens in the markets, but feel pretty comfortable with the customer.

And I think, Vishal, you were asking, is any of this in the plan? None of it is in the plan in terms of the cross-sell opportunities. So that's all potential upside when we underwrote the deals. Yes. Hugo in the back? I'll just spread it around. Hugo, he's got his hands.

I wanted to ask mainly about NII. I'll just go with three questions. So first of all, on your NII growth, how much of the growth comes from the deposit hedge roll-off? How much of the growth comes from margin expansion within the Barclays book, if at all? And then can you remind us what's the kind of maturity if there are any cliff hedges in your hedging approach? That was it.

It's obviously for you, Enver. So...

Well, the simple answer is that the biggest impact is from the two acquisitions. So if you look at the NII development, it's a step function going from EUR 1.3 billion that we have in '24 and then we have a significant increase in '25, right? And that is mostly from these two acquisitions. Then the next evolution is from '25 to '27. And I guess you're asking about '25 to '27. I would say the biggest part is the asset mix part and the growth of that. The deposit hedge roll-off is basically offsetting the compression that we will see in '25. So what happens, '25, we will lose some of the deposit margin because we'll hit the low point of rates, right? And then we'll have a recovery from the deposit hedge in '26 and '27. But like-for-like, '27 and '25 will not be completely different in terms of deposit margin contribution.

And in terms of hedging, any cliff effects? Or...

We don't have cliffs. So we have a rolling hedge. It's -- the structure of the hedge is designed in a way that we have -- like 20% of the hedge deposits are on a 3-year rolling basis every month. And we do have the structural hedge, which we would refer to as the deposit hedge. And that's a 10-year rolling, which gives you an average maturity of 5 years, and it's also monthly roll-off. So we don't have any cliff effects. It's quite a smooth hedge.

Okay. Gabor?

A couple of questions. One is on your P&L guide. I think you guide us to EUR 1.4 billion or more than that. I think if we start from -- or if you look at it on a comparable basis, you were a bit below EUR 1 billion as of 2024, and you tell us there's going to be EUR 350 million or potentially more accretion from the deals. So if I just add the deals to your '24 performance, I would get to EUR 1.3 billion. And you are telling us you can deliver more than EUR 1.4 billion. So you assume earnings growth in the rest of the business. Is this really all driven by the margin recovery or the deposit spread recovery we discussed? Or anything else to consider? That will be my first question.

Yes. I think the key components, definitely top line, that we said. We have seen expansion also in the NCI side, to a less extent obviously, than the NII. But the NII is the main driver. And OpEx, we said OpEx in '27 is going to be lower than in '25. So these are the big contributors. Maybe just to be a bit more accurate on the starting point because you said it's around EUR 1 billion going to EUR 1.4 billion. Just if you look at the EUR 1 billion, we had, as we discussed earlier today, management overlay release. And we already had 2 months of Knab in the numbers, right? So from a stand-alone perspective, your starting point is somewhere closer to EUR 920 million, EUR 930 million like-for-like going to above EUR 1.4 billion.

Okay, okay. A couple more questions, if I may. One is on, I mean, just in terms of the here and now. Macro environment, relatively volatile, market turbulence, including today. I know you are not particularly geared to tariffs, but how do you think about the likelihood of having to create overlay -- macro overlay provisions? And any sensitivities you can share around that?

David?

Yes. So I think the way that we always look at it is our biggest sensitivity in our stress testing is through the unsecured book, and that obviously is related to unemployment rates. I think it's hard to forecast forward-looking on tariffs. But what we did when you think about the management overlay was that was built back over 2020 through 2022 or so. And that was in the face of -- it started with COVID pandemic, then the war that pressed on, all of that uncertainty. What we did is we took that and we built that into our models to maintain it for the most part. Then we had -- on the other side, we had commercial real estate, which was something that we basically reduced from EUR 600 million in the U.S. on office where we were most concerned down to about EUR 300 million today. So that's gone to half. We have a lot more transparency. So we took that management overlay and layered it into our models to capture that uncertainty. It's just really a transfer of reserves from one ECL bucket to another ECL bucket. So I don't think it's gone away, that uncertainty and tariffs or however you wrap the sort of macro concern around it. We wanted to capture it in our models, and that was the exercise at year-end and capturing that on the retail side.

Okay. So I take it if unemployment rates went up, you would -- or you saw unemployment rates increasing, you would create more overlays?

Yes. We're sensitive to unemployment rates. As that goes up, we would expect there to be more defaults in our -- primarily our consumer loan book but across the retail exposures. But I think really our -- most of our sensitivity is in that consumer book, which is about 11% of the overall retail exposure.

If you had to narrow it, just looking at unemployment, that's the single greatest variable that impacts it.

And the last one, if I may squeeze in. The 375 basis point excess capital generation, do you assume any further SRTs in there? And how do you see this potentially contributing to building more capital?

Sorry, Gabor, you were saying the 375 basis points that we see? The 375 basis points, that's annual just from earnings. Nothing else considered.

Okay. And how do you think about the potential to use SRTs, too?

We think it's a good tool and we're planning to apply it. We have applied it so far. But it's always a decision also on the commercials of it.

Mate? We'll go at this table.

A couple of questions from my side. Number one, intra-group capital allocation, I think you're very clear. 90% of revenues, 90% of the franchise is now Retail and SME. We haven't heard anything essentially on corporate, real estate, public sector lending. Could you talk about the rationales here? Is that the change in opportunity set, i.e., you've acquired some assets, some beachheads in growth markets? Or it's the relative unattractiveness now of the corporate and real estate segment? And is it the right way to think about it that the current business in absolute terms remains roughly the same and you're growing other parts of the business? That's the first question. The second question would be on digital distribution. I think, Sat, you mentioned 90% digital distribution. Can you clarify what that actually means? Is that -- presumably that's not all end-to-end 90% digital distribution, right? To what extent does that still require human oversight, human interaction and so on?

I'll take the first one, Mate. Sat, digital engagement. The question on business mix and the 90% Retail and SME and we said 90% DACH/NL focus is less about deleveraging the corporate real estate public sector. It's more a reflection of the growth both organically in the coming years, but more so the M&A. And that's really kind of the redistribution. We don't assume a lot. We don't put volume targets in the corporate real estate and public sector. I mentioned these are niche lending businesses that we have. If there's great opportunities, we have the capital and liquidity to pursue them. But we just don't assume that in our plans. So if you had to say if there's further opportunities whenever, say, there's excess cash, we just don't assume that volume growth. That's pretty much static. That has more to do with it than any redistribution of capital. Quite frankly, the challenge is we generate a lot of capital. It's just being -- finding the right risk-adjusted returns. You have to be patient on that.

So on the digital distribution, there's two aspects to it. And I'm not sure which one you talk about, but let me clarify them. So we have 11 core products, of which 10 of those 11 are digital, fully digitized. That is from a wing-to-wing basis. So a customer can come in, open a current account, never have to talk to anyone and it will be opened immediately. Brokerage account is very similar. So that's one piece of when we talk about the 90%. The other piece we talk about when we talk about the multichannel strategy, so we have our branches and then our digital channels. And that aspect as well, through the digital channels, whether it's through the digital bank or it's through those strategic partners where we embed our technology at the point of sale, if you want to call it, or where they touch the consumer, within there also the overall distribution of originations will be greater than 90% in the midterm. So those are the two digital distributions, I'm not sure which one you're talking about, but kind of clarifies that.

Thanks, Mate. Okay. [ Tracy ], I think we have -- yes, go.

So you mentioned being an active player in the European banking consolidation. So I was wondering, when do you think you will be in a comfortable position to explore M&A again given the two integrations? And then a clarification. If I'm not mistaken, you mentioned that your targets do not include distribution of excess capital. So I was wondering, what about the 175 million share buybacks? And if you could comment on the timing and a little bit more about this. And my last question is on growth and the drivers of growth. So you mentioned retail. And if you could give us a little bit more detail on geographies and the products and how much of this could come from consumer in Germany since now you are starting very little.

Okay. We have a couple of questions. Let me take the M&A. I think we're full for the moment as far as integration. So we're pretty busy at least for the next -- for the foreseeable future, the next 12 months or so. But as we mentioned, we have a game board internally. We have kind of a broad scope of things that we look at. I think we purposely don't share a lot of details for a variety of reasons. Hence, we look at kind of this DACH/NL, kind of Western Europe, as we mentioned. But I think for this year, we really got to make sure that we're on firm footing, we do a proper integration. And then the reality is M&A has a lead time of 6 to 12 months from when you look at a deal to then you're into a process and then if you get invited in the second round. So I think any real M&A of consequence, you're looking at '26 and you start to maybe look at things in the second half of this year and assuming -- by the way, it's all idiosyncratic, the availability of opportunities. But yes, M&A is a key feature. But as we stressed during the presentation, we're going to be patient. Sometimes you go cold for 2, 3 years and people say, why aren't you doing deals? It's because the deals don't make sense. And then you get really fortunate like last year in two incredible opportunities which, ideally, if we could do it again we'd rather not do it in the same year because I think the bandwidth is sometimes a bit challenging. But that's when you're able to strike. And you have the capital liquidity and you've been reviewing these things. So -- and that should kind of inform you as to how we look at opportunities. But we do want to be a player in the consolidation across Europe. And we think it's actually ultimately to the benefit of European banks and the European Union. We're big believers. I think -- so that was M&A. Capital distribution, do you want to take that, Enver?

Yes. So I think two parts of the question. The first one, any excess capital distribution is 0, nothing. So we have not assumed any excess capital distribution, also not the 175 million. On the 175 million, we changed the rules how we distribute excess capital and we made it very mechanical. So we said anything above 13% will be distributed, special dividend or buyback. We today announced what the special dividend part is going to be. So by definition, the rest will be defined as a buyback. In terms of timing, the only thing that we have right now, we just closed Barclays in February. So we need to finish that. Once we have done that, we will look at distributing that 175 million.

And the consumer growth, Sat?

Yes. So then on the consumer growth, so I think it's going to be mostly -- so we haven't factored in any of the additional items that we spoke about earlier. So the consumer growth in Germany will predominantly come from the Barclays acquisition, so kind of doing what they're doing overall. We don't assume any other cross-selling into that or across the group either. So that's number one. A lot of the growth is going to come from -- so we have on the advisory side, we're seeing pretty strong securities and insurance sales in general. So we're doing pretty well there, and I think that's going to continue for a while. And then on the consumer lending side, it will probably be around the consumer loans, installment loans, areas in that space. Mortgage is still suppressed. It's mostly -- the market is okay. But a lot of the returns or the margins that we expect are not there right now. So we're just maintaining the discipline. And I think probably next year, we'll start seeing -- or this year, later in the year, we'll start seeing an uptick there. On the geographies, we've got the 7 geographies. For the most part, I think it's going to be within those geographies. We're playing a little bit more in Ireland. As an example, we had a mortgage platform that we had put into play, I think, earlier 2024. And that's going pretty well. So I think we'll see a little bit more of an uptick there. But that's pretty much it. None of the cross...

Retail and SME is really a tale of two stories, right? Mortgage has been really muted, and that's for a variety of reasons that we've highlighted in the past. The consumer and SME has actually done quite well, consumer loans and factoring and leasing. I think that's actually performing. If you, Enver went to it, just bigger picture, take GDP kind of collectively for the geographies that we're in, assume 1 to 2 points growth, which is when we talk about the conservatism, not overextending ourselves. Hopefully, we do much better than that. But that's kind of what the plans are based on.

On mix of capital, the technicality introduced, so whatever is above 13%, vis-a-vis exploring the options. How do we -- how can we think about the technicality about 13%, the exploring and the option?

It's after exploring the organic and M&A. So if you don't have anything organic or M&A, then above 13% would apply.

That's why the 175 million is more straightforward, right? It's the here and now as opposed to you're talking about things in the next 12 months.

I was thinking just beyond the 175 million.

Beyond that, if we can deploy it in organic growth, we would rather deploy it in organic growth. And we find M&A that meets all our requirements and also our return thresholds, we will deploy it into M&A.

Maybe, Tracy, if we just go across this table.

Johannes from HSBC. Three questions, please. First of all, you currently clearly benefit from still being a modest balance sheet lender with a niche status in most of the markets. And you said you're not chasing the market and be patient. Is there any level and size where you think those rules will change for you, where you have to do new business to keep the model running? Because some of the larger banks definitely are in that trap. And secondly, on your revolving credit card business of Barclays card. You previously said you want to export it to other countries. Can you put on some more ideas what's behind that? And then last but not least, what gave you confidence to increase the U.S. commercial real estate exposure now in the fourth quarter so heavily? And also probably not related to commercial real estate, but what's the state with First Idaho Bank (sic) [ Idaho First Bank ]?

I'll take that last question on the U.S. And then I think you asked about if you have a substantive footprint in market. And Sat, you'll take that and then the cards. So actually, Johannes, we have an example which is our market share, which we don't like to use market share because it leaves you to do unnatural things to protect market share, but you then actually bring on products or assets that don't meet your risk-adjusted returns. And in Austria, we have, I'd say, a decent market share in a number of products. And we haven't found that to be an issue. I think if you play the long game and if you're patient and if you don't overextend yourself, in due course and if you're efficient and you mind your cost base and you don't overextend on the risk cost, and there were some idiosyncratic risks in Austria that the one bank that did not have exposure to was BAWAG, right? If you do these things, you buy yourself time and you can be patient, and then there's organic and inorganic opportunities. As far as the U.S., and I think you were referring to the commercial real estate, that is an acutely distressed asset class. And it still is a distressed asset class. I hope the takeaway is even though we had exposure going in over the past few years, and David had mentioned this, it's a reflection of how we underwrite. And we took some losses. I think we ended up taking about EUR 30 million of losses across the years on our portfolio. But the worst is behind us. And the reality now is you see some really interesting opportunities. But the underwriting for those type of opportunities, and we did a deal that David had mentioned earlier today in the presentation, a multi-office deal that was cross-collateralized, is of a different standard when you think about the debt yield, when you think about the advance rate. So there are some good opportunities. I think you can't -- it's not one broad brush. The whole asset class is tainted. There are pockets of opportunity and those are things that we're going to look to pursue. As far as Idaho First Bank, we've been very disciplined, methodical. It's going well. We built an online franchise as well in terms of deposits. But that's a long-term play. That was not for 1 year or 2 years. That's to have the bank license to be able to raise deposits, to be able to do the community banking, to be able to look at the platforms. And then lo and behold, you get the diversification benefit. Our core is still the DACH/NL, but then you get Western Europe and the U.S. that gives you that product and geographic diversification, which I think will serve us well in the years to come. So I think on the Barclays...

So on the Barclays question. I think the way you will see it -- first of all, the first 12 to 18 months in that is going to be focused on doing what they do today, really focused on the German market, continuing to originate through the digital channels that they do, do and not really doing too much beyond that to an extent, mainly because they have a very strong business. They have a strong customer base. And with the integration, and we have a systems migration, we want to make sure things go well. So this is a little bit further out, but the first step will be taking their product offering and bringing it across the BAWAG Group. So if you think about in Austria, as an example, we have a credit card issuer there as well. We have it for BAWAG and easybank, which are our own cards, but then we also have a credit card issuer for various banks throughout Austria. And so there might be an opportunity to instill the revolving credit facility into those features there. And then I'd say the second thing is we'd enter markets that we know. So whether it's the Netherlands or other areas, I think there's opportunity there. So that's kind of really how we're looking at it in general.

Let me pause on the questions in the room just to make sure the folks online get a chance. So we have a question from Pierre-Marie Gerez. I hope I didn't butcher that last name. How do you plan to manage excess capital? Should we expect a buyback every year if no acquisition in the framework?

I think it's going back to the same question. So our capital distribution policy is clear. Organic M&A first. And absent of that, the excess capital above 13% CET1 ratio will be distributed each year in terms of -- in form of special dividend or buybacks. And we said that right now, we prefer buybacks over special dividends.

I'm Borja Ramirez from Citi. I have two questions. Firstly, on deposits, I looked at the Barclays Ireland accounts and the business that you acquired apparently had a very strong growth in deposits during last year. So it seems like a good -- I think, good opportunity. And also, there was a listed German bank that recently guided for strong deposit growth. So I would like to ask for your thoughts on the German deposit market opportunity. And then my second question would be on capital optimization. I did a very quick back-of-the-envelope calculation of the RWAs in 2027 based on your EUR 1 billion of excess capital. And I get to around EUR 25 billion of RWAs, but very rough estimate, and this is better than consensus of EUR 26 billion. So...

That was just the back of the envelope.

Yes. So -- but it seems it's better than consensus. So maybe there's also you're doing some capital optimization also to generate value.

Just on the deposits. So great questions. A, the Barclays acquisition, when we underwrote the deal, and that was one that we pursued for a number of years, we never factored in a deposit franchise. Lo and behold, they built a really strong deposit franchise, up to EUR 4 billion of deposits. And that was a nice add-on that we were more than welcome -- we're happy to take on. As far as the German deposit market, we're a small player. We're not the ones to comment on the overall market movement. We will be very tactical in how we price deposits and make sure it's strategic. But I don't think we're the ones that can really give you a broad sense just given our share. What was the other question?

EUR 25 billion back-of-the-envelope calculation.

Yes, back-of-the-envelope EUR 25 billion.

What I said before, yes, we'll look into SRTs. Maybe just if you take a step back, why it's interesting for us, we have a high asset quality on the one side but also high risk-weighted asset density, at least for retail and SME because we moved from IRB to standardized approach completely. So you have sometimes that imbalance of high-quality assets with high risk weight. And obviously these are perfect to do SRTs, right? And so yes, we see that opportunity in the plan and we are making use of it.

Okay. We're going to jump to an online question here from [ Kieran ] from Amundi. Regarding the EUR 18 billion surplus cash, what are you waiting on before deploying backup in yields? How material could this boost be to earnings guidance provided? Well, we're waiting on the better spread environment. But yes, it's quite substantial. We'd love to deploy it into securities. Enver mentioned, our securities portfolio today is about 5%. Historically, it was as high as 20%. But we're also not going to chase. The spreads have been at all-time tights. Look at the issuances that banks have been doing and you get a sense of the very tight spread levels. We think that is a bit frothy. So I think being patient, picking your spots and also the asset classes that you like, and we'll continue to be patient. And hopefully, there'll be opportunities to deploy the cash as well as into customer lending too, buying portfolios. And the reality is everything that we bought from an M&A standpoint has had a deposit or funding overhang. That might not always be the case in the future. So...

Maybe continuing on that EUR 18 billion cash. So if you were to see these spread levels how much of that EUR 18 billion cash would you potentially be willing to invest and how rapidly? What kind of impact should we see, let's see, over 3, 6 months? Could that be a quarterly jump effect that we suddenly see?

I would say, first of all, the cash, right, we say EUR 18 billion. But there's liquidity buffers. There's requirements. So it's not EUR 18 billion, but it's a lot. So maybe you want to take it, Enver.

Yes, sure. So actually I think it's more -- EUR 18 billion number is a big number. But I would probably answer the question on the percentage of total assets, right? So 25% is very high. It's unnaturally high. Would we feel comfortable getting closer to 10% to 15% cash? Definitely, which would mean we would triple the current securities portfolio pretty much. And it still would be at around 10% to 15% in securities, which would not be crazy. That is not the hard part. Patience and spread levels, that's the part. Pulling it -- sorry.

I'm sorry, no. There was a period where you could issue covered bonds. And we did a covered bond, a 20-year covered bond and [indiscernible] flat. Look at what the covered bond market looks like today across even kind of in the Germanic area, where you're seeing covered bonds issued at spreads of 40, 50 basis points. It's not beyond the realm of belief that, that will continue to reprice and you'll see widening. So I only bring up that example to give you a sense of how things swing, right? And obviously, that was during a negative rate environment with different dynamics. But I think if you're patient over a longer period, you will find these opportunities. So...

Secondly, on the cost of risk, you guided for roughly 40 bps. And you were quite clear, there's around 5 bps plus baked in from SRTs. So that makes 35. We have seen kind of 32 bps over the past 8 years. Just to understand the mechanics also with Knab and the Barclays, so maybe you can give us a bit of a trajectory where you come from, from BAWAG, what you see here as a base, how you see Knab adding to that, and then on top, Barclays? And as a second part of the question, I mean, we have recently seen a bit more of provisioning for some German banks very active in consumer lending. You could almost call them one-trick ponies in consumer lending. So it's starting to fight there. And just your thoughts about is that baked into '25? Is that the same you have in mind for '26, '27? Or would you rather see a bit more of a pickup in SME, for example, in '26, '27? How is this composed, basically?

Maybe, David, the loss environment and then if there's something on the budget, just what we're seeing kind of pre and post pandemic.

Yes. So I think the -- broadly, we've seen the delinquencies and losses come up over the last 2 years basically normalize from the benign environment during COVID. And it's plateaued basically in the last 2 quarters. And so really, that sort of comfortability at the pre the -- 2019 levels, and that's what we consider normalized risk costs in our book. And if you look at that and you just say, okay, of our retail book, we have about EUR 4 billion. And we talked about it in the earnings deck today, we have about EUR 4 billion of consumer unsecured in that book. That's the preponderance of our risk cost within that. And so when we add Barclays, even though you are adding Knab at the same time, you're adding EUR 2 billion of credit cards and a little bit other into that mix. And that simply is a mix effect that drags up your overall risk cost on a total basis. It's pretty much that simple. So what we do, we expect that, that normalized rates will continue because it's pretty steady at this point. The NIM goes up to accommodate that, right, because you're bringing a higher-margin book on. And overall, we do price in a level of conservatism that there's some absorption within the loss forecast.

The reality is post-COVID, all the stimulus measures, that really made the risk environment pretty benign. So I think as David mentioned, looking at the pre-COVID, that's probably a better baseline.

And maybe last one. In terms of the product mix, we quickly touched on it, but you were very precise about rather growing the Retail and SME business, right, I mean, into the 90%. We came from the 80%. What are now the real markets, niches, products where you can further accelerate growth? And am I right assuming that the corporate side is way less of an opportunity you currently see also in terms of spreads, risk-adjusted returns? So here, we'd rather see a kind of flattish book development and not these kind of big opportunities where you might jump into.

The reality is we've never exited the corporate lending market. Just the market became so frothy. So you had spreads tightening and you had underwriting standards loosening, right, covenants nonexistent in some cases. And that's just not something we're going to participate in. But if that normalizes or firms up in terms of better spreads, better risk-adjusted returns, we'd love to be in the corporate lending space. So that's something that just we're patient. We don't put a volume target on it. And then just that overall business mix, we just see that's where the -- with the acquisitions, that's where the growth is taking place because of the add-ons and assuming that the rest of the business, the non-retail business stays flat for the most part.

But is there a particular market or product? I mean, in the past, you talked about the Netherlands space basically, also with NHG mortgages...

You're saying a new product.

Exactly. I mean, the Irish market which is always...

We'll tell you after we do it. I don't think it serves us well. The reality is we like factoring and leasing. We like mortgages. But the risk-adjusted returns oscillates between different jurisdictions. Nice try, though. Okay. Here we go. Anonymous. Besides the planned bank tax hike, do you expect the new Austrian government introduce any other measures for the banking sector to support the budget?

I mean, the new government was sworn in, I think, yesterday. So we haven't heard anything.

It's good to have a government. That's always a good starting point.

Just some quick clarifications, please. So first of all, can you confirm what's the tax rate you assume in the plan? Because when I'm running the numbers, you're getting to something like a 28%, 29%. And I thought 25% was more normal. Perhaps I'm wrong. And then on '27, do you assume an improved -- like lower bank tax in Austria as well? And then a final question around excess extraordinary dividends versus buybacks. You said you prefer buybacks at the moment. So what would make you prefer extraordinary dividends in the future?

You take that. I'll take the buyback. I'll take the buyback and then -- I mean, that's a question -- I think it's a high-quality problem to have if you're trading at a certain multiple. But the reality is on a forward basis, right, and I think we put out the plans and we feel very confident in the plans that we put out and there's an element of conservatism to those plans. If you really believe those numbers, then buybacks at this moment are very attractive, right, on a forward-looking basis. At some point -- and we don't draw a line in the sand. A high multiple stock is a really attractive currency to use for acquisitions as an example. But we're not at that point yet to debate buybacks versus dividends and kind of shelving the buybacks. There will maybe come a point, and we'll be clear in terms of when we kind of make that switch. But at the moment, just given the opportunity set ahead of us, we still think buybacks are super accretive.

Yes. On the tax question, so the -- currently, I would say the normal run rate for tax would be 25%. It's a mix of 23% Austrian corporate income tax and then what we have outside of Austria, Germany, Netherlands and partly in the U.S., all higher corporate income taxes. Moving forward, we assume 26% in the other years. That's the average that we would assume. And that just reflects the different mix with the addition of the Barclays Consumer business and Knab's business in the group. Netherlands is at 27% and Germany is around 31% in terms of tax rate. If you put everything into the mix, you get to around 26%. Bank levy, 2 years -- we just followed what the Austrian government announced. So we have no insights into it. They said they will move to bank levy from currently EUR 170 million for the full sector, total banking sector in Austria, to EUR 500 million in '25 and '26. For us, that means we are going from EUR 8 million roundabout to EUR 25 million for the next 3 years or total reg charges going from EUR 15 million to EUR 40 million. That's what's in the numbers. By '27, the government said they will drop it to EUR 200 million again, so similar level that we are seeing as of today. And that's also reflected in the '27 number.

[ Thibault ]?

Can you hear me? Yes. Another question. I mean, you're highlighting in the slide that you have this EUR 1 billion of dry powder for M&A. There should be another tool in your toolkit now that is -- thanks to all the great work you've done over the last few years, that you have a stock that is actually well valued that could also be used to fund M&A. So you've not mentioned that anywhere in the slide, but would that be something that you would consider potentially? And also, would that new tool also allow you to look at different type of assets in terms of size or in terms of even valuation given where stock is trading?

Thanks, [ Thibault ]. Absolutely. I think if you have a currency that's incredibly valuable, we would be remiss not to use that as part of our acquisitions. I don't think we're at that point yet. But I think if everything comes to fruition and things come to a fair value, hopefully we'll be at that point and we'll be able to use that for our acquisitions. And then the second part of the question, what was it?

If you look at the M&A activity you had, you were more focused on like restructuring turnarounds, rundowns and like value plays, right? So does it allow you to look at those bigger assets or more expensive assets, basically?

I'd say, [ Thibault ], the -- I think earlier we were doing more of the value turnaround opportunities. The last two, I would say, are less value. They're great franchises. I think we were disciplined in how we bought and kind of how we priced those particular opportunities.

You ran out of battery.

Okay. Can you hear me?

Yes.

Okay. Did it die out earlier? Or...

No, no, just right now.

Okay. As far as the currency, obviously we'll use that. We're reluctant to use that. I don't think we're at that point yet because I think it would be dilutive. As far as the deals, the two deals that we did were not -- I would not say they're value-placed. I think they're great quality franchises. But we were disciplined in how we bought them, right? And I think that's EUR 600 million of capital. We're going to -- we generate also -- we create that value in the EUR 350 million of pretax profit. So there's work that goes into it. You have to price that into any deal that you're doing. But we'd love to, I think, look at a whole host of things, quality franchises. We just are disciplined in how we buy things. And like we said today, I think the question is around the cross-sell, the growth opportunities. We just don't factor that in because when you do that you start to, I think, overextend yourself. And we try to be disciplined. Did we lose deals in the past that we should have probably pursued because we were too conservative? Probably. I can think of one or two. Are we reluctant to go after bigger deals? No. We'd love to go after bigger deals, but it's a matter of what's available and, a, is there a willing seller; b, is there a willing buyer? And can you come to terms on price? So that's something I think we'll try to continue to be disciplined on. So you're right. The currency makes a difference as well. I don't think we're there yet either. Other questions? Is there anything online? Okay. So I think that wraps up our Q&A session. Again, I want to thank everybody here in the room, investors and analysts as well as the many attendees online. This was great. I hope you guys appreciated this and this provided a little more insights into how we run the bank. And we try to be as clear as possible as far as our targets. So thank you. And yet again, thank you for all of you who supported us as far back as our IPO. We don't forget things like that. So I hope you guys continue to support us, and we'll do our best to deliver results. Thank you.