Erste Group Bank AG (EBS) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Erste Group Third Quarter 2026 Results Conference Call. I'm Serge, the Chorus Call operator. [Operator Instructions]. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Sommerauer, our Head of Group Investor Relations. Please go ahead.

Thank you again for the kind introduction and also welcome to everybody this call on behalf of Erste Group. Today's call, as usual, will be hosted by Peter Bosek, our Chief Executive Officer -- Ilinka Kajgana, our Chief Risk Officer. They will lead you through a brief presentation highlighting the financial achievements of the third quarter, after which they are ready to take your questions. As usual, my recommendation to look at the disclaimer on Page 2 on forward-looking statements because there will be one or the other in this quarter, which is a [indiscernible].

Good morning, ladies and gentlemen. Welcome again to our third quarter conference call. Even though everything around us seems to change even faster our message to assort I can again to share with you quarterly financials that a record on an estates. We bolted record revenue, complemented by a decline in costs quarter-on-quarter, which [indiscernible] these costs remain more and consequences of the offer net growth profit -- or the new quarter as you may recall. But let's look a little bit deeper and start on first quarter operating performance [indiscernible] performance higher. Net interest income was clearly the star performer, up [ 5.5% ]. This was mainly attributable to continued volume growth and rising rates. These also posted a new record, this income from security business -- well as payment services continued to [indiscernible] Trading interest [indiscernible] lower but this was mainly due to fair valuations volatility of customer loans. With these quarterly revenues almost reached EUR 4.1 billion. At the same time -- paving the way for a record quarterly operating result that -- EUR 2.3 billion. If you look at like-for-like year-to-date comparison [indiscernible] the picture is equally positive. Net interest income was up 7%. Net fee income by almost 10%. Net trading and familiar result rose to 30%, where costs rose by about 3%. Risk costs were broadly in line what we saw in the first 9 months of 2025. And if you add all this up, we also posted a record operating profit and record net growth for year-to-date, excluding Erste Bank Polska. Based on these strong figures, we decided to upgrade our financial outlook for 2026. We now believe that we can grow net interest income fixed as to bank post by more than 6%. And with this, should be the NII target for a large of [ EUR 100 million ] by competitive margin. This will be helped by better loan growth, we should open our year-end loan of beyond EUR 290 million, it previously about EUR 290 million years. Fee growth for as the exports should be around 10% compared to [ 79% ]. And consequently, the cost income ratio should also come in bigger for Erste -- below 46%. In addition, risk costs are expected to stay at the lower end of our 25 to 30 basis points guidance for Erste, including Polo shop. While all of these bots rail for 2027, I would kindly ask you for patience when it comes to official 2027 guidance. For the simple reason that -- communicated at the end of September, we will launch a tender offer for Erste bank Polska shares next Monday and prior to knowing the outcome of the offer, it makes legal sales to issue concrete papers. Having said this, is a bit almost that is currently out there, we see no reason by the favorable business momentum should not continue into 2027. Let's now move to Page 5, some additional details of our financial performance. With net interest income climbing to a new height and interest-bearing assets growing broadly in line with loans, net interest margin increased to 273 basis points. The cost income ratio also continues to improve, supported by strong revenue momentum and muted cost growth. impact increase an all-time low of 43.1% in the third quarter. The risk cost ratio on the other hand, remains [indiscernible] this is also a reflection of the general positive credit risk environment in our markets. Banking digital remained stable at high levels with the year-on-year increase explained by the inclusion of just Erste Group Polska. And finally, earnings per share and return on tangible equity also -- rate to record levels in the third quarter. The strong P&L performance is clearly linked to -- balance sheet growth. And with this, I'm on Page 6 of the presentation. In the year-to-date, you will see it on the slide, the major growth driver is the solution of Erste Bank Polska started in with the first quarter. This, to a large degree goal of the mature increase in intangibles in equity, but more importantly, also significant increased customer loan -- the good news is that hidden behind this inorganic growth, there is also substantial organic growth in the business, excluding Erste Bank Polska. The customer loans grew by [ 5.8 ] Year-to-date, putting us right on brick to achieve our 6% to 8% growth target for 2026. Customer deposits rose 4.5% year-to-date. On the asset side, we saw a good growth, balance with both, the retail and corporal segments making good growth. On the liability side, slower retail deposit growth was offset by higher inflows in the corporate business. But while customer deposit flows was quite in line with loan growth year-to-date, quarter-on-quarter was on small while loans continue to grow a good pace. And this explains the quarter-on-quarter rise in the local deposit ratio shown on the upper left-hand chart on Page 7. While it was down year-to-date, this rail is year-on-year on inclusion of the busiest Erste Bank Polska. Talking about year-on-year customer loan growth, excluding Erste Bank Polska equal 7.7%, while customer deposits advanced by 6.6% in line with more lease process. Asset quality order achieving mile positive quarter-on-quarter trends post the NPL ratio -- and the coverage ratio improved by a couple of basis points. The decline in the reported CET1 ratio is -- including third quarter interim growth. But even on a pro forma basis, we saw some -- to 15% freight, this major effect we guided for last quarter, later an outsized increase in [indiscernible]. And pro forma, we continue to resecure payments at the maximum with our target payout range of 40% to 50%. On target in this respect, the magnitude of the finance dividend for 2026 will be, of course, depending for the outcome of the Erste Bank Polska offer. When it comes to decrease in leverage ratio traditional plans of ours in the third quarter, we registered a slight decline in the green coverage and funding ratios -- the leverage ratio was stable. All these ratios remained at very sector levels. Let's now briefly examine the macro -- we now reach on Slide 9. A quarter ago, I told you that the cheaper and we see the global economy situation was through. Today, I cannot say anything different maybe with one tangible difference that in the meantime, we saw significant increases in interest rates across the term and also in growth geographies, not in all our geographies, but also there. And of course, we also saw renewed upward pressure on energy prices. Despite all logistic growth performance and outlook for our region remain broadly unchanged from a quarter ago. As the other key macroeconomic indicators like inflation expectations and enrollment rates is real estate tenant fees basis. Take all of this into account, we are therefore still operating in an environment that is favorable for us. Solid economic growth combined with positive upward sloping yield curves. That's the -- nice time being amidst that supports sustainable volume growth before margins. Talking about sustainable volume growth, let me share capital performance highlights on the retail business in the third quarter '26 -- I'm on Slide 10 now. In our business, excluding Erste Bank Polska, many of the positive gains that you have by now for -- continue. We saw continued good demand for housing loans involve cross-border geographic cut segment, particularly in the Czech Republic, Angola, Croatia, but interestingly -- the Austrian same events. Our success story of an evening customers to manage their own security savings plan also continued. We now have over 2.3 million trains where customers contributed were between EUR 50 and EUR 200 monthly to invest in securities, thereby creating a stage -- of assets under management inflows for gain. This may also be 1 explanation in addition to rising interest rates, while we saw a consolidation of retail deposit volumes near record versus the third quarter. It may also help in understanding the minor mix shift we observed in the past quarter, namely as more increase in current post volumes, while current accounting sale deficit decreased slightly. So far, this is just one data point after a couple of quarters of moving in the opposite direction, but we will certainly watch this space. And finally, George continues to grow. We have now over more than [ 1.2 million ] cans to the platform, but this is not the aim of the story. We are also doing a lot of business through our digital platform, thanks to reach our overall digital sales share surpassed 80%. In the coverage segment, excluding Erste Bank Polska -- reached 11 already, loans were up by 7.3% year-on-year and 1.6% quarter-on-quarter, that someone bigger than as we sold in the region business. If one of the gross drivers were similarly the second quarter. There was good loan demand from SMEs is various for large corporate customers, which generates better demand for investment launch -- capital overdraft facilities. This is consistent with the constructive economic backdrop mentioning before. Czech Republic, Angola -- but also 3 Austrian segments -- were complete contributions. Corporate deposits, which are traditionally quite waterline grew even faster. They went up by 15.5% and 3.4% year-on-year and quarter-on-quarter. Year-on-year, this was mainly due to inflows in all subsequent, while quarter-on-quarter, this was mostly driven by large corporate and public sector clients. Similar growth rates were registered for current accounting current deposits. Our market business, which is a great, great -- delivering consistent results digested in the third quarter sales. For treasury sales as well as selling capital markets products reinstitution clients, it is one of the drivers of our fee growth story. In addition, the ECM and DCM teams also contributing to this effort year-to-date is successfully executed 256 transactions with a core range issuance volume of [ 189 million ]. In Asset Management, year-to-date net sales of EUR 3.9 billion exports -- contributes to assets and management volumes which including our Polish asset management operation for the first time, surpass EUR 120 billion. With this, I hand over to Stefan for the presentation of the quarterly operating plans -- reporting segments.

Thanks very much, Peter, and also welcome to this call from my side. We are on Page 13. I won't repeat what Peter already told you about loan growth, but at one or the other interesting perspective. In absolute numbers, we added another EUR 4.7 billion to our net loan stock during the quarter. This translates into year-to-date organic loan growth of more than EUR 15 billion. This is quite impressive in my view and shows well how we support the economic development of the region we operate in. In terms of geographic highlights, a couple of countries were already mentioned. Hungary continued to do well, but to a lesser extent than in previous quarters. This was due, on the one hand, to FX depreciation in the third quarter after the first half benefited from significant FX tailwinds. And on the other hand, to a slowdown in demand after 3 quarters of tremendous housing loan growth triggered by subsidized mortgage scheme introduced a year ago. The rather small quarter-on-quarter increase in Polish loan stock is also explained by FX depreciation. In constant currency terms, it was perfectly fine. The Czech Republic continued to deliver a consistent performance with unchanged growth drivers compared to a quarter ago. both retail and corporate business grew in a balanced man. The other Austria segment, which essentially means large corporate lending across our footprint, also posted excellent growth in the third quarter. And finally, a word on the Austrian savings mix, with annual growth of 5%, they also did really well, supported by better mortgage demand on the retail side and the good growth mix of investment loans and working capital facilities in the corporate business. Due to the continued healthy growth momentum in the first 9 months of 2026 on the back of a reasonably robust economic development, we confirm our 2026 organic loan growth target of 6% to 8%. But given all we know today, this probably means the upper half of this reach. And as a result, we again raised our year-end net loan stock guidance to higher than EUR 290 billion from previously about EUR 290 billion. This, of course, includes the banks. Let's now move to the highlights of our deposit franchise on Page 14. Our deposit base was flat quarter-on-quarter but grew by 6.6% in real money that is more than EUR 16 billion year-on-year. The latter was driven by better growth in corporate business, while retail also contributed, but at the lower level in both client groups inflows were well balanced between current accounts and term deposits. As already mentioned, in the context of loans, quarter-on-quarter growth in Hungary and Poland was negatively affected by currency depreciation. At the same time, growth in Slovakia somewhat overstated by a large financial institution inflow. At Erste Bank [ Viztara ] and the savings banks, we saw some mainly retail-driven current account outflows over the past quarter resulting in a slight decline of the deposit base. As Peter already pointed out, we are watching this, but should not over interpret this data point as we have seen the opposite trend in previous quarters. In any case, the most important fact when talking about deposits is funding costs. And these have only etched up marginally in the third quarter, while as we all know, interest rates have moved up noticeably. This resulted in a more profitable deposit base. And talking about a more profitable deposit base transitions us nicely to net interest income, one of the real highlights of this quarter. I'm on Page 15 now. The main reason for the step change in net interest income growth quarter-on-quarter can be attributed to 2 factors. Firstly, volume growth held up well, and secondly, short- and long-term interest rates went up. And with roughly half of the loan book on variable rates, this obviously led to higher interest income on our loan portfolio. At the same time, as just mentioned, funding costs for our West retail deposit base only moved up margin. Add to that, incremental NII tailwinds from higher reinvestments -- investment yields and also volumes for maturing government bonds. And there, you have a massive 5.9% increase in net interest income quarter-on-quarter. We want to be fair and adjust the second and third quarters for the minor negative had positive one-offs, respectively, the clean increase would have been more around 4.5%. But even this is a very respectable number and bodes well for our future development. The third quarter print is the best proof that the concept of NII sensitivity is rather theoretical, assuming 100 basis points instant parallel shift on a static balance sheet is simply not reflective of real life. Loan and deposit mix, growth trends and changes in the rate environment are much more relevant. But for those who had touched significance to this number, sensitivity has barely changed over the past quarter standing at around EUR 120 million for a 100 basis point parallel upward shift while the same change to the downside would result in a minus of about EUR 110 million to EUR 150 million. In terms of segment highlights, our Austrian retail and SME businesses continue to perform very well for the reasons already mentioned, as did our Czech operation. And finally, Hungary extended its stretch of strong NII delivery, supported by good volume trends. While as Peter already mentioned, we don't provide a concrete detailed outlook for 2027 and today, due to the imminent tender offer for Erste Bank Polska, the print we produced this quarter really warrants an upgrade of the 2026 outlook with positive implications for 2027. We now believe that Erste Polska will grow NII in excess of 6% this year. And as I can imagine, before you ask, why we guide for less than we have achieved in the third quarter year-on-year in addition to the small positive one-offs we benefited from in this quarter. This is due to a technical effect I will explain shortly in the context of other operating results later. This effect will likely have a negative NII impact in the fourth quarter. Please note of about [ EUR 33.0 million ]. Despite this, we should deliver our 2026 guidance for the enlarged group of higher than EUR 11 billion by a comfortable margin. Now over to our fee performance on Page 16. The quarterly fee print also set a new record and could have been even better if polish fees would not have been impacted by expenses related to a local micro campaign. These will still be significant in the fourth quarter but paid out thereafter. In all other segments, we posted good quarter-on-quarter growth in net fee income. If we exclude Erste Bank Polska and look at the year-on-year performance, growth was equally impressive. Fees grew by 10.7%, and the reasons are the same as in previous quarters. strong growth in securities business fees on the back of continued demand for asset management products and good traction in payment service fees. Consequently, we now project Erste Polska fees to grow by about 10% instead of 7% to 9% in 2026. For Erste, including Polska, we leave the guidance unchanged at about EUR 4 billion despite allocating Polish FX fees to net trading and fair value result. Let's now check out operating expenses on Page 17. Managing expenses is all about maintaining discipline even when revenues are growing much faster than cost and cost discipline we have successfully maintained. Year-on-year cost inflation, excluding Erste Bank Polska was only 2.4% and driven primarily by the usual suspects, staff and IT costs. Quarter-on-quarter costs were even down, but here, we benefited from the nonrecurrence of Polish brand amortization. You remember, second quarter was the heavy rain introduction in Poland. That's about EUR 15.5 million and lower personnel costs on -- as a result of seasonally lower employee share incentive costs. When it comes to our cost guidance for 2026, we only do domestic -- sorry, cosmetics with tweaks. The overall cost guidance for 2026 remains unchanged at about EUR 7 billion. Please be aware on an FX adjusted basis. We also confirm the guidance for Erste Polska, expecting roughly a 3% cost uplift. When it comes to potash integration costs, which we have forecasted at up to EUR 180 million we are mindful of the fact that we have only utilized EUR 100 million year-to-date, of which EUR 27 million in the third quarter. From today's point of view, it is therefore unlikely that we will fully utilize the guided amount in 2026. This simply means that any unutilized amount will shift into 2027. An additional integration cost in 2027, however, will not be guided separately anymore as we don't expect them to be material on the group level. If we now add up everything you heard so far, and I'm on Page 18, 1-8 already. Namely that operating revenues hit a new record, while cost inflation was well under control, there can only be one result and that's record quarterly operating profit. This statement is insofar remarkable as in the third quarter, net trading and fair value result normalized to the lower end of the EUR 150 million to EUR 200 million quarterly run rate. This was entirely due to fair valuation volatility of our Hungarian loan portfolio, where the volume of fair value loans doubled to more than EUR 2 billion over the past year as a result of the introduction of a subsidized mortgage team. And this had a negative effect of EUR 68 quarter-on-quarter due to rates going up. In a year-to-date comparison, the effect was insignificant though. Returning to record operating profit. Importantly, this statement is true in all relations. So irrespective whether you include or exclude or stamps or whether we look quarter-on-quarter or year-on-year or even a clean year-to-date comparison. This also means that the cost/income ratio also reached its best ever quarterly level at 43.1% as already mentioned by Peter before. In light of all this, we decided to upgrade our cost-income ratio guidance for the business excluding Erste Bank Polska to lower than 46%, underscoring strong positive operating leverage in 2026, while we confirm the full year outlook of lower than 45%, including our Polish operation. And with this, I hand over to Alexandra for more details on credit risk.

Thanks, gentlemen, and good morning. I'm now on Page 19. When talking about credit risk, no news is usually good news. In the third quarter of 2026 is a perfect example of a by and large, known news quarter. As Peter has already mentioned several times, the credit risk environment in our region remains good. Deposit risk costs of 24 basis points which is on a key basis pretty much unchanged compared to the first 2 quarters of the year. We released the last remaining industry overlays in the amount of EUR 71 million, which mostly benefited the Austrian savings bank. We also topped up FLI provisions by EUR 25 million, and this mainly impacted the other Austria segment and explains the quarterly charge provision -- in total, we now have about EUR 350 million of primarily FLI provisions, which we move with the changing macro -- as a result, we do not expect and hence, to not guide for material overall releases going forward. In terms of segment and country highlights, we mainly posted allocations in the corporate business in Austria which includes also the FLI impact in other Austria, which I have mentioned before, while there were only minor net allocations in the retail business overall. Slovakia benefited from a significant provision release related to the corporate business on the back of rating upgrades, which explains the net release in the third quarter. Everything else was unexpected. We, therefore, confirm our full year outlook, 25 to 30 basis points, including steppers. And I mean that realistically, we are talking about the lower end of this range. The rationale for doing so despite being ahead of guidance in the first 9 months of the year is the same as small quarter ago. The ongoing volatility in over to politics and its possible downstream effects. Let's now turn to asset quality on Page 20. In line with what I just told you about risk costs, stability is also the name of the game when it comes to asset quality. In actual fact, we saw minor quarter-on-quarter improvements in the NPL and in the NPL ratio and the NPL coverage. The former now stands at 2.3%, while the latter excluding collateral, sits at 68.8%. It's hard to highlight any specific developments in countries or segments is we haven't seen any material shifts over the past quarter, certainly not to the negative. This is also backed up by the fact the NPL inflows continue to be on a declining trend overall. Based on this, we see no reason to change our asset quality outlook for 2026. We expect that the group NPL ratio will stay more or less at current levels, while NPL coverage is projected somewhere around 70%. And with this, I already hand back to Stefan.

Thanks, Alexandra. We are on Page 21 now. The year-on-year decline in other results, excluding Erste Bank Polska fully explained by the third quarter 2025, benefiting from a significant one-off legal provision release in Romania in the amount of EUR 77 million. Quarter-on-quarter, we also posted a small deterioration, which was driven by 3 partly offsetting factors. Firstly, we posted some real estate selling gains in the amount of EUR 48 million in the other Austria segment. Secondly, Erste Bank Polska continued to book a fixed legal provisions in the amount of EUR 32 million. And thirdly, since the new government in Hungary has yet to retract the mortgage interest rate cap, we booked a provision of EUR 38 million to account for the possibility that this may not happen at all. In which case, and here, I'm now circling back to my comment on the full year NII outlook not being more aggressive. This provision would be released in the fourth quarter of 2026 and the impact booked in the appropriate lines, about 80%, so think of EUR 30 million would negatively impact net interest income, the remainder risk cost. So in P&L terms, the impact is fully digested in the current quarter, but it may still impact NII risk costs in the fourth quarter versus the benefit in other opportunities. Hence, when it comes to the 2026 outlook, we would expect other results to, on the one hand, closely track banking levy charges adjusted for any one-off bookings that happened or may still happen in 2026, including the effect I just explained. Let's now move to the bottom line and returns on Page 22. With operating profit hitting a new high risk costs being moderate and other results broadly in line with expectations, quarterly net profit for the first time surpassed EUR 1.1 billion. As a result, earnings per share rose to EUR 2.74 for the quarter and return on tangible equity increased to 23.8%. Ordinary return on equity also improved to 18.2%. Tangible equity climbed by another EUR 2.1 per share in the quarter to almost EUR 47, while book value per share improved to 61 units. One small caveat in the context of returns in the third quarter, they are always somewhat exaggerated as there are no AT1 coupon deductions. All of this puts us in an excellent position to deliver on our recently upgraded bottom line guidance which we hereby fully confirm. That's a return on tangible equity of higher than 20% and a higher than 20% earnings per share uplift based on a reported net profit of higher than EUR 4 billion in 2026. With that, let's now move to wholesale funding and capital on Page 24. The main impact on our liability structure year-to-date was clearly coming from the consolidation of Erste Bank Polska. Quarter-on-quarter, there were no meaningful changes aside from a small increase in outstanding debt securities on the back of increased MREL-related senior unsecured issuance. In addition, we were also more active in issuing certificates of deposits. But our key funding source remains unchanged. That's our strong customer deposit franchise across all markets, and in particular, the highly granular and well diversified retail deposits. When looking at our wholesale funding activities. The third quarter was another busy quarter that helped us to complete our 2026 funding plan early. The key highlights here on Page 25, come from a group perspective from the first EUR 1.5 billion dual tranche issuance in senior preferred format. Our CE subsidiaries were also very active during the quarter, [ Jas telna ] successfully executed a second EUR 500 million cavern benchmark transaction, while Erste Bank Hungary issued a senior preferred debt. in the same amount and very successfully when it comes to the spread levels, if I may say. Looking at regulatory capital and risk-weighted assets on Page 26, let me remind you that in any third quarter interim profit is not included in reported regulatory capital as it's neither reviewed nor audited. And this, together with a minor impact -- negative impact from our -- from other comprehensive income explains why CET1 capital slipped slightly quarter-on-quarter. At the same time, risk-weighted assets rose by 3.2% or about EUR 6 billion quarter-on-quarter to EUR 292.8 billion. This development was driven by an increase in credit risk RWA by about EUR 5 billion, primarily driven by the EUR 3 billion one-off method effect we have already flagged last quarter, while the overall growth is also a reflection of a strong loan growth we have experienced during the third quarter. Market risk RWAs contributed about EUR 1 billion to the quarterly RWA in Greece. When looking towards year-end, regulatory capital should benefit from full profit inclusion, while risk-weighted asset growth should be more in line with asset growth plus a markup in operational risk, which is mechanically tied to profitability. Consequently, I would expect our CET1 ratio to be somewhat higher at year-end compared to the third quarter pro forma level of 15%. Think of somewhere in the area where we were around half year. And you can see the waterfall for the third quarter on Page 27. That's purely the organic view and does not take into account the outcome of our tender offer for Erste Bank Polska shifts. So in reality, we will certainly end up somewhere else, depending on shareholder taken. As far as the third quarter pro forma print is concerned, we maintained the dividend accrual at the upper end of our target payout range of 40% to 50%. With this, we indicate our strong confidence in our distribution capacity. Nonetheless, we retain full flexibility when it comes to deciding about the eventual 2026 payout in order to be able to internally fund and up to 46% additional stake in stents. And with this, Peter, I hand over to you for concluding remarks.

Thank you, Stefan. I'm on Page 29 now. As I already mentioned at the start of the presentation, the good business performance year-to-date allows us to upgrade our financial guidance for 2026. In light of many uncertainties that are out there [indiscernible]. But thanks to encouraging volume trends, a very constructive interest rate environment, the demand for asset management products and smooth integration with Erste Bank Polska, an acquisition in its -- we are now confident that to grow our loan growth, excluding Erste Bank Polska towards the upper end of the 6% to 8% target range, which, combined with our Polish business should result in a year-end net growth of north of EUR 290 billion. We are also more positive in net interest income -- expecting an increase above 6%, excluding Erste Bank Polska our EUR 11 billion target, including Polska by comparable margin. Fees exports should grow by about 10% and help us to push the cost-to-income ratio, excluding Erste Bank Polska improved below 6%. And finally, thanks to the general good asset quality back we target risk costs, including Erste Bank Polska lowering of our 25 or 30 basis points target range. Everything is remains unchanged. Meaning that we should comfortably deliver return on tangible equity, above rank result and reported net profit above EUR 4 billion crores. All of this puts us on a strong run rate for 2027 for which we will provide detailed guidance with for results at the beginning of February. The next stage, we will know the outcome of [indiscernible]Erste Bank Polska which having received all the required regulatory approvals, we will launch next Monday is -- in community. With this, ladies and gentlemen, we are concluding our presentation, we are looking forward to your questions.

[Operator Instructions]. And we have the first question coming from Gulnara Saitkulova from Morgan Stanley.

So first, on Poland, Santander commented on its results call earlier this week that they are comfortable with the remaining stake in Erste Bank Polska. And given the position what has to be prepared to revisit the pricing of tender offer to increase the likelihood of acquiring additional shares? And how do you balance the strategic benefits of increasing ownership against the maintaining attractive returns on your investment from potentially paying a higher price?

So maybe if I may start, the course for the ore just to jump in. I mean the strategic regression and for us to increase our participation in poster is very clear and obvious we are now owning this [ 29% ]. So good news since beginning of the year is that there are no surprises. Everything is going as expected. We see a strong profitability. We have a very positive outlook on the economic growth reported in the upcoming years. We have really good coverage in place, although the chart is closing beginning of this year, as you are aware, we are right on track with our IT integration. So we are very happy with around 49% investment, of course, we would like to increase -- when it comes to Santander, it's, of course, up to Santander to decide. It will also situation from our perspective. But it's very clear that related to the price of the shares, I think there are different interests to very obvious. And this is not a point to speculate about the price now as we are starting our money.

This Will launch on Monday, having received all the approvals. I think exactly it was by day and last weekend -- and then let's see what happens in the course of the tender offer. That's it.

And just adding to that the question on capital. Given the decline in capital this quarter, could you provide more color on this EUR 3 billion one-off increase in credit risk-weighted assets Specifically, what is it related to? And previously, you mentioned that MST transaction could potentially mostly offset the risk-weighted asset inflation from the LGT updates. Could you confirm whether you still expect to realize this effective benefit this year and highlight any other key capital headwinds or tailwinds that investors should be mindful of going forward?

Yes. Thanks very much for this question, important 1 these days, obviously. And I can start with a very clear and storm statement. Absolutely no whatsoever headwinds are expected. To the contrary, to be honest, rather tailwinds expected in the near future. Namely, we will be very likely concluding a significant in the fourth quarter. We have very good signs that in terms of regulatory requirements, it's going to be smoothly in the sense of if anything than even a small relief. So that regarding sort of the environment we operate concretely to the third quarter, please be reminded that we have been flagging already in the second quarter impact, which Alexander will explain in more detail of EUR 3 billion from an LGD model for corporates, which, of course, was exactly arriving then in July as expected. If you adjust for that and the OCI, which comes from this translation, then you are in a very normal development. So when it comes to fourth quarter outlook, my personal expectation, as I already shared with you in the presentation, is that we will trend higher or, of course, subject then to the BTO and all of that. So in other words, we will have a lot of capacity for going either into a significant step-up in our holding in stars or if this does not materialize in a significant distribution. So that's my take. But Alexandra what details maybe on this model EBITDA?

The EUR 3 billion on effect that Stefan mentioned consists of 0.25% of something related to CCS and EUR 2.6 billion to the retail HD material voltage. This is a very long time planned and one-off effects. We already applied in April 2024 for this model. production go live was then in July 2026. So 26 months of regulatory approval. And this -- the updrift is simply coming from the adoption of changes in IRB regulation in the meantime and the conservative addressing of historical data quality. So overall, a one-off effect, nothing unexpected. And yes, so much to the model.

And just to complete the picture, since this has been in many course of our colleagues also an interesting point of discussion I think we informed you about our SRT impact on the CET1 ratio in the half year and give you an update on this. We back then said 72 basis points, barely changing in the third quarter. We are now at 73 basis points why that -- we had a very successful and I'm very happy about that for sort of development of this great market, implementation of a small SRT's more in the respect of the group level in Croatia, which had an add-on effect. And then, of course, we have a runoff of the existing sites. And the effect that we are planning for the fourth quarter should lead us to something around about 80 basis points overall effect by the end of the year, a very important indicator in our dialogues with the rig.

The next question comes from Gabor Kemeny from Autonomous Research.

Firstly, on your NII, please. You mentioned that the higher reinvestment yields benefited your NII and your margins in Q3, I see a 3.5% average yield on your financial asset portfolio. So presumably, you have some room left for upward repricing. Can you give us a sense, obviously, how much is left? And how this may impact your NII in 2027? The small technicality, you mentioned on the Hungarian interest rate caps. So you moved the cost in other results. which you expect -- remain unchanged to rebook to NII with a neutral bottom line impact in Q4. Is this correct? Or have I missed something? And then back to the is and your comment on adjusting the dividend payout. Do you mean that you would cut the payout to ensure that you see a Tier1 ratio stand above the 14.25% target. So you would -- to protect the CET1 target. Thank you.

All right. Gabor, thanks for these 3 very important points. First, our replication book A little rather, I see it rather 3.4% and 3.5%, everything else corrected you say we're still upward trending. And as you saw and you remember, we discussed this after Q1 and after Q2, the overall net interest margin now printing at 2.73% for the third quarter reflects all the points that we discussed during the call today already. And I think it's a very, very positive signal. This volume development, combined with the net interest margin, I think in my personal opinion, ticks all the boxes. On the an area, just to confirm exactly it is like the EUR 38 million we booked now in the other operating result, simply reflecting the full impact of, so to say, internal application of this interest rate cap that has been introduced already a while ago, but a former government should there be, at any point in time, reduction adjustment shortage of this, then it will have a positive impact when it comes to the allocation to the lines, NII and risk. You are right, the EUR 38 million would translate to roughly going into NII and then the remainder into risk. And of course, the positive effect would be another price. So in other words, just to confirm, as you phrased your question. And look, on the video take up, now I could talk for the next 20 minutes about all the facts that are influencing, so to say, a potential impact on CET1. You know all of those volume, prices -- but too. The message is, at the moment, we are accruing for the absolute maximum of our dividend policy. And as long as we do not have a final take-up that would reduce that significantly, that's the assumption. Obviously, should there be a significant take-up by the minority shareholders at a certain level that would, as we always said, also have an influence of the dividend in 2026. It's simply much too early to say.

Got it, Stefan. And the replication portfolio, what -- maybe I met your comments. So what is the benefit now and how you expect it to evolve next deal, please?

I think, we have talked about that, that we are somewhere in the area of 2% to 3.4% yield. But you are asking about the absolute number, right? Or what's your question concretely?

NII impact, yes.

Yes. So the total volume is now just north of EUR 80 billion with all the components included, including Erste Bank Polska and so on and so forth. And the impact on the NII is in the area of let me just check the concrete number EUR 3 billion, EUR 3.1 billion roughly business year 2026. And if you ask me, which I assume, what do I think about 2027. So everything else equal, it should be still upward trading, however, at a slower pace.

The next question comes from Benoit Petrarque from Kepler Cheuvreux.

So the first one is on your NII guidance above the EUR 11 billion number for the full year. Obviously, you have a very strong print on Q3. Even if I take the EUR 30 million adjustment in the fourth quarter, I still get to exactly EUR 11 billion, I get to a small decline quarter-on-quarter. So I was wondering why you've not maybe upgrade your NII guidance for the full year to maybe a slightly higher number? Or do you expect operational trends to maybe be less favorable in the fourth quarter? The second question is actually again on NII, but this time on the trajectory into 2027. So is your Q3 NII a good run rate to think about '27. And could you talk maybe about this trajectory in looking at the current forward curve, obviously, the deposit pricing in your main markets, potential for mix shift and obviously, the volume growth, which remained strong. So could you maybe help us to look at '27 a bit more in details.

Look, let me start with '26. I share with you that in the Q1 roadshow, I had not 20 -- 30 discussion rounds about what range in our NII would be feasible and the expectation of the investors was anywhere between just below 11%, up to 11% in the quarter. And frankly speaking, if I reflect on those discussions back then, we are exactly in this range. Now 11.25% will be too much. below 11% is, of course, too low. So it's the range has been tightening a little bit. But I do not disagree with you that if you extrapolate the third quarter, even adjusting for the we discussed before, then you will rather not end up with 11% or 20%. So that's the story. But everything is still live. We still have 2 months to go. So north of 11%, as I always strongly emphasize doesn't exclude also a print of 11.1%, 11.50%, but I cannot really go further than this because there are so many moving parts as we discuss heme into 2027. Everyone would love to see a guidance into '27. We don't give one today. However, if you look at the volumes, if you look at the margins, including certain pressures on the deposit side, as we heard, especially also from our competition, to be honest. We have had a very good quarter in that respect as well. Then you can certainly expect a very, very solid NII guidance for us to be published end of February. So in my own belief, we will have a significant NII drive assuming, let me say, a supportive interest rate environment during the year 2027. But more color I ask you for understanding then with the full year numbers in February.

This is very clear. Just in the past, you said that volume growth will be the main driver, and we could assume a stable NIM. Do you think it's going to be the same in '27? Basically minor by far will be volume growth and NIM could stay roughly stable?

Yes. Look, in principle, yes. But I just want to point to one thing that we all know, you know as good as we do. There is a certain level of interest rates when the dynamics on term deposit repricing and deposit beta kicks in more aggressive. Are we there today? Probably not. Might we get there? Maybe let's see ECP and our expectation we'll do 1 more step. The Czech guys will do one more step. Will this be enough to generate a certain deposit best better dynamics as we saw it in the last retake cycle, let's see. So those are the moving parts. But in principle, there is no change to that. If I have a solid volume growth, if I do a healthy business both from a risk perspective, but also from a margin perspective, that's the main driver, and that's exactly our growth story.

The next question comes from Tarik El Mejjad from Bank of America.

Two questions, please. So to come back on the tender in Poland. And I mean, I think it's obvious that the checkup will be relatively small. And I'm not sure if you can give us a bit more guidance in case of the -- especially on the light of Santander, the valuation what's really the reach the 50% already accrued payouts. And I would be even a bit more provocative in my question is, if you want to -- if you take up a small and you still as you see you said in our recent conference, you want to balance between distribution and longer-term buildup of the stake in Poland, if you can be actually even more generous in terms of special distribution on top of our policy as you build up on the market stake? Second question is on asset quality. And I mean, I heard your comments on the initial presentation. but you can see flare-ups here and there. I mean, especially in Central Europe, could you -- what kind of comfort you can give this is not something that will surprise the market and maybe yourself in terms of how tiger this relation?

Maybe let me start with the first part of the question when it comes to the voluntary time off reported [indiscernible] answer. So it would be for us, great. If we achieve something slightly above 50% because this would put us in a situation that we can [indiscernible] in increasing our participation without asking for additional approvals. So everything is very much depending on market situation, as you rightly mentioned, in the second part of the equation, we are trying -- shareholder with you, I think it doesn't make sense to pay too high prices for the share because this is something we will closely nonpoint how to distribute our capital and is improving in the past, and we're waiting to can rely on as we came in the second in the quarter in the fourth quarter when it comes to the tender offer.

Coming to your question on asset quality, if I understood correctly, it's about CEE in general and also going forward. So if you just look at the Q3 formation of net impairments of 170, only 33 come out of seed. So this is a very good picture, and it's not a one-off special quarter. which shows pretty well how extremely resilient and how good the risk profile in CEE has been developing for a very long time and also going forward. We would not expect any bigger changes. It's coming to Romania. Romania was, as you might recall, especially in Q1 was an outlier out of the CE community, but also Romania in the course of the year until now recovered from the Q1 impact on unsecured. There have been sales of unsecured NPLs, which led to releases of provisions, and the remainder of the bigger impact in Romania is due to FLI, and we all know how macroeconomic situation in Romania looks like. Poland, we also published or we published today or published today the figures roughly 30 bps as of Q3, a very, very good level. So overall, in CE, nothing which is on also going forward.

The next question comes from Ben Maher from KBW.

I just got 2, please. I apologize if you already commented had issues during the call at the beginning and some fees. Looking at the EUR 4 billion guidance that implies quite a solid or strong 4Q as required to be that guy just interested around different given parts line that gives you that confidence. Also I've seen some check pension reforms that are currently going through parliament and that looks like it could be potentially quite impactful if those do come through? Just interested in any thoughts or any guidance around potential impacts to check fees from those changes. And then loan growth you see, you touched on a deceleration during the quarter. Obviously, rates appear to be going back up and you look forward markets in -- Czech, for example. Just interested in how you see the loan growth in some of these countries into next year?

So let me take -- thanks for the question. It's an important one. Let me take the fees stood your question correctly, you had to join the call a little bit. We were addressing that in our statements already. But just as an explanation again. In all the countries, the developments have been at or, I would say, half of them above our expectations so far. That's why we raised also the year-on-year guidance for the development of the fee line to 10% year-on-year, 10.7% so far, the first 9 months. Now the fourth quarter is typically and traditionally a very strong quarter when it comes to fees. We have the premium bookings and then all of that if you look at the '25 fourth quarter and adjust for, so to say, the overall growth that we have already achieved, you're getting relatively close. There is for sure, and I have no problem to admit that. There is, for sure, the ongoing impact from the Polish campaign, which, by the way, runs super successful when it comes to client acquisition. But this will have an impact since some effects of the investment into this kind of acquisition are still there in 2026 in the fourth quarter. So summing all up your indication in the question that maybe getting 2 or even above EUR 4 billion might be difficult, I can confirm, but the guidance of around EUR 4 billion still holds very nicely if you sort of say, apply the typical rules of what round about EUR 4 billion. That's my statement. And with that, Peter, to you.

To the part of the question that we were mentioning the station filed corporate [indiscernible], which we see no acitretin impact into next year. We have very much [indiscernible]. But given the trends of our chain, especially in the asset management therefore, we will be able to be more on crores next year when it comes to Czech Republic. When it comes to loan growth momentum and what we are expecting in the near future, we don't see too many changes. So especially in Czech Republic, Hungary, Croatia, Austria business going for we very experienced some kind of increase of competition in Austria. So -- but this is nothing as seen from time to time in some can -- but we don't -- everything we don't have any kind of reason to expect a decrease in this low-cost demand, especially in the [indiscernible] and what you see in the corporate banking, there is a very strong demand for investment loans, which, from our perspective, a very positive signal for the further development of R&D costs because our clients are just taking in distant loans when we have a positive outlook on the future. We are optimistic when it comes to loan demand.

The next question comes from Jovan Sikimic from ODDO BHF.

I have a short question on track operations. I mean, I think you reported a bit of increasing margin in Q3. Can you tell us a bit how do you see the current competition, especially on actual both size lending and funding and how do you see it going forward? And maybe also strategic on for existing operations in Hungary and Serbia. I mean, how do you assess your current positioning compared to peers, especially in those countries witnessed, I would say, kind of major political turnaround. So would you consider eventually some inorganic growth opportunities in both of them in next future?