MONETA Money Bank, a.s. (MONET) Earnings Call Transcript & Summary

Dear, ladies and gentlemen, welcome to the conference call of MONETA Money Bank, a.s. At our customers request, this conference will be recorded. [Operator Instructions] May I now hand over to you, Mr. Spurný, Chief Operator -- Chief Executive Operator and Chairman of the Board of Directors. Sir, please go ahead.

Good afternoon, ladies and gentlemen. It is my pleasure to introduce today's presentation of MONETA Money Bank's 2020 results, where we cover both the full year and the development for the last quarter. First and foremost, I have with me Linda Kavanova, our Head of Investor Relations. Then let me introduce other presenters. We have Carl Normann Vokt, our Chief Risk Officer; we have Mr. Andrew Gerber, our Chief Product Marketing Officer; we also have Mr. Novotný, Jan Novotný, Chief Business Development Officer on the commercial side; and Jan Fricek, our CFO. I would like to ask you please to turn attention to Page #4 of the presentation. We just wanted to provide a couple of highlights on governance of the bank. If you look at the MSCI Index, the bank achieved in 2020 an A rating of corporate governance, which pleases us. Secondly, we are also increasingly environmentally conscientious bank where we reduce footprint -- carbon footprint by close to 60%, and we continue -- we will continue in doing so. And we are also very proud of the fact that MONETA, the only Czech company included in the Bloomberg Gender-Equality Index, where we have a stable score for the second year running. If you then turn -- if you turn the page to Page #5. We -- let me briefly comment our achievement of -- our achievements of 2020 from a financial perspective. The bank generated operating income of CZK 12.1 billion. We've incurred cost base of CZK 5.5 billion. This translates into the impairment profit increase of 19.5%, and incidentally, this actually meets the very original guidance that we provided prior to breakout of the COVID-19 pandemic. Cost of risk heavily impacted by the pandemic. We have incurred CZK 3.6 billion cost of risk in 2020, and all of the above translates into net profit of CZK 2.6 billion. Then if we continue on Page 6, commercial and other quality indicators of the bank. The bank generated the deposit growth in excess of 47%. It also paralleled that growth with lending expansion, which is nearly at 45%. We've registered increase of nonperforming loans. We currently stand at 2.3% level. With respect to capital position, we have -- we command a strong capital, 18.2%. This is the total capital equity ratio and enjoy solid liquidity expense in 190% liquidity coverage ratio. Turning the page, one of the key subsequent regarding the following closure of the year was the receipt of 2 documents from PPF group, PPF group sent us a proposal to initiate voluntary offer to purchase up to 20% or potentially 29% of our shares at CZK 80 per share. With respect to this matter, we've provided position statement to the management Board as required by the Czech legislation. In addition to that, the intent of PPF group is to stimulate the bank into acquisition and mergers, subsequent merger of Air Bank in certain affiliated companies and I'm sure we will cover this matter in context. So in the Q&A session. Now if you allow me, I would turn to our strategy and how we perform against strategies that we've published and provide -- reporting it again. If you look at Pages 9 and 10, here we comment both commercial and financial targets of the bank. And I would summarize that the bank is developing quite well in the context of the target of increasing the share of profitable and return producing retail banking. If we then look at retail and small business targets, what is positive here is that we have successfully involved organic and acquisition realized growth, significantly increased our position and relevance in the mortgage lending. We are successfully defending position in unsecured retail market share, albeit as you will see year 2020 was a challenging year. And we also successfully developed both deposit taking market share as well as distribution of third-party asset management products. And this is coupled with success on the ability of MONETA to distribute insurance products. If we turn the page and you look at financial targets. Overall, the bank produced 10.8% return on tangible equity, which we consider satisfactory results in view of the prices that we experienced throughout 2020. We've also suffered due to that decrease of incremental profitability of the small business subsegments in the bank, where we posted significant anticipatory provisioning. If we then look at the overall quality and sustainability of our risk position, I think what is very important here is that our NPL position still remains relatively low, albeit we have -- and you will see later, downgraded significant portion of the book in anticipation of potential losses being incurred in conjunction with the COVID-19 pandemic, substantially increased our coverage of the lending portfolio. The overall coverage stands at 2.6% and coverage of nonperforming exposures is at 110%. So it's above the target that we had. And lastly, due to both organic and acquisition-driven growth, we successfully increased the client base of the bank to nearly and beyond 1.3 million customers, and we comment on that also later in the presentation. On Pages 11 and 12, we provide you with a more granular overview of the bank's performance. So a few comments here. On development of the retail franchise, lending growth accomplished 60 -- 68% year-on-year. While the deposit taking activity in retail exceeds 60 -- 65%. This is, again, chiefly driven by the acquisition. Nonetheless, the bank generates this respectable rates of growth through organic expansion. On lending, the organic growth was at 15%, in excess of 15%, and on deposit taking, 20 -- 21%. You will see that this growth rate also stands very well against the development of the overall market. On the entire franchise basis, commercial lending -- sorry, mortgage lending expanded at the rate of 124%, while the organic growth in that category measly comes at 40%. On unsecured lending, the bank reports a very good headline growth number of 20.3% year-on-year growth, but this is chiefly and entirely driven through the acquisition of Wüstenrot. Our pre-acquisition perimeter portfolio actually decreased by 6.4%, and this is chiefly due to lower demand for consumer-related lending in the Czech Republic during 2020, when the new production suffered and contracted by more than 30%. What is also important here, however, is that with the production, we have accomplished, we actually in the new production market share what was available on the market at -- to about 20% while in 2019, we had about 16% market share on average of green production. If I then move on to the small business franchise, again, we've -- we've generated respectable growth of nearly 19% of the loan portfolio. On the core deposit growth we have even better results in nearing 30% growth, 28.2% to be specific. And this shows that the bank successfully develops primary banking aspect of our services with this subsegment of customers that is self-employed, professional trade people [ and the line ]. If we look at our lending activity, what was in this segment very decisive for us is the ability to distribute in a fairly industrial manner, come with related guarantees. But according to Czech Moravia means guarantee bank we had in some months, around 50% market share in providing COVID guaranteed loans where the bank enjoys [ state ] guarantee of up to 90% of the loan exposure. So this was a great success as our market share is very much disproportionate to the overall market share of the bank. In terms of SME banking, I would say that here, again, on pre-acquisition basis, we have flat portfolio slightly increasing due to Wüstenrot, as Wüstenrot financing home improvements, some [ contagium ], some costs. We continue to enjoy above the market strong deals from the SME portfolio. And we have, again, successfully managed CZK 3.8 billion of loans, which are covered by the state. This pertains mainly to working capital facilities, and you will see that the nominal value of working capital facilities limit is significantly higher than a year ago and significant portion of that increase is covered by state guarantees. We've also generated respectable growth of 11.7% on SME core deposit volumes held with the bank. On digital capabilities, we continue to expand both the digital usage and distribution to digital channels, and this is evident from the numbers. Turning the page to Page #12. If you look at our risk position, I have commented this for it's important is that the overall coverage of our loan portfolio through loan loss provision allowance increased to a level of 257 basis points from 2019 year-end level at 194% -- so 194 basis points. So this shows that the bank deployed conservative policies, and I dare to say that we are in top 10% in terms of coverage amongst the banks operating in Czech Republic. Capital position, super strong, 18.2% with CET1 ratio, exceeding 15%. And this translates to excess capital that the bank commands in absolute number of CZK 6.4 billion. This is excess over regulatory requirement plus the 100 basis points management buffer. So -- and you will see that also in the capital section of the RWA density remains stable and grows at about half the rate of growth of our overall loan exposures. On cost control, here, I would like to get across the message that on pre-acquisition basis, our cost base remained flat. It actually decreased by 20 basis points. And the inflation in our operating costs is driven by acquisition of Wüstenrot and the related integration and restructuring charges. So we report very good cost/income ratio, which if you adjusted for one-off impacts of the Wüstenrot acquisition would come at 5% higher as we will be below 51% on the cost income ratio basis. And on the acquired perimeter of Wüstenrot, we have locked in synergies of CZK 300 million, we accomplished the legal merger of Wüstenrot Mortgage Bank. And we've also improved commercial performance, obtaining 12.3% market share on subscription or takeout of new building savings from [ charge to charge ]. Where the interest rate is subsidized by premium provided by the state. So overall, we believe the situation is satisfactory if not favorable. On Page 13, I would like to comment a little bit on our -- on the shape of our operating platform. I think the key ones here is that we saw efficiency improvement throughout 2020. If you look at employment in the bank, it increased by 50 FTEs to the level of 3,009 FTEs. Please bear in mind that the acquisition of Wüstenrot drove roughly 300 FTEs into the bank in the second quarter of 2020. So few efficiency driven actions of the management, we actually accomplished fairly significant efficiency improvements. With respect to branches, we ended the year with 159 units, decreasing the lease space by about 2,500 square meters. And in January, as an event subsequent, we are closing additional 6 units. So the branch network will be somewhere around 153. We've also added last year tied agent network, which we've inherited from Wüstenrot. That network has 61 consultation offices, which we do not pay for. These are financed by the agents themselves. However, they are branded with MONETA, improving the recognition and relevance of the MONETA brands. On ATMs we have optimized the ATM network for efficiency, closing about 80 locations. This action was prepared actually in the fourth quarter of 2019 prior to the pandemic, significantly improving cost position. And we are the only bank in Czech Republic that actually reduced the ATM deal -- the ATM network. The same, we've installed 66 new machines throughout the year, eliminating some significant operational risk arising from outdated equipment that we inherited from the previous owner of the bank. And you can see that we substantially increased the contactless machinery [indiscernible]. And we've had positive development overall on development of the client base through both organic and acquisition growth, and we've registered significant improvement in the usage of our digital channels. Now, if I can ask you to go to Page 15 to go to section of the operating [ macroeconomic ] environment. On Page 15, I would like to start with the key macroeconomic indicators. On GDP,, 2020 number has come in. The contraction of GDP has come in at a better rate than was previously expected by market participants. And the contraction is now estimated at 5.6%, while the -- at last quarter we reported more than 7% expected contraction. The forecast for 2021 has been actually estimate increased by the Czech National Bank to a level of 2.2% from the 1.7% that we had here, and the Bloomberg consensus is 3.5%. Here, we also show industrial production and foreign trade, which both suffered throughout the 2020 due to various restrictions and emergency state declared in the Czech Republic. And on the GDP development, the only government spending created positive contribution to GDP, all the other 3 categories are unfortunately negative. Nonetheless, even with the government stimulus, Czech Republic maintained strong rating at AA minus with a stable outlook. Now turning page to Page 16. We comment quickly on the job market and expected level of employment. If you look at 2020, the Czech Statistical Office reports unemployment at 3.2%. So we have fairly strong increase from the level of 2019 with the market consensus expecting the unemployment to rise to 4.5% during the current -- during the current year. If you then look at demand for employment and our job vacancies and unemployed, you see -- you can see that Czech Republic still remains positive gap in vacancies against unemployment. However, that gap is narrowing quite significantly compared to 2019. And then if we look at another indicator, and that is the state budget deficit. In 2020, the current forecast is that the deficit is coming in excess of CZK 367 billion. This is a record number in the history of Czech Republic, and I believe this is actually a record number [ and I believe if ] we take Czechoslovakia all the way back to 1918, we've never had a budget deficit like this. For the current year 2021, the deficit is expected to be CZK 320 billion. This is agreed upon deficit by the Parliament of Czech Republic. The January number of the deficit came in at more than CZK 31 billion, and it doesn't have impact of the tax release that were agreed upon by the Parliament in December of 2020. So the number could be higher. In other words, the government is doing whatever it can to support the stability of the economy and employment. On Page 17, briefly on inflation and interest rate. The inflation for 2020, 3.2%, with expectation that this number will come down to 2.3%, and consensus by the market analysts that rate hike will come. If you look at statements published by the Czech National Bank, as of yesterday, there was a strong theme of normalization of the monetary policy in the second half of the year and by conditional to some other comments. All of this reflects itself into the exchange rate of the Czech crown and the Czech crown is currently the strongest against euro since beginning of this crisis in -- at year-end March of last year. And the last comment on the operating environment on Page 18. We tried to summarize level of bankruptcy or insolvencies of individual entrepreneurs and citizens of the country. You can see that actually the number throughout 2020 has decreased and is not -- does not seem currently to get -- cause any concern. Nonetheless, we are remaining cautious on this front. And that, as I have commented with reflected into the 2020 provisioning policies, an approach that we've adopted. Now if you allow me, I will briefly comment on the banking market developments and how MONETA stands against such. So if we can go to Page #20, we start with the deposit market. The deposit market expanded to about 4.9 trillion. The market overall grew in excess is 9%, whilst, as we have said, MONETA grew in excess of 47%. And this is the most visible from the retail deposit position where we generated not only high growth, but currently, we command CZK 192 billion of deposits entering the year with a position of CZK 116 billion of deposits, if I round it up to a whole number. We've also had double the market growth on the commercial deposit side. Albeit we do not really take deposits from large depositors, from corporate depositors. We've increased the deposit position by CZK 7 billion to CZK 65 billion overall. So we consider this performance to be fairly -- to be fairly good. On Page 21, we take you through development of the lending markets in Czech Republic. The overall lending market, which we consider relevant to us based on figures with Czech National Bank stands at CZK 3.2 billion. The market expanded 3.8%, whilst we [ experienced ] growth in excess of 45%. This is most notable again from the retail side, where retail, as you know, is part of our strategy, where we've increased the portfolio to a level in excess of CZK 155 billion. And on commercial side, we have increased the portfolio by about CZK 10 billion to CZK 76.6 billion, which translates into headline growth of 13%. So throughout the difficult year through a combination of acquisition and solid organic growth, the bank managed to expand quiet substantially. On the next page, on Page 22, let us cover development of pricing. Unfortunately, the pricing on the asset side continues to deteriorate. You can see that the market deteriorated, both on mortgages and on unsecured credit. In unsecured credits, in the fourth quarter, we reduced our pricing through various promotions and marketing communication, and we came in 40 basis points below the market as we have sought to obtain additional volumes in the market. And nonetheless, the situation is complex. As I said, we've in the entire year, the lending activity decreased by 30%, even though we've increased our market share on new volumes from 16% to 20% comparing 2020 results to 2019. On mortgages, price-wise, we are aligned with the market. On deposits, we show you detail subsequently in the presentation, we've had success with repricing and lowering the cost of funds, which is visible from both annual and quarterly numbers, and this process will continue throughout the first quarter of 2021 and will be fully visible in back -- in the second quarter of 2021. So let me stop here. Before I turn over to Jan, I want to again reiterate. 2020, operationally, it was very difficult year. The bank fulfilled most of its strategic aspirations, except facing significant difficulties on the unsecured consumer market. Nonetheless, we are roughly in line and exceeding in strategic aspirations that we have set for the bank. And now, Jan will take you through the guidance and our results.

Thank you so much. Good afternoon, ladies and gentlemen. As you can see on Page 24, in 2020, MONETA successfully delivered against all guided metrics with outperformance at several places. On operating income by CZK 100 million and combined by a tick over then guided cost of risk. And on net profit, we delivered by CZK 200 million more, which is also reflected in higher return on tangible equity. Now if you turn 2 pages, you can review our 2020 income statement in more detail. Last year, our profit was heavily impacted by [indiscernible] demand. Starting with the positive, it was the acquisition reflected in one-off gain of CZK 1.1 billion and subsequent consolidation of freight [ orders ]. On the [indiscernible] , COVID-19 pandemic has to elevation cost of rate by CZK 2.8 billion and subsequent lowering of the interest rate environment, which put more pressure on the net interest margin. Despite the negatives, we delivered 4.5% growth of the net interest income, which supported the operating income growth of 15%. Elevated cost base, as you will see in a minute, was driven by the acquisition while only [ precising ] perimeter, we kept cost base even a tick below 2019 level, a nearly 7x higher cost of risk resulted in the net profit decrease by 35% year-on-year. So altogether, the reported cost to income ratio dropped to 45.7%. However, the ratio would be nearly by 5% higher once it excludes one-off gains from the acquisition. Now on Page 27. On the right-hand side, we provide you with a decomposition of net interest income. The interest income strengthening came predominantly from the loan portfolio expansion by nearly 45% year-on-year. This upside was partially offset by continuing yield erosion caused by changing product mix and various interest rate environment. The chart below shows positive effect of continuing repricing actions of our customer deposit base. This obviously helps to partially compensate for yield erosion in lending. Further detail of these actions will be provided in the balance sheet section later. And the third component of the NII composed of the other interest-bearing assets and liabilities. In the second half of the year, the interest income from our investment portfolio of government bonds and from excess liquidity was almost fully offset by higher cost of hedging and wholesale funding costs. On the next slide, you can see the composition of net fee and commission income. The income side went up by 1.3%, while expenses increased by nearly 30% year-on-year. Main drivers of the elevated fee expense are commissions based to the Tied agents network of Building Savings Bank for distribution deposit program. And accounting the classification of some reimbursement from fees to operating expenses. And this concerns predominantly [ our ] investments. The next page to further develop the composition of the income side. You can see positive and negative trends there. On the positive, the third-party commission income stream was expanded by 5.6%. In 2020, we doubled the distributed volume of investment funds with the great support of our new specialized surface loan and further amplified by the management decision to rely heavily on the trailing fee instead of the opening fee. And secondly, the servicing fee income increased by 10.5% year-on-year, and we successfully repaired decreasing trends to consolidation of the billing sales product generating recuring servicing fee. And on the negative, the transactional activity slowdown post-COVID-19 outbreak predominantly on ATMs and resulted in the transaction fee income declined by 15.2%. Now let's have a look on the cost performance. Firstly, the acquisition parameters. On the right-hand side, you can see that the cost base of the [ acquisition ] parameters was mainly stable or more precisely, 20 basis points below the last year. This did -- this demonstrate continuing strong cost discipline of the bank. There are basically 2 main inflationary pressures underneath. Visible on the D&A line and regulatory charges, which is predominantly contribution to the deposit insurance fund connected with our customer deposit base expansion. These pressures were successfully offset mainly through lower marketing expenditures during country lockdown and savings on rental costs. And if you turn the page, we can continue with the consolidated view. Increasing [indiscernible] on the chart on the left-hand side has basically 2 main drivers: First and foremost, the acquisition namely of consolidated cost base of acquired entities, together with balance cost of their post-acquisition structural integration with MONETA. The incremental cost base was partially offset by already raised cost synergies. However, the full potential of CZK 300 million will be realized fully in 2021. And secondly, higher personnel expenses were impacted by 2 factors: The first was obviously the acquisition; and the second, accrued for management bonuses recognized in the fourth quarter. It is important to highlight here that the net growth for 2020 is up 60% of the previous year, aligned with the performance on the bottom line. So this concludes the profits and loss section. And now I will hand over to Jan Novotný, who will continue with the balance sheet section.

Thank you very much, Jan. Now in the next few minutes, I would like to walk you together with myself going through the rest of the balance sheet development section of today's presentation. Let me start on the Page 33, where you can see the development of our overall balance sheet in last 5 quarters. You can see that we have ended up with a CZK 301 billion at the end of fourth quarter 2020, and I can also see more detailed overview of the composition on both sides of the balance sheet. We have expanded it by more than CZK 80 billion throughout 2020 with a steep growth, especially in net customer loans by more than 44.5% as well as in core customer deposit by even more 47.4%. Both thanks to the acquisition of former business entities as well, and thanks to a very healthy organic growth in several categories that we will cover on next few pages. You can also see that as of Q4, we have reduced our position in both repo operations and reverse repo operations. And we have increased our portfolio investment securities by almost CZK 10 billion year-on-year. Now on the next page, on the Page 34, you can see more details to the last mentioned category. We have reached almost CZK 36 billion in investment book as we are having a very comfortable liquidity position, and we are optimizing it with a yield shown on the right side of the page. Maybe one more important fact to mention, is that we are investing [ solely ] into the Czech government bonds. Now let me move to the next page, Page 33 -- 35, which is showing the evolution of our loan growth for the last 9 quarters, in a split by customer segment. You can see that despite the expected COVID environment, we have been very successful in delivering our long-term strategy to grow our lending group both organically and through acquisitions. The total growth of the lending group was almost 45% in 2020, and we delivered this growth mainly in our strategic segments, meaning retail and small business. From a share perspective, we are proud that those 2 combined which have reached more than 70% share on our lending book at the end of 2020, and is fully in line with our strategy to be a retail and small business bank for the customers on the Czech market. Now let's -- please let me move to the next page, where you can see the development of the loan portfolio yields. You can see that there was an decrease of average yield throughout 2020, mainly due to the shift of the overall portfolio composition to a less risky and secure mortgage lending. This is impacting the retail part of portfolio, but also due to the primary changes, especially on the commercial portfolio [ on loans ] price based on the [ flow rate ]. As you can see on the right side of the page, both factors had an impact starting from the second quarter, meaning the private change as well as of the acquisition of large mortgage portfolio in [ formal restore ] entities but you can also see that the margin has stabilized in the following quarters. So that was a brief overall book overview and now let's dive a little bit deeper into the [indiscernible] categories and its yields evolution. Starting with the retail part of the portfolio. And for this section, please let me hand over to Andrew.

Thank you, Jan. So on Page 37, we show the detailed development of the retail loan portfolio. Overall growth of 68.1% year-over-year was significantly supported by the integration of Wüstenrot, which added CZK 49.9 billion in receivables. Underlying organic growth, on the other hand, was still healthy at 15.3% year-over-year, which is more than double the rate of the market, which is up 6.9%. Mortgages, obviously, continue to be the key driver of growth, with the portfolio up 124%, including the acquisition, while the underlying organic growth remains extremely strong at 39.9%. The mortgage market in the Czech Republic remains very robust, and despite our relatively conservative positioning to the market in the second quarter in response to the first wave of the pandemic, we were able to build a very strong pipeline during the second half of the year. And in the fourth quarter, our market share on new production reached 17%, which is the highest we've ever had on a quarterly basis. Our consumer loan portfolio grew 20.3% year-over-year. However, on an organic basis, it declined 6.4%, driven again by our extremely cautious positioning in the second quarter and subsequently, relatively weak demand in the market more broadly. We also transferred approximately CZK 1.2 billion of balances to NPL as a result of the new payment moratoria we introduced in the fourth quarter, and this contributes to about 2.4% of the decline in the balances in this segment. At present, we see little sign of meaningful recovery in demand in this market, and we expect this business line to remain challenging throughout 2021. Similarly, when you look at the revolving products, we continue to see decline there as there's lower demand for short-term credit and clients accumulating more or higher deposits in current accounts, which obviously affect this segment. In the auto loan portfolio, which declined 16.6%, which was driven by lower new sales, largely as a result of mandated closures of the dealerships on which we rely for distribution here. And we also see generally lower demand for cars, especially in the second-hand market, which is where the bulk of our business is. Moving on to Page 38. We cover the yield development on the retail loan portfolio. The yield on the mortgage portfolio was broadly stable throughout 2020 at 2.2% with a 10 basis point decline visible in the fourth quarter. We expect this trend to continue in 2021 as we see lower new business rates in the market kind of 10 to 15 basis points below this level. Overall, we expect to see the portfolio rate to continue to decline gradually in line with this trend. On consumer loans, the yield declined 110 basis points to 7.9%, driven largely by the integration of the Wüstenrot portfolio, which consists of a lower-priced housing purpose loans. On an organic basis, the decline was only 20 basis points, which reflects the long-term trend in this category, driven by continued price competition in the market. As you saw earlier, new business rates dropped 50 basis points across the market, and we expect this to continue into 2021, and our new business pricing fell further as a result of a needing to align more closely with the market. And again, we expect to have to remain competitive in this segment throughout this year as we face fairly aggressive competition. In terms of auto and credit cards, you see the yields are broadly stable, the 2 charts at the bottom of the page.

Thank you very much, Andrew. Now please let me walk you through the similar overview for the commercial group on the Page 39. You can see that we have achieved a growth of more than 13% year-on-year and you can also note there is a small drop of the portfolio at the end of 2020 due to a seasonal decrease of the working capital [ line usage ]. However, the working capital product line is still a very well growing portfolio with a year-on-year growth of more than 17%, as you can see on the chart on the right side of the page. Here we were very successful in implementing several state guarantee schemes, which allowed us not only to grow a profitable portfolio, but also allows us to greatly improve our risk position from a collateral perspective. Similar approach, we have also successfully implemented in our new holding production in small business, where again, we have improved significantly our risk position, thanks to the usage of the state guarantees schemes. And at the same time, we have successfully maintained a very solid growth of this product line by 18.6% in year-on-year comparison. Now please let me turn your attention to the Page 40, where you can see the development of the loan yields on commercial book. As I have already mentioned on previous pages, the key impact on the commercial yield was the drop of partners during Q2 with a full impact during Q3. You can see that this has been stabilized in Q4, but a slight different in the small business, whereas the guarantee schemes in production allowed us to allocate significant to a technical team production as well as significantly improve our risk position. We have decided to decrease slightly the pricing of new production while maintaining very high profitability of this product line. The second section is our yield on loan portfolio on auto, where we continue to improve our financial terms with our partners, which led to overall improvement for the loan book yield in 2020. So that is all for commercial loan book. And now please let me thank you for your attention, and over back to Andrew to walk you through the rest of the balance sheet section of today's presentation.

Thank you, Jan. So in this the -- in the next section, we present some detail on the deposit portfolio, but in the interest of time, I'm going to focus really on the cost of funding, which is detailed on Page 42. So overall cost of funds dropped 28 basis points year-on-year. This was driven by 16 basis point decrease in core customer deposits and 110 basis point decrease in wholesale funding. The core customer deposits began to benefit from a series of repricing actions we initiated in the third quarter -- the second and third quarter. In total, we repriced approximately CZK 75 billion in savings balances with this effect rolling in from August onwards. And based on these actions, we expect to see some continued improvement throughout the first half of this year where the cost of funding should drop to around 35 basis points on the core customer deposits by the middle of the year. And to date, we've been able to achieve this without any significant outflows in the portfolio. The other important driver here is that we continue to enjoy strong growth on the current account balances, which obviously -- where we obviously -- we don't pay any interest. So as we continue to maintain the pace of growth there that further feeds into the cost of funding. As I said, on the following pages, we detail the development of the balances in the individual categories, but I will skip over that and hand over to [ Carl Normann ], who will take you through the risk metrics and asset quality.

All right. Thank you, Andrew, and good afternoon. We are now on Page 47 with an overview of cost of risk for 2019 and '20. Due to the COVID pandemic, the 2020 cost of risk sharply increased year-over-year and made it out close to CZK 3.6 billion or 1.74%. The bulk of provisions was booked in the first and in the second quarter of last year. Looking at the 2 segments, the retail portfolio showed cost of risk of 1.8%, where the commercial portfolio ended up at 1.63%. On the following page of Page 48, here, we provide a more granular view on the key drivers of the [ bookers]. The impact of macro deterioration and the direct COVID-related measures on provisioning accounted for close to CZK 2.8 billion or 1.35%. If you -- as the book ups related to the acquisition of Wüstenrot, the total 2020 cost of risk for these 2 aforementioned elements and the core cost of risk amounts to just 26 basis points, which in fact, constitutes a slight improvement year-over-year. Going to Page 49, we have an overview of receivables and loan loss provisioning balances over the last 8 quarters. As you can see on the chart, provisioning balances nearly doubled year-over-year and reached close to CZK 6 billion. Despite the significantly increased amount of the loan book, the overall coverage increased year-over-year from 1.9% to a solid 2.6%. On the next Page 50, we have a breakdown of the COVID-related book-up of provisions and the total amount of close to CZK 2.8 billion. There are basically 4 categories driving this: One, CZK 1.5 billion impact stemming from the macro inputs into the IFRS 9 model; the second, more than CZK 700 million migrations to stage 2 and 3, driven by portfolio moratorium; the third element, more than CZK 400 million related to post-moratorium loan restructuring; and last but not least, almost CZK 100 million for exposures in certain industries and individual commercial exposures with an increased risk profile. Moving to Page 51. We have a more granular breakdown of the evolution of the NPL stock over the last 5 quarters. Quarter-over-quarter, the NPL ratio increased from 1.5% to 2.3%. This is almost entirely driven by the fact that we have adopted a prudent approach by having moved altogether around CZK 1.9 billion to stage 3 in the fourth quarter, and these are exposures of customers having asked for additional payment holidays or restructurings. The vast majority of these receivables are retail exposure, a comparatively small share are commercial customers. Going to Page 52. The chart shows the development of the NPL formation throughout 2020. Adjusted for the amount of downgrading exposures in the amount of roughly CZK 1.9 billion, requiring restructuring or additional payment holidays, the new formation of NPL from the core performance showed similar numbers like in the preceding quarter. As a result, the total NPL stock increased from CZK 3.4 billion in September to CZK 5.4 billion at year-end. On the next Page 53, we show the evolution of delinquencies since the first -- fourth quarter 2019. The 2 charts clearly shows that the different delinquency buckets benefited from the various payment moratorium, mostly in the second half of the year. However, we expect delinquencies to rise again going forward, following the end of the different payment holiday programs and potentially declining governmental support. Turning to Page 54, we have an overview of loan portfolio balances and coverage is broken down into stage 1 to 3. As a result of the downgrading of receivables throughout the year due to the COVID impact on our customers, stage 2 receivables increased from more than CZK 4 billion to close to CZK 14 million in December. In the last quarter, we moved more than CZK 2 billion to stage 3, almost entirely due to exposures requiring restructuring of payment holidays after the state sponsored moratorium, which ended in October. This also led to a shift of underlying provisioning balances from stage 2 to stage 3. On the next Page 55, we show the development of receivables covered by payment holidays over the last 3 quarters. Once at the peak of the moratorium, we reported a total of CZK 34 billion covered by -- at the end of December, we had a total of CZK 1.6 billion, plus around CZK 300 million economically collectables of receivables. In retail, the moratorium penetration dropped from a bit more than 15% to 0.9%, and in commercial, we saw a drop from 15% to 0.2%. So summarizing the risk section. The bottom line message that throughout '20, we have built up a substantial coverage for COVID-related credit risks of almost CZK 2.8 billion. This coverage provides protection against customers ultimately defaulting in coming periods. Needless to say, developments around infection rates and government support to companies and individuals and the impact on GDP and unemployment rate will determine how delinquencies will evolve going forward and hence for us require close ongoing monitoring. With that, I hand over to Jan Fricek.

Thank you, Norman. In sake of time, I would be very brief about the capital. And on Page 57, which projects a strong capital position of MONETA with positive trends recorded across all 4 metrics. And if you flip the page, I can comment on the excess capital position. At year-end, MONETA recorded the highest level of excess capital over its [ Q1 ] capital target, including 100 basis points management buffer. The CZK 6.4 billion excess capital contains CZK 2.1 billion of accrued dividends from the net profit of 2020. I also want to point out that we delivered Czech National Bank for inclusion -- excluding the dividend into the regulatory capital to emphasize our intention to pay it out to our shareholders this year imminently after we get regulatory deadline. However, 3 hours ago, we had quarter revenue of financial results with the supervision at the Czech National Bank during which they emphasized their intention to fully follow the guidance of the European regulators with this respect. And as you probably know, this guidance limits the dividend payout at 20 basis points of RWA, risk-weighted asset, or 15% of cumulated net profit of 2019 and 2020, depends what is lower. Nevertheless, the guidance is currently valid only until September, which provides still some chance to pay out the rest in the fourth quarter this year. So with that, I will now hand over to Tomáš Spurný, who completes the presentation.

Very well, that takes us to our guidance on page -- on Page #60. We republished guidance with the intention to confirm it. The target net profit 2021 remains at CZK 2.8 billion. And this guidance consists of the following: We would like to generate minimum operating income at CZK 11.2 billion or, hopefully, exceed it. The cost base stay flat at CZK 5.5 billion or below under strength of the synergies that we've realized and offsetting some of the inflationary pressures that we feel, which will translate into the impairment profit of the bank at minimum CZK 5.7 billion or higher. Our cost of risk is projected in the range of 80 to 100 basis points. It depends on the evolution of the Czech economy as well on the additional volumes that we generate through organic growth, and we hope -- we actually pray that the effective tax rate stays at 20%. So this should translate into earnings per share at CZK 5.5 per share and increase on the return on tangible equity to come in at maybe more than 12% or higher. So this is the guidance. On Pages 61 to 64 -- sorry, to 62, you see the key assumptions that we have -- that we have on the medium plans and perhaps a couple of words on the balance sheet on Page 62. In 2021, the minimum target is to increase the lending portfolio of the bank, which is gross performing. It doesn't include NPLs, CZK 243.2 billion, with growth being aimed at the retail portfolio, where we project stability or a slight decrease in the commercial book. And the commercial book comes down because we expect repayment of the leasing portfolio, and we expect growth on the small business franchise and some other movements in the composition of the portfolio. So on commercial, we are aiming not to increase the volumes, but rather to improve the mix, providing a better capital return. And on the retail, we are aiming for improvement of both mortgages and unsecured lending. Just for your illustration, in 2020, the bank did CZK 32 billion in mortgages -- new mortgage volumes, and it provided so-called CZK 9 billion of what we call super net. This is the incremental lending on unsecured. Just for comparison, in 2019, on the unsecured lending, we did CZK 14 billion. So the challenge is on unsecured lending if the market is very, very competitive. On the deposit side, we are looking at minimum target, core deposits, CZK 273 billion. Again, aiming the improvement mainly on the retail side, where we are seeking to call down some of the higher interest rate deposits on the commercial. So all the eyes are on development of retail franchise of MONETA Money Bank. Perhaps, a couple of words on investor interaction. We are planning to have the first quarter disclosure on 29th of April. We are also going to -- we are planning some conferences. Therefore, it's right here. I won't go through it because it is fairly clear. All of it will be virtual as we have learned to do in 2020. Ladies and gentlemen, we really thank you. We thank you for your participation, for your time, and we are ready to take your questions.

[Operator Instructions] We have a first question from Anna Marshall.

Two topics from my side, please. Firstly, to follow up on your comment about dividends. Just wanted to understand, purely theoretically, what the scenarios could be in terms of potential distribution in Q4 of the year after the regulatory restrictions [ will require ]? Would you aim to distribute wherever you've accrued for 2020, 80% of 2020 earnings already in that one quarter? Or would it be part of that in Q4 and then potentially elevated distribution in the coming years? So basically, how are you looking at that matter? And the second topic is the strategic matters in relation to the PPF proposals. Just wanted to ask you for an update on -- perhaps more detail than was mentioned in the management opinion in terms of the benefits of the tie-up potential acquisition of [ your ] bank and as well as the 2 other affiliates. And also, how would you look to mitigate the potential risk related to this acquisition?

Anna, this is Tomáš speaking. The first element, dividend, I want to be crystal clear here. We presented to Czech National Bank our business plan going forward and spent considerable amount of time discussing the business plan with them in context with our 2020 results. We plan to -- in the fourth quarter, we have CZK 3.9 billion distribution plan for fourth quarter of 2021, subject to regulatory approval. And this figure consists of 2 elements: first, the profit accrued for dividend in 2020, which equals roughly CZK 2.1 billion and CZK 1.8 billion to pay from the profit not distributed and kept by the bank for 2019. So this is what we are committed to propose and discuss with the Czech National Bank. I asked this question today, and I was told that the bank will follow the ECB [indiscernible] respectively, the Board recommendation, which is very clear, and they have unequivocally taken that position vis-à-vis our communications in the market. I also asked them to be allowed to make that comment to our investors so that we manage expectations accordingly. And based on shareholder feedback, if you look at the ECB allowance, this would come at around -- it would come at around payment of CZK 300 million. And we, on balance, are probably not going to propose this because the administrative cost related to paying CZK 300 million to our shareholder base is not really favorable. We spend a lot of time with it, especially with respect to guarding and managing the withholding taxes in the bank's domicile of our investors. So it would be very painful for us to do such a small distribution. So this is on the dividend. On the PPF, if you don't mind, I will not make any comments on the benefits or [ areas ] at this point. I think our position on that -- because if we were successfully mastering and approving such transaction, we have a real -- in my view, we have a real chance to acquire additional 5% of the profit pool of the Czech National -- of the Czech banking system. And if you look at the profit pool on 2019 basis, this is CZK 91 billion, 5%, I think everybody can calculate that. In 2020, COVID color year, the net profits of the Czech banking system at third quarter was CZK 39 billion. So I think it's reasonable to expect that the banks this year will generate CZK 52 billion [ to ] CZK 55 billion on invested equity as the total equity is at CZK 575 billion. So I think if you focus on retail banking, on the profitable segments of retail banking, we were paying disproportionate share of the profit pool in medium term. And for me, the medium term is 2 to 3 years. And I think we've -- had proven on all our transactions that we can handle things fairly quickly. If nothing else, we can merge companies within 6 months of acquiring them. So from that perspective, mitigation of risks -- unfortunately, I have a different view on risk here because if you look at MONETA's books, we hold unsecured portfolio slightly below CZK 40 billion. 70% of that portfolio are related to so-called consolidation loans, where the bank consolidate competitors and own exposures, whilst if you look at purchase-related financing, we have smaller tickets and a lot better-diversified rate profile. And I don't want to judge what we will find there, but this is my experience, very successful experience from Slovakia when I did -- when VÚB Banka Intesa acquired [ Quatro ] and [indiscernible], which today are very -- still contributing significant value to [ give it ] profitability. So I don't want to judge it now, but we will manage the risk. As we knew, we have excellent risk management on the front. We have proven that we can collect debt. And I think if you look at our profitability since IPO, we have actually sold CZK 20 billion of nonperforming loans that we've inherited from the previous owner at an extraordinary gain of CZK 2 billion. So I think that speaks for itself. And I am not making any conclusions now. So what I'm simply saying, we will look at it, and if we believe it's good, we will put it in front of our shareholders. And that's all that we can say at this moment.

The next question comes from Simon Nellis, Citi Bank.

Just following up on the PPF transaction. I was just wondering if -- I mean you obviously looked at this, but are there any risks that they wouldn't have to make a mandatory buyout offer at [ AD ], if they did exceed a 30% stake? I mean are there any scenarios where they wouldn't actually have to tender for the free floats in your view?

Thank you. By the way, I very carefully studied your reports on that. I believe you have a mistake in the accretion under the Citi scenario, including the synergies. The accretion is actually 8%. It's not 0 under your own calculation. And I think you could have one of the best reports that I have seen. Yes, there is risk that they will not make the mandatory tender offer and the risk is called time. Should they acquire 20% in us, and subsequently, if the transaction were to take place 12 months from that day, that is the acquisition, there is a risk of time because CZK 80 per share, they have to pay as long as the change of control -- potential change of control occurs within 12-month time horizon. So this is the first risk and last one because I cannot see any other. And I would comment that they have made a public statement, which is actually very unusual for them as they will do it at CZK 80, and they have also made a public commitment that the bank will remain traded. So I hope [indiscernible] that they will keep these commitments.

Yes. Okay. Very interesting. I'll take a look at my analysis and correct any mistake there. Sorry about that.

I want to say it's [ CZK 9.6 ], that's the earnings per share, [indiscernible].

I'll check it out and correct it. So that's very helpful. So I mean, do you think that this kind of signals, if they do want to keep it listed that they are open and willing to potentially renegotiating the share exchange terms because it seems like to me that the terms are not particularly satisfactory for shareholders, given it doesn't imply much of a control premium [indiscernible] per share.

If we frame it around your model, which is dual, one is based on the Citibank's model of our performance and second is based on our guidance, I think you are correct in short -- in medium term because you look at it on 2023 basis in your calculation. I think what is for debate, and it's not for us to decide, it's for shareholders to decide, is that a larger bank is typically more robust in the long-term horizon. And that's, I think, debatable. The benefit is obvious. It's very debatable from short-term value perspective. And as I have said, I do not want to make any value-related statements until I go through the due diligence.

Okay. Fair enough. Maybe I can ask just some questions on the operating result then. I see that the consumer loan yield that you're writing is below now the market, and I think that's driven by the acquisition effects. Are you expecting to be able to claw back and increase that consumer loan yield over time? Or is that going to be under continued pressure in your view?

I will make the opening comments, which is effectively -- with respect to our internal targets on consumer loans, we have ended CZK 1.6 billion short of volume for 2021. So we have not fulfilled the plan. We tried to rectify the matter. We tried to save intensity of marketing communication in the fourth quarter, and we were successful because we've taken more than 20% of the market. Currently, in the month of January, the bank is around at 5% deficit to its current target. So we've improved the production. However, if we are continuing at this pace for the entire year, which is a ridiculous statement, we would come in 5% below our target. And this will cause a significant issue for 2021 performance. It causes an issue, but we would see a gap in our related revenue in 2022 and in 2023. This is a reality which we face currently. And currently, we are operating -- in the first month of the year, we improved the price. Andrew, can you help me out with this?

In the beginning of the year, we're about 20 basis points above the fourth quarter level. But I think what I would say is, we will need to stay competitive in this market now because as Tomáš just highlighted, we had to build market share above where we would normally be in the fourth quarter in order to get closer to our targets, and this will have to continue. And I think the other pressure that will be there is, I believe, the market will continue to move down. So I think we won't remain significantly below the market in the medium term. I think we won't be significantly above where we are now because there's continued pressure.

So entire equation on that front has 2 components: one is the level of our production and price; the second level is the level of extraordinary repayments that we see in the bank, and that has increased [indiscernible] [ slight ] essentially. And I think when we come out with first quarter, we will again reinstate this reporting on the repayment of the portfolio. But what is remarkable event of 2020 is the following: If you look at the exposures of the moratorium, about CZK 3 billion of that were extraordinary repaid by the customers. So we've seen a significant spike in repayment activity as people -- good honest people with good intention are trying to reduce their debt quite dramatically in the face of uncertainty of COVID. So it is very difficult to make a call on that. And I have previously commented that the target of the bank is to continue at the level of 2019 in order to rectify the situation, but the situation is difficult.

The next question is from Andrzej Nowaczek, HSBC.

First, I just have a follow-up question on consumer lending volumes, especially in the last quarter, but really in the last 2 quarters. The lack of growth, is it solely due to the lockdown? Or is there more behind it, such as, for example, would you have lost customers that you acquired from [ December ]?

I think if you to look at the bank, and we've reported on it all quarters , we have so-called preemptive D&A where we try to approximate internal lending capacity based on customers whom we know. So the capacity is sufficient to accommodate the growth of '21. However, the demand is extremely low. If you look at our digital spend, we reduced the digital spend by about 30%, and we optimized it. We generate roughly, 2020 versus 2019, about 140% of the lease. So we have increasing lease. However, the conversion of those leased, especially on the [ inter ] lending, dropped down by 60% because of risk concerns and because of price points and because customers don't take the loans. But the latter is the most important. People simply don't pick it up. This is very important. And as a way of strategy in late 2019, we've introduced more prudent approach and consolidation of debt. Therefore, while this category previously says consumer debt consolidation constituted 70% of our volumes and 30% was fresh lending, we actually reversed it, and said, we will continue on diversification of our books to smaller tickets and to [ debtors ] who have lower indebtedness and higher [indiscernible] ratios. So that change of strategy led partially to decrease of the growth in the unsecured consumer lending strategy, and we believe this was the right move because post-COVID what we are observing is that the highest default that we had are unconsolidated loans which has, for the last 10 years, behaved entirely differently. They were in line with normal straight installment lending. The consolidation loans are now having a lot higher rate of default because for the last 10 years, as you had the rates coming down, people were able to consolidate, get a top-up and decrease the rate where the final product of that was lower monthly payments. This now becomes increasingly more difficult. So those are the customers who are the most vulnerable, and I repeat and underline, we have departed from this -- in November of 2019.

Okay. So what about [ what was not accomplished ]? And on PPF, if you can answer it, what are the related party transactions regulations? Hypothetically, would Air Bank had to be formally merged with Home Credit for this not to be an issue? I mean Air Bank having its liquidity, which is then -- and deployed to lend to contrary customers. Is that an issue?

No, that's incorrect. Air Bank would be merged as an end product with MONETA, and MONETA would own Home Credit, which has 2 entities: Czech Republic Slovakia; and the third entity that Home Credit offers -- that they operate is called Zonky. You can find it www.zonky.cz, which is a quasi peer-to-peer platform. However, most of the funding is provided to the group. So they have a digital platform. They have point-of-sale and credit card lending, and they have that. So the structure, today, they are sister companies. If the transaction were consummated, we would merge Air Bank to MONETA. So that would become a single entity, and we would own those subsidiaries. And if you look at our structure, today, we have 2 business subsidiaries, one is called MONETA Auto, which is a balance sheet of approximately CZK 7.3 billion, which competes head-to-head with Home Credit. MONETA Auto finances used automobiles, and it's profitable solid company, which -- where we have -- where the yields that we show you in the yield section of our lending are on both retail and commercial side. And second, business entity that we have is called MONETA Leasing. This was bought in 2014 by [ GE ], was bought from Volksbanken, and this is entity that we have pulled last year into effective runoff as the leasing category in Czech markets have become very difficult to maintain due to VAT and other tax-related issues. So we today have 2 subsidiaries. We would merge Air Bank with one of the [ proper ], and we would most likely amalgamate Home Credit with MONETA Auto, as they are 2 direct competitors. And just for you to understand in Czech market, every major bank operates such entity Komercní Banka Italská has something called [indiscernible]. That was also a privately held company, which they have successfully purchased more than 15 years ago. Our competitor, Erste Bank owns something called [indiscernible]. This is actually the largest lender of the semi-secured credit financing leased vehicles. And we also have a very large player on the Czech market, which is called Hello bank!, which is 100% owned by BNP Paribas Group. That company also compete with us in this space, but there are a lot more focused on credit card issuance and on point-of-sale retailer. So this is the market landscape where if and when we would take out a significant competitor in a fairly concentrated market.

Our next question is from [ Klaus Umek ].

Sorry. Can you hear me?

We can hear you, Klaus. Please go ahead.

Sorry, guys, it's all over [ scribbled ] here. I think we have -- because of the passcodes to registration adjustments, sorry for that. So yes. So first of all, congratulations on the strong results in a very difficult environment. Perhaps, one -- first question around the management recommendation for the CZK 80 takeover price, partial takeover. You obviously mentioned the excess capital of CZK 6 billion today, also the CZK 0.8 billion of related provisions that you've taken that could result in a significant upside. How do you think of this capital in the context of that price? That's not something that we've seen in the management analysis or recommendation that you've released on Friday.

We have fairly considered this. I think that if you look at the 180-day average, we have published it. If you look at the closing price, we also published it. And obviously, I would think that given the granularity of information that we provide. Wherein the third quarter, we published the excess capital, and we are very consistent. I would expect that the capital markets are intelligent enough to evaluate the excess capital and the earnings potential of the bank. So I don't really have anything to say on that because it's not my place to say. And I would like to add that that this is not the capital position. And I'm sorry, based on your voice, this is not [ Klaus Umek ], I know. [ Klaus Umek ] quite intimately and the voice. I'm sorry. [ Oliver ], I think it could be [indiscernible] on the line. So we have a bit of...

Yes. Correct. It's [indiscernible] speaking from [indiscernible]. Okay. Maybe the next question. I mean, obviously, you've also done the benchmarking analysis on the broker recommendation of the price. And that was pre-announcement, of course, we've seen some of the targets that come up post the announcement is probably, analysts went back and revised their models. I was wondering, you do not, of course, I think with a control premium, which is the target price in this case. So I'm wondering how you kind of feel about that using that as a justification for the solidity of the target price?

[ Oliver ], we have not evaluated the appropriateness or otherwise, with respect to control premium or anything else. We basically stated the fact. I think that they were trying to lay it outdoors, something which doesn't belong on our doormat. I think that given the fact that more than 50% of the bank is owned by professional institutional investors, they will make a judgment call on all of that. We have simply done our bank from the chair that belongs to us, and we will now -- we will not make any additional comments on that because we've laid it out in the position. You are trying to create a situation where your question actually implies the answer. And I'm sorry, we expect customers. We distribute your product. We are engaged continuously with your boss. Mr. [ Umek ] spends a lot of time on MONETA. And we have spoken our view. So I don't know what else to tell you because there is nothing to say. And we have individually and collectively said that the management of MONETA will own its shares.

Understood. Okay. Maybe next question on the direct lending that you've mentioned that has been under pressure a little bit. I'm trying to understand whether other assets apart from Air Bank, whether that's a good fit in the current environment on the risk side. I understand it is early days, and you will obviously go through a due diligence. But just generally speaking, whether that's your view, a good strategic fit in the current environment with the pandemic and post-COVID world.

I tried to explain my outside-in view, and I underline, outside-in view that in my opinion, outside-in, I believe that the purchase point lending, if you go into a furniture shop and you buy a credenza for 36 months installments, it's actually a lot safer then refinancing an unemployed minor [indiscernible], who has had 12 different credits, which averaged a 15% PPI. And if I refinance him as 7%, and give him a 20% top-up, I am better off. So this is my view. I tried to explain it. And actually, you know what, if I look at last 20 years of their performance, the facts speak in favor of my outside-in view.

Okay. And perhaps, on the kind of next-step short term on the transaction. I mean, obviously, you said you would now kind of engage immediately and start working and going through the -- starting to do due diligence. I'm just trying to understand timing around that, when would you expect to give any further color on the transaction timing.

We are going to appoint advisers next week. So currently, we are in a position of having their proposals. We are trying to make that a competitive process in order to balance time and quality. So I hope that we will have advisers flying down. In terms of investment bank, we have JPMorgan. We will take one of the advisers from the Big 4. We have also studying request for -- well the results from law firms. So this is one package. I think it will take us a couple of weeks to begin, and ultimately, we would like to bring the result to shareholders at the end of April. Whether we are able to manage the schedule or not, I caution because it could take a little bit more. These are not publicly traded entities. And I'm sure it will be a -- it will take some time. So we will go through the process. And by the way, I have called Mr. [indiscernible], he used in a video of [indiscernible]. And I asked him whether he would independently review the proposal and the due diligence work in order to appease Mr. [ Umek ], your boss. I will talk again also on Monday, whether he is available to do so.

That's a good idea. Perhaps last question. A last question from my side on the -- should this kind of not go through, you've mentioned obviously that you've been actively looking at potential acquisitions. I think you've mentioned 2. Is that then becoming your focus should this transaction not be voted in by shareholders, for example? Or what would you kind of think of as the B plan as a standalone entity going forward?

I'm sorry, I didn't understand the question. Could you try to paraphrase it for me? I really didn't, I apologize.

That's okay. So thew question was if you would continue pursuing the financial acquisitions that you mentioned, you were looking into prior to the PPF approach. Should it be...

[indiscernible] There are 2 other things, which are still open and even when an alternative, which has better value for our shareholders comes, we will entertain it. One is an acquisition and second is the potential takeover of MONETA. And we have consistently said throughout the post-IPO history of this bank that if somebody comes with an offer and wants to take over MONETA, no problem. We are open to that. And we have said very clearly and transparently in our position that there has been discussions, and that metric is not closed. So we say, fine, let's see, if it comes. If it comes, we will consider it on both ends.

The next question is from Robert from PKO.

I have maybe 2, 3 quick questions. First, is my understanding correct that keeping Home Credit as a standalone entity does contribute positively, has advantages with regard to risk-weighted assets? Secondly, assuming that we get a 25 bps hike in the reference rates this year, what would you expect in terms of the impact on the average loan rate, especially in the corporate and the mortgage segments? Because you mentioned ongoing competition a couple of times during your presentation, so would you expect the average pricing in those 2 segments to go up by fully 25 bps or by a smaller amount? That would be it for now.

I'm sorry, I don't want to take floor from my colleagues, but if there is a hike of 25 basis points, we will get benefit from the hedge position that we have in the bank. However, on the consumer lending, this will have impact not whatsoever, and there is plenty of resets by the Czech National Bank, and these rates are driven not by the interest rate environment but the [indiscernible] index of competitiveness. So the more competitors there are, the faster the erosion of the same. So that's the first part of your question...

Yes indeed, that's why I'm asking only for about corporate and the mortgage segment. That's correct, yes.

So if I may, Robert, to commercial portfolio, if you look on the composition of our commercial portfolio, it's provided on Page 39, there you can clearly see the product details. The immediate impact of interest rate hike would be translated into the working capital, which currently the bank holds and that is [ CZK .5 billion ] in this portfolio. The yield of this portfolio will go up immediately. In terms of the investment portfolio, about 45% of the exposure as a [ small business ], the rest is on [indiscernible]. So we can add additionally about [ CZK 20 billion ] of the exposure that [indiscernible] is up again as well. But the rest does basically remains as the rate as it is because it's a big thing. But if you look on our whole balance sheet in total, I'd say, you can estimate that 25 basis point hike means about CZK 100 million -- approximately CZK 100 million positive impact on the NII. However, what is important in our business plan as we published in October last year, we have already reflected 2 hikes as they -- these were guided by the Czech National Bank in the previous outlook as well. So in terms of the change or impact to our business plan, this basically does not provide any incremental upside. Hopefully, this answers your question.

Okay. And the Home Credit and risk-weighted assets impact?

Well there is none really because these assets have -- today, if you look at the way of business model of Home Credit, they originate the loan. It's at 10%. So this to Air Bank is a 7% yield. This is put into a special purpose vehicle, and their business model is that the premium finances, operational expenses -- the premium paid finances, operational expenses of Home Credit, they effectively hold securitized portfolio of these receivables in Air Bank. So it has no impact if you merge the bank on risk-weighted assets. It goes on in the same way as our consumer lending. So there is no impact, per se, but it will increase proportionately with the increase of size of unsecured portfolio.

[Operator Instructions] We now have a new question, please introduce yourself and your company and ask your question.

Can you hear me?

Yes, we can. We can hear you clearly.

It's [indiscernible] from BTG Pactual. Two questions for me, if I may, please. The first one is, just wanted to understand a little bit how the Czech Central Bank works. And how long you expect the review of the conditional part of the PPF tender? And how long you expect it to be? And whether if there's an issue, presumably not because they're already a regulated entity, but I'd like to hear your view. And the second point is, you've been very generous in the explanations that you provided in the assessment of the offer. And you added quite a bit of detail about other potential strategic interest in the company, including someone else that at some point in the past that made the potential takeover offer for MONETA. Now the question is this, did they cover -- sorry, the partial tender offer by PPF has a deadline of February 26. So how likely do you think it is that this other party will show up before that date? Because at that date, the shareholders need to decide whether they're going to give their shares to PPF or whether they're going to keep them potentially to give them to someone else. And if PPF get a 20% stake, presumably, it would put everybody else at a strategic disadvantage. So what do you think is going to happen there? And what can you do to avoid that, please?

Let me -- Jan Fricek will help me with the question. But first and foremost, the probability of someone else showing up, I dare not to assess this because the chance is there. I would add perhaps that the date on the offer in the proposal that we had received is actually dual. They have the option to make the offer longer till, I believe, March 5. So they're 2 days actually to be precise. Second, how our Central Bank works? It is the most prudent -- I think imagine the German regulator, the German Central Bank and combine German supervision with the Bundesbank, and you get the answer. It is a very prudent institution with a simple view of the world. The higher capital, the better; the lower dividends, more splendid. And if there's anything that could be controversial, it will be taken under the microscope. And from a deadline point of view, they will take their time to consider. So if there is anything, which is a related party transaction, it will receive more than 50% of attention than if it were an unrelated party transaction. So this is my view. Jan, if he wants to add something, too.

So I'm just thinking, if I understood the question correctly, you also asked how long it will take the Czech National Bank to answer the potential request from PPF to increase from 10% to [ 20% ].

They have 60-day period. And I think you can expect that Czech National Bank rarely issues any decision prior to that administrative deadline. So you can count on 60 days.

Okay. But conversely, could it be more than 60 days? Could they decide, well, we're going to review it indefinitely.

Conversely, it can be anything because Czech National Bank considers -- just let me provide you an example, it was Chinese group going under the name of CDFC, which took a 10% position in one of the Czech banks and, subsequently, wanted to increase it to 50%. And the Czech National Bank considered it for so long that the Chinese group went bankrupt. So they took 18 months to study the Chinese, never coming to a decision, and then the Chinese simply disappeared.

Well, I guess, in that case, they did their job, right, because they prevented an acquisition from an unstable party.

It depends on your geopolitical views, yes.

Congratulations on these results.

[Operator Instructions] There are no further questions.

So ladies and gentlemen, let me make concluding remarks. I would like to thank my colleagues, and I would like to also thank our staff for delivering on commitments throughout very, very difficult year. We would also like to thank our shareholders. [ Of course ], we will continue to seek to improve the development standards of the bank. We will also continue to find alternatives for the bank, and we will with respect to the PPF proposal, we will keep you posted as much as we can throughout the process, and we expect that it will be formally published on Monday when the result deadline runs out. And I really thank you for your attention, and we appreciate all the questions that we received, and I wish you a wonderful weekend.

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