Nova Ljubljanska Banka d.d. (NLBR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome again to NLB Investor Day, and welcome again to this region of opportunities. My name is Milos Maksimovic, and I will be your moderator for today. Since everyone is here, we should get started because we have a lot to cover. I'm proud to announce our first speaker and one of our hosts, Mr. Blaz Brodnjak, NLB's CEO.

Esteemed clients, business partners from the whole region, investors, investment bankers, analysts, consultants, journalists, colleagues and friends from nearby and as far as California -- as far away as California. So we have people here from California, Sweden, in other parts of the world. And we have people online as well since this is a hybrid event. So warm welcome also to people online. Allow me to humbly and warmly welcome you to this fantastic venue of the National Theater. Welcome to Belgrade, Serbia. Welcome to the part of the world, we, in NLB call and treat as our home. I'm enormously proud to have been privileged by addressing you in person and online at the first Investor Day of NLB Group in its history, consciously organized here in Belgrade following the transformational investment accompanied by just completed role model integration of 2 banks into today already one, NLB Commercial Banka with a fully enthusiastic and motivated team to support our regional clients in the Serbia market as well as in the region being the largest, obviously, Serbia market in our region. Located at confluence of Sava and Danube, Belgrade has been a regional center since Roman times, and the rivers have been connecting it with the Central European and regional capitals. We're now already 2 million inhabitants, significant -- really significant investment into the municipal infrastructure and nationwide educational reform, combined with a project called Digital Serbia. It has got a critical mass to again act as a development hub for the whole region. And we are happy that we have been accepted here as a credible investor and a genuine trend. Similar progress we can witness with some incredible recent unicorn stories in Croatia and many SME companies playing important roles in small global niches, actually playing them from villages throughout Slovenia and other countries in the region. I'm not sure whether everyone here and online has been aware of the fact that Serbia has for many years in a row belong to the largest recipients of foreign direct investment per capita in the world. By that, confirming high attractiveness, all its business environment on one side. And we are convinced also that other regional markets can offer comparable opportunities once all political leaders focus on a dialogue jointly tackling priorities and reforms that really matter. Allow me to just look back for a minute to at times when Belgrade still has only moderate 25,000 inhabitants. This was, for example, still the case in 1869. This is the year when on the 2nd of October, Mahatma Gandhi was born and yet today's world is again in a desperate need of some of his wisdom. On the 20th of October 1869, a fantastic building was put in production, and the first play was performed here in this special place. In 1869, now getting a bit personal, a gymnasium was actually opening doors in the older Slovenian town where I was born and attending the school in 1869 as well, right? This is a town called Ptuj. And to be really personal, in 1869, one of the largest wooden presses for grapes was actually installed at what is today my family's estate. One of the largest wooden presses actually in Northeastern Slovenia, just to reflect a bit on the past. There were many ups and downs for this region in the last 150-plus years, many ups and downs. But I firmly believe that a time has come to settle with the past and focus on what really matters, which is the quality and sustainability of our presence on the planet in the interest of our children. Today, we have all, unfortunately, rightfully again, been extremely concerned and keep fingers crossed through the absurd development in Europe to finally turn to the one common noble idea, which has been connecting and bringing us together for decades rather than dividing us. And midst of the current turmoil, we, in NLB firmly believe that Europe has finally understood the importance of integrating the entire Southeastern Europe region into the cohesive union at a significantly accelerated pace. The time for respective invitations, speed-it-up reforms and full accession is now and the clock is ticking. We genuinely believe in this integration being not only right, but also [ just ], and we have been very actively promoting all initiatives supporting the establishment of the free trade zone of the entire region, leveraging on smart specialization and enormous talent pool. We've been among world's leading regions in terms of Olympic medals per capita. Nikola Jokic was for the second year in a row just awarded the most valuable player of NBA with Luka Doncic contributing some unique magic to the game. Tadej Pogacar won 2 Tour de France races in a row. The last finals in European championships in volleyball and basketball were played by Serbian and Slovenian heroes. Croatian football team played at finals in World Championship in football, Water Polo has been prioritized by Montenegrins, Serbians and Croatians, just to give us a couple of examples, with Macedonia, the Montenegrin handball teams taking Champions League titles. Some of the greatest minds in history, such as Nikola Tesla and many others were born here as well. And these are just some examples speaking about creativity and innovative spirit of our people who represent enormous potential once granted a chance to shine. NLB has onboarded the journey of raising awareness and recognition of the region in the eyes and hearts of global investors by listing our shares at London and Ljubljana Stock Exchanges in November 2018. We have traveled around the world on multiple roadshows. And finally, invited you all to visit us here where we live and create. Being fully conscious of the ambiguities, threats and risks deriving from the conflict in Ukraine with a heart full of pain and solidarity with Ukranian people following still not fully retreated pandemic, please do not resent that we today chose to talk about opportunities our region, its businesses, people and finally the team of NLB can offer to you. We are truly honored by your great response to our invitation, and we thank you all from the bottom of our hearts for devoting your time and attention to us today. We are especially thanking all the investors who have already trusted their money to our business prospects and in advance to the ones who will. At the same time, we today want to demonstrate that we put our money where our mouth is. Besides introducing ourselves and our strategic priorities, we invited and are really privileged by their attendance, reputable speakers and panelists to share with us their views, experience and enthusiasm to demonstrate that our region really is full of opportunities. And we'll rather sooner than later win the deserved attention and even more productive investment keeping our most talented people here. I trust we are all interested in hearing the outside perspective about the shape and above all the attractiveness of the region for international investment. While at the same time, we want to highlight the noble trade boosting initiatives coming from this region. Our utmost gratitude goes to our clients, managers and business owners from all of our markets in the audience and especially the ones participating today at the upcoming panel. Throughout the years, we have developed genuine partnerships, and I can confidently state that we understand we are stronger together and that we are the ones responsible for ever-improving quality of lives and wealth of our people. With our seamlessly delivered products and services to our clients, we continuously improve their experience while with the entire universe of sustainability-related initiatives, we address much broader environmental, societal and governance list of topics. For today's panel, we really gathered a prestigious team following the idea of key industries and smart specialization within our region; energy, food, wholesale and retail of both pharmaceuticals, tourism, finance and last but everything else, but least the ICT industry, and to our belief, some of the most important focus points for the upcoming period. You will hear a lot about NLB's plans from us, of course, but we assess it as extremely important to listen to our clients, to listen to clients with regional operations, also offering them a chance to introduce their vision and priorities today. I'm convinced that this will help all of us getting better insights into our region and will trigger even more interest for investment. Besides that, we are demonstrating that business does neither know nor accepts borders, as we have brought together the leaders of some of the most meaningful businesses from 4 regional countries, partly even competing. We sincerely believe that the only appropriate response to the ever bigger [ debate ] is rather connecting and co-opting. In the afternoon, I believe that NLB will reassure you that our sustainability agenda is getting further boost, and we will wrap up with 3 wonderful people, proving that our society and spirit are much more than strictly business. We are extremely passionate people. And when embracing France, we don't let them you go. Please allow me to wrap up by starting that I'm personally truly happy that we will now be addressed and welcomed to the region by the person with unbelievable drive, especially since he has not been feeling well in last days, he has still come and he still really appreciate. His energy is iconic. He has been carrying the flag of the United Markets of so-called Western Balkans 6. Marko, you are my idol. Esteemed ladies and gentlemen, welcome once more to Belgrade and all apart of the world, a place we deeply cherish and truly love as it is our home.

Thank you, Blaz, once again for these opening remarks. And now ladies and gentlemen, you will have an opportunity to hear the keynote speech given by Mr. Marko Cadež, President of the Chamber of Commerce and Industry of Serbia. Mr. Cadež, the floor is yours.

Hope we hear each other dear friends, large distinguished businessmen and participants of NLB Investor Day. Good morning, and welcome to Belgrade again. I would like to use this opportunity first of all to congratulate the organizer of this event, NLB Bank, for having commercial [indiscernible] on the banka as an integral part of the NLB Group family just closed 2 weeks to go. Thank you very much again. In the Serbian National Theater today, the companies from all economies of the region, NLB cooperates with, but also from all around the world. And we have, as we heard also online presence of big investors, representatives of the regional business system, their present and future potential investors, bankers, analysts. Thanks to NLB Bank for bringing us all together and to businessmen who responded to the invitation who will today participate in the discussion and attend the meeting. I'm so glad that I can learn from you today, my friends. Why in front of us, all risks and challenges, Serbia is still worth investing and why attractive -- why Serbia is attracting 60% of FDIs arriving in this region. We already heard my dear friend and colleague about some facts, but not only despite of that, but because Serbia and Belgrade is also home of more than 6,000 companies from all around the region from Slovenia to Macedonia and they are working here, they're operating here. They are seeing Serbia as a market worth to invest and worth of the -- to place their capital. Of course, despite the fact that sharing the fate of the European and the world economy, it faces great challenges and risks. During the past 2 years of the pandemic, Serbia managed to save its economy, companies and people to exceed the results from the precrisis 2019. In terms of K macroeconomic parameters that for now, after and during Ukranian crisis, it is well maintained and in the first quarter, in the March of this year, the growth of both production and exports of goods and service is continuing to hope it will continue as well to preserve macroeconomics and exchange rate stability, and despite the growth, it keeps important inflation under control still. I will not go into the detail about Serbian facts and figures that I think all of you already know, it is not so easy to stay here in front of you doing everyday operations, everyday business knowing very well what are the risks and challenges of Serbia and our economy, but also the regional economy. But I will maybe indicate the few facts. Yes, in the shortest time, the economies of this region, whenever the members of the EU such as Slovenia and Croatia are preparing to become one, just that they have begun to recover from the consequences of COVID. They now share the fate of European economy on which they rely most firmly, which they account for 3/4 of the trade and exports, and which is already facing the severe consequences of the Ukrainian crisis, which is more or less going to the global crisis. Apart from the alarming assessment this week that the world is on the verge of a new financial crisis as a result of inflationary pressures, the war, the COVID battle in China and many other aspects that the world economy was facing also before the war. But there are some facts that we will state. The energy will never be cheaper again than it was before the pandemic and the Ukrainian crisis, that there will no longer be cheap money as it was until before. And then the consequences of the crisis for the region in the certain for the whole world could be greater than the consequences of the pandemic that you may feel this new impact, not maybe now or this month or next month, but by the end of the year, I think that we will face the new reality. But what is the answer? What we can do? What are the chances? What are the opportunities? I really believe, and I really insist that the regional cooperation is the great answer. We could use the opportunity to attract a new foreign investments, a new investments in the best way only if we work together, present ourselves as a single region, as a single economy, as a joint regional market, as a single investment destination. I deeply believe that the biggest reserves and the biggest chances for further growth of the economies in this region regardless if there are EU members like Croatia and Slovenia or are rooted or on the way to be one. And why I believe this, I think we all share these values. This integrated approach is already present in your businesses much, much before politics in the region of Brussels, even they recognize the regional economic integration opportunity, your businesses live this every day. The NLB Group is not just [inindiscernible] are not just Croatian companies. Umka or Delta or Kappastar are not just Serbian companies. Alkaloid is not just Northern Macedonian company [indiscernible] is not just customer when they build a regional approach in the very essence of their existence. And all of you present today are incorporating these values in everyday operations in your core and let us face this. This is something the politics, not only in our countries, but the politics in Brussels, the politics the biggest EU members have to learn from. And this is the one simple true. It is not about our national economy, it's a fighting who is gaining more, who is having more deficit, who is having less deficit or more surplus, who is building more growth or less growth. It is the question of all of us today to connect us in the regional value chains and to promote the creation of big regional players, the players like your companies, but also to make the possibilities for you to grow even further. I share -- I very share the opinion of my friend, Blaz, that and I will really quote jointly we could create miracles by breaking the economic barriers and expand the space for doing business. The fact is that the pandemic and now the crisis in Ukraine made the issue of regional cooperation in this part of the world even more important, as the best and obvious answer and defense against everything that we are facing now and what is ahead of us in the future. And what are the demands of the business community? What is our demands basically in the Western Balkans, Southeast Europe, name it however you want. To continue the dialogue between the business community and the institutions in Brussels and support the European partners in order to remove obstacles in doing business with EU, which is of interest of the both companies from the region, companies from the EU, especially from the member states, we are close to us and are part of the region. And I will just show you 2 examples in the last week. One is 2 days ago, we started the joint initiative in the commercial sector between Croatia and Serbia between 2 chambers and their companies in order to facilitate trade via road and railway border crossing reduce the waiting time at entering the EU. I think all of you coming from Croatia, anywhere through Croatian Serbian border, you saw the tracks, you saw the lines and you saw how this really is impacting our economies. Just a week ago, we had a great meeting between business community of the West Balkans region and Brussels and all the [ BGs ] relevant in Brussels to try to communicate one and simple demand; let us find new ways, let us find a new approach, how we work together and how our paths into the European Union will look alike. How do we accelerate the establishment of the Common Regional Markets. There are different initiatives. You will find a Chamber Investment Forum, WB6, Common Regional Market or Open Balkan Initiatives. Why I will just have the importance of the Open Balkan Initiative? Because Open Balkan is really our manner of accelerating all the initiatives we have. It's nothing else. It is nothing new. It is nothing what we are establishing in parallel, but it is 3 states that decided to put the faith in their own hands and to try to make more, to try to be faster and it is open. And it is possible. It is possible. Serbia, Albania and Northern Macedonia at the beginning of the realization. It's 1 year ago, we commuted relative -- a lot of teams, the most important steps in the consolidation of mutual trade to our Common Market among the 3 [ clusters ] we aligned, working hours of the border crossing. We reduced the border -- waiting on the border crossing for trucks only -- trucks for only 15 minutes. We recognized -- mutually recognized our -- facilitating the trade documentations like [indiscernible] sanitarian or veterinarian certificates. We will also issue the first joint working permits and open ID member cards on the summit in [indiscernible] on 9th and 10th of June. And this is concrete steps. This is why I'm also inviting and we are trying to invite all other partners on their way to EU to join the initiative because this is nothing else than the economic fostering our way as fast as possible and to show to Brussels that we can -- that we can do a lot. And on the other hand, there's other side of the medal to make them listen, to make Brussels also listen that they need to change their approach and how it is possible. We have a jointly proposed solution. This is not a solution which we actually made from heaven or invented devil. We propose 2 steps to the EU membership of all our countries on the way to the EU. For EU offering, the Western Balkans first -- to initially become the part of European economic area. We are calling into European economic area [ '20 ] as a Southeast Europe economic community. And later, a full member. By applying the same EU accession model as Finland, Austria, Iceland and the model is functioning now as -- in Norway as we speak. It is not impossible. EU is the most important economic partner upon which economies from the region as well from the Serbian economy directly rely. And [indiscernible] dilemma in Serbia, it might have looked differently in the past, but Serbia places 2/3 of its [indiscernible] to the EU markets. 25,000 companies do business with EU partners, Serbian companies. Almost 1 million people are employed in these companies, and they engage -- directly employed, and they engage suppliers, farmers, cooperatives with additional, the same number of people because if you look in the numbers, there is no dilemma. There is no dilemma, if you look at the numbers in all the region. But dear friends, allow me to return and to add something to the words of my dear friend, Blaz, our host today. Only together, we can do miracles. Let us use this platform today. It's a clear message to those who decide in our capital, in capital from the biggest EU member states or in Brussels. Let us be creative and not hammered in the process developed decades ago in the world so different than this we are living in now. Let us find mechanisms, and we have proposals, which will allow us to do business without barriers in establishing European Economic Community first for our countries on the way to the EU, making European Single Market as the core of our -- all our societies and let us do it today rather than tomorrow because my friends in this moment, we are living in, the timing is more important than bureaucracy. My friends, let us send this clear message to fellow politicians sitting over our fates. The timing and readiness to act now will determine it not only if we as a region will be ready to do miracles, but if we as a continent as the European project will survive, not contemplating, but acting will decide if together we will fail, altogether we will try. Thank you for your attention, my friends.

Mr. Cadež, thank you very much for this aspiring keynote speech. Now it is time to focus and focus our attention to macroeconomic overview of the region. So our guide on this assignment will be Mr. Richard Grieveson, Deputy Director at Vienna Institute for International Economic Studies. Mr. Grieveson, the stage is yours.

So good morning, everybody. Thank you very much for the organizers for the invitation. It's a great pleasure to be here and to have the chance to talk on behalf of my institute about this very important, very interesting region. I represent The Vienna Institute for International Economic Studies. That's a research institute in Vienna. We've been looking at this region for 50 years. It's a region very close to our heart, and I want to talk about the challenges. So of course, there are some challenges, but also to emphasize the opportunities in the future in this region. 20 minutes I have, I'll talk about 3 things, basically. I will start with kind of orientation, the economic fundamentals of the region and how we put it in the regional so the broad Eastern European and the global context. The second, how these 2 major shocks, which we've lived through in the last couple of years, the pandemic and then the invasion of Ukraine affect the region, what they mean for the region. And then finally, the most important part, what are the challenges? What are the policies that should be implemented to address them and where are the opportunities for this region in a very different global economy? So let's start with the big picture, how do we think about this region. So the orange bars are the per capita GDP for this region and then the gray are some comparatives. You can see that compared to Central and Eastern Europe as a whole, this region is still relatively underdeveloped. So there's still economic potential. If you compare it globally, so in the global emerging markets space, it's actually already a pretty developed region. It's much wealthier than places like India, South Africa and Brazil. The market size, so within Central and Eastern European context, these are mostly small or medium-sized economies. So Croatia, Serbia, Slovenia are the medium-sized, the rest are pretty small. But the Western Balkan 6, if you put them together, and I would endorse fully the messages of the previous speaker in terms of thinking of this market as a whole. It's actually a pretty big market. It's bigger than Slovakia or a little bit bigger than Hungary. So a market of a fairly significant size if it functions as a single market. Pre-COVID, so looking at 5 years before the pandemic, the real growth of this region is the chart on the left was average, slightly below average in Central Eastern European terms. Decent in a global context or a decent rate of growth in the global emerging market context, but a little bit below countries like Turkey, Poland, Romania, so regional peers. What was very significant in the easy years though, so these years up to 2019, chart on the right was much low inflation. So this is a problem of the region before the crisis, before 2008. And that really changed in the years after the crisis. Inflation really came down a lot everywhere in this region. And this was a really positive story that we've looked at a lot over these years, a really decent, robust growth performance consistently, coupled with very, very low inflation. And that's a new reality for this region and something that we see as being very positive. The external competitors of the region, competitiveness, it has been a problem. Historically, it has been a problem, but it's improving a lot. And the big reason why it's improving is the FDI attraction. So that was already mentioned, I think, by both the previous speakers. This region is the leader in Eastern Europe over the last 10 years in terms of attracting FDI relative to its GDP. It's really a great success story. And although there is still a problem of competitiveness, you see the gray bars here, a lot of countries still run current account deficits, some of them quite big relative to their GDP. They also tracked a lot of FDI that's the orange to finance these deficits. They're building increasingly competitive manufacturing sectors. That's the core of the growth model, especially in Serbia, for example, and that's helping to improve the competitiveness of the region. What I think is a challenge, and I'll come back to this towards the end as well, but just to mention it now, what is the challenge of this region? But it is a challenge for Eastern Europe as a whole. Western Balkans is by no means unique, is the demographic story, the declining working age population and at least in some countries, deficiencies in the education system. So this is what has to improve, and I will come back to that towards the end of the presentation. So that was a big picture. That's the context. That's how we see the region. So some strong points, some room for improvement. In terms of the pandemic. This region actually came through the pandemic pretty well. This chart shows the cumulative growth for 2020 and 2021. So the downturn and then the recovery, all of Eastern Europe and then some Western European comparators on the right. The orange bars, the region we care about. You can see most of the countries are rather towards the top of the distribution here. So Serbia was after Turkey, the best performer in the region over this period. Also, Albania, Kosovo, Bosnia, Slovenia did pretty well relatively. Both compared to the rest of Eastern Europe, but also especially compared to Western Europe. You can see that the euro area, countries like France, Germany, Austria and Italy did much, much worse in these years. How do we explain this, this resilience and strong recovery of the region in the pandemic. Well, I think there are a number of factors. One is certainly from the second wave, the winter of 2020, restrictions went as tight. There was a clear prioritization of the economy over public health from that point on. Second thing is a relatively low share of services. So this success in attracting FDI into the manufacturing sector really helped. Of course, Montenegro, Croatia tourism dependency is a bit different, but the rest of the region less exposed to services. That was the sector most affected by the pandemic. What we also saw was really a rapid and very impressive adaptation to the pandemic. So we showed in a study every single wave in this region, the economic hit was smaller than the previous wave. So firms, banks, consumers, workers all adapted in a very impressive way to the pandemic and kept the economy going. We saw also good policy responses in the region, and I would highlight Serbia actually as a best practice example in that sense. So governments acted well in a lot of this region to stimulate the economy through the pandemic. And then we also saw, and this is very important, good response from international organizations, and that's especially important. So people like EBRD, the IMF for the less developed economies of the region. So Bosnia, for example. Just as this story was looking really good, just as the recovery was becoming strong and entrenched, the war started. And we see very clear, visible on economic sentiment everywhere. In this region, it's not as bad as in some other places like in Turkey, but you can see the downturn in economic sentiment across the whole region. And I think it's clear why that is the case. Our projections, we did projections for the next 3 years. We just released them last week. We still think every continuous region will have positive growth this year. We downgraded most of them, but relatively, it still looks okay, at least in the baseline scenario, which are the gray bars. If there is an EU embargo in Russian oil and gas now, which looks, I think, quite unlikely, but if it happens, of course, the picture changes a lot. To take that into account, we also have this adverse scenario. Those are the orange bars. There, you can see the situation looks worse. Some countries in this region would still post positive growth but much, much lower. But in the baseline scenario where we don't have this big embargo straight away, there will still be -- so the story is not as positive as it was, but we will still see this resilience across Southeastern Europe. Similar story for inflation for the other way. So in the baseline, we're going to see higher inflation. Inflation is certainly back in the region. But it won't be extremely painfully high unless we have this embargo and this adverse scenario straight away. In that case, I think we see double-digit inflation everywhere. The region does have a huge -- or parts of the region do have huge reliance on Russian gas, especially Bosnia, North Macedonia and Serbia, I think the story is very well known. In terms of the financial contagion, and I think many of you will know the story very well. We have seen pressure on exchange rates, especially against the dollar. Chart on the left shows the region and other countries from Central and Eastern Europe. So we've seen this weakness of currencies not especially big, actually in the Eastern European context, the countries of Southeast Europe are actually performing better than countries like Poland and Hungary, EU member states in that sense. And a lot of this has been the way central banks have stepped in. And I wanted to emphasize this point, I think it's important. Chart on the right, central banks have big reserves. They have big firepower to use against this. And we've seen big interventions in currency markets across the region. Going from Serbia, where FX reserve is about 20% of GDP, up to Bosnia, Croatia, where it's about 40%. Obviously, Croatia with the Euro accession coming up. This is especially important. So we've seen this intervention, and we've seen this relative stability in currency markets. What we haven't seen so much is real interest rate increases. So we've seen nominal rates go up a lot. You all know about that. But in real terms, adjusted for CPI and interest rates are actually still pretty negative across the region. That's good from a government financing perspective, but maybe in other ways, less positive. How last thing is the inflation shock? This is a very important question. I think it's maybe the #1 question in my profession at the moment. Certainly, it won't disappear quickly. So inflation is back. It's going to be strong the rest of this year. We think probably the situation will be better by next year, inflation will be lower partly because of the Central Bank reaction, although in real terms, as I said, it hasn't been that strong, but also because we see this higher inflation, it's eating into real income. It's going to reduce inflation and pressure from the demand side. We see that even already. That will continue and intensify this year. This worry about the wage price spiral, not so sure about that, to be honest. The 1970s was a very different time. Labor was organized in a very different way. I think that is -- those fears are probably overdone. But it's very uncertain. Major uncertainty in all directions. And anybody who really has a very strong view on inflation in this environment, I would be quite suspicious of that. So turning to the last section of the presentation, probably the most important, the challenges and opportunities in this new global economy. And it is a totally different economy. COVID has delivered structural shocks that will last, and the war is now doing the same. I want to highlight first 4 challenges of the region. The first is the EU question. We've seen the process stalled. Slovenia joined, Croatia joined, but for -- the rest of the process is stalled. Maybe it's starting again with some positive signs so momentum may be starting to return, but this is important. And the whole story of economic and development in the region, it only works if this happens and if the EU accession process gets back on track. The second challenge is some of the fundamental weaknesses that the region has, and I would highlight 3 institutions, infrastructure and demographics. All can be overcome. I will come to that in a minute, but these, I think, are the real challenges of the region and where compared to a lot of the rest of Eastern Europe, the situation is not too positive at the moment. Third challenge affects everybody, but it's maybe especially important in this region is the new geopolitics. We know that Russia is an important player in this region. China also is increasingly so, actually. And in this new context, since the invasion for this region, the balancing act between Russia, China, whatever and the West is going to be much more difficult. The -- from our perspective -- from an economic financial perspective, the integration is overwhelmingly stronger with the EU, and that goes for every single country in Southeast Europe. So that's clear what the incentives are from the economic and financial side, but we know we cannot fully take the politics out of it. And our sense is, if there is a hard divide, if the region is forced to choose, there will be some loss, either giving up the relationship with one side or the other. But the incentives from our perspective are very much towards the EU side. The fourth challenge, and I really think this is a challenge, but also an opportunity is the green transition. It's very complicated. I don't have much to say about it now. It is, of course, a challenge for the region. There are going to be a lot of difficulties for the region. But it is also an opportunity. This is an area where nobody is very advanced actually. It's an area where Western Europe is also -- most of Western Europe is not especially advanced. And we see lots of opportunities actually for leapfrogging in the green -- in the new green economy. So those are the challenges. I want to finish by emphasizing 2 big opportunities. The first is the investment story of the region and so-called near-shoring. So since the pandemic a lot of firms in Western Europe have become much more nervous about how extended their supply chains are. This is intensified then I think by the war as well. And what we find, we've done some studies, some surveys. German firms especially are thinking very seriously about shortening supply chains. 40% of German firms are worried about the supply chains. Within that, 2/3 are considering changes. So considering near-shoring, taking production out of Asia and moving it into closer markets. And in that sense, Eastern Europe. Western Balkans is absolutely first in line. 40% of German firms is a lot. And this could really be a very significant change for the region if it takes the opportunity. Can I take this opportunity? Quite possibly. Three boxes here, start on the left. What German firms already in this region like, proximity to Germany, knowledge of the region, relatively low cost. That's why they're here to start with. That puts Southeastern Europe close to the front of the queue for this near-shoring. What new investors care about -- what the potential new investors is the availability of skilled labor and the political stability and governance question. They care much less now about labor costs, the level of wages as much less important than it was in the past. That's no longer the clear advantage of this region. What they're worried about when we ask them in the surveys is unfortunately both those things in Southeast Europe. So the governance question and the availability of skilled workforce. So they recognize the region has very good workers that comes out in all the surveys. They're very happy with the quality of the labor. They just don't enough. And so these are the 2 things. I think the policy priorities for the region -- for policymakers in the region are very clear. It's the governance question and the availability of skilled labor question. That's how the region can take advantage. If they do that, the upside is potentially pretty huge. We've said already, I think all 3 of us so far have said this. The region has been very successful in attracting FDI relative to its GDP, that's true. But the GDP is still quite low. In per capita terms, the stock of FDI in this region, and that includes even Croatia, Slovenia, the more developed markets, is very low compared to the real success stories over the last 30 years, which are countries like Czechia and Estonia. So if the region can take this opportunity of near-shoring, which I think it can, if it gets the policy right, the upside potential here is potentially pretty huge. And this is a very interesting development strategy for the region in the future. The second opportunity I wanted to emphasize is digitalization. Digital economy was developing fast. Anyway, IT hubs, including in this region, we're developing fast, we are in Belgrade is an important IT hub already. But the pandemic still a huge digital shock. I mean it delivered 10 years' worth of digital improvements in a few weeks. And what this does is it changes Europe's economic geography. The defining feature of European economic development in the last 30 years in this region, in Eastern Europe, in general, it's been proximity to Germany. That's the chart on the left. Sorry, it's so small. Basically, countries like Czechia or Slovakia, a huge advantage given the geography over this region. That will now change. That's changing as more and more of the economy is digital online, this pure geographic factor is less and less important. And what we see is already some tentative signs of this, the chart on the right. In the last 10 years, in North Macedonia and in Serbia, so 2 of the countries of the region, we've seen what we call brain gain, so meaning net immigration of younger educated people. And this is completely new in this region. This is a complete change of trend to everything we've seen in the past and our hypothesis is basically, these are young people from the region. They go to Germany or some to study but then they come back. And they work in digital jobs, in IT jobs because in this new digital economy, they're going to have to be in Germany anymore. So this is -- and this, of course, in the context of the demographic challenges I mentioned, this is probably especially important. What especially the non-EU members of the region need? Well, they need this deeper regional economic integration, which we heard about in the previous presentation. I endorse everything that was said. They need these domestic reforms, especially on the governance side, on the institution side, there's progress, but it -- it needs to continue. But that alone is not enough. The region needs a much firmer EU accession perspective. The whole thing will work without that. Even if we know that membership will not happen next year or the year after, there needs to be much deeper economic integration with the EU now. And there are a lots of ways that, that can happen. We've published a number of studies on that. There's a lot more that can be done with creative thinking. But a couple of examples would be -- well, probably the best example would be inclusion in the EU budget, which has been such a huge advantage for countries like Hungary. It's financed so much of the infrastructure, and this region hasn't had that or at least the non-EU members of the region haven't had that. So this is something that we constantly push in our studies as well. That was it. Just to conclude because there's a lot of information there. So in 2020, 2022, the global economy suffered 2 pretty huge shocks, and they will deliver very lasting structural changes in a positive and in a negative sense. Production chains will shorten. So this near-shoring will happen, just a question of whether the Western Balkans can take advantage of it. Inflation is back, at least for now, and this move towards a multipolar geo-economic order has accelerated. It's not like it wasn't happening anyway. But of course, with the war, it's accelerated massively. This region, Southeast Europe, mostly came through the pandemic pretty well, at least the countries that are not extremely reliant on tourism. And the recovery was stronger on cost before the invasion. This year will be difficult, especially because of inflation, but that should improve from next year. The region faces challenges. I don't want to downplay those. The stalled EU accession, but hopefully, that can start to move again. Governance, demographics, I mean, there are clear challenges that the region faces. But near-shoring, FDI attraction and digitalization are major opportunities for this region. There's a clear case how this region can benefit from them. And if policymakers at the local level and also at the EU level do the right things, we are very optimistic that this will happen and that there is a very bright future for this region. So thank you for your attention.

Ladies and gentlemen, we are all aware of effectiveness of our region. But on the following panel, we will analyze, how it can also be a great investment opportunity. So let's see who will take us through this interesting topic. We will discuss on this topic with Victor Erch, analyst in the Redwheel Emerging and Frontier Markets team with Mr. Ales Ipavec, CEO of Ljubljana Stock Exchange; Samuel Goodacre, JPMorgan Executive Director and Head of CEEMEA Bank's team, Mr. Richard Grieveson, which we just had on the stage, as you know, Deputy Director at Vienna Institute for International Economic studies and Mr. Matko Maravic, CEO of InterCapital. Welcome, gentlemen. We have planned 30 minutes plus 10 minutes for questions and answers, hopefully. We'll have enough time for that. So I will start with a question for Richard. So Vienna Institute for International Economic Studies has first-hand expertise of the region and publishes unrivaled comments and analysis on events in the region, as you have just shown in your presentation. So would you support the thesis that gathering reliable up-to-date and downtime information about the events in the region presents an important bottleneck for better understanding and closer ties with the region -- within the region and internationally?

It's a good question. I'd say it's very mixed actually. So I mean, there are -- so we look at the whole of Central and Eastern Europe from a Soviet Union as well. And I would say in that context, the reliability, quality availability of the data from this region is not [ too bad ] actually. There are a couple of countries where it's still challenging where our statistics department would certainly say it's still challenging. So Bosnia, I think, Kosovo. You really have to go still to the websites, the PDFs, type it by hand. There is still some of that. But more and more, we see this region integrating with EU data standards, more and more with Euro stat norms. That's certainly the case for Serbia, for example. And so the situation is improving more and more in that respect. And I would say that relative to even 10 years ago, the data -- reliable [ data to date data ] is much less of a bottleneck than it was. And it's improving all the time.

Okay. Great. Mr. Maravic, you brokerage sales is commanding market share on Ljubljana Stock Exchange, and it executes around every fourth trade on Ljubljana and Zagreb Stock Exchanges. So kind of the regional brokerage house see the evolution of stock markets? And what do investors expect from you? Is it good research or cheap execution capacity to find counterparties in block trades, what is it?

Well, thank you for the question. I first want to use the opportunity to welcome everybody being here and being online. Secondly, to congratulate the entire NLB team for putting this event through and this beautiful venue in a great city, I'm really privileged to be here along with my colleagues. So I'll answer the second part of the question first, I guess. We have been a fairly small brokerage house 15 years ago, a couple of percentage points in market share. And since then, as you pointed out, we hold roughly 25%, both in Slovenia and Croatia. And our growth was primarily through institutional flow. We're always institutional broker. We didn't have many retail clients. We were, I guess, fortunate enough to go abroad fairly early and attract these investors to the region. Roughly 70% of international flow in Slovenia goes through us, roughly 50% regionally wise. So that's the story of our success, I guess. But -- now coming to the first part, it's actually not good that we hold 25% of the market share. That means that the market development has been subdued. It means that there were no new entrants. I mean it's good for us. But as for the market and long-term perspective, it's not natural that a brokerage house holds such a large market share. So the reasons for that and going forward, what we believe or what I personally believe needs to change is always a typical same old story. I'm not going to go into that one that we are lacking large in scale listings. NLB was probably the only large in scale listings we had in the region in the past 10-plus years. So -- and majority of them should be coming from the government sector. But it's -- I guess, it's not in our control. We are preaching about it, but it's not that we can do much about it. But what we need to focus on and where growth is, is lack of retail participation on the domestic market. It's not just on domestic market, it's in the finance sector in general. So roughly 3.5% of total wealth of a household in Croatia is in financial assets, it's roughly 7% in Slovenia and roughly 20% in the Euro area. So heavy, heavy underinvestment. And what we need to do, we need to make a push that every single household in the region owns financial stocks, funds and that part of it is from the region.

Now a question for Mr. Ipavec. Mr. Ipavec, trading on Ljubljana Stock Exchange in many ways resembles typical frontier market trading. Loan liquidity, weak market efficiency, coupled with a certain amount of information asymmetry. So many large investors find valuations on Ljubljana Stock Exchange compelling and would like to invest more, but it seems that they are afraid that they will not be able to sell quickly. So a lot of transactions occur through block trades and issues have selected market makers to narrow bid-ask spread. So do you think your resources are best spent with encouraging institutional or retail trading in what way and why?

First of all, before I answer your question, let me thank the organizers, our dear colleagues from NLB for inviting me to this eminent event. Yes, I mean Ljubljana Stock Exchange, of course, is focused on different segments of investors, be it retail clients, corporate clients, foreigners, domestic clients. What we are seeing in comparison to other stock exchanges in the region is that percentage of retail clients is relatively low. It's around 28%, and this is something we would like to address. And that's why we also, after 10 years, implemented market maker. So majority of our stocks in the stock exchange has liquidity providers. We also -- better 2 companies listed 7 ETFs on our stock exchange, which was also the case after 10-plus years. And we are putting a lot of effort also into the financial literacy, which is quite low in Slovenia, even though we are quite developed country. Yes. So our focus are all investors, but where we have to do our homework are especially retail investors.

Mr. Erch, now let's go to you. At the Red Wheel, you manage almost USD 24 billion. You believe you can deliver long-term value to your clients by being active and having as little unnecessary restrictions? So what are the most important characteristics such as quality of the management, valuation strategy, macro environment for a market or company when you consider investing?

Thanks for that. Thanks for inviting me to the conversation. Thank you to NLB for hosting us. Amazing inaugural CMB, It is a fantastic venue. I feel like a musical star for the first time in my life.

Welcome. Welcome.

And in terms of what we look at in -- across the globe in markets and countries that we operate in, a lot of the factors, Richard, you touched on in your presentation. But by and large, the last 10, 15, 20, even you could go to 100 years back, we believe there are 3 main paths of economic development of the country, through commodities, through tourism and through new factories of the world or FDI inflows in that sector. And if the cash inflows into the economy from those sources is reinvested correctly. You can really create this amazing virtuous cycle of higher domestic employment, driving consumption, driving urbanization, which then again drives higher investment and so on and so forth. So when we look at it across our universe of 70, 80 countries globally, we really look for countries that we think have the basics in place to be able to take advantage of those. That would be an educated workforce, good infrastructure and a willingness to spend on that infrastructure with a government that can implement those projects, equally important fiscal monetary policy that is conducive to growth and promote stability. And I think that's something that the region definitely has too, in that aspect. When it comes to the companies that we look for, I mean, strong management teams, experienced management teams that we think have a very credible plan to execute to tap into that secular tailwind. From a valuation perspective, we're growth at a reasonable price investor. So we can we can invest in companies trading on 30x earnings as well as 5x earnings as long as there is a good trade-off between the growth that they provide. And so that's really an attractiveness of this region. And that's why this region can be as attractive as Vietnam, where growth is higher, but serve valuations. Lastly, governance, of course, you touched on it, too. It's a super important factor. But today, it's no longer enough to just have governance and protect us minority shareholders. We also need to have a very strong environmental and a social agenda, and we continuously push companies like NLB to align with us and align with international goals on that. So a lot of different factors, but hopefully, that gives a broader overview. Thank you.

Thank you, Mr. Erch. Now let's give it to action for Mr. Goodacre. And your team follow financials in CEEMEA region. So from South Africa to Poland, basically. You specifically cover a key Turkish, Polish, Czech and some Russian banks, OTP from Hungary and NLB be from Slovenia. So you initiated coverage on NLB in December 2018 with a report titled yield to play in [indiscernible]. So can you explain the key differences in how banks operate in this region and in other markets? So how you see this region from the perspective of risk and opportunity? You're going need to -- it's already on just fire at will.

Well, thanks again, everybody. And in fact, I'd echo Victor's comments, it feels very special to be here on stage. And as a young star, I aspired to being a musical theater dancer, but I can't dance. So that's why I now analyze banks across the region. And I think that -- I mean, 3 things strike me really on the back of your question. So the first one is that I would argue the business model of banks in this part of the world in CEEMEA and perhaps, to a certain extent in emerging markets more broadly are actually quite simple. So simple businesses that historically have been deposit takers and lenders, and we can see that in the fact that revenues in CEEMEA on average of 80% net interest income and then perhaps some of the more developed European markets, that's as well as 50%. So I think that firstly talks to a lot of growth opportunity outside of what traditionally has been banking in this region, and we're really excited about some of the ancillary financial services, I'm sure Blaz and Archibald will go on to talk about this later. But effectively, it's been a region full of growth, and we would expect that to be sustained with new business streams going forward. The second thing that strikes me about EM banks that bank in this region is that they have been highly profitable. So if you look at our coverage in developed Europe, for example, this year, we expect the average ROE of European bank to be high single digit, in CEEMEA, in our coverage, it's 14%. Partly, that's high rates, high growth and whatnot. But I think the third thing I would say is that sort of returns have to be considered in the context of risk, and it's something we've all sort of spoken about. But that would bring me on to the point of cost of equity because you have to think about the return of a bank relative to its cost of equity. I think investors sort of think about investments in terms of excess return, particularly when marrying it up versus valuations. And that then leads us on to a vastly interesting discussion on politics in the region, some of the headwinds banks are facing. And I think we'll go on to find that it's not a journey without its bumps, but one that we think banks here can sustain and fight in.

Okay. Mr. Grieveson, can you let us know a bit about your approach to understanding the region? Which indicators do you see as leading or at least coincident? So how can an investor separate noise from relevant information? Or to ask differently, is political turbulence around elections, relevance or should the investors focus more on long-term underlying economic data?

A very interesting question. I think, again, it's a very mixed picture in the region. I mean this is one of the problems that people from outside the region will see the region as a whole. We encountered that even in Austria, which I think Austria has most people and Austria have some understanding of this region. But even there, and I think it's even worse if you go further West to see it as 1 region, which functions in the same way, and that's the whole story. Of course, it's completely differentiated. I mean 1 of the things we found in these studies and the surveys we did is that there are countries in this region, which are seen by German investors as strong in terms of political stability. Of course, there's some political noise. Of course, in some of the countries of the region, a lot of political noise. But even countries, which I think often from the outside, people who don't know the region are seen as risky. Once firms have a presence here, they don't feel that at all in many countries. You see basically between elections stability, the stability and policymaking, which is the main thing for them. It's that there are no big shocks in the -- there's a small example. I was in Turkey last week. And this is the whole story that this constant policy initiatives, which come out of nowhere. And I think most of the countries in this region, that's actually not the case. And so that's actually, in a way, a positive for the region. You just have to get people here first so they see that. And I would say, I mean, in terms of what are the most important indicators, again, it really depends on the country. And I want -- I think, again, it's such a differentiated region. You have countries in this region like Serbia, North Macedonia, which are integrating successfully into the manufacturing book -- phones cutting out.

Let's borrow one from Mr. [indiscernible] So we'll change it. I apologize.

So I mean, countries like Serbia and North Macedonia, really integrating very successfully into the Central European manufacturing. All they're following a kind of Czech, Slovak growth model, which has been very successful in that region. And I think they're doing it quite successfully. We have other countries like Croatia, Montenigo, which are really tourism economy. So what indicator you look at, it really depends on the country. I mean, of course, we look always at the fiscal indicators, the external debt indicators, the volatility of the exchange rate, all of these things to look for problematic cases. There are risks in this region and not said certainly, but I would say again, by a broader Central Eastern European standards, not especially. So I think to conclude, I think this region still has a bit of a problem with how it's seen outside firstly, that people overstate the risk of this region from the outside if they don't know it. And secondly, that they see it as a whole, and they don't see the differences. But once people get here, that goes away pretty quickly.

As we said, between the elections, everything business as usual. Okay. Now a question for you Mr. Ipavec. Again, Ljubljana Stock Exchange has 27 listed companies that at the end of 2021 had combined market capitalization of EUR 9.5 billion. So combined value traded in 2021 without the block trades, amounted to approximately EUR 320 million, indicating substantially lower turnover as compared to developed stock exchanges. So what can you do or are already doing to improve case of trading cost, excess of -- access for investors? In short, what would you say to all the investors are looking at this Investor Day to entice them to trade on Ljubljana Stock Exchange?

If you compare Ljubljana Stock Exchange to the developed stock exchanges in the western part of Europe, I fully agree with you, we are just not on that level from all respects. So -- but if you compare Ljubljana Stock Exchange to the stock exchanges in the region, which is our more natural peer group, then we are speaking of 1 of the best performing stock exchanges. Yes, indeed, our market cap right now, adjusted equity is EUR 9.5 billion. but it used to be EUR 5 billion, less than 5 years ago. So this is 90% increase. Our daily turnover 5 years ago was less than EUR 1 million. Today, it's EUR 2.2 million, which is 120%. Let's say, last year, our average daily number of daily trades was 130, today is 240, which is, again, a substantial 85% increase. So as often as -- it's often the case, you can look at things as half empty or half full. But let me answer your question. So what would I say to the investors. Slovenia, generally speaking, as an economy is ranked top 45 best-performing countries in the world with -- by GDP per capita. Obviously, I cannot comment specific shares listed on the stock exchange. This is true also for NLB. But general understanding of analytics and in investors is that companies on the Ljubljana Stock Exchange or better the valuations of companies are relatively low with high dividend yields. We are also part of a European Union, which means that we are committed to the European regulation. We are also a member of European monetary union, which means that for European investors. They don't have FX risk. And lastly, our trading platform is seperate, which is also a widespread platform among biggest stock exchanges in Europe. So in a nutshell, I would say that investing on the Ljubljana Stock Exchange is investing in European country, which is stable, which is developed, which is modern and transparent. But due to the history of 50 years of socialism, we have not be has not been able to fully develop our capital market. But as I said before, the capital market is developing slowly but continuously, and we are growing. And I would say that Slovenia is some kind of sleeping beauty. And actually, I would say that the whole region is sleeping beauty. So dear investors, we are waiting for these magical keys from the prince.

I wish you this growth of 190%, every 2 years...

We know that this is not sustainable, but at least it's a really stable and positive trend.

Okay. And we are really focused. Okay. Mr. Maravic, now a question for you. Your sister company, Intercapital Asset Management created ETFs on Slovenia blue-chip index and on Croatian blue-chip index. Both are listed on Ljubljana and Zagreb Stock Exchange and you are providing market-making activities with narrow spreads to iNAV. So are you thinking about listing this ETF on any other global stock exchange and opening this region's capital markets to retail investors in other countries?

To answer it, yes, we do plan to go further abroad with the ETFs, probably in the regional markets in parallel to creating an ETF on a local -- for the local market, coupled with Croatia and Slovenia. But in general, listing of ETFs has been highly successful, especially in Croatia, and it is another product to attract -- as I mentioned earlier, to attract retail to the market because, especially in Croatia, in other case, necessarily in Slovenia, it's the most tax-efficient way for retail to participate in the market because there are no -- it's a total return ETF. So no dividend or dividend tax and after a 2-year holding period in Croatia, there is no capital gain tax. So it's -- for over 2 years, it's actually a text-free instrument. And you do get access to the best and most liquid companies in the region through a single click. So it was, in a way, our way to attract new investors in retail to the market. I think we succeeded that, especially in Croatia. We listed them in Slovenia a while ago and hope to develop at least the same level of liquidity and the same level of interest on that market as well. Going abroad, it's going to be a challenge, but I'm sure the colleagues will pull it off. It was challenging, now it seems simple to list it domestically and succeeded. So I really hope that soon enough, we'll have it on other exchange. But if I may, I want to sort of tie to what Ales was speaking to all the investors who are here and online. Yes, the liquidity is not great. It's not in line with Germany or U.S. We are aware of that. But in this market, whoever wants to get in can get in. We have block trade. It's going to take time, but you will get a position and you can build a position. And I think that's very important. You do need some more patience. And again, if you're coming to this region and being patient, it is natural that you're buying at very, very good valuations. That's -- I mean, it's over ties together. You're not paying the multiples. You're paying in Germany or you're paying in the U.S. for the same sector for a similar level of the company. So it's -- don't be discouraged just because the liquidity is low. Brokers can get you a right block to enter the position. That's more for the institutional crowd, I guess. And for the retail, as I said, we need to develop it.

Okay. We have a...

I would just like to reply to Matko. Even more important for investors to come in is to get out from the positions. And yes, I mean, this is the fair, I mean, that they would be stuck with the positions in this region. And I must say, yes, as Matko said, we cannot compare with Western countries. But regarding to the small capitalization, it's also obvious that investors would not have positions in billions. So you don't also need liquidity in, I don't know, in hundreds of million per day and liquidity is there. And it was there also when we were facing very, very dark days in March 2020, in February this year. And even more important, not only that it was -- there were not a single day without liquidity on Ljubljana Stock Exchange. But even though that our index plunged for 30%, it recovered really fast and it was announced or ranked in 2020, one of the best performing industry the world. It was a 30% increase. And even now, after all the mess in Ukraine, we are still around 15% below the record high of last 10 years, which is -- so not only liquidity, but also the recovery of the market was really, really fast.

So stable -- you may go, Matko.

I don't want to steal the show discussing with Ales but the thing about exits, yes. But majority of the investors that came into the region foreign investors initially said we're going to -- we want to be here long term because we do see a long-term value in the company. We don't have many investors coming in and going out in 2 days. That's not the fact. So it's usually a long-term investors. And usually, those investors were exited when there was a panic on the market, not necessarily domestic, a panic, either with them having outflows in their funds, so they need to sell everything. And then they come sometimes say, look, it was hard to get out. Yes, it was hard to get out. And that's the fact. It's truly, especially in these types of situations like corona style situations, it's even much harder to get out at a proper valuation, but we didn't have or many problems with international investors exiting when there was so call it, a normal market, right? It's usually the problem when there are external shocks happening. And that's the case, and that's the risk every investor needs to incorporate in their cost of equity when coming into the market. It's a risk that's known and should be incorporated.

Okay. Also, I would like to encourage any of you jump in if you like to debate, we are open for debate. But unless that's the question. I have a question for you, Mr. Erch.

I mean...

You may comment. I believe there's the 1 just on -- just give it some...

Yes. No, exactly. And I would reiterate the comments that you made on the longer-term attractiveness of the region, yes, it's clear. The whole world is going through a cyclically tougher time at the moment. But as we look at those -- the potential for massive FDI inflows over time, the near-shoring aspects that we're seeing, not just in manufacturing but also in the kind of digital factories of the world, as you know. We're moving away from Indian outsourcing onto nearshoring in that sense. So significant secular tailwinds that are here. Yes, as you mentioned, it is a less liquid market. It is comparing it to some of the other global markets that we invest in. It has lower population growth that has an older population. Yes, it does limit the potential GDP growth rates, but the region will keep growing at 3%, 4% sustainably, which is very, very attractive when you consider, again, valuations and the cost of equity that you're putting on the market. So I think that speaks for, yes, the cyclical headwinds at the moment. But over the longer term, I think the trajectory is very clear. And yes, like you said, it is a less liquid market, which means you need to have a longer-term time horizon. You need to have long-term capital that back that. And yes, broader capital market development, market cap to GDP, if I take the [indiscernible] region as a whole, it's 10% to 15%. I mean, as we look at the larger emerging markets over the past 20 years, they also started at 10% to 15% of GDP, they're now at 80%. And so it's clear, we do need some more private decisions. We need some more participation and to get a true reflection of the GDP in the stock market. But that will come as the countries develop along that path of economic development, I think.

What can we do or what we should do to improve our allure for the investors?

Well, I think something we speak to our holding companies about liquidity is usually a function of price, and there is there isn't as much liquidity as there could be because sellers aren't willing to sell at this level. They're holding on for a better level. And as the company keeps developing and the country as a whole develops along this path, at some point, it will trade on 1x earnings, and it will be too cheap to ignore, and the liquidity will sort itself out over time. I don't think you can manufacture liquidity. Yes, you can help it. You can broaden the market. But as the country develops, I think that works itself out over time. And we've seen that multiple, multiple times over.

Mr. Goodacre, let me ask you. Shortly after the acquisition of Komercijalna Banka, you sued a favorable report on NLB. So can you share with us your views on the banking sector consolidation? The financial reasoning behind it, strategic, rationale? What would be the price pay that would make you wonder, raise your eyebrows, have you made my analysis -- any analysis on the correlation between banking sector profitability and market concentration?

Yes. So look, I think consolidation is a really interesting theme and actually a really important one. So biggest isn't always best. But I think in the concept of banks, they are in effect, I would argue, scale businesses. So if you have 1 client or 100,000, you need a branch or historically have needed a branch. And I think what we're seeing across CEEMEA is that banks which have had subscale positions haven't said as well, either in terms of returns or valuations. And I think echoing a point Victor said earlier about investing in a management team that you think has the correct strategic vision is really important. And NLB, obviously, is one that fits the bill, a bank like OTP in Hungary are also sort of on that path. Because if you look, say, across banks or the top sort of 5, 10 banks have, on average, a cost-income ratio between 40% to 60%. And those in market positions 10 and beyond typically would have 80% or 90%. So they are and have been very limited from a profitability perspective. So I think the region is life for consolidation. I think the issue that we will begin to face is, are there credible and attractive assets because there has been a huge wave of M&A over the last 3, 4 years. And in terms of valuations, I think when some banks embarked on an M&A spree sort of 15, 20 years ago, they were paying a lot. I mean I think 1 thing that investors will be mindful of now is any goodwill generated. So I think if -- I mean, again, losing OTP as the example, they've been quite proud that they haven't paid on average more than 1x book because they no longer want to generate goodwill. And as we've just seen from NLB, if you can generate significant negative goodwill, that's very good for your capital, too.

Okay. Mr. Erch, back to you. You have been an investor in NLB for some time now and have with this acquisition of Komercijalna Banka that was well received by investors. So management of NLB is quite openly discussing preparedness to execute further value accretive M&A. So what would be your take on that? And would you be supportive of large-scale acquisition at the expense of the dividends?

Yes. And I would just reiterate Sam touched on a lot of points that I wanted to mention as well. But like you said, we've seen significant -- the last 10 years, we've seen significant success stories. OTP is 1, but Bank of Pennsylvania and Romania, acquiring market shares as Western banks retrench from the region. I still think there's more to go in all of that. I mean, their market cap has gone from $500 million to $3 billion in that same time horizon. So been hugely successful. If we talk about the Southeastern European region, GDP is the same as Romania, $270 billion. Yes, it's more fragmented. It's in 8, 9 different markets, which means it will take a longer time to piece that puzzle together. But we think definitely for NLB, there's no other bank that is more local to the region than them. And so if they're patient and disciplined, we think there's a massive opportunity set. But to your point as well, we have seen prices at the moment with NLB shares trading on 0.6x book that does put into question that discipline and how much are you willing to pay and sacrifice in favor of paying out a dividend. So that is a question that we're battling with, too. In general, like you said, we do need to see M&A that brings scale, not just revenue synergies but cost synergies and M&A just for entering a new market, I think, has proven -- can prove a lot more difficult than nice tuck-in acquisitions like the Sberbank Slovenia assets, for example, which very clear synergistic qualities. So I think those would be kind of the price you're paying and is it cross-border just to enter a new market. Those 2 would be an important factor for us, too.

Mr. Goodacre, seems that we have come to dilemma dividend versus growth. So we can see that many banks in Europe actually -- which have to meet more complex regulatory requirements, try to juggle between the ambition of consolidating their market position and at the same time, returning capital to shareholders. So what would be your preference, dividend and share buyback or value-accretive M&A?

I think it depends on the region and the investor. So -- but perhaps we could argue that an emerging market investor might be more growth-oriented, for example. So I think there needs to be a fine balance. You noted earlier that 1 of the reports we issued was called yield pay in former Yugoslavia because, of course, when NLB first listed, the dividend underpin was a really important pillar of the investment case. And when they came to market, the employed yield was about 11%, 12% obviously, in euros. So that did attract a lot of income investors, not just a growth-oriented EM investor. I think in Europe, the market began to get very excited about capital return in general and specifically buybacks. So the ECB approved in the last 3 years, 10-plus buybacks, and they were important drivers of rerating at the European bank level. But I still think in emerging markets, particularly in CEEMEA that a valuation support from a dividend yield is important but that can't be at the expense of capitalizing on the very high growth opportunities in the region.

Okay. We have just a few more minutes, hoping that we will have also some questions from the audience. So I'll just have 1 more question for Mr. Maravic. Intercapital employs a number of analysts that provide coverage for most of the largest companies in the region and by that, help investors overcome lack of reliable and available information about the companies from the region. So to invest in smaller and less liquid emerging markets, you need reliable and trustworthy local partner. So how knowledgeable are your investors? Do you see improvements of financial literacy from your local retail clients? And are you able to sell to investors story of the region or only individual names?

Well, we do see the improvement, definitely. We have been investing in the research department for years. Have 4 analysts and plus 3 during the macro. So it's a big, big important department within our firm because whoever is coming to the region needs a solid piece of research to even put the region on the table, I guess. So our research was primarily focused for the institutional clients. And it is sometimes long and fairly boring piece with a lot of information, but it's not -- it was not channel toward the retail. So the retail does receive it or does read it, but it's not necessarily a piece for buying couple of thousand euros of stock. So what we do plan and what we did in the past year to started to produce more lean, simple pieces of information in order to get retail to start investing domestically because what we saw as a trend we, as you mentioned, in the beginning of the panel, we hold 25% market share in few markets, but still over 3/4 of our volumes is not in Croatia and Slovenia. So it tells you where the retail flow, especially is going these days or not these days, past year, I guess, or it's going more to the U.S. market. So we need to bring them back and to bring them back, we need quality research or quality research tailored for the retail investors.

Okay. Thank you. We have just a couple of more minutes, so let me check whether we have any questions from. No. No. No. Okay. We are almost out of time. We have to follow the agenda because we really have a lot to cover. So gentlemen, thank you very much for your takes on these subjects and for your participation. Let's hear 1 round of applause for our panelists. Now our next roundtable is all about success and, of course, our region. So we have very interesting and experienced guests joining us, guests that will show that this region really is on of success and how can we make it even better. So I kindly welcome Mr. Matija Bitenc, CFO of Petrol. Thank you. Mr. Fabris Peruško, CEO of Fortenova; Mr. Živko Mukaetov CEO of Alkaloid AD Skopje; Mr. Emil Tedeschi, CEO of Atlantic Grupa; Dušan Milicevic, Comtrade System Integration CEO; Mr. Aleksandar Kostic, Vice President of MK Group and Board member of AEC Banking Group; and Andrej Sovrovic, member of the Executive Board of Delta Holding. So welcome, gentlemen. Thank you once again for your time. Mr. Tedeschi, I would like to open with you. We prepared some questions, but in preparation of this talk, we came to another question, which is how do we even define this region? So that would be first question for you. How would you define the region that we talk about?

I mean...

We just need to have -- yes. Thank you.

Hello, everybody. I think it's completely individual. There is no 1 definition. For me, region is very emotional, but also a practical term. For me, it's impossible to sit in our factory in [indiscernible] and not consider, for example, Italy as a region of us or Austria, where we are a leader in the [indiscernible] segment or even if you are staying in Russia and not considering Romania, or Hungary or Bulgaria as a part of region, I think it will be insane. Sometimes when we say the region, we are talking about former Yugoslavia but I think that the region also historically, business-wide could be much, much wider. And I don't have authorization to define the region for me. The region somehow is, for sure, for Atlantic Grupa, the former Yugoslavia territories and countries plus, I would say, for sure, Austria and Italy, less Hungary, Bulgaria, Romania, Greece, Albania because we, as a company, we don't have a business there or not significant business, but I think it's completely individual.

Thank you very much. I would like to go with the same question for you, Mr. Mukaetov. Having in mind that as a pharmaceutical company, you sell your products all over the world, of course, but generate more than 50% of your revenue in Southeast Europe region. So what do you consider as if the question is, what is our region?

Thank you very much. First of all, I would like to thank NLB Group for inviting us here. It is a fantastic event, and I am more than happy to be here. Having in mind the region, definitely, as Emil said from his perspective from ours, it's a little bit, let's say, different, which means that for us, countries such as Albania, Greece, Bulgaria and Romania can be treated as a region, of course, the countries of ex-Yugoslavia. So more or less, it's how we are feeling more like regional, even more domestic, I would say, for us because culturally and from the other perspective, it's probably a little bit easier to approach to these markets. But anyway, our logic is that we should be global. That's the region is just a starting point and that we are all starting from here. We should find the synergies here. we should find the, let's say, potential easier way of building of the teams, which can build this global strategy for all of us. So definitely, this should be a starting point. Maybe just a combination of a fusion, let's say, our logic, we have production in the [ grade ]. We have chemical laboratory in Ljubljana. And on other side, our legal corporate team is in Zagreb. So we have together a mix of fusion of something which have the base in this region. Thank you.

Because you see that this approves, I would just like to remind you and encourage you that we are open for debate. So if you have anything to add on any question or to follow up, please do so. Mr. Milicevic, moving back to you, actually, the first time to you. Your take on region definition, but from a perspective of technology company group.

First of all, thank you very much for your invitation for this great event. Thank you NLB Group for having us here today and inviting us and giving us opportunity to be on this thing. It's really fantastic. Talking about the region in terms of IT company, it's very specific. When corona happened, we figure out quickly that a few months after corona, region in terms of IT company is going to be plundered. And we figure out the engineer who is working no matter in which country or which country the world has same price and same contribution to the company wherever company is located. When we moved from Day 1 to Day 2 to work from home. Engineers after -- once we figure out their home company, their company can be wherever in the world. And this is the challenges that we are facing in IT industry to date, not just we as IT company, I guess that all of you are facing the same problems with IT experts because now they are global experts. Price of those experts are globally equal. The people who went from San Francisco move to Texas when corona broke out, those companies in San Francisco decreased salaries of this region because cost of living in San Francisco was not equal to cost of living in Texas, and they figure out if you are living in Texas and working from home remotely, why should I pay the additional 30% for extra cost of living in some more expensive state in the United States. So in terms of IT company, our region is global and practically, we are operating. We had contract, are already operating globally even before corona. We have offices in Manila, we have offices in Boston, San Francisco, all around Europe, we started from this region. And practically, we use capacity of this region, I guess if we are going to talk about the capacity of this region to extend our business all over the world. So in terms of IT, our region is global.

Okay. quite understandable. Mr. Peruško, now going to you. Your company has 1 of the leading market positions in retailing in Serbia, in Slovenia and in Croatia. So at the same time, we do not see your competitors trying to have presence across the region. So how would you compare strategy of choosing markets and companies versus the one where you try to build a regional market leader?

So I think that we inherited a part of our markets and positions where we are operating. What we did in a couple -- in the last couple of years, it's -- we actually improved our capital structure. And we started to be, I would say, one of the good examples from being one of the trouble child in the region, being someone who is bringing actually hygiene and in the business for good liquidity, et cetera. We have still our -- some of our smaller issues but I would say that we did a great step. I would like also to follow up a question which you had earlier about the region, I think that the changing [indiscernible] which started with COVID, where initial response was let's close borders, et cetera, and protect countries and societies from moving around. It was the first response where we tried to actually minimize the damage of COVID, but we quickly realized that we are not able to operate in this environment. So in our case, we are one of the largest -- actually, we are the largest oil producers in the region. Our sourcing, it's mostly that here in Serbia. So you are not able to close border without actually allowing others to trade with you. And slowly, as borders were opening and we started to communicate more, the recent war in Ukraine impacted this region and it will impact this region in the way that we are much more open to each other and it will facilitate this process because there is now very clear -- it's very clear to all of us that now we need to solve all infrastructural issues here in the region in order to be able to operate as a region. I think that I actually mentioned earlier, rail communication, there is a part of the gas pipeline, which needs to be -- to connect Croatia and Serbia, which was never finished before the end of Yugoslavia, et cetera, and those are actually infrastructural projects which we'll now start here in the region because they will push region to work together even more than previously.

Actually, it will sort of make it more solid because we will be more exchanging goods and everything else between the neighbors more than ever, maybe.

And some so let me make a joke. So some of us will not look for a mother somewhere else, it's here.

Okay. Mr. Kostic, having in mind that your group solidified your market position in Serbia by recent acquisitions. And having in mind this merger between NLB and Komercijalna Banka. What is your take on perspective and future of further consolidation of banking sector in the region?

So maybe coming first to the point about the region, we see this region as ex-Yugoslavia plus Slovenia. That's how our group thinks a take on it. We are very saddened that we couldn't finish the whole transaction of all those bear subsidiaries that we wanted to finish due to the unfortunate events that we all know. But buying, I would say, one of those assets was, of course, better than buying none. And we see that there's a huge potential for consolidation in the financial market in the region. This, we see as our playground and we will definitely continue forward with new acquisitions. We have a few in mind. But looking also, I would say, in the NLB and Komercijalna Banka, I mean, it's a great thing. We were competitors. We came second best, sadly. But nevertheless, we're happy for them. And I think we have the management of [indiscernible] banka and the management of Nova Ljubljanska Banka has a very good relationship with the management of [indiscernible] Slovenia and NLB here. So I think we're good partners. And I think I am looking forward to the further consolidations and who knows where maybe our paths across in 5, 10 years from now.

You may. You may have applause if you like, no problem. Mr. Bitenc, We talked about the region itself and about big plans, but do we have appropriate and enough educated people in the region for all this to happen? Our people, actually, the assets which we can rely on, do we get enough of, let's say, well educated workers for all these things to happen?

Maybe I'll try to answer it twofold. So if you look at our sector, so energy consumption, comparing us to our grandfather, grandmother, we consume 3x more energy today than we did 50 years ago. So that's enormous uplift. If we look at how much food we eat compared to the Roman times with the same stomach basically, we consume 2x more energy, okay. I don't want to start with the water resources, where 4 billion people have water shortages today, not in 100 years, today. That's half of the world population then we have issues with the land and so on. So today, we consume approximately 6x our planet in terms of how much is capable to renew itself, okay. And taking this awareness and applying that to our segment. So let's say, we're talking about mobility. We know that there is a green transition going on in Europe. If you look at Slovenia, for example, today, we have 1.7 billion vehicles out of that 1.2 million personal vehicles, out of that 5,000 electric cars. If you look at Croatia, we have 2.2 million personal vehicles, you have even less electric cars. We don't have established a grid. We don't have enough infrastructure. I would say that we don't have the awareness that we need to change. So that's on the demand side. So we need to change, the people need to change to live in a better world in the future. And on the other hand, if you look at the HR, the potential of our people in the region, there is a lot of potential. But of course, as all the regions in the world, we are fighting for everybody, yes. I would say there is enough knowledge with not enough people to do everything that has to be done in order to achieve our goals. So we need to digitalize. We need to automize. We need to bring in the robot -- to robotize the processes, really to focus on the most added value activities in our companies to achieve our goals. So in a way, I would say, of course, there is a lack of talent, if you take into account of today's way of working, but if we can digitalize, automize, then I would say we have enough people to do that task.

Okay. Mr. Milicevic you already kind of answered a little bit talking with about this workers in the industry, which can now be either San Francisco or Texas or god knows where. But talking about IT experts in the region, what is the situation? Do we have enough well-educated people? Because we are witnessing that there are -- there's, let's say, a growing number of programmers in the region. But do you find your skillful workers in the region and then outside or it doesn't matter anymore actually?

For some reason, this region was ignored for many years. And practically, thanks to this duration of maybe for investors somehow in last 20 to 30 years built so many IT companies around this region. At this moment, you have really big IT players who are existing in this region and operating elsewhere. Looking from that perspective, we practically had enough capacity in technical terms to grow our business. Today, when you have like big H-tech who is acquiring more IT experts in this region for EUR 140 million in 1 year, you cannot generate this number of people because today IT industry is very trendy in this region because we develop so many companies who are worldwide very known. We have to -- in the way to change our educational structure, being at conflict, figure out that like 10 years ago. And our own [indiscernible] 10 years ago to figure out if we have to open IT high school. Three years after that, we opened IT faculty. Today, we have more than 800 students entering on this faculty every day and benefit out of action which we took 10 years ago we are feeling today, there is a global shortage of IT expert. We have to figure out. We have to adjust our studies programs to practically need today's companies and today's economy. What was Matija was saying, we are talking about our automatization, robotization. We have to introduce classes to elect a faculty in Ljubljana, Belgrade, Zagreb that practically get capable engineers who are ready to onboard in 2 months' time and to start working and bringing benefits to the company. So we have capacity, demand for IT capacity in this region is growing constantly, and we have to respond smartly on that location.

Mr. Milicevic, thank you very much. I think you had...

I just wanted to add and maybe a little bit to create a little bit of turmoil, not that I would like to create the conflict us versus someone else. But the only lack what I see for the moment when we talk about the region is a lack of leadership. There is 2 main assets, people and the nature and there is limited resources. But at the same time, I think whatever country we take, there is at least each of these country has 2 different society like a wide transparent society, building, creating the new values and the dark society, which I would not define between private sector and public sector because within the public sector, there are good people, quality people, sharp people, which set up the right targets and want to help society. But generally, there is a lack of leadership. There is a -- because the leaders are the one who should create the floor for the discussion, for changing the ideas, for dialogue and the people generally with certain talents, qualities, skills, they are around. But the question is, are we are capable to stop erosion of exodus of quality people, medical doctors, nurses, engineers, waiters, chefs, whoever, good salesman, marketing guys, architects, builders, any human activities, the people are leaving because the good people, they have the options. And it's our responsibility. I wouldn't say it's only politicians because I'm very often, for decades, talking about a lack of quality of leadership of elite within the societies. And this is academic elite, it's a political elite, it's a religion elite, it's trade union elite, it's a business elite, intellectual ones. And they are extremely good example -- positive example that there are companies and the teams which are capable to grow staying here and expanding the business, creating new values, but also there is a part of societies, which is just asking like, give me, I want salary. I want to be paid. I want be paid double than today and I am not interesting where the money is coming from. And this approach is saying for us, it's like alarm that the game is over. If we don't wake up -- and I'm so glad to be surrounded being the oldest one on this panel. And I used to be always the youngest one among the panel, I think it's now your generation even without dividing people to old and young to change this paradigma. I think it's not the question, do we have enough engineers? I think this region is capable to produce even more engineers or number of engineers needed. But it's a question of the leadership, much wider picture. What does it need? Change of educational system, vouchers, equalizing private education, public education, let students deciding, opening up the float and then I don't have a problem that we are going to have a lack of engineers or importing engineers from India, from Pakistan, from Syria, from Argentina or who knows from Ukraine or from Russia doesn't matter, but it's always a question of leadership. And I don't buy the story that there is a luck. There is a competition for the good people. And for sure, if you take, for example, Infobip, they don't have a problem. They attract the people out of the world. Take [indiscernible] 46 nationality works in [indiscernible] it's possible that someone from Great Britain would come to live in our region. And this is, for example, a positive example. And it's always a question of leadership. I will encourage all of us to take -- it's in our hands this -- are we going to be capable to create atmosphere, legal framework, relationship, regulation to be sustainable. Otherwise, no of our companies will survive in the next 10 or 20 years. Today, average day of duration of a corporation is only 18 years. In the '60s, when I was born, duration of a corporation in average was 60 years, 6-0, so, which means company exists, company disappears. The winner is going -- who is going to stay. For that, you need the capable leadership.

You actually led me to my following question to Mr. Sovrovic talking about sustainability. So we can offer hear that this region could be self-sufficient, self-sustainable. So having in mind how diverse is Delta Holding? What is your take on this sustainability? Is this region sustainable? Can it be sustainable? And I would also like all of you gentlemen to take part in this answer as well.

Definitely, yes. I mean, all the previous -- my colleagues spoke about, it is about long-term sustainability, about what are the potential in the region, what are capacities in the region. And we are thinking about that. I would definitely say that the key point is what we spoke about is about the people. So definitely, we are seeing acceleration of the business all around the world and definitely in our region. And what -- to your first question, I would say that the business itself is defined the region. And we are definitely looking to work in all the countries where we have the possibilities and where we are welcomed. We are definitely seeing the lack of proper staff, and it is our fault. I mean we cannot speak too much about what institutions can do. I believe the -- what the contrary is a concrete example. And in some ways, we did the same way within the -- our company. So we are trying to create the people according to our corporate culture to our needs and to tailor them. We are basically known for the fact that we are mostly hiring people without any prior experience. We are doing through different programs, and we are really trying to give them the best possible education in -- both in formal terms and in business terms. Going a little bit broader on sustainability, absolutely connects to the energy sector. We are seeing probably the biggest energy crisis in the world, and we have probably came again a little bit too late to notice this. And there was this huge [ price ] in 2008. Then the Queen of England asked the best economists who very well explained how the crisis happened. Well, if it is well, if it is so obvious, how we didn't see it coming. So again, I would say that the alarm, as Emil said, is absolutely upward awake. We need to take the matter of many different things we do in our companies in our hands. Look how we can educate, how we cannot only educate in our company, how we can contribute to the society, how we can give back in many different projects. And definitely, it is the only way for us to have a sustainable business because I believe we all in here -- our companies and our business for decades now. And one of the -- our key advantages of the people living in there, it is that they are working here for a long time, that they see a prosperity. They feel they can find -- they can grow in roles, and we really need to be thinking for our future, not only for today.

It's in line with Mr. Tedeschi just said, creating leadership. So you are already doing something in that way. Mr. Peruško, I would like to hear your take on this. Also what Mr. Tedeschi said regarding the lack of leadership and on the sustainability of the region itself. What do you think?

So if you are affecting -- reflecting on sustainability, I think that our -- the biggest issue is population decline, which is a consequence of a number of things, different way of living. But also, I think that the atmosphere in the region was not such that we created an environment where people will see a long-term growth for themselves. And I think that the atmosphere in the society was not such that it would create a positive enthusiasm that people will see that they are able to develop there for them and for their kids, place where it's good to live. And this is the reason that we -- in the last 20 years, we lost around 10% of the society in the whole region. And it's not only Croatia, Slovenia, Bosnia, Serbia in the south, it's also Hungary. So the broader region with the accession to EU, a number of people because of mobility moved. And now we are in the position that we need actually to populate this region again. Definitely, the shift in demographic, which is now happening in Ukraine, where more than 5 million people left the country, this is one of the quick fix which could be for this region. But if you are looking in the next 10 or 20 years, we are definitely not able to increase population. Just naturally, we will need to create more immigration. And Emil mentioned [ Rimas ], but they are also, if I'm looking out for the Nova. So we were able to attract people from abroad to work for us. There is a number of things which needs to change local in legislation, et cetera, that it's making us attractive to move here. This is taxation on salaries, et cetera. This will actually help us to be competitive with our offers to other regions in Europe so that people will see this opportunity to live and develop here. Huge advantage is technology because it doesn't matter where you live. You could live in [indiscernible] as Infobip and work. Nobody knows where you are living. So if we are changing the atmosphere in the society, if you are changing legislation framework, it will develop this region and provide much more opportunities for people to be here, to come here and enjoy life here and creating value here. We are not able to grow as a region. -- with our growth of population. So this is one of the main drivers. It's productivity, one. But second, you are not able to grow so much with productivity if you are not growing with population. It will impact positively also real estate market, et cetera. So this will provide the new fuel for the society here, and it will help us as a region to be competitive in the longer term.

I would quickly agree with Fabris about the most important resource as being basically talent and people here in the region. That's one problem that we are facing as MK Group. We're really starting to find talent. Maybe it's a problem with the leadership, I don't know. But it's hard, I would say, to find right talent for the -- for our group. And the problem, I think, is also that the people who have left are young. The people who have stayed are older. And we don't only have a probably with decrease in population, but an aging population as well. So yes, I absolutely agree with him. Food, which is, I think, a very important resource, I think we don't have a problem as a whole region. I think especially now with this -- Serbia who is a large net exporter of food who has said the priority of Serbia will be to export to its neighbors, meaning Albania, Croatia and Macedonia. So I think that's very important. I think it's very nice to see this cooperation and the fact that we see that actually, we were one country before and when -- that's how we should behave even though we are fragmented now into many. And energy transition, definitely an important thing. I think Serbia has plenty of solar locations down south and plenty of, I would say, wind locations on the east territory of our country. We are very active as a company there, and we very much believe that the renewables could be a very big opportunity for Serbia, I don't know. We haven't exploited Croatia so much or Slovenia, but you can maybe comment more on that, I don't know.

I would like actually like -- you can go, Matija. And then I will go to Mr. Mukaetov, I would like to hear your answer also on the sustainability. Mr. Bitenc, go ahead.

Maybe in terms of the supply of energy sources, so of course, we are highly dependent on the world today. So we really are facing immediate issues if the embargo, when the embargo is taking place, how to source the energy from other sources or other parts of the world. And even today, we are -- we have partners in the United States throughout the entire world trying to bring in the natural gas products, fossil fuels, at the end. So in this respect, it's very difficult to be self-sustainable and independent due to the scarce of the resources in the region. It's a fact. Of course, what we can do in terms of the sustainability, of course, we can invest in the renewables. So we are doing that in petrol. We're doing that, I would say, extensively. Two days ago, we just opened a new wind power plant in Ljubac near Knin with 9 wind power turbines. So together, it is enough for roughly 30,000 households. So that's our second wind farm. Now we started another solar power plant, 22 megawatts. So we have a large pipeline in front of us. We are also in discussions with your colleagues from Delta to kind of start a joint project of solar power in the Delta system. So I think we see that the awareness in the industrial part of our societies has risen significantly. In particular, in Belgrade, where most of the multinationals have their offices, headquarters for the region. We see that there is a push from the Belgrade throughout the region. For example, through Heineken, Coca-Cola, that will require their logistics services go to the, let's say, LNG because it's more or less environmentally-friendly. And we are -- together with them, we are setting the standards. So there is a lot of potential, in particular, in wind and in solar, also in Serbia as well as Croatia. In certain countries, I can talk for Slovenia, we have to set up the institutional framework, so we are not satisfied with how much projects we've done at home. So in Slovenia, for example, we have the largest solar power plant. It's 2 megawatts. So basically, it's very small size. So there is a lot of potential, which should be exploited. Of course, a lot of investments is required to do that, not only in building up the solar power plants, but also in building up the grid. A lot of investments will have to be made. So the government policies and also the funding is important in this respect. So we have to work together. I believe that we can substantially increase the share of self-sustainability if we will run in the same direction with the same pace.

You mentioned the pipeline. So eventually, the name of the company will not be Petrol. It will be Electron, right?

No, I wouldn't say that it would be Electron.

Actually, the change from fossils...

No, we were discussing -- it's a discussion which is ongoing in Petrol. So we have a large piece. So maybe it could be power, for example. Because today, if you look at our portfolio, so we are energy retailers. So we are not in upstream. We are offering fossil fuels. We are offering LNG, LPG. We are offering electricity. We are investing heavily in production of hydrogen. So basically, we'd like to be energy-agnostic. So if you're our consumer, if you're our industrial partner, whatever you need, you come to us and we'll provide it. And if I refer back to my first discussion, so the consumption changed or increased by threefold in the last 50 years. That's because our lives have changed. So we drive more. So the mobility has increased. The -- we buy more, so we purchase more. So we are the capitalist community. We have larger leading spaces. We are heating as well as we are pulling down our office spaces, our homes. So if we -- together with progress, more and more energy will be needed, and that's where Petrol comes into play. And focusing, of course, on environmental-friendly solutions, which we started 20 years ago. So that's when our department for, let's say, sustainable solutions has been founded.

If I add just one sentence before your call just to connect all these things. I believe that the key sustainability is a part from leadership the knowledge. It is the word somewhere all around us because what is the sustainability. It is what we need to take the most of the resources that we have, and I believe this is not the case today. So in terms of energy, especially, we cannot invent something that we don't have. Of course, we are looking to improve all the alternatives and renewables. But we need to use the research that we have in the best possible way, meaning that we have the best possible people in charge in leading these companies, in importing the best practices from all over the world and making the most of the resources that we have. I believe that is our first priority. Apart -- on top of it, we can build on everything else.

And maybe just to add. So what happened really with COVID and this digitalization? So we are competing for the same talent globally today, and that's why we need to kind of form attractive employer value propositions. So we retain the talent and we bring the talent in from the rest of the world. If you want to do that, we need to, I would say, upgrade our product, our services to bring much more added value. So we need to focus on certain sectors and align that from schooling on from government policies. We have to all run in the same direction with the same pace. That's the only way how we can manage the situation because we face the same issue. We have very good schools, I would say one of the best schools in the world. So we produce a lot of talent, enough talent, but how to keep it here, that's the question.

Okay. I will go now to Mr. Mukaetov. The second question regarding the leadership talents, we all connected. Mr. Sovrovic just connected it all in one sentence, almost. So do you face lack of talent, lack of leadership? And do you -- what is your take on sustainability of the region?

First of all, I think definitely that our biggest resource are people, and we should fight how to keep them here. I think that that's as a business community, as a business leader, we should be the advocate to society to increase the positive stories about good values, about how we should motivate them to stay here. It's a fact that we are living in society which is very much polarized, very much politicized. And that is on other side, influencing, I would say, negative to the quality of life in which we are all living in this part of the world. And definitely, from this perspective, we should be proactive, we should be more aggressive in this promoting of these good values. I mean I would say our example. We are aware that we can't expect too much of some of our, let's say, segments of society, which are more related to the state, so that's why we can file on our program of practioning dual education. Now we are starting education center, which we want to be a formal education school probably in the future, even faculty, as you mentioned. So definitely, we should take more action, I would say, how to motivate the people to stay here. And definitely, the business community is, I think, one of the major players which can do that.

Go ahead, Mr. [indiscernible].

It's -- we already mentioned the few dimension of -- few items which are crucial to attracting talents which are born here or the talents which would like to come here. Why didn't they? I mean first, we need peace. And if we are talking 30% of the time about next potential conflict, it's an end game. This is number. Second, we need predictability because this is what people are looking, especially the talents who have several options where to work and where to live. Then we talk about the quality of educational system because everyone would like to see for their kids, for our kids what's here for them. Then with the COVID crisis, it's obvious that they're talking about the health service and system, which has to be on the certain level. We have many positive things. We have infrastructure generally, which is in good condition. Yes, there are project which has to be done, but still we have geographical position. We have a quality of water, air and food, which is one of the best in the world. Take the expats, which are coming to these -- our countries. Nobody would like to leave. People like to stay. But the moment kids get to go under a certain level of the school or university, people are thinking maybe we should come back. Also, our local communities are not always welcoming foreigners. The big cities is one thing. There are certain regions where the foreigners are not welcome. We have to become more global, more open and more respecting the differences. And we have the lowest -- one of the lowest density of the super quality geographical position, which is our asset. Density was a huge issue during the COVID time. It's our huge privilege. But we need -- when I said leadership, we need certain master plan, which would not be only from the individual countries but from the cluster of countries. Even individual countries can compete on a certain level, but I think that we have a joint need. We need consumers. But at the same time, we need experts on every level, how to attract. And we are not talking about the thousands of people, we are talking about a couple of millions of people. It's up to us. But if we have the same time, the people which want to keep status quo or can only survive in the certain crisis environment and conflict environments, then we are slow downing and that we are not competitive as a region. And when I said to the -- about the leadership, I didn't want to criticize individual CEOs or Board members that we are not capable. I'm thinking it's our responsibility to be extremely active on that much wider frame. Otherwise, as Fabris said, 10% of population gone. It's not only lack of talent, it's a lack of the consumer for our goods and services. As Aleksandar said, our population is aging. Who is going to buy in 10 years' time our products and services? This is a question.

I know who is going to sell drugs for the aging population. Okay. I would like -- we already had some -- and cosmetics.

No comment. I mean still -- for me, the best alkaloid product is becutan cream. Becutan is for the babies.

Yes, for the newborn.

Which means we need newborns.

Definitely.

Okay. I would like to have -- we have, I think, really interesting discussion, and we already learned about the region. For the people, for some investors and people watching us online and in the audience, which are new to this area, I would like to hear takes on how would you describe even though we described it in many ways, but how would you describe the main characteristics, advantages and opportunities of this region. So I will start with you, Mr. Peruško and then go to the right-hand side. So if you were describing this region to someone who has never been here or -- so what are the opportunities, characteristics and advantages? We heard what flaws do we have, but let's try to attract somebody.

I would actually put this in a more macroeconomic context, which I slightly touched earlier that COVID and war in Ukraine changed a lot in terms of how we are behaving. And on war in Ukraine, I think that this will facilitate actually joint projects here in the region, especially in ensuring self-sustainability, in food, in energy. There is a lot of projects which ended in '80s and they never finished, which will allow us to work better together. There is a nuclear plant in Slovenia, where Croatia and Slovenia are working on developing a second block. This is part of sustainability because it's decreasing CO2 emissions. There is -- Europe was developing in the last 30, 40 years based on the cheap gas coming from Russia. Now gas will partially be compensated with the LNG. You need the pipelines between Croatia and Serbia. And a lot of new investments are coming in, in energy with solar, et cetera. This is driven by EU agenda of let's decarbonize society. But also I would like to mention maybe one anecdote. So in the recent elections in Germany and when we are looking at this from the context of war in Ukraine, actually, in Germany, 2 major ministries which are in charge of foreign affairs and economy are run by green party. So this is actually putting a ton of the future development in Europe, where we need to come up with new paradigm, how we will develop our energy resources in the way that we are able to provide a cheap energy for the economy. Energy went up in the last year. We have a huge increase of energy prices in electricity, in gas, et cetera. And if you are not able as a continent to come up with an answer how we will prolong our sustainable energy sourcing, we would not be able to develop economy in Europe in the future. And I think that this will be a major answer -- a major topic for our future here in the region. Now coming back, I think that -- and Emil mentioned earlier, we need here to get out of the conflict language in the region. I think that we have one particular area in the region where this is still a major topic in society, and I think that all of us needs to -- through our work actually to facilitate that this is [ demineralized ] and that this is not a top topic in the region. Region, as we were discussing after now, do not have a good density. So we are one of the least densely population in Europe. It's a great nature, good geographic position. But somehow in a global development, we still didn't find the right economic model how to grow faster than other regions in Europe. And I'm not looking at this very pessimistic. I think that in a changing environment, this could be a new opportunity for us to find a way. Maybe when we were mentioning also newborns, I'm always taking this, so I'm lucky to not born in '60s but '70s. In '70s in Croatia, you had 75,000 newborns per year. Today, you have 37,000. So it's half, means without actually our internal generation and immigration, we would not be able to grow enough to compensate this.

Okay. Thank you. Mr. Tedeschi, let's go to you. Actually, I believe you have one microphone probably behind your back, but doesn't matter. So what would be the main characteristics, advantages and opportunities of our region? We already mentioned many of them, and I see that we already have some questions through the platform, and we will try to see whether we have some from the audience. We have still some time. So how would you describe these 3 main things, actually characteristics, advantages and opportunities of the region for someone, as you said, in Texas, right?

I think that there is several proof that our countries or surrounding region is a good place for living and it could be a great place for doing business. But somehow, we have to clusterize and, in many aspects, act as a cluster of countries. And knowing that sometimes we can be even competitor, for example, Fortenova and Atlantic Grupa in the food production and MK Group. And then we are in certain fields competitors. But in the same time, Fortenova is our largest customer. And opposite, we are their largest supplier. MK Group is our large supplier. Petrol is our strategic supplier of energy, and they are our large customer. Alkaloid is our strategic supplier, which means that we came to the position that within the business, we don't need to take who is going to be winner among us. We have to find the things to create a new value. One plus one, we need to create 3. Same thing when we talk about the countries. Yes, we have a national policies, we have national parliament, we have an edge on late legislation. But on the certain things, we have to promote to communicate the cluster of countries. Because individually, we are too small for the potential institutional investor coming from Texas or from North Dakota or from Mexico or from Argentina because they cannot even recognize we would be always below the radar. And I think it's all about the strategy of creating the legal framework, setting up priorities and those of the quality of communication. In communication, the important things that the people who are communicated, they have to be authentic one. We are authentic. Then the people are going to start to believe. And there is all Jewish sentence that you can cheat all the people.

Sometimes?

Sometimes, you can cheat some people all the time, but you can't mislead all the people all the time. It's not possible. But when we just shift paradigm from the positive perspective, I really believe that there are good examples. Croatia per se, we have 2 unicorns, which is per capita leading position in Europe, and we have to utilize it. And I'm so happy that today, we are celebrating Infobip, [indiscernible] Scottish and Isabelle [indiscernible] and [indiscernible] and that we are proud like we are proud of [ Novacap ]. We are proud of the Slovenian skiers or basketball players or whoever is a superstar, Nikola Tesla, like being the genius #1, which is coming off of this is. But instead of fighting where the Tesla is belonging, which is stupidity, we have to be proud of him. He was global and he is a global icon. And when you have the right communication, then you start attracting. If we are going to spend the time of insisting of our differences, how we are going to interpret the history? That means that we are not learning from the history and we are not focusing. I'm really positive. The COVID decreased the buzzword globalization in terms that the companies to be present in every and each market of the world. Somehow put more into the spotlights life/work balance, quality of life, and especially the new generation are more aiming to that. And I think this is extremely positive situation for our region that we have a good asset and potential good proposition for the families moving or to families staying, living, working here in the greater environment. It sounds like a lot of blah, blah, blah, but I really believe that there is a proof that we have the assets. But the question is now, how we are going to use our quality time to be productive in the end? It has to go for the value creation and not for the value destruction.

Thank you. Before moving to Mr. Kostic, I'd just like to ask Mr. Milicevic because Mr. Tedeschi almost mentioned everybody, why aren't you selling anything to Atlantic Grupa?

That was my takeaway. I figured out this year we are just not partnering with you. So after this funnel, I'm sure that we shall come to present our portfolio at Atlantic Grupa. Yes, I think that we have one security project. which is interesting.

Yes, but the question is the good company, the CEO is just a spokesman. I was not well briefed. I'm pretty sure that we cooperate at least on one project, but this is always opportunity for developing more, and inviting you here. I mean I'm really open for the good talk.

Actually, it was meant as a joke, but great. Probably you do already.

I was thinking to mention that as well.

Okay. Mr. Kostic, going to your main characteristics, advantages and opportunities of this region, but from the perspective, actually imagine that we are talking with a large investor from Texas, Mexico or whatever or wherever, Argentina. How would you describe it?

I think we have great talent. We just need to fight for that talent to stay. And I think we have great resources, but we need to fight to utilize those resources in the right manner and to maximize the use, I would say, of those resources in the right manner. I couldn't agree more that the time of wars is over, and we need to grow over that. And there is still a talk about it in that 20% or 30%. And there is -- and depending on which part of our region, there is more and there's also less talks on that. We should stop using these times or these, I would say, internal complex to get, I would say, short-term benefits because long-term wise, I think they're affecting us a lot. And long term-wise, I think we're losing a lot of smart people that are just leaving and don't want to be part of all of that. And they are the ones who we, I would say, want to keep and they're the ones who we want to stay. I think joined together and working in synergy as we saw in some of the presentations before. Balkan region is a huge potential. We grow. I think that's very important. And we grow economically. We grow faster than all the developing European economies. So if you put it in perspective, if we can grow faster working together, and if we can continue growing over the next 10 years, we're not just going to be, I would say, comparing always that far away from them. We're going to be closer to them in the way of standard of living. But if we work together, we can maybe grow faster, and I'm sure we can grow faster. And on that chart, the Balkan 6, and I don't believe it's 6, I believe it's 8 or 9, I don't even know, but it is a few more names, we're not going to be compared to Czech or we might not be compared to -- maybe larger than all of them, probably not large in France or maybe Germany. But we'll be larger than those economies. A better place for living. I absolutely agree. I mean there's no -- I believe that then you can -- [indiscernible]. There's nowhere in Alps you can -- unless you're a super professional skier. But there's nowhere in Alps you can ski that level with the level of, I would say, after skiing, I would say, content that you can have in [indiscernible]. It's great. If you look at the Croatian Islands or if you look at the sandy beaches in Albania, nothing better than that in my view, right. If you look living in Belgrade or Zagreb or even Ljubljana, but of course, depends on what type of person you're really, Ljubljana is more calm, Belgrade is, I would say, the most dynamic out of all. There's no better place to live. So I think we need to join together and we need to work together. We have a huge potential, but we need to overcome our differences because some obviously still have some differences. I don't think that here we have any differences. And Emil just rightfully pointed out, we're all working together, so there is no difference. We need to work together more. And Emil pointed out that he used to be the youngest one, now he's the oldest one. Generations are changing. Managements on top of those companies who managed to survive, I would say, this transition period are changing. And it's our role not to be this ego first generation competing once against another. We need to work together. I don't care if Emil's company will have more revenue or Delta will have more profitability, for example, than us or Comtrade is going to employ more people than us. Because without Comtrade, Delta and Atlantic in this region as large companies, we cannot be a large company. If you don't have 20 or 30 large companies, hundreds of, I would say, mid to large companies, thousands of mid companies and thousands, thousands of small businesses, forget it. I mean we are nobody. So yes, I only see -- I would say, I would point out synergy and working together. That's the key.

Okay. I believe Mr. Tedeschi, you had a reply. Okay. No. Mr. Sovrovic?

I'm fully in line with everything being said. I just don't want to repeat everything because we are short on time. We just had 2 things that I believe are changing within the region in a positive manner for the investors. On one side, I believe that there is a really passion in people in here. I would say there is really healthy hunger in seeing people to grow, to learn to live better with this buzzword globalization. I believe we really opened up to the world, and I really believe that there is a talent to work with, and it's our job to find a way how to do it. On the other side, I would say and what I'm really glad is that what we are speaking today and the culture within the society is changing so that it's not a shame to be a businessman. There was this business owners buzzword, I would say, in this region for a long time when I was starting. There were even some different words connected the world. When we came back to sustainability, we, as Delta, are publishing corporate social reports every year together with MK. The first pages there are what are our profits. Why? Because our first role in here is to generate profits. Why? Because we are reinvesting into the society. We are, by this, giving security to our employees, and we're really on our way up. And that's why I really hope and I'm really happy that we've seen in the trends, very good foreign direct investments in the country. But I really also hope that in the past, us domestic investors will really have similar conditions to work in because I really believe that we have a lot to offer. And definitely, I believe it's a culture where we are understanding more. We are speaking more about the Unicorp as Emil said. In Serbia, there are also some fantastic IT examples, many different examples. And I really believe that not only we'll be known for sports. And when somebody speaks about Serbia's Djokovic Novak is great, I mean. But we will speak also about some very good business examples because I believe we are capable of this, and this will attract even more business and show our countries and our region in the best possible manner.

[ Nicolas Yorkij ], back-to-back MVP. I mean, also, I mean, for us, following MBA, back to back MVP.

Plus, we did it this morning.

Actually, we have launches as well. Okay, we have MVP back-to-back, but also great examples from the region. Mr. Milicevic, your description of characteristics, opportunities and advantages of this region.

It's getting more and more difficult to speak up to those guys because each of them can have a very nice conclusion to audience. And I mean the characteristic of this region is this energy. Leadership, what Emil was saying and organization culture, with energy, this is something which brings benefit to all of us. And I mean I will not add anything to everything what was said. I just want to prove what I was saying about the energy of Belgrade and how Belgrade nightlife looks like you will have a chance tonight to see it for all these foreign investors who came, and we have to prove what we are seeing today. It will be always interesting to have meeting minutes of those panels, and those meeting minutes of those panels we sent to regional governments. You see, guys, everything what we need to do is here. We are talking about -- I mean Yugoslavian economy was the fifth economy in Europe in '80s, I guess, when we -- some of us were born. So this region has capacity. We have to open the borders. We have to speak directly. We have -- competitors are bringing benefits to other competitors. We need competitors. This is good what we are seeing here that we are helping each other to grow. So I want to thank you for the opportunity. The energy is here, we have knowledge, we have capacity, and I really hope that we will get to know each other during today and this way we will prove what we were saying during this panel.

Thank you very much, Mr. Mukaetov, your take on characteristics?

I will say only one thing, which I think we can say for the Balkans. The ambassadors when they are coming to the Balkans, they are crying. But when they are leaving the Balkans, they are crying more.

I can testify to that. I used to work in one of the embassies. Mr. Bitenc, your take on the opportunities in the region.

It's difficult to follow up on my colleagues.

Let me just say I concur. It's okay.

What we found out, so we have the Sun, yes. We have a lot of Sun. It's beautiful to live here. We have beautiful [indiscernible] coast. We have a beautiful water. It's a region where you can jump in the water in the middle of the night, naked, nothing will eat you. Not many places like that in the world. It's true.

It's true.

We need to do the energy transition, as I spoke before. We have only one planet, only one sky. We need a lot of investments to do that. So we are inviting everybody who is listening to join us. And with our passion, we can make it -- this effect.

Thank you very much. Mr. Tedeschi?

I would like to emphasize to what Andrej said that we are living a different decade changing Paradigma. It's not having one large empire and wants everybody to be a slaves, that we are here building the society culture that we celebrate other people's success even if they are a competitor because having successful individual, teams corporation create a much wealthier, a sounder and more perspective for the future. I think it's extremely important. It's crucial that we learn how to celebrate other people's success. Ego is again, very, very important. It's needed but has to be controlled. And every time when I see the interview of successful business leader creating positive results, new acquisition, new market, new formulas, new product, awards, et cetera, et cetera, for me, it's personal stimulants that it's possible and there is zero envy. And for me, this is because dreaming that you are going to be the best, it doesn't mean that you are going to be better than the other. Every one of us is competing with our own selves, being better than I'm -- that was yesterday. I'm going to be better tomorrow. I'm competing with myself, and our teams are competing with ourselves, not with other people. And the business, it should be like this. And then it creates a good feelings, mutual cooperation. It's never going to be ideal, but it's up to us to create a real better world. And in that sense, starting for quite lower point, let's be fair. We have in the next 30 years in front of us, I would say, great horizon for the potential investors because they are assets, they are good companies, they are capable teams, they are countries which deserve to be invested in, and they are great examples. And I invite all the investors and thanking NLB held by the President Blaz Brodnjak to organize all this for us because it's not only promoting the NLB, promoting the -- all our companies, promoting our society because investors can stay and go, but it's important, and the winners is the companies and teams which are going to stay here in 10, 20 or 30 years. And I really believe it's possible.

Thank you very much. And on that bombshell, we shall finish this talk. Thank you very much. Gentlemen, thank you very much for your time. I believe we had a very interesting talk, and we had some questions. I encourage you to approach these gentlemen in the following pauses that we will have because I believe it was more valuable to hear them here on stage. I hope you enjoyed. I shared it. Thank you very much once again for your time. Thank you, guys. Thank you for your patience between the changes. Since we are in a national theater, of course, we need to have the scene change between the place. Now I have the opportunity, and I'm delighted to present new NLB Board members. So please welcome Hedvika Usenik, Antonio Argir and Andrej Lasic. I would like to start with first question for you, Hedvika. What will you bring to the Management Board of the NLB?

Thank you for the question. Well, first of all, I would say, 20 years of banking experience. I have already been working now with the team for almost 4 years. The last 2.5 years in the capacity of assistant Management Board for the area of retail. So the results that we are presenting today and that we published yesterday, I think also partly a result of my work and the work of the colleagues because we are already really strongly working as a team for some time. So I would say having worked 20 years in banking, but mostly sales, marketing, product management, corporate retail, I was always under pressure of results. So it was never easy, and you cannot hide anywhere. You either deliver or you don't. So I think I'm bringing to this Management Board for sure, the ability to deliver results. The ambition, I don't like status quo. I like delivering results that are outstanding. And I think, and this was mentioned really a lot in the previous panel, also cooperation. I think it's super important, not only in the region, but sometimes in the -- also in the organizations. We tend not to cooperate but compete among each other. And I'm always saying, why? Because we have a market outside, we have to compete in the market, not internally. So some healthy competition internally may be productive but not too much. So for sure, I think I will be bringing good cooperation with the team. I think we have a good energy for sure. And I think I'm the first woman in the Board of NLB in the history. Thank you for that. So a small contribution to ECG topics also from our Supervisory Board. I was not seeing it is very important, but I was not dealing with it too much because the process was intense. We need to deliver results. But when I was nominated, I heard so many compliments, positive comments, especially from women who really within the organization, but also outside, who felt somehow proud that I made it. And if this opens the path to some other women to get off the comfort zone, like I did today to come to this stage, my first investment day, then I have also done my contribution to ECG, I believe.

Okay. Great. Thank you. Andrej, going to you. You know the banking set out and you have an excellent insight into your clients. So how important is the human touch and personal relationship with clients?

Yes. Thank you, everybody, also from my side. And thank you, Hedvika, to come to bring this humanity to the Management Board from the women perspective. But back to the question. In any service industry, in actually any industries as we heard before, but especially in service industries, especially in banking industry, talent, human touch is key of any success. I will just give you, let's say, a recent example. We all know, we are all aware that last year results, last year business performance of the whole region of the -- all the companies in the region, we're one of the best. The GDP growth was record high. Balance sheet were the best one. And usually, the bankers are looking last year balance sheet, putting into the scoring model and then are deciding. Just now, we actually got all the results of last year. But with all the war in Ukraine, especially all the problems in the delivery of all the goods, raw materials, especially the energy that was discussed before, a lot about that in the previous roundtable, we know those results tell us nothing. So we have to be -- to understand the challenges, to understand the needs of the clients. In changed situation, we actually have to be every day, every single minute with our clients. Otherwise, you are out. You cannot properly structure advice, help and jointly prepare. Because my main mission actually is and my commitment, success of our clients is our success, and success of our clients will improve GDP in all around region. Improved GDP in around region will improve living conditions in our countries. And only that when the, let's say, average salary in the our countries, we know that in some of our countries in that region, the average salary is still very low. They cannot think realistically about sustainability. But everything what we discuss when we'll improve the living condition with that average salary, success of our clients, success of us, we will can -- then we will have a precondition to discuss about sustainability. So the human touch is actually everything.

Thank you, Andrej. Antonio, if we paraphrase a bit, you epitomize the so-called Balkan dream. You started as a loan officer in Northern Macedonia, continued your journey to the CEO's position of NLB Banca, Skopje and are now a Board member in the largest banking group headquartered in this region. So can you tell us what matter the most to make such a progress?

First of all, thank you for that comment. And I can convince that everyone can do it. Really, everyone can do it, which is ready to step aside, to step in front, to take decisive actions individually and professionally. And what matters the most, I am dividing it in 2 aspects. Let's say, internally, individually and externally. Externally, meaning the environment, meaning the company for which you are working, meaning the group for which you are working. If the company is ready for new ideas, if the company is offering really challenging and inspiring tasks, and if you are surrounded by colleagues which will support you, challenge you at the same time, and you will together as a team deliver excellent results and celebrate together, that's really one of the preconditions for success. And I have to say that I'm really happy and proud that they work for NLB Banka, Skopje and NLB Group, which really offers this all, which I said. And then I'm coming to the, let's say, internally or individually. My belief is that every person should have his personal vision. And he should really, really strive the -- both time and energy to that vision, not to be addicted to that vision. And I believe then that every conscious and even unconscious, everyday actions will go toward that vision. And if you have a combination of these 2 things, actually, which I had somehow, I was called, what, middle of 2020 during COVID time from the area of the leadership from [indiscernible] to take over the group steering position as CEO. And I was -- I have to say it was not an easy call, not an easy decision. But again, if someone wants to really grow, really contribute to the society, to the team, to the company, to the countries, to the region, you have to grow, you have to take courage, you have to go out of your comfort zone, take the opportunity. And together, achieve really, really good results. And again, I will underline everyone can do it, who is willing to take their ownership, who is willing to take decisive decisions personally and individually.

Thank you. You mentioned steering functions, overseeing the group steering functions. So strategic foreign markets have nearly EUR 10 billion in total assets and have contributed 40% to group's profit after tax in 2021, so which is very, of course, meaningful. What are your priorities [indiscernible]? And how are you planning to ensure that this sometimes very different than specific markets will continue to deliver expected results?

I will stress out that actually the expectation from the strategic markets will grow in the future even more. And we base this expectation on the economic development that we are seeing coming from the region, and I will not repeat what was already said previously on previous panels. Because all countries have the EU agenda, we are almost -- EU candidates, this means we are striving for the development for big infrastructure. projects, et cetera, et cetera. So this is opportunity for us to grow as a societies. And we, as a bank, as a group, we have this role in this growth. In order to seize this opportunity, actually, we have to develop steering function within the group, which will have duo, let's say, approach. One is assuring that group vision, group standards, group guidelines are implemented across the countries, across the banks. But on the other side, not to forget and even strengthening the importance of local management board and local team because local management boards, they know the specifics of every country of every market. They are delivering even today and they will deliver even more in the future. In order to do this, we have to have good professionals, good team in the banking group steering, but also in other areas of the bank, where we will actually focus and develop the right set of KPIs. It is important. And beside the regular financial KPIs, which we ever have, we are developing, let's say, additional 3 setup of KPIs. First one is transformational, our transformational KPIs, where we will focus on transforming the business model of our banks, preparing for the future banking and focusing on digital, digitalization, productivity, leverage information capital, ESG aspects, so environmental and social governance, et cetera, et cetera. On the other side, we will focus on platform approach, where actually we will try to develop group sharing services in order to use the synergies on a group level because we are big regional group, but not that big worldwide. So we have to somehow keep these entrepreneurial spirit and keep this touch to the region every day. Then the second set of KPIs is focusing on, I would say, the bread-and-butter business. So focusing on key segments, retail and corporate, where we still have enormous opportunity to grow the market share, to increase the cross-selling, to develop the distribution aspects of the business. And the third KPIs are really important for us. These are focusing on delivering and promoting the group values, where we are actually focusing on people, developing and growing people inside the bank, in sale group, where we are encouraging and promoting entrepreneurship and where we are focusing on the improving the life of all our stakeholders within the region.

Thank you, Antonio. And you mentioned retail banking within the second set of KPIs. So Hedvika, retail banking is an important part of NLB Group's business. And we often hear, and Antonio also just mentioned that the regional markets offer opportunities for further growth by implementing the right strategy, retail banking can prosper, of course. So what are your plans and strategy to support and enable growth and best-in-class service for your retail clients.

I believe that the gentleman from JPMorgan was mentioning that the banks in this region are simple. And indeed, and we also have a very simple strategy, I would say, for retail banking. It is basically growing retail lending. I believe we have still a lot of potential because the markets are growing. We are well positioned in terms of customer experience, NPS, also penetration of loans is not too high. So for sure, we can grow, we can grow with the market, but we can also grow higher than the market. If we manage to do it in, for instance, in NLB in Slovenia, which is a market leader and for market leader it's always hard to grow market shares, but we did grow really immensely in the last 2 years. So we can do it everywhere, and we actually see it in practice already happening now. The second topic is -- was also mentioned before already is the fees and commissions. The share of fees and commissions on total revenues is in some markets still on a very low level. And while in Slovenia, we are already in retail at 45% in corporate and 50%, we still have the potential to grow and investment funds were mentioned. So a lot of potential in this area. Also cross-sell can be improved. So these are the 2 important topics. And the third one I would mention is business transformation. So more or less, trying to put out of the branches, all the simple transactional cash business, not all of it, but as much as possible, move it to digital channels, move it to cards, POS, ATMs at least, and then focus in the branches on more value-added activities. So really a good advice to customers when they need advice when they're buying a home or when they need to invest or when they need to manage their personal finance. And this means that our branches in the future, there will be less of them. We will have less staff, but the stuff will be more qualified. And all the simple transactions as much as possible, we should be doing digitally, and we just have a strong contact center to support this digital transformation. Of course, it's not happening overnight, but it's also not super complex. So we know what we have to do.

In your opinion, how long will it take?

It never ends.

Never ends. Okay, okay. Okay, so actually branches are going to become advisory channels.

Yes, more and more. It's transformation journey.

Okay. Okay. Andrej, moving from retail to corporate. Some say that corporate banking is the end of all the all of banking. So whether you're a large multinational corporation, SME or a startup, corporate banking has a solution for you. So you service all types of businesses in various industries and sectors, employee lending, trade finance, investment banking and much more. So what is your strategy for corporate and investment banking clients?

To be the best in class in the region that is simply. No, maybe yes. Firstly, it's really intense hard, hard, hard work with the clients, together with our clients to understand the clients, to be in proper time with a proper product with the clients to have best. This is we just discussed and to have the best offer in the right moment for the clients and to digitalize to improve internal productivity to decrease internal cost and to decrease time to money, all this stuff that we are discussing usually. I'm really glad that also the corporate, so CEO meeting prior discussed about robotization. We just these local hubs that Antonio was discussing, we are just implementing the first robotic system in Sarajevo, for instance. We are thinking about how to create ESG team here in Belgrade, especially of opportunity, actually our best plans that roll just discuss the opportunity here in Serbia. So we will establish the brand, the hubs, how to jointly structure all this project in depends on the some region. So actually, Sarajevo, we are robotizing, we are improving productivity. But to go more into the details regarding the strategy. It's actually I would say, 4 main pillars. The first one is to improve the noninterest and interest income ratio. As Hedvika said, we are in Slovenia at around 50%, we are not yet in the group. In the group, it varies between 20% and 30%, so the level of noninterest income. But it's easy to say, to come to 50%. We have to bring proper products, proper -- with that and thinking about the acquiring which we have to improve, especially for SME business, I'm speaking about cash handling to improve the cost, to improve the -- to decrease the cost, improve the efficiency. I am speaking about the advisory service, investment banking and so on and so on. So we have to bring and come be with a proper product to all the countries in our region not on just on the -- into be a simple bank as one of our investors said. The second thing is to grow as strongly below that if we have excellent basis for growth. My personal vision and the vision of team is to grow from currently 18% in Slovenia to 25% in next 5 years. It's a similar story in Serbia after just -- we just finished the transformation integration of both banks in NLB and Komercijalna Banka. Current market share in Serbia is 8%. Our vision in next 5 years is 13% to 14%. I strongly believe that this motivated team needs our energy actually and also with our funding and the equity position of the group, it's very much possible and also to continue to grow together with the current market trends on all the other markets, I do not mention all of them. So interest income, noninterest income growth of the market share in the [indiscernible], maybe it's still a dream. I don't know. I hope not. My biggest actual vision is to enter the Croatian markets. Currently, we cannot yet work there or bank there with Croatian companies. We just hear, the previous round table, so I'm constantly speaking about them, how they are interconnected, all regions, especially economically, it's very much interconnected. [indiscernible] his company is working actually in all the countries. Unfortunately, currently, we cannot add bank in the Croatia due to some reasons from recent or a bit longer history. So the third vision is to enter into Croatian market. Where we strongly believe that we have huge opportunity and great knowledge about those company. And the fourth is this ESG sustainability agenda, which we are actually constantly discussing. We will grow in that aspect, we are having strong KPIs in that aspect in all the country of that region. We will promote sustainability and transformation. We are fully aware it's not possible from today to tomorrow, but this will be promoted. And we will bring proper advice also for the company how to cope with that because the investment will be quite some heavy as was discussed.

And we mentioned, of course, growth and the corporate banking and investment banking, but both of these worlds need experienced workers, right? So how important are skilled and motivated employees and what kind of employees are you looking for?

I believe everybody is thinking about the talent. Yes, it's the, the of success. If we would like to be the best in class in the region, we have to be 2 steps ahead of our plans. To be 2 steps ahead of our plans, we have to be together with the clients constantly to understand their needs, their opportunities, how to attract those things, but we are looking at our people and what I believe we strongly possess. And also regarding the talents, our biggest mission is to be the best employer in the region. I strongly believe that we are becoming because as I see our bank is very much attractive for the young talents and maybe not for some industry like IT, which is actually a global thinking. But I strongly beat now to work in and have this privilege, and I'm seeing that the people are wishing to come and to work with us and to work with this team. But to continue what we are looking for. For sure, everybody who is working in bank and in corporate banking has to have great knowledge about the banking, about all the banking product and about the financials. So this is, I would say, first precondition. Then secondly, has to have sectorial knowledge. We are all aware, I will mention COVID, it was mentioned several times, COVID has different implication of different industries. War in Ukraine and this province has different implications on different industries. So great sectorial knowledge about the implication on such in today's rapidly changing world. And then the third story is, of course, social skills. Without social skills without being dreaming, smiling with the clients, you will not create long-term partnership relation, which is actually our dream because I strongly believe that long-term profitable corporation, it's only with long-term partnership and, especially, mutual trust. You need social skills for that. And the fourth, I don't know, which is the most important, it's for sure not the last one, it's agility. Agility -- without agility, you will not seize the opportunity that are in front of you. So these are actually the 4 elements that each of the banker that work in NLB Group has to have.

Okay. And then besides group steering, which we already mentioned, you're also covering payments. So this is a heavily discussed topic with pandemic accelerating, the adoption of digital and contactless payments. So with consumers now becoming more comfortable with these payment trends, do you expect to see continued innovation and acceleration in the payments industry? So how is NLB Group positioned to embrace these trends? And how will you compete with other providers, be it other banks are or fintechs already, so what is your plan? What is the game plan?

I would like to emphasize one really clear message with the new setup of the Management Board with the support of the Supervisory Board and that all our colleagues from the management board, payments are not anymore simple operations part. This is really important because now we are looking at the -- on payments as a business opportunity. This is a really important change. And when we say payments in our bank, in our group, we mean payments from cash to regular payments cards to the most developed, I don't know, wallet or whatever kind of payments. And having this in mind, I have to say it is not an easy call to define the strategy, how we will develop the payments in the future. We all know that everything will be here, but how with which application, what kind of approach, which role we will have, we have to still define. And it is not the unique dilemma for NLB Group or NLB banks. It is a worldwide dilemma because you can see the different, really different practices all across the world. All across the Europe, where actually somehow, we have at least under the sticked regulation or whatever, but again, different practices from different markets in different groups. I perceive payments as everyday service that our clients are using embedded in their normal regular life, primary actually service of any banking app starting. And I perceive payments as an entry gateway of fintechs into the banking and payment industry in general. And having said all this, defining all this, for sure the innovation in payments will accelerate even further in the future. And here, not only banks but players will try their role, their approach, et cetera, et cetera. When we think about our experience, I have to say that COVID was a really, really excellent opportunity for us to learn even more, which payments -- which payment services, which payment channels are really relevant for our clients besides the cash which is only present and will stay for sure for a long period. We are with m-banking, e-banking for almost decades in our group. Our NLB wallet is only present in the region, and I think it is one of the, let's say, most known banking wallet in the region. But still there is a huge, huge, huge way to go. As I said, 70% to 80% of all payments are still cash. So our aim is, for example, to go below 60%, which again is a huge potential. But beside developing new services, new apps, new approaches, we have to also work on education, convincing our clients, ourselves, drive the change for new payments, for new way of payments. For example, if we use survey related to Slovenia market where Slovenia is fifth in the world regard contactless payments, but only 1.5% of these payments are to mobile wallet, which I'm using everyday for 3 years and 99% of my payments are done through the wallet. So we have a lot to do on education and driving the change towards our clients and ourselves personally every change starts with ourselves. What will be important for us in developing the payment strategy or the payment approach listening to our clients, I would divide in 3 aspects. So building the best user experience, which was several times stressed out by Hedvika and Andrej. So the payments should be really seamless, easy, convenient. Then we have to focus on safety and affordability of the payments. So safety because if we want to increase digital penetration of our clients, they have to feel safe on using our applications. And at the same time, affordable but again addressing best-in-class user experience and safety. And in the end, developing value-added services on payments, leveraging and information capital that we have from payments, but also from other interactions with our clients, developing new ways of interaction with our clients, leveraging on open banking, open finance, developing the ecosystem where we will all win together. In order to do this, we have to add some, I would say, fintech characteristics to us, to our trusted brand and adding fintech characteristics to our trusted brand I think it is a winning strategy. And we are working around solution of partnering, cooperating, probably even investing in fintech company.

Thank you, Antonio, we already ran out of time. I had one more question for Hedvika. Can you have a short answer, I apologize, my previous roundtable killed my agenda. So that's the problem. So Hedvika, the question is as Antonio talked about payments. When it comes to retail banking in general, digital penetration has been growing steadily over the past few years, but banks are still working to make sure that they can fully meet their customers' needs to digital offerings, our clients, of course, want more seamless experience across all touch points. As Antonio said, it is simple. It's simple for the end user, but behind, it's not simple at all. So what has been your experience? And how are you planning to further enhance customer experience and provide them with value-added services in the future?

I will first share my personal experience with our bank. It was just a few days ago, I was traveling to Spain for the 1st of May holidays. And of course, in the last time, I remember that I need a higher limit on my card because otherwise, I would not be able to pay for hotel. And I called my personal banker and I said, look, can you increase my limit? And he said, yes, sure. In 2 minutes, you will have your -- to sign in your mobile banking the increase and it came in 2 minutes, I signed and my problem was solved. So 2 channels working well together, even easier would be that I do it myself, but somehow it's the personal touch sometimes still matters now. So we would like to create this kind of customer experiences, remove the frictions where we spot them and continuously improve the customer experience. Of course, we want to build a better platform than the fintechs have or at least comparable platform but more services on it. But sometimes, we are in love with developing stuff, but we don't take too much care to activate customers to digital channels. And this is very important because you might have a super platform, but if only 10% or 20% of customers are using it, it's not really helpful. So you need to do -- you need to work on all fronts, basically customer experience developing, but also making customers use your platforms.

Thank you very much, ladies and gentlemen, new Board members, Andrej Lasic, Hedvika Usenik and Antonio Argir. Thank you very much. Ladies and gentlemen, thank you for your patience. So let's discuss host country and its opportunities. We will discover what opportunities Serbia is already utilizing and which ones should be chased with the help of NLB Komercijalna Banka Board members, Mr. Vlastimir Vukovic, Dejan Janjatovic, Dragiša Stanojevic, Dubravka Djedovic and Igor Stebernak. Welcome. Thank you. Thank you once again. And we will start Mr. Vukovic, we do obviously saw on the 29th of April, NLB and Komercijalna Banka merged to form one of the largest banks in Serbia NLB Komercijalna Banka. And in doing so, reached an important milestone in the process of becoming the leading bank in this country. So can you share with us some reflections on the integration process itself?

Well, Milos, first of all, thank you for the question. And you know, I want Janjatovic to answer to this question.

No. What?

Not too bad, not too bad.

Not too bad.

Not too bad. Not too bad. So joke aside, I think that we did a great job. So this integration is, I could say, probably the best in banking sector in Serbia and probably one of the best in region. We are witnesses that we finished last week, operational and legal merger. And this is something which went very smoothly. And what I mentioned several times that we didn't receive any complaints from customers for public social networks. And it means that we did a great job. How? I think that there is a lot of factors, but I will just give you some maybe 5 and 5 decisions very important. First, to organize the team in a manner that there is a group of people who is working solely or at least 50% of the working time at the project. And we had 14 stream leaders. We empower them. We were also all hands on, but not to jeopardize their authorities. So it was very important to empower them as a leader. And then of course, we have the great majority of the bank who is working daily business. And we clearly communicated that there is no high-value or low-value work that we're all working for the integration and also showing to the market and ourselves that we are really leaders. The second very important thing in the process is that we say no to some complex projects and some complex changing of IT system and usage of IT resources. And it was a very hard decision but we take it -- took it. And it has also increased our capacity for integration. But at the same time, as a team, we think about it, what is the next steps after the integration, and we developed a very comprehensive plan of 25 different initiatives in order immediately after integration, so today to start with those projects, which will change the bank. The third one is unique, I could say, for the market. We moved to almost 90% of sales force from NLB Belgrade to KB in first working day in January. You know that January is not so productive month in sales and we did it. And it is really a change in the procedures, mindset and everything, so they needed time, and we have enough resources for their onboarding. And after 1.5 months, they're starting to produce this. And we are very proud that we grow 2.5x up to 3x more than market in the months of integration. And this is huge for our success. The fourth thing is, of course, communication. So all the time, constantly, objectively and timely, we communicate each and every steps in the integration for internal external public, but also to our customers. We prepare ourselves for this. And uncertainty is the biggest enemy of changes and also integration. I think that we did a great job because we informed them. And also Dragiša has got further for our name of the project Aurora. We have a contest and survey to employees to include them and to vote which is the best sign of the project. He proposed Aurora. We proposed Victor, the Victor in Belgrade. But Aurora won. And I think that also this show that we include from the beginning, people just realized that this is our project. And the last one, great teamwork. And I could say that we are all proud that we established such a good cooperation of understanding, and this is the best foundation for us and from future wins in the market.

Mr. Vukovic, this is really impressive, what you said that actually the sales was rising at the time of integration, which is quite -- was quite a big challenge. But I would like to ask Mr. Stebernak, what were the biggest challenges you had to overcome in the last 16 months and what positively surprised you? Investors would be probably interested to learn about the success and timing of extracting synergies. So can you tell us some more about that?

When there's a challenge, immediate reaction is resources. So that's the main challenge towards the project. especially because it's not only the integration. Actually, it was the line business, the regular business that as Vlastimir mentioned. It was integration, not only one, but actually 2 because we integrated Komercijalna Banka into the NLB Group, and we integrated Komercijalna Banka and NLB Belgrade into NLB Komercijalna Banka. And we started already with the transformation. So that's the part that will continue now once we finish the integration. So I would also emphasize as one of the key success factors, the dedication, the focus of the team and the energy of the team. So here come to the surprise, the positive one you're asking about. So I mean the team was assembled from different members, from different cultures. So there were people from Komercijalna Banka from NLB Belgrade from other banks in the NLB Group, from external partners, but what surprises me that from the very beginning, actually, the team clicked together and they worked as one team with one focus and one goal. And honestly, I thought it would take more time to come to that level. Okay. And then for the investors. So our estimated or the synergies we are going to realize there will be roughly EUR 20 million recurring on a yearly basis, and they will be to the full extent in our balance sheet from 2024 on. So I mean we are gradually adding them into the P&L, of course. And what's also important to mention that the cost of integration is inside of what we projected. So it'd be slightly less than [ EUR 28 ] million.

So again, impressive. NLB Group was quite open about its intention to build a leading bank in Serbia. And your role as an Executive Board is to implement necessary steps to deliver on this ambition. So Vlastimir how will the merged entity compete in the market? Actually, how will NLB Komercijalna banka differentiate from other banks?

I think that all banks will tell you the same story. But each and every story is completely different. When we are putting our strategy and ambition, we put, I could say, our 4 Ps like you have marketing mix for 4Ps. The first 1 is people, processes and then proposition or maybe personalized proposition and the fourth one, of course, for you is profitability. So this is the 4 main focus of our intention. Why, people? Because all of us are people. So employees, our customers, shareholders, we are all people. So we need starting from this center. And we need to develop and also this is what I mentioned, 25 different initiatives and projects here in the center experience. So -- and we need to offer a unique experience to the market. It's easier said than done, but I'm sure that with this energy, which we all have, we will do this. This -- why, for example, processes? We are just starting on project target organization [indiscernible] project. where we will have, of course, looking on our procedures and processes within the branches, sales, back office in order to be faster and to reduce time of transactions in favor of advisory and sales roles. For you just information that only 6% of all time spent in the sales are sales time in the branches, only 6%, so try to imagine how many opportunities we have only if we do the right thing in the right time. Also, there is, of course, some gaps -- and this is actually good news. If we compare ourselves and our competitors, especially in cross-sell, upsell potential. And of course, we know how to fulfill this. But first of all, we need to start from the people's need and employees need and to create what all gentlemen and one lady, now we will have, Dubravka, second lady to tell and told that, of course, the people capital is most important and to keep the talent with us and keep also the employees who are producing value. Value proposition is very important. So we will be faster, we will give, for example, our customers very soon, much faster digital loans, automatization loans in cash and also housing solution because this is anchor for the retail. So we need to be a one-stop shop for our customers and offer them a really unique experience because this is the moment in their time to solve maybe with the marriage, I could say that the second big decision in life. And of course, at the end, we will deliver profit, what we promise. And I think that this is really what we will do. I'm sure that Dubravka then and Dragiša will give the insight. But this is it in a nutshell, we will be the bank who will produce something else in the market. And I think that we have more than capability to do it.

Great. Talking about nutshell-ing, I have always apologies to you as well since I keep the agenda with that from talk, but I believe it was interesting. So let's try to be consistent and concise. Dubravka now moving to you, how to achieve these ambitious targets in corporate and investment banking in years to come? What is the game plan, as I was asking, Antonio?

Thank you for the question, and welcome to all the investors, to Belgrade, my hometown, and also thanks to our clients for here because we are here for you as well. How to deliver on the ambition? Well, very simply, we are very ambitious. We have demonstrated this already in the first quarter of this year. We have grown our corporate portfolio 3x faster than the market. We have increased our market share by 50 basis points and we have delivered on some new products. What we want to focus in the future is continuing delivering on those products, but also delivering very valuable services to our clients because it's both product and the service. And this is what was missing in the old Komercijalna Banka that NLB Group and this team will bring. We have chosen an adequate team of people with right capabilities and knowledge to help us deliver on that. We are establishing the processes, and we will be very close to our clients, to deepen the relationship, to explore the relationship in order to deliver also the services that they need as efficiently as they need. So to start from the product, we have enriched the portfolio by starting to work on project finance, both in real estate and in renewable energy because this region needs better air quality, better soil quality. And this is what we need to help the private sector together with the public sector to deliver on this. So wind farms are in our focus, solar projects, biomass, biogas. We are already working, as I said, with some of the same clients that were here today and that are here today with us to deliver those, but also with municipalities because Serbia is a whole -- has a lot of issues on energy efficiency and renewable energy targets that has to deliver in line with the agenda and commitments it has signed with price agreements, et cetera. We want to enlarge our small and medium-sized enterprise portfolio because SMEs are the backbone of Serbian economy, they produced more than 60% of value-added and employ a majority of workforce. We will and -- this is our target, and we already delivered on this in '21 and also in first quarter is to grow the SME portfolio of some 2.5x in the next 3 years. We have growth of some 12% already in the first quarter. In this segment, we have basically scaled 4 regions in Serbia that will deal with this group of clients to be close to them, to understand their needs. We have put together the quality team from some very experienced banks in the market. such as Banca Intesa and OTP and others. So knowledge, experience and together, we will deliver on that as well. Very important part of the segment that we are focusing on, and we'll continue is the documentary business, the trade finance products, the LCs, factoring, which we introduced last year for the first time in Komercijalna Banka. So those additional products beside the lending that is very important. And the aim is to be the bank #2 in this segment. We already grew year-on-year in this segment, 120%. Very important, of course, is the cross-sell. And there, I tied it up together to noninterest income part of share, which was traditionally very low in Komercijalna Banka, in which NLB expertise and all our aims and goals go towards that end. It's really to give additional service through currency exchange products, hedging products, enhanced payment operations with clients as well as all the fees, this team, for example, from project finance transactions being agency fees or others. So these are our goals. And we part of reorganization started delivering on that, organize organizational change, such as incorporating treasury sales into corporate function to be closer to clients to have our sales teams closer and deliver on those products. In order to enhance, of course, the profitability and additional revenue, which we will and we have to do.

And, Dejan, let's move to you. How about the risk appetite and how efficient processes can contribute to achieve all these goals?

Thank you, Milos. Regarding risk appetite, our goals and the business strategy are well in line with risk appetite, and we are adjusting them all the time. The challenge for us in this year and probably in the next one will be how to balance between ambitious targets and the risks that originate from this certain geopolitical and macroeconomic environment. But as always, in this uncertain situation, smart, cautious and brave approach will bring us to the safety -- it will bring us safely to the destination where we going to be. When talking about how to achieve advantages in the market. Efficiency of the processes are one of the most important things. But we also need to put client experience and employee experience on top of our priorities when designing such processes. And we also need to develop and nurture the culture of respect, the culture of cooperation and continuous improvement. Digital end-to-end trade process supported with smart data models, real-time analytics, it will bring us needed efficiency and will bring us the quality of service to our customers in the way and at the time they actually need them. We aim not only to build the best time to decision and time to cash in the market, but we also want to offer the high professional service to our customers. And if you like, to sum this in one sentence, we actually want to simplify daily life of our customers when banking. But there is no great customer experience if there is no great employee experience. So we are going to offer to our employees a very positive working environment, the great culture, flexible working and also opportunities to learn and to develop both professionally and personally. Our new headquarter building will be modern energy efficient, pleasant home for our employees where they will find their inspiration and where they will find the space and time to socialize, to relax with their teammates and colleagues. I remember last year, immediately after the acquisition, when we came to the Komercijalna Banka, we told to our new colleagues what is in front of us. We told them that we need to integrate both banks to harmonize with the group standards, to grow in business, to reduce NPL and all that in a very short period of time. They looked as probably as we are kind of lunatics, but we invite them to that journey with us and promise to them that if somebody of them get to sleep today and the week in May this year, they would not recognize the banks in terms of the standards we follow today, in the way how we cooperate it, communicate between each other and how efficient we are in breaking bureaucracy and bringing needed changes. Today, when they are convinced that the promise was real, we tell them now we need to transform the bank. But this time next year, you will be all very proud to be the part of this unique transformation process and you'll be very proud to work in the best bank in the market.

Great. This goes for an applause, yes. Igor, back to you in order to differentiate because we talked about how the bank is going to differentiate from other banks. But you need to have good data management, right, and of course, modeling. So when will it be achieved? And how can you explain on that one?

Yes. We believe that data governance or data strategy is also one of the piece in the puzzle together with other pieces that colleagues explained already. So it's interesting that we started actually one project before we started the integration project, and that was the project to build up the data warehouse. So it's it proves to be a very good decision because it helps a lot in the integration. It enabled us to do the proper financial reconciliation, and it also bring a piece into the successful integration project, and it's a good foundation for the future as well. So we are going to, with the new organization, increase also the importance of data governance. So we are centralizing data governance on one side. And on the other side, we are building data expertise by business lines. They will have the access to the single source of data and they could be as agile as they want in providing data analytics for the business lines. So actually, we will use this data to fit in the models that we are going to develop in the Komercijalna Banka. And of course, we will fit all the models developed on the group level. And here, I see the big advantage actually because getting the competitive edge on a group level is much faster and much more efficient than doing that on a standalone level. So we are going to continue with the development in this segment. So there is no big bank foreseen. We will continue the development as we are doing until now. So each month we deploy a new version. We map additional data into the data warehouse. We release some new reports, and of course, now we will focus on sales and the risk to support all the ambitious goals as the goals just present itself.

Okay. Again, Okay. Now let's go to Dragiša. Dragiša, what are the key steps in acceleration of digitalization?

Well, I could notice that my colleagues, plus Antonio, already answered this question. So my topic here is to how to realize. Maybe the toughest job here, but let's do that. After the finish the integration, now we are an opportunity to starting to new journey in the context of improving the integration. Actually, in the previous period, we have facilitated our clients that could actually sign the contract remotely, provide rental services, including cash loans and overdraft. Also, we introduced digital wallet and support the NBS initiative to some specific regarding Serbia to actually -- to allow our clients business that is the payment transaction is only a phone number instead client account, which is really convenient. You can pay using only phone number. Actually, a new service in combination with change of client behavior. In the previous period, we actually understand that client change due to education, but also due to pandemic, and let's be honest, that's the case. That's helped actually us to increase the number of active mobile users by roughly 35% in comparison to the previous period and definitely position m-banking as a primary digital channel.

Yes. But despite these good results, there is still significant room for further growth, right?

Yes, yes, definitely right. Actually, to achieve that, we plan to utilize the capacity and the knowledge of the group in order to introduce new digital banking platform which will be based on a big base solution here. This is actually the key component of our future digital footprint. We are already working on that area. And actually, first service will be on that platform. It will be digital boarding. That's actually cover [indiscernible] plus the KYC process. Frankly speaking, we are on the realization and hope the next few weeks, few months actually, not weeks, will be an opportunity to launch that. I hope that till July, that's the target, and hope to write actually new services that will the first service on our new digital bank.

One short question for you. What is the role of the recently established NLB DigIT company in Serbia?

We actually recently established. That's a new company of -- the youngest company in NLB that's NLB DigIT and we hope a lot -- we expect expectation from it's very high, actually. That way, the role is very important in the context that they work on developing comment platforms and actually responsible to the same user experience in the whole group. From the KYC point of view, I actually expect that NLB DigIT will be involved in all processes, what the colleagues already mentioned, maybe to emphasize that we actually plan to introduce loan origination platform. Dejan already mentioned that, that you have you actually for retail for corporate to optimize the KYC. Additionally, we work a lot on that topic, but now in the area that could continue with this. Also in the context of data management, we're starting a lot, but definitely that's long journey in that context. And maybe to mention that we also want to introduce operational CRM. That topic what's Vlastimir especially interested, in the context that he wants to improve sales activities in that area. And maybe to mention, maybe colleagues didn't have said, but Helena already -- Hedvika, sorry, already mentioned that we actually wants together to put a cash transaction from the branches. We actually -- in that way, we want to rework completely our ATM networks. We plan to introduce 250 multifunctional ATMs with cash-in and cash-out function that by the end of this year. And actually, we completely renewed our ATM networks in 1 year. That's actually turned to [indiscernible], but I hope that we successfully finished that.

Okay. I believe that answers my question. Vlastimir, I have a personal request for you. We have 6.5 minutes left, but we are already well into our lunch time. It's my fault because of the merger case of the agenda. So if you agree, because I have another question for you, which I may move then to our press conference, if you're okay with that. What is your perspective on further bank consolidation, banking sector consolidation in Serbia? But I would like to save us some more time for the lunch break because we need to be here back at 2:30 sharp in order to continue and get back on track with the webcast and everything else. If that's okay with you?

This is in the heart of our strategy, so the customer experience, so lunch is quite okay.

Okay. Thank you very much. Ladies and gentlemen, so furthermore on the perspective bank -- banking market consolidation from Vlastimir Vukovic, we will have on the following press conference, enjoy your lunch, but be back at 2:30 sharp. I believe we can make it. We can make this happen. So see you back here at 2:30. Enjoy your lunch break. Thank you. [Break]

I don't have a presentation, but let me try. It is there. I don't need it. What we want to tell you now is, in principle, something that is new, and it's more or less a follow-up to what we've done so far. And there is a lot of greenwashing. There is a lot of paperwork, there is a lot of promises that are more or less fake. And for me, sustainability starts with everything we do every single second of our life. And it doesn't start with what NLB has written there and it doesn't start with any of your businesses or whatever has written them in papers, right? It really starts with our behavior and it starts with our habits. In this respect, of course, NLB has joined certain initiatives and initiatives are nevertheless important because they put a structure to it. There is a methodological framework there are clear requirements. You have to think of things. You have to start setting targets, you have to start measuring, actually delivering because you're then being, of course, assessed against the delivery and so on, right? So this all makes sense, but that's not enough because if we don't change the person in the mirror, we don't stand a chance. And here, I'm simply being practical. And I take some personal commitments that my family is struggling with, which is we do not heat our house any longer to more than 20 degrees centigrade during the winter, and we will not cool it below 25 in the summer. This means that I don't drive ever, ever again, more than 120 kilometers per hour on the highway, right? This means that the light is not on, if there is no one in the room and if there is enough light to actually see, right? These are small little things. NLB has decided to become a paperless company because we firmly believe that you can sign any contract and you can store any contract in digital form, right? Of course, you then have to understand the whole scope of the carbon footprint of the digital record. It's a bit more complex than simply saying we will get rid of paper. But in principle, there are commitments we've made. There are promises we stick to. There are things we advocate and heavily promote, be it from governance, in the governing bodies of NLB, you have people from 10 countries. We don't have 26, as colleagues was saying, were saying before, but 10 countries. It means that we have 55% of women at managerial positions. Unfortunately, you didn't see many women so far on the stage, right, only 2 I think. But we are working on it sincerely. And in B-1 positions and B2 positions, there are, of course, 55% of ladies. This means that really with paperless, we mean that our clients, our clients' lives, when it comes to usage of banking services have really been improving because they don't need to travel anymore at all by that not producing emissions because they don't commute to our branch. You can sign at this point of time, any contract as a private individual client of NLB d.d. in Slovenia via mobile phone. There is no paper at all. Contract gets e-mailed to you, and of course, you do with it what you want. But in principle, there is no physical signature. There is no need to come to the branch because even if you don't do it through the mobile app, there is a video chat feature in the mobile app, that within 24 -- and it's working 24/7, you can close any transaction, apart from mortgage collateralized housing loan, on spot, real-time, 2 o'clock at night from South America, right? This is client experience relation of sustainability where we actually improve lives of people, but at the same time, clearly reduce also carbon footprint. Then is entire inclusion element, then there is entire obviously, societal governance element. And here, we have really been vocal and some politicians don't like it. We know, we understood that. They don't like it. But we tend to call things by the name. If we see deficient governance with our clients, we don't lend against such clients, right, to such clients. These are material decisions. We start asking our clients, obviously, what are the principles applied in terms of how they actually measure carbon footprint. What are their commitments and so on? Nevertheless, I will come back to you then later. I will pass the word to Hedvika because there is a concrete step NLB is going to make today in a couple of minutes. Thank you very much.

Thank you, Blaz. So I will come back to the same messages that I was sharing before, so in terms of priorities that we have as NLB Group. But I will do it with a bit more data so that I -- Archibald and I like data. I'm a salesperson, but I really like data. So this time, I will bring some more data also to bring some more juice into the -- what I was explaining before. So first of all, why we see a lot of opportunity still in retail lending? A few things. First of all, if you look at the chart below, you see that the indebtedness of households in our region is on a rather low level. So we expect that it would grow in the future, there is potential to grow and we intend to grow with it. The second topic if you can observe also housing loan and consumer loan penetration on active clients in different markets. And you see it's quite diverse. And you see it's also quite low. For instance, housing loans from [ 1.5 ] to [ 6.6 ] in [indiscernible] and even [ 6.6 ] is not really very high. Consumer is a bit more diverse picture, but still there is, especially, in the markets where we have many clients like Slovenia, like Serbia, like Macedonia, also, for instance, Banjaluka area. There is a lot of potential to also grow housing lending. Plus in most of these markets, we are positioned in a way that our deposit market share, retail deposit is typically considerably higher than lending market share. So these are all the data that make me think we have a lot of potential as the group to grow. And we have shown it also in real life. So we have some success stories already to share. The second topic, which was mentioned many times already today is the fee business. We are quite proud of the numbers that we managed to make in Slovenia so far. So 50% of revenue is coming from sustainable fee business in corporate and 45% in retail, but still, we believe there is possibility to grow. Of course, this will be a bit under challenge in growing rates. But for us, it's really important also to grow in absolute terms. And you can see on the upper graph that, again, we have a lot of diversity. So we have the possibility to grow both in Slovenia, but especially in the region. So to bring numbers at group level, closer first to 40% of total revenues and then further up. So this is 1 topic. And the other 1 is diversifying the fee income. If you look at the bottom chart, in terms of the structure of fee business, the taller columns are Slovenia. And you see that the structure of fee income is much more diversified. So we have quite a considerable contribution coming, for instance, already from bancassurance, asset management, which is not so much the case in the region where the region is more dependent on accounts, payments, cards, but not other sources of fee income. So if we are able to grow also in this in -- also in the region in bancassurance, asset management, investment banking, trade finance, then we will have a more diversified structure of fee business and a more stable structure. And another chart supporting this thesis is look at the differences of cross-sell rates between our countries. So we are ranging from [ 1.4 ] to [ 3.3 ] on the total customer base. But if we observe the cross-sell rates in some of the segments, for instance, premium clients in Slovenia, average cross-sell rate is [ 4.7 ], private even [ 5.8 ] almost. And an average customer who takes a housing loan has a cross-sell rate of [ 6.6 ]. So in a way, things are connected. So if we do more housing lending, consumer lending, we can also cross-sell more and we do more fee business. And the third one that I also mentioned today is transform the business model. So it's very important simply to increase first digital penetration. The chart on the right-hand side is showing how we were growing digital penetration in Slovenia. This is penetration on active clients. So a client using either online or mobile banking actively against all the active clients. And I can proudly say that we reached, in April this year, 50% penetration, and we intend to grow further. Our current ambition is above 60%, but hopefully, we can manage more. And in the region, we have a lot of potential to grow because you see that the typical penetration rates will be between 10% and 20%. We have slightly higher comparable to Slovenia. So our ambition is to grow to 55% active penetration at group level by [ '25 ], which is not an easy target. It's quite an ambitious one. So if you calculate how much we have to grow per year, it's quite high numbers, but I'm sure working together in a focused way we can make it. And then when we have a higher penetration, it's a question of how much we are also selling via digital channels. So another KPI that we started following is sales via digital channels ideally end to end. And in terms of transformation of the business model, it's not just digital penetration. We also want to position branches in a different way. I said before already, less transactions, more advisory. So this is an example for NLB. We have designed during COVID time our channel strategy and made some KPIs, which we are then adjusting every year. So we have already, in 2 years' time, decreased the branch network by 20% almost and also the people in the branch network for the same percentage. But at the same time, we were selling more. We were selling, for instance, more than double housing loans and double asset management products. So in this way, we were able to improve the productivity also because we are changing the structure of employees in the branches. So less cashiers, more advisers -- less or no cashiers, more advisers and more advisers who are able to sell mortgage loans and have a license to sell asset management and bancassurance. So this is our ambition. We will develop, and we have already developed such ambition for each of the subsidiaries. And we will make sure to follow up because currently, in some countries, even up to 50% of the resources is tied in the transactional business, which we don't want so much going forward. And the last one but super important is the focus on customer experience. This is just one of the metrics that we are following. It's a brand track, NPS. It's how the people in the market, not necessarily our clients, are perceiving us and our brands. And you see, in most of the market, except Slovenia for historical reasons, we are really well positioned. But also in Slovenia, we were coming from really low numbers. But in 2 years' time, we managed to make a huge step forward in terms of brand perception. I hear from marketing specialists that this is not so usual, that it's very unusual to make such a big step forward in the positive territory for a brand. So we are confident that we will come to the maximum level. But for sure, our strategic direction will be to position ourselves very high on the top of the market or towards the top of the market to be able to grow and attract new customers. And back to Archibald.

Thank you very much. First of all, welcome also from my side. It's great to see you all in person, and I really appreciate the high turnout. And at this point, also thanks to the teams in PR communication, the local colleagues who helped organize this. So I really enjoy the event so far, and I hope you do as well. I had already plenty of very interesting conversations, and I think that's the main point of this event. So we kept it lean on slides because the main point of this event really was, first, share the good news we have. We'll have a webcast as well coming up. And the story, as such, hasn't changed that much. So in reality, we keep doing what we do very well already. And I think the facts speak for themselves. We had really a good run over the last couple of years. And so in this sense, nothing stops us from reiterating our existing ambition, which is from a financial sustainability point of view, of course, deliver ROE 12%, exceeding that in a good case, even in a base case. We heard about macro base cases this morning. And we absolutely see the glass not half full but 2/3 full. Yes, there are many challenges, but we believe this position is uniquely positioned to overcome these challenges. And so we see plenty of opportunity. And you've heard Hedvika and Blaž talking about how to go about it. I think this forum, this event and the touch points you had with people, I hope, show you that this is backed up by credible team because this is all what matters. We can have the best and most fancy slides. Ultimately, we are people that are more into acting and doing than putting fancy slides together. We also have plenty of those. But I think for you, what matters most is to be credible, to believe us that we deliver on these ambitions. And the ambition is, in this sense, as I said, stable. We -- you said we are a high-yield play on the Balkans. I think we still continue to be that. And we grow from a EUR 200 million business, give or take, to a EUR 300 million business. And that was very clearly facilitated and enabled by this transformational acquisition of Komercijalna Banka, now NLB Komercijalna Banka, which will, of course, contribute [ in less than a year ], say, EUR 100 million exactly. So -- and the reason I'm confident we can do that is not just the relatively good and -- macro outlook, of course, conscious of the challenges. But you heard our clients speak. I was really inspired by the forum of the CEOs and CFOs of our customers. I think this backs up our story in the best possible way because these are the guys that we support being successful, but ultimately, they drive the success of this region. We are just helping them achieve that. And you've heard [ Hedvika ] speaking about that. So we believe there is enormous potential, and we are, of course, committed to capture this also in financial terms. And yes, there's also a very substantial capital return. So EUR 500 million is nothing else. And over the next 4 years, give or take, we will generate something like EUR 1 billion in profits. And a good -- a very good, decent share of that, we want to return in cash. The only thing I learned in INSEAD is cash is king. So that's a business school, and that was basically all I remembered from that school. So here it is. And of course, we see all the growth beyond the organic growth. So the other part of that equation is we want to reinvest. We want to be part of investing into this region. And that means some of these earnings, we have to deploy, of course, in all the organic growth opportunities we see and we talked about it. But there's also inorganic growth. You've seen us going very planned and conscious about Serbia. You'll see us prepared but unplanned to capture the opportunity of Sberbank, and the reason we could do this so fast is not just sheer luck. It was we were ready for such a step because we were working for months on executing or being transaction-ready. And the reason we could transact over the weekend was thanks to a team working in the background for a year or so on getting transaction ready. So these things don't happen randomly. And so we want to have this capacity. Of course, what facilitates this transaction readiness is capital, ultimately. So capital markets these days are difficult. Colleagues from [ JP ] I talked to on site, yes, it's difficult. But we believe capital markets will open up again. So there will be a normalization at some point when the dust settles on the rate outlook and, of course, the political situation. But we believe that there will be opportunities to grow, and of course, we want to be ready for that. So outlook, I'll skip. Just we keep it basically slightly improved. You see now for '22 this year, based on a very strong Q1 on which we will talk anyway later in more detail, we have improved outlook to close to EUR 700 million. This doesn't include Nbanka. If you include Nbanka, we are already in excess of EUR 700 million. So the '23 ambition with the Nbanka acquisition, which, of course, was not part of this original outlook, is already done. So that was an enormously value-creative acquisition, not just generating something like EUR 30 million revenues on top, but, of course, also delivering synergies going forward. And I'm looking forward to this process. By that, I would pass back to Blaž.

This was another important part of sustainability, which has been profitable, right? So we are still a business. We are addressing, of course, all sustainability initiatives, but we want to show you that there is a robust thinking of how to sustainably operate and deliver stakeholder value. And stakeholders, of course, vary. They are not only shareholders. We are talking about societal aspects as well and all the others. And in this respect, we have committed a couple of years ago to no coal direct financing. So we can be writing whatever strategies. We simply took a decision, no new financing to coal-based technologies. Current exposure of NLB Group to coal is EUR 2.4 million. So it's immaterial, right, and it's quickly amortizing, depreciating. So in this respect, these are concrete decisions we took. We, at the same time, were the only -- first, I'm not sure whether we're still the only, but the first bank that has actually signed UN Principles for Responsible Banking from our region. And in this respect, we're committed to several other commitments, while several lines, we actually signed with the EBRD, so European Bank for Restructuring and Development. And at the same time, we also signed with other bodies various instruments that are requiring from us a very strict and comprehensive agenda of sustainability issues. Well, we decided to go another mile, right? And by that, NLB is today joining also the Net-Zero Banking Alliance. This is entering the clot of the ones that are committing the most seriously and the most genuinely. By that, we are really going to transform the way we think, the way we set targets, the way we act and behave in our own actions and in actions of our clients. This is committing to the green transition, but this is also committing not only to that because there are also societal and governance elements that, of course, we all understand on the sustainability and to a certain extent, they have been more important even in our part of the world, right? We still need to mature as democracies somehow. So as of now, myself and Archibald will assign this commitment. Thank you for being with us at this moment. That's a very meaningful point for us. Thank you very much.

Great. Congratulations.

Ladies and gentlemen, welcome back again. We love to talk, but we love results even more. So on the following roundtable, we will have presentation of first quarter 2022 results, and it will be presented by Blaz Brodnjak, CEO; Archibald Kremser, CFO; and Andreas Burkhardt, CRO of NLB. Gentlemen, if you are ready, the stage is yours.

All right. Okay. First, the disclaimer, obviously, because it was not announced. Clearly, disclaimer is a very important thing, and everyone dealing with us and any other investment understand this very well. So I will not spend time on a disclaimer. Actually, we came to Belgrade to discuss Q1 results, right? And everything else was, of course, additional program. And I guess, of course, that has been -- it has been meaningful, and you have liked it so far. But at the end of the day, we need to discuss what we have delivered. And the first quarter of 2022 was a very robust one from various dimensions. So in all client segments, in all product lines, basically geographies, we have had a very robust loan demand. We had very solid progress in fee income. And of course, in the meantime, we on the go during the weekend also bought a significant bank actually in Slovenia, whilst clearly delivering final stages of the integration of NLB Banka Belgrade and Komercijalna Banka Belgrade. So this was a very rich quarter in terms of activity, but above all, a very rich quarter in terms of delivery of results. So I'm specifically happy about the recurring trends, right? So I was mentioning strong demand, but I was also mentioning, in principle, revenue pickup. And if you look at the net interest income, if you look at fee income, if you look at, above all, pre-provision recurring results and operating recurring results, we are growing significantly the business, and that's an important message. We are in the midst of the war. We are still not fully out of pandemic, but we have had a very solid quarter, and we see this demand happening still. We have been mentioning clearly, of course, uncertainties regarding gas supply and oil supply. But so far, first quarter is showing that, of course, especially March was extremely strong. So after that was obviously a war in place, March results were very, very strong. And as mentioned, happening in all dimensions, there has been significant improvement in even NPL books, there has been solid results coming out of cost of risk. Despite N Banka's acquisition clearly and one-off recognition of certain elements, total developments are still pretty much in line and above expectations, and that's really encouraging. We have been further gaining market shares. So in Q1 alone, in Slovenia, for example, we gained 0.6 percentage points of market share in 3 months in housing lending alone, right? This comes on top of 1.9 percentage point last year, which means 2.5 percentage points in 15 months. That's actually the size of the absolute stock of a midsized bank in the country. We simply gained and added incrementally in a single year. We've had a solid growth of books already in Serbia despite integration still not being finished, right? These guys were really heavily engaged, day in, day out, more or less on integration but have delivered growth of corporate and retail books. And this was north of what the market was growing, so they have been growing the market share on the go. So this I also see as a very strong achievement of Q1. KB -- NLB, KB, now NLB KB started delivering growth in absolute but also relative compared to market terms already despite not yet being integrated, right? And of course, now we will support this post-integration period with strong marketing campaign, which was clearly subdued because we didn't want to support 2 brands. But now it really starts. And this is really something that is a very strong progress. And this is something that we are really betting on, especially, obviously, in Serbia. Uncertainties have been there, of course, especially around explosion of war. But so far, situation has been not only contained but very solid. You've seen growth of Slovenia for last year, published in Q1 of 8.1%. We've seen this year's forecast at around 4% still, which is, of course, people are talking cooling down. But if we were discussing this in 2017, we would say, are we overheating, right? And so this is a completely different perspective in this respect. I mentioned but would just add again, positive trends in asset quality despite these turbulent times. So books in relative terms and generally further improving, and that's really encouraging. Capital strength is there. Clearly, we are waiting for the recognition of negative goodwill. You have seen it communicated. The number is out, right? So now we need regulatory recognition to be able to count it in as the accountable equity but this will, of course, then further strengthen the capital base, and this we somehow expect within H1. So in H1, we believe we would be able to actually communicate significantly improved capital ratios deriving from the negative goodwill recognition. Key events more or less after that. So yesterday, we were blessed by the upgrade. So we are really happy in such a volatile times. We only hoped for it and it crystallized, which proves that the rating agency has understood the potential we've got within this region and the loss absorption capacity and robustness of what Archibald calls a fortress balance sheet for the times to come. And in this respect, this is really a very solid basis. We place hopes that this is going to help, of course, bank's ambition to issue capital instruments. We have clearly informed you that for already now 4, 5 months, we have been more or less trigger ready to issue Tier 2 instruments. We have been discussing potentially AT1 instruments, nothing to concretely disclose yet, but we are thinking of these opportunities because we believe that would be potentially many alternative opportunities to grow organically on one side and on the other hand, clearly through further M&A, nothing concretely on the table, as we speak, but there will be pretty volatile period in front of us. And NLB wants to be ready, wants to be ready to keep providing stable dividend payout, but at the same time, of course, also growing the business significantly. By that, I would pass the word to Archibald to give you more on financials, as standard routine, and then Archibald on the asset quality.

Thank you. So I'm not going to read out all the numbers. The report was published. Blaz gave you the highlights. You see here the balance sheet inclusion of N Banka. Be mindful this is a balance sheet of some EUR 1.5 billion. And I think the highlight really especially on a year-on-year basis is the recurring pre-provision result. That's a very impressive performance, and it's both interest and so rates and non-rates. Cost is, I would say, developing. So that's for sure a space to watch. We are conscious of pressures on cost. Inflation is a fact also for us. Also, we pay utility bills and things like that. So for sure, we'll have to keep paying attention. Of course, we keep investing in what we call value-added costs. So everything associated to building the brand, supporting the brand, building technology, hiring talents these are spends we are willing to take because they are building the future. We will not drain the business while we are trying to grow it. But pre-provision, even net of costs, I would claim hugely impressive, and we are very proud and very happy at this point. It obviously shows in all the numbers. Here, you see that the margin environment which is stable, which, for the time being, is good. I mean people are expecting Q1 was a huge market volatility already seen, the swaps went up substantially. But of course, it takes time until this feeds through in our balance sheet because our liability side is basically fixed with deposits still coming in actually. And we had a few outflows in Serbia, but by and large, we have run a hugely stable deposit franchise. And that is, of course, in times of rising rates will now very much come to our benefit. And of course, on the asset side, we will start slowly pricing up. We had, of course, lively debates with -- Hedvika is not here, on retail pricing because she still runs for market share. We still want to slowly shift the market upwards. And of course, that's going to happen, not because we want or have to be more profitable, but simply this is where rates are going. So we have to start educating also the market, our customers that this is where we are headed. And it's, of course, going to come. Fees was mentioned. This is really a success story across several dimensions, very big, I think, contribution increasingly from value-added products. So selling nonbank products, asset management, bancassurance, especially in Slovenia. This is a true success story. You remember that we ultimately decided not to divest Skladi, our fund manager, our local fund manager in Slovenia because simply, the market was not there to offer value. So we will keep a vertically integrated model for now. And of course, we'll look for opportunities to expand that in other geographies. Serbia will be very high on that list. And -- but there are many, many other initiatives driving fee. I mean the colleagues talked about offering a broader service spectrum to corporates, cross-selling more in retail. Our subsidiaries are just getting going really on this because, of course, so far, they were very much a rates business. Now it's increasingly also a service business. Costs, I mentioned, you see and huge kudos to the team in Serbia, not just at the integrated and grow the business. They also helped us manage costs. So extra rewards for that and recognition. It is necessary. We have to come to a sustainable business model also in such a situation that means to also address costs. And in essence, it not just reduces costs because we are too administration heavy. It also improves substantially the customer experience because at the same time that costs went down, the time to yes in housing went from 30 to some 10, 11 days in Serbia. So it's not just about cost, too complex and people-heavy environments are simply also not a good customer experience. So this journey continues. We talked about loan growth. I mean year-to-date, something like 4%. If you exclude N Banka is, I think, very impressive. And of course, we want to really keep riding that wave. As we explained, we deliberately here go for market share, especially in retail. And yes, we sponsor it a little bit with, let's say, not immediately aggressively rising rates as my ALM colleagues would want me to do but we capture here clients and client relationships that will be with us for the long term. So I think this win in market share, especially in housing extremely relevant also for the long-term sustainable success. Capital, of course, we are now a little bit in a tight spot because we immediately had to digest risk-weighted assets of N Banka and not yet recognizing negative goodwill. But of course, with inclusion of negative goodwill will be immediately, let's say, above our risk appetite, again, visibly above. And so in this sense, we are in a good spot. Of course, you all know that the EUR 100 million cash planned to be paid in '22. So EUR 150 million already announced, the other EUR 50 million coming up. I'm still looking at cash or the high-yield play in the Balkans. So yes, there will be cash, cash yield coming your way as shareholders. And it's all, of course, provided for in this capital. So this is already deducted. By that, I pass on to Andreas.

Thanks a lot. Hello, and a warm welcome also from my side. Since we have a little bit wider audience today, maybe 2, 3 sentences more than you are used from my side. Okay. So on asset quality, I mean we have a very well-diversified portfolio, which is to the large, large extent in our core markets. Actually, we have a split corporate retail 50-50. And here, again, on the corporate side, half is bigger corporates, half is SME. And on retail, also very well split between retail and so between consumer and between mortgages. And from the regional distribution, obviously, we are still big in Slovenia. So a good half of the portfolio is in Slovenia and the next biggest market, obviously, is Serbia. If you see the growth in the first quarter, then on the corporate side, obviously, here for a good part, N Banka is contributing on the retail. It's both N Banka, but also as mentioned by Blaz, I guess, our strong growth. On asset quality, Blaz also mentioned, we are still improving. Actually, for these times, honestly speaking, quite impressive. Stage 1 portfolio remains very high. But you shouldn't be surprised is that Stage 2 is now flat because in the recognition of the Stage 2 from N Banka, this becomes a Stage 1, right, because it's a fair value recognition initially. So that's why in Stage 2, nothing is changing. Now asset quality, I don't know, I always use the wrong direction. On asset quality, on a different view, we have EUR 378 million nonperforming loans left, actually that's again a slight decrease and obviously since we are growing percentage-wise a decrease. But you see, nevertheless, EUR 20 million more than at end of last year. And that's obviously due from N Banka, and that is actually a good news because that tells you that also here, the size of the NPL portfolio from their side is very, very small. And if you see the coverage ratios and you're used to that, they are very, very solid and I mean, obviously, no bigger changes since the last quarter. On impairments and provisions, we actually build EUR 4.4 million additional provisions in the first quarter. You see actually organically still releases. So again, a very successful quarter from NPL resolution also from off-balance items again. On the other side, you see the onetime effect of EUR 8.9 million from Sberbank. That's, of course, to a large extent, which you can also then see on the lower part due to the fair value recognition. Now just don't be surprised that the cost of risk is minus 17 bps despite the fact that we have a positive cost of risk. That's from the onetime effect. So the EUR 8.9 million because it's a onetime recognition are distributed over the year. And if you divide that by 4, obviously, we are still slightly negative. So far to the figures, before I'm then handing back to Archibald actually, maybe just a few more words. I mean we are, obviously, again in very challenging times. You see sharply increasing energy prices. You see also strong inflation, obviously, for risk manager, that's always something which gives you a high attention point, right? I have to say so far, it's almost too good to be true. I mean, again, like in COVID times, we are very, very carefully going through our portfolio. Of course, there are some attention points, but so far, no negative news. As you probably also read, we had some EUR 20 million Russian bonds at the beginning of this story, whereas something like EUR 12 million, EUR 12.5 million matured and were paid. So actually, we are down now to EUR 7-point-something million which is obviously also very good news. And otherwise, no direct impact from this region. But of course, we have some clients which are working with the region. This is also very limited, I have to say. But of course, we have them. so far here, everything goes regular. And for me, I have to say, first time maybe since I'm in this group, a little bit higher attention than usual is retail. Retail was always very, very solid. It's still very solid. We don't see changes. But of course, consumers, if the income is moderate and you go in the supermarket and prices are 20% up, that's a stretch, right? So we will follow this very closely. We will keep you very closely informed, but I have to say also here so far, everything looks very solid. I also have to say through the relatively big portion of the mortgage book, we are also here very solidly covered. So if you create an NPL, the next question is, will you have a loss. It should be also very moderate. But so far, I have to say we don't even create NPLs, right? So far, so good. But again, a challenging year, which after 2 years of COVID, I was somehow hoping that this would now fade out a little bit for me as a CRO. We will keep it watching. But so far, I have to say I'm happy. With this, thanks a lot. And as I said, I'm handing back over to Archibald.

Okay. I'll be short on the KB integration. You had a full panel on it. In short, a really good success story. The team delivered everything that was promised in time, in budget. And I can just say thank you again at this moment to a lot of people that were involved in both in Slovenia and in Serbia, literally hundreds of people working on it. I think what worked well for me personally is to keep really close touch with the key people in both entities. We had a weekly call to sort out outside big formal meetings, what needed to be discussed. And so I think collectively, we have created here something like a methodology, a path to how to integrate. So we really learned as an institution how to go about such a project, and we have partially codified this already. So we are really ready more or less a part of the team seamlessly transitions already, including myself to integrating N Banka now, and we will onboard a consultant and repeat the exercise. It is a bit emotionally tiring to run the whole program again. So the colleagues in Serbia can happily move on, and I'll have some fun in Slovenia. That's a topic. Okay. So here we go. The role play, the role book or the playbook is defined, as I said, so there is nothing to be invented here. We have really all dimensions covered. Of course, IT is going to be a bit more complex. You know that I help oversee the IT function together with Jiri, our CIO; and Bojana, his deputy. And so we run, of course, now 3 core banking systems in Slovenia, so that's going to be tricky. We were just about starting a consolidation of the Slovene -- of our own systems. Now we get a third system. We probably will just accelerate the integration still into our legacy environment and then consolidate. But there is, of course, let's say, technically a little bit of a more challenging situation than what we faced in Serbia because here, we actually had the 2 core systems from the same vendor. So this admittedly helped, of course. And we don't have this luxury with N Banka. But otherwise, this is pretty much now established playbook, and as I said, the key people will run this project again. By that, I think, Blaz, are you going to cover it?

Thank you, Archi. So Archibald said that some of these figures are not yet including N Banka's effects because there are still some things we need to figure out, obviously, but he was simply mentioning revenue dimension, right? EUR 690 million guiding here is still without N Banka. So we are very solid in 700-ish territory, right, as we speak. Details and more reliable numbers will be provided at the next interaction. But in principle, this is a very robust revenue evolution and development. On the other hand, still a robust asset quality, which means cost of risk is not overwhelming, the books are in relative terms, still improving counterintuitively. But being the case, coverage is even increasing, right? So good news from the risk universe. And I guess, of course, everyone is somehow questioning the decision of the Management Board and Supervisory Board of the bank to suggest to the AGM. Clearly, this at the end of the day, shareholders' decision, right, to hold actually a qualified discussion with you twice a year. We believe there is value in splitting dividend payments because by that, you a bit reduce volatility of share pricing around dividend cut-off dates on one side and you keep more stable shareholder commitment. On the other hand, we believe that in the upcoming period, there will be many opportunities eventually requiring also discussion with you. Is it still a high dividend play? Or is it a growth play, right? If these were a more sizable acquisition, this would allow for -- to us actually and to you to actually discuss this in a structured way twice a year as an automatic mechanism, not calling ad hoc AGMs, right? This is a bit easier to predict. It's a bit easier to plan, right? So one thing is to really have a bit less short-term volatility around dividend payout dates and cut-off dates. On the other hand is allowing us a twice-a-year dialogue with our key stakeholders. We believe this is important. This is simply facilitating such a structured debate. If your will was different, you could, of course, decide differently at the AGM. This is what we suggest. We see a value in such a mode, right, operating mode. And simply because of that, we have suggested it this way. Our commitment for EUR 100 million dividend payout this year is here, right? It is provided for in capital, right? This is something we have -- which we can open and clearly explain. So that's why I think it was necessary to explain the suggestion a bit more. There are only these 2 reasons, nothing else. There is no other dilemma or whatever to be associated with it. So, so far, robust evolution, what remains to be a challenge is the delivery of oil and gas. And of course, it's these inflationary pressures, which we still need to understand in relation to how European and regional regulators would simply absorb this within their monetary policy. So this is a fact that is more or less impacting capital markets to the extent that we have not been able to issue yet the instruments, but we have announced we are working on issuances of capital instruments, which would further strengthen the capital base on one side and would on the other side, of course, reassure that the dividend payout capacity is even stronger, not impaired. Thank you very much. This was it from our side when it comes to simply presenting and introducing. And now it's your time. You will have, of course, a chance to raise any questions. Thank you.

Thank you very much, gentlemen. We already have some questions from the platform, but we will give advantage to the questions from the audience. [Operator Instructions] Let's go first to the first row -- sorry, first row then the fourth row. Yes. Go ahead.

Sam Goodacre from JPMorgan. Firstly, thanks so much, once again for a really eventful and successful Capital Markets Day. And congratulations on all the milestones you have delivered upon including first quarter results. So I've got a couple of questions on the results and then some clarifications on your guidance. Firstly, with the N Banka transaction, you've recognized nearly EUR 173 million of negative goodwill. Could you clarify what the fair value adjustments on the acquisition are given into results you were guiding, they could be as much as EUR 100 million, but it seems that actually they were significantly lower than that.

So in short, things were better than we conservatively when we announced the transaction anticipated. I mean we had very little time to run a due diligence. We identified a couple of question marks in this due diligence. We put conservative price tags on all of them. And then we, of course, systematically ticked off these question marks and with a lot of -- I mean this things don't resolve all by themselves. So we started to chase money all over the world from Sberbank places across Europe practically. And most of these situations, we could successfully resolve. That's the short of it. And so in this sense, it is -- it's a robust number. This 170 plus. Of course, there will be another goal on it because we now run a full review of this number because we have to apply to ECB to recognize the capital order from a regulatory point of view. So there will be another test on it. But we are pretty confident that it will hold by and large.

And in terms of the capital impact, when the ECB approves the recognition, what, at the moment -- how much capital do you think it will add? Or where do you think your capital ratios may end up at the end of the second quarter, not just because of the negative goodwill, but also any things you might need to do around RWAs or such like.

Well, it will be pretty much the negative goodwill. We might also add Q1 because technically, it's going to be Q1 result, a part, all of NLB d.d. Q1 if we consider that we want a bit more comfort. So I can't give you a precise number because -- but we wanted to be comfortably above all management targets. So we don't want to run capital stress. We also run a bit of MREL need. Obviously, we started to run MREL needs. So we might also just want to be more comfortable for MREL purposes. And by that, we will use this leeway to position us comfortably.

Okay. And then I've got just 3 questions on the guidance to '25 that you presented. So when it comes to the slide where you spoke about the pillars of growth to EUR 300 million plus of earnings. On the revenue side, you mentioned loan growth and fee income without perhaps alluding to rates. So could you remind us what your rate expectations are or what the sensitivities are? And is that indeed baked into the EUR 300 million or not?

It was originally with a very limited amount baked in. So if you ask me, if anything, it has improved because by no means did we expect such a rapid change in the rate environment as we've experienced in Q1. So if anything, it's rather a bit on the upside. But of course, we have to be careful because if this is not happening in a controlled way, the feed in through Euribor, I mean Andreas alluded to, we also run a bit of downside risks here. And in this sense, for the time being, the base case is a controlled uptick of the rate environment and that rather provides more upside.

Okay. And then on the dividend commitment of EUR 500 million in the next 4 years, could you just clarify how that fits with what you had previously said about EUR 300 million to '23? So this is not an additional EUR 500 million?

No. It's not that high yield...

I mean that would be high yield.

No, it basically -- from the EUR 300 million, EUR 200 million are still due, right? And that's the basis on which we add the EUR 500 million outlook. So in other words, for these 4 years, EUR 500 million to be paid.

And then final question. The EUR 1.5 billion of RWAs that you think you could absorb, is that based on the current situation? Or would that be post any issuance? You said you're ready to go with Tier 2 and you would consider AT1. So is it reliant on issuance? Or is that the sort of...

It depends a bit. If -- as Blaz said, I mean, if we were running any tight spot and wouldn't have the capacity from Tier 2, let's say, we currently have a lot of headroom for Tier 2. So obviously, we would like to use this headroom and issue more Tier 2. Our risk-weighted asset base has grown considerably, so we could issue. Adjusted capital markets for the time being are not very much supportive to that. So in this sense, I'd rather see us doing the capital markets deal be prepared for M&A and not be rushed into any other conversation. But that's the base case scenario. As you know, situations can develop dynamically. We got a phone call on Sberbank. I don't know, was it on Friday, Saturday. And so I hope next situation is going to be that spontaneous, but still situations can evolve fast.

Now gentleman in the fourth row.

It's Simon Nellis from Citibank. I'd be interested actually in you elaborating a bit on your risk weight optimization plans. I think your risk weight density is now 60%. Where are you targeting that going forward? That would be interesting. And then also on the risk side, you mentioned that the impact of new macro forecast will only be in the second quarter. I guess, given the challenges the global economy is facing what kind of IFRS 9 forward-looking provision changes might be coming from that? And I guess, in a worst-case scenario, what would be the impact of some kind of immediate oil and gas embargo do you think? Maybe a difficult one to answer though.

So first of all, on risk-weighted asset optimization, I mean what you can see is that the equivalent treatment now we have, in the meanwhile, in 3 countries, this will only contribute all the while. Because in Bosnia, for example, what we don't have yet is -- we don't have insurances in many cases for the collaterals. So that knocks it out for the time being. Of course, now the teams are working on that, right? So that will help a little bit. And obviously we will continue to try also on the other working steps on which we are working to further improve. That will not be a revolution. So that will be gradually. Now help me again with your second question.

It was on the risk cost from changing your macro forecasts.

Here, obviously, I mean, we only had in 2020 extraordinary is booked already in Q1. Usually, this is due in Q2, as you said. And here, of course, I do expect an impact so far. As I was discussing with the team, the impact should be less sharp than in 2020. So not a drama but obviously visible. In 2020, I mean, COVID was simply something which, well, such a kind of an impact we didn't see the last 100 years. So it was a little bit hard to model. What we see now is, of course, very dramatic, but in a sense, let's say, more something which can be modeled. So far, again, impact should be less dramatic than we saw in 2020. But let's see. I mean the team is working on that. The very interesting question is your question number three, I guess, what happens if they are -- well, if there's an oil embargo, if there's a gas embargo or the other way around actually, so if Russia would stop. I think the more sensitive question here for the region is the gas. Slovenia, for example, is largely depending on gas. There's a dependency also in Serbia and so on. I mean what we are doing is we are in very close contact, first of all, with corporate clients, which are potentially impacted. And here, honestly speaking, the 2 questions are very relevant. One is we see sharply increasing prices and this we see now already for a couple of months, right? So here, honestly speaking, so far that for our clients, has proven to be very manageable. So they were largely handing this on. And we didn't see any bigger disruptions here, obviously a bigger shock is to be expected if just suddenly someone turns the wheel. It's a little bit hard really here to work with the scenario because which scenario in that case would come. As far as I understand, Slovenia has, for example, to stay with Slovenia with an example from before, very limited reserves, practically no reserve. So it's depending from Austria for mostly in reserves. Austria, on the other side, is depending to a good part from German reserves and so on. So what would really happen? How suddenly would that happen? What would Germany do? Would Germany try to cover also these smaller markets? Or would they just try to cover for themselves. So here, I cannot really help you with a concrete number. Obviously, we have to understand if that happens to ad hoc, I would expect solid impacts. But one thing, and we saw this actually in the last crisis, so in COVID, one thing has proven to be true, which I said then, so 2 years ago. The very good thing with the companies, but also retail clients in the region is people are used to a lot of trouble. They're very creative, and they are well educated. And what we saw in the last scenario is that in reality, things turned out to be much, much softer than we were afraid of initially simply because -- especially companies found solution, and that's what I would honestly speaking, to a good extent also expect here. What is a little bit a higher attention point, which for us as a group, of course, is unusual is also retail. So that's not immediately just turning-the-wheel question. But if you see increasing prices, if you see further increasing energy prices, however, then energy would be supplied. And if you have a certain income and incomes in this region are still relatively moderate, and you go in the supermarket and everything is 20%, 30% more expensive, if your heating is getting much more expensive, the gasoline for your car and so on, the question is how many of these clients would not be able to repay their loans anymore. Of course, we are following this very, very closely so far, honestly speaking, also from early warning signals, nothing visible yet. Let's see how that might change. This is, of course, for me at the moment, let's say, unusual high attention point. Least worried here, I'm in Slovenia. Because Slovenia is low indebted, households are low indebted. People are very conservative. They have savings. They are living a lot in owned properties. So these are all elements which if you ask me make it the smallest question in Slovenia. But outside Slovenia, that might look a little different. Of course, what is true actually for outside Slovenia, much more than for Slovenia is that family as a concept where people keeping together still works much more than we are used in the Western world. So that should, for sure, also help here. And again, we have a lot of mortgage loans. So on the impact then on our P&L, it's still a next question. But of course, my first worry would be the NPL increase rather than the P&L. So let's see. So far, I have to say everything very controlled. But to an extent, your question is the $1 million question, which I guess no one at the moment can answer in a simple way.

The real question is what would be a systemic support, right? In Slovenia, you've seen through COVID, but through governmental measures, so much support they know that people have actually piled up the savings, right? And we saw now in Slovenia immediate reaction was regulation of pricing. So the government simply regulated -- started regulating oil pricing. So suddenly, fuel was EUR 1.5 fixed for 3 months, right? So this is happening. And Slovenia can -- it seems afford it. Other countries not necessarily have this firepower but improvisation capacity Andreas is talking about is enormous. These guys have been used to continuous crisis of these or other natures. So we would see them resourceful to overcome the situation. And of course, the real question is, is embargo at full embargo at all realistic because some of Eastern European countries might be suffering a lot and then would simply condition it with support from other core countries of the European Union.

Any more questions from the audience? [Operator Instructions] First row over here. Just a second. Mic is coming.

Mladen Dodig from Erste Group. Thank you very much for picking Belgrade to organize your first Investor Day. I think it means a lot for the country and for the region. And thanks for all the promotions you made for Balkan countries. Just 1 question first, a small one. Are there any new rumors on constitutional core decision on Swiss franc? Nothing? Okay.

We expect 6 months to 2 years for them to rule.

6 months to 2 years?

6 months to 2 years.

I heard yesterday 3 to 9 months. So obviously, everybody has their own opinion.

Look, I believe there should be no other outcome than annulment. But of course, we will know when we know.

And in light of today's rate hike by Serbian Central Bank, so 50 basis points to 2%. Can you remind us, I think you spoke about it in the pre-earnings call about the structure of your portfolio, which is exposed to variable rates. Can you remind us, I think you spoke about 1 billion, but I was not sure whether this is only for Serbia or...

No, on group level, we have something like 3 billion, give or take, variable, Euribor linked.

3 billion. So more variable on asset side than...

Of course, there was a shift a bit to fixed in the last year. So this number has gone down a bit. And the housing production in Slovenia, for example, a good part of it was fixed because people wanted to lock in these low rates. And Serbia, in particular, I mean the colleagues will know better, but again, the variable space is very much the euro-linked business. So the corporates are borrowing in euros, Euribor linked, again, not necessarily local rate linked. But of course, in the liquidity is you had the question. And consumer lending, I think, is a fixed business, mostly the local currency. So I don't expect a lot from Serbia. I think Serbia is very prudently managing its macro position. I was in Kopaonik the other day, and I listened, of course, very careful to what the Finance Minister and Governor had to say. And to me, it was very, I mean, reassuring. This is a very, I think, big picture, long-term view managed situation. And so far, it was very successful. So I have a lot of confidence. The biggest priority of the Finance Minister, if you remember, was to achieve a BBB rating for the country, which seems ambitious now. But it tells you that there is a lot of thought process around how to manage the macro environment in a nondisruptive way, which I think for us is the most important thing.

That's all. Congratulations on the results and all the milestones made.

Thank you very much. Maybe just adding, right? We have been investing liquidity reserves into, example, 10 years Slovenian bond, right? A year ago at minus 0.3. Now it's plus 1.8, right? So it's repricing also liquidity reserve book gradually. You don't see the rebound yet of the margin, but this will significantly impact the margin on the go.

Any more questions from the audience? If there is no any, I would switch to questions which arrived through the platform. So gentlemen, we already broke our time frame, but let's try and be concise. So first question, Serbia and energy dependence on Russia. Have you modeled potential energy shock scenarios on your loan book?

I guess Andreas responded.

Yes, already. Yes, exactly. So we're going to skip that one. That was my guess. So how are you viewing potential impacts of inflation which has ticked up considerably in other countries in CEE?

I believe we touched this one as well just now, right? So as long as there is a moderate uptick of the interest hike, right? I mean one thing is, of course, non-euro. But if you look at the 15-year average of Euribor before actually negative experiment, it was 2%, right? So in 2%, Euribor level, it would not introduce overwhelming credit risk for our clients and would significantly improve profitability of the bank. So moderate hike is absolutely in the interest rate we believe of normalization of specific elements in the weighted average cost of capital calculations in any of the business models because negative expectations from the banks or 0 lending rates are not normal.

Thank you, Blaz. Let's move on. Komercijalna Banka discrepancy between net interest income and loan growth, can you please explain the year-on-year growth of interest income of 3% year-on-year versus a loan book expansion of 17% year-on-year?

So very technical. But of course, one part of the answer is dynamics, right? So loans start contributing over time, and a lot of the loan origination came from ZIB and there was a bit of heaviness on second half of the year or even last quarter, as I recall. So it's a bit of a timing question. And there's a technical dimension as well in the fair value consolidation in the group versus the stand-alone result. For this one, I would really refer you to the detailed disclosures, which we will, of course, provide -- to explain this in more technical detail.

Thank you, Archibald. Do you stick to your EUR 100 million profit target in Serbia?

Yes. I think we've been loud and clear on that.

Vlastimir was also loud and clear.

Okay. So then let's move on to the following considering that we answered already this one. So pressure in the region on banks from politics, regulators to expect like in Hungary, Poland, though given sharp rate hikes there?

Well, we've been discussing Serbia, other more or less countries so far our presence are practically linked to euro, having practically fixed rates and solid reserves to actually maintain the situation. So we've seen Swiss franc experiment, right, which didn't come from regulator, but from the legislator. And it is now with the judicial system. This was a surprise. There might be such populistic surprises. But at the end, we believe in synergy, and we believe it would not prevail. Rate outlook in Serbia, I mean, we touched a bit...

I mean here the Central Bank has excellent publications on their website. I think they're more qualified to provide guidance here. My expectation from what I said before, this is a very forward-looking and responsibly managed macro policy for FX stability, rate stability, FX reserve stability. So they really cover all dimensions very thoughtfully.

And let me just check whether we have some additional questions from the platform. No, that's it. Okay. Gentlemen, thank you very much. This was Q1. Okay. go ahead.

This was it for the webcast. So I would still have a wrap-up short address later on. Thank you very much for your attention and the guys online, next time, hopefully, we see you live at the Investor Day, right? Thank you very much. Now, it's a very interesting piece because we will host now 3 special people. Don't run away, 3 special people, half an hour, and then we finish. Thank you very much.

Ladies and gentlemen, as Mr. Brodnjak just announced, we have -- great. Now we're [ lighted ]. Okay. As Blaž just announced, we have 3 very special people on the stage. The idea is to hear the story, which is titled from Zero to Hero and to show that it is really possible since we should talk about some local examples of opportunities used perfectly. So the mystery of how to get from the region to the world and become global success story will be revealed by Mr. Vlade Divac, former professional basketball player and philanthropist; Rade Šerbedžija, actor, director and musician; and Mic Melanšek, Chief Marketing and Creative Officer, Co-Founder of Hooray Studios. One piece of announcement. We will have bilingual most probably. [Foreign Language]

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[Foreign Language]

[Foreign Language]

Okay. So we will have kind of a bilingual mix. So if you need translation, as you know, you have the translation earpieces on your chairs. If you need additional one, just raise your hand and we will provide one for you. So we will have mix, okay? We have one for Mr. [indiscernible] already in the first row. The idea is to feel comfortable and to finish this day -- this beautiful day with a cherry on top with these 3 amazing people. I will switch now to our local language. You actually represent the generation that lived in a completely different setup that we are in today and that we're functioning today. And you're actually a person who left a deep trail here in the market in the region, and then you were on completely other side. Everything fell apart around you, and you emerged in a place where you have to go to castings. So how did it look like? How did this path look like? And how did you succeed in addition to the charm and the qualities that you possess? So how did it look like to leave the environment where you're well known and start for scratch?

Well, that was quite impossible. Coming from a country where, as you said, you play the leading roles in films and in theater and all of a sudden, due to war, I left because of the war because I was in favor of peace. I was against war, and that's why I left the country. And I lived in London. I was almost half refugee there, and that was a difficult position to audition for some parts. But I was happy -- because at the time, 1993, one young director from Macedonia but he grew up actually in New York, Milcho Manchevski, great director, and somehow, he found out that I'm in London. He got my number, and he called me and he asked me to have a drink somewhere in Soho. I came there, met him and he said that he is preparing a film and then he would like me -- to give me a script to read it. I remember I read it that night. And when I finished the script, I read it again. Then tomorrow I met him again and I said, "Hey, Milcho, that's fantastic. That's great script." And he said, "Okay. Then you must know I wrote this part for you, main part." I said, "Impossible. We never met before." He said, "Yes, but you played 5 main parts in films of Živojin Pavlovic, and he's my favorite director." After that, Before the Rain won Venice Film Festival, and I won the award there. [indiscernible] is the best actor suddenly. And this film got nominations for Oscar, and it opened the door for me for American films. [ Nevertheless, it ] means I was lucky.

Yes. It's a short sum up of the situation. But again, that was the guy from the region.

Yes. No, but he grew up in America.

Yes. And it opened -- of course, he knew who Rade Šerbedžija is. Okay. I would switch now to Mr. Divac. Vlade is a top sportsman, someone who did so many things on your way to the Hall of Fame. How do you stay motivated? How do you fight with the fears? And how it looks from your perspective going from one completely, maybe we can say even, school of basketball then going to some completely different? I remember I was just a small kid, "Oh, Vlade Divac is in Lakers." I saw the picture. I couldn't believe. So how did it look from your perspective? And what is the main change you had to go through?

Well, I had the opportunity to have a drink with me, so I went through that story. I couldn't believe it either when I show up in the locker, when I see all those legends, starting with Magic Johnson, and guys that I had the opportunity to see all those guys on TV playing basketball in Europe. Well, I would say, just like Rade said, it's a little bit of luck there. But when you believe in something, you are -- you don't have a fear. You just go for it. I was 21, and my agent back then told me to sign some papers so I can be drafted by some teams from NBA; told me about a story that everybody loves me and I'm so talented and blah, blah, blah; and told me like that should be between 10 and 15 on that particular draft, but nobody picked me up until 26 and I was very disappointed, right? And then Lakers took the chance and they picked me at 26. So it was a great feeling to know that you're going to be part of the -- one of the best sports organizations in the world. They were ready to invest and make me feel comfortable, and they did everything right to help me to adjust for a new culture, a new style of basketball. And of course, opportunity came in, and I just grabbed it.

But of course, there is a presence of natural talent, in your case, and -- natural born talent and work. But now I would just -- you wanted to say something?

Yes. I mean when we talk about luck, obviously, it's a lot of work and talent behind that. And when we are talking now from the distance, we say luck, but it's a lot of work and talent that we both -- or all of us have in that regard.

As I say, you are the right person to fact-check this. But they say for like Dražen Petrovic and for like Kobe Bryant, they were very talented, but they were always there to do their 200 shots first before the practice and practice, practice, practice. So talent without work is almost nothing, right?

Well, we always talk about the successful people. It's nothing coming from the sky. It's a lot of work. We assume that's -- we don't need to talk about it. Without work and without the dedication of whatever you do, it's not going to happen. You have to earn luck.

So he was born that way, but he [ also worked ] for that. So...

Absolutely.

Yes. Okay. So now let me introduce you to Mic. For those who don't know, Hooray Studios made something really, really interesting. We talk and we usually can hear in these days that print is dead and that nobody is reading anymore books. Everybody is reading it online. But what Hooray Studios did was actually they use the old technology. They made books which are personalized. And instead of selling maybe 500 copies, they went up to 1 million and more copies worldwide. So Mic, your take, and how did it look? Where did you find the inspiration? And for instance, somebody would presume that, okay, what is else there to be invented in the book world, in the printing process? So how did you come up with the idea? And can you tell us just a little bit...

Sure. First of all, listening to you, sir, today, I must say I understand my mother, why she was in love with you. So thank you for making my mom happy [ half those ] times, probably numerous times. My dad says thanks as well. Anyhow. To answer your question, it started really slow. So my partner, Rado, is here in the audience. So we started basically with the intent to make something nice. I know this sounds like really cliché, but we both came from previous jobs that we were kind of forced to, let's call it, sell things that we wouldn't believe in or would not be proud of. And at that time, we both became uncles, et cetera, and this was not the only idea. It was not like when you look back in time, you said, yes, I knew it. No, we didn't know it. It was just one of the ideas. But we knew that we were hard-working. And I was joking before -- no, I was not joking about rakija. So this is not a joke. We started with rakija and Bosnian cheese. We had it on a plate. We talked a lot about what should we do, how should we do it. And we knew that we don't have the finances because we were both students. We only had like 10 grand, so like EUR 10,000. But we knew that we can easily compensate the lack of money with energy, with enthusiasm. And we don't like that. This was an open book. So we were like 29, 28 years of age at that time. So nothing was impossible. So that's why choosing the [ branch ] which was kind of a dying -- and me, especially, this kind of, let's call it, pisses me off. I want to prove to myself that something can be done. And I think we did a good job, and we are super proud of it.

So actually, you had this kind of a [ spite ]. You wanted to show that it is possible, but you also used local resources from the region: Bosnian cheese and rakija, right? We talk about region...

Exactly. Yes. Opportunities in the region, right?

Okay. So Mr. Šerbedžija, I would like to ask you regarding that -- we heard how it happened that Milcho Manchevski wrote the part for you. But at what point of time you knew, okay, now I'm okay here and I succeeded? You said it opened the door. And of course, there is maybe one, the other movie, third. When were you feeling relaxed and, okay, I'm back at my own? Okay, you're not in your former country. You're in a completely different continent. But when did you knew that you made it?

Well, after that, I made some films -- really, I mean, big films like The Saint with Phillip Noyce opposite Val Kilmer and Elisabeth Shue. Then I made South Pacific. I was thinking this main part with Glenn Close [indiscernible] and all of this stuff. And somehow, it was very important for me this experience with Stanley Kubrick. I had a small part, a few scenes in this film. But working 3 months with him, it somehow showed me something special. And somehow, yes, made me, how to say, relax. And I remembered that he said -- after this film, he said to Tom Cruise, we were drinking something, he said, "Listen, this guy will not stop now 10 years shooting films," and it's really happened.

Actually, if there is kind of an Eastern Russian accent bad guy in a movie, most probably, it will be you.

Yes. There's no other. I'll tell you something. I did a lot of these Russians, as you said. But I made also some great Greek characters or Romanian, even Croats or Serbs, in my American films. But it's only what I can do with my English. Because if you have accent, you can't reach main part in American films, very -- all very rare. It happened for me a few times. Let's say this film, American-Canadian coproduction and Greek. It was Fugitive Pieces where I played with Rosamund Pike and Stephen Dillane, and I got the main part. So it can happen but very rare. But you know what? Even Antonio -- [ what's his last ] name?

Banderas. He has a strong Spanish accent, right?

Yes. But he has a strong Spanish accent, but he's also -- he's playing foreigners also, never Americans.

Yes, of course. Actually, I have -- it's my personal angle. When I was dreaming about going to the States, so everybody asked me, "What would you do there?" I'm, "You know, I would try to do some auditions. Mr. Šerbedžija has to go to retirement one day.

But you know what? Even British actors...

They cannot go...

Very difficult they'll get the main parts in American films, but they are only guys who are playing good guys in American films.

Okay. Vlade, growing up from the city of 13,000 inhabitants to the one of the best players on the planet is one part of the story which we already just started. But what is that what we can say for our sportsman from this region that is so distinctive for them? We are witnessing that Jokic is now, again, MVP; Luka Doncic, all the other guys. What is so distinctive with our players, other sportsman from other sports, Novak Djokovic, as well, which is so different comparing to others? What is defined -- is it just this [ wishful ] success and talent and also a lot of work? Or there is some kind of secret recipe?

Well, you don't have a secret recipe. It's a lot -- first of all, I can talk about myself. And I can see you mentioned Luka and Nicola. They have probably the same -- [ it's a lot ] for the game. And you always -- every day, you try to be better. I was lucky to play with one of the best players in the world, and they made me who I am. And then I had teammates that I try to pass on experience the I got from all those years with the Lakers, where I try to make them better. [ It's a lot ] for the game. I enjoyed -- I can tell you a funny story when I was 15, 16 years old and I got some first money from playing basketball. It's a few hundred dollars or whatever, but I don't know, early '80s. So I was so happy to bring those money back home and my dad actually forced me to take the money back because he was asking me, "Do they know you would play basketball even if they don't pay you?" So that was a good message that, yes, I really played basketball for fun, for love and all those contracts and the fame came just as a natural thing.

Yes, as the slogan -- the old slogan said, "I love this game," right?

Exactly.

Yes. Okay. Great. So it's one of the advices, do what you love and you will not work a day in your life. But we need to get there. Okay. So Mic, a question for you. Do you have -- do you think that in this region, there is enough freedom and courage for this innovative approach to things? As you said, one of the things that motivated you was everybody says that the industry is dying. So no, I want to show that it's not dying. So do you think that we still have some...

I would argue that mostly, we have that in the region. Us going -- so we started in Slovenia, which is a very small country with a small market and then going abroad...

But a very big bank.

Yes, very big bank. Exactly. So we started here. And then going abroad, everybody was saying that -- because Germany was our first market -- you should not go to Germany unless you have 250,000 on your bank account, and we had nothing basically. And -- but we were stupid, and I mean this in a very good way. You don't see obstacles when failure is not an option. And I'm sure a lot of people who succeeded, [ whatever branch there ], in that they have this mentality because -- and I don't mean this in a bad way, but us approaching businessmen outside of the region was pretty hard for us. It was -- we saw that we wanted to make things big and stupid and fun, and they just wanted to make them safe, which I don't think playing things safe at the beginning of, let's call it, owning business, but I'm sure elsewhere as well, it's not the way to go. Then you become mediocre and people don't take you seriously, because you have to make mistakes. You have to break things down.

Yes. Okay. Mr. Šerbedžija, can we say that the personal potential that a person has can only thrive and can only blossom when we are kind of together? You mentioned working with Val Kilmer and all the other actors, and Mr. Divac just mentioned that he learned from other players and try to teach other players. So it's not possible just to have personal potential, or is it? Or you need other people and then have kind of a community and work together?

I always prefer working together in everything in life and in part. It's maybe why I like more theater than film. And I must tell you, you know probably that I'm running with my wife and a friend of mine, [indiscernible], we are running theater festival Ulysses on Brijuni. And we are trying to make international theater. But we did really great productions. You probably know or see some of them. And I'm happy because of that. But mostly I'm proud of something what we are doing 22 years. During our festival, we have some special workshop. A friend of ours, a famous Scottish musician and composer, Nigel Osborne, and professor in Edinburgh on Music Academy, he's always working with music, working with disabled children to help them, to healing them actually. And he has great -- big success with this method. And every year, we are doing this. This year, we will organize one month. We invited some artists from Ukraine or some people -- some artists who actually escaped and who are now in Poland or in Germany to come in our camp for one month, working with this Nigel Osborne and with these children -- disabled children. And we want to teach them how to do this with the children so that they can be able to do this in Ukraine, and they will have a lot of work.

Thank you. That's a great thing that you are doing. Vlade, I would like to ask you a question regarding advices. Actually, what we are also doing here, we are trying to send a message to some people in the audience and people watching. Can you remember some advice, piece of advice, that you regret not taking and also piece of advice which you remember that was crucial for your further development in the career? And what would be your advice to the following -- to the next generations?

Well, I don't regret about anything. That's all past. What you learned from the past is just experience that can help you in the future. But advice that I remember that helped me during my career is my dad telling me when I start having like small success and going from my hometown to Kraljevo then Belgrade then L.A., but before that, I was young, and he was telling me that -- to make sure that the journey on that road is more important than...

Than the goal itself.

Than the goal. And I always took that seriously because I really enjoy my journey. And the goal can be different from what you really feel. Are you going to be happy to reach that goal or not? But the journey is always very important for me.

It's all about the journey, and we shouldn't probably forgot to stop sometimes and smell the flowers.

I agree. I agree. But I said it's very important that who you are on that road to success, are you going to be happy when you reach the goal. A lot of people reach the goal, but they don't find that success and happiness.

It's probably been too fast or maybe too abrupt. They find the goal, but they didn't enjoy the journey...

Yes. Whatever. They start missing all the stuff. I mean on my journey, I learned a lot. I grew up a lot. I see the world from a different perspective. What I was thinking that is important when I was 15, I realized it's not, things like that.

Okay. I will go back to you, Mic. What I did mention earlier when we talked about your great invention of personalized books for kids, that you actually had growth of -- I believe we are still here, so I should talk in some percentage -- 4,900% rise, if I read correctly.

At some point, yes.

At some point. So when it struck you, how did you feel? How did you -- is there a syndrome of a drunk millionaire? Was that, oh, we succeeded or...

Yes, it refers a little bit to what Vlade said. So -- and it's not a bad thing, I would say. We started this company because you need to somehow fulfill your ego, I think so, right? And you have different ways to do so. You have illegal ways, and you have legal ways. So we wanted to be more on the legal side, doing things correctly. So it was never a matter of how many books we would sell or how many people we would have, but it feels good. It really feels good. So for us, the main -- the thing -- the point in time when we said we succeeded, first of all, it didn't happen yet. But if I would need to choose one, I would say it was the time when we were able to put our egos aside and said it's not the -- only the 2 of us who are the limit of the company, but we should hire smarter people to join us, which sounds simple, as I said, but coming to that conclusion at age of 34 was not that simple.

Okay. Mr. Šerbedžija, for you, a question. Do you think that there is still space for further development of the culture pattern which could make a great impact than the world has seen? Or we have seen it already all? Do we still have some space to develop a new culture better? [Foreign Language] So maybe we have seen everything and we are just recycling.

[Foreign Language] For me? For everybody?

To everybody as well, but first of all you because you are an artist.

I would like to believe that we can live in a better life and a better world. These things -- this war make me unhappy, and somehow, I'm even not thinking about that right now. I think that we, all of us people, not only artists, not [ sportists ], not successful businessmen, have to think more about world, about others, about peace. And that we have to try to love people, to understand different people with different culture, different problems and so on. We have to try make ourselves better.

So would you say that we actually -- it looks like we lost empathy and caring for other people.

Yes.

I will now switch again to you, Mr. Divac, and just -- I'm switching from Mr. Divac to Vlade and going first-name basis and then last names, but pardon. What would be the message -- how would you describe the region? We had really a great crew of CEOs from the region earlier today, and I asked them to define to some people watching us from somewhere around the world, how would you define this region. I would also like your answers on that. What would you -- how could -- you probably did it so many times. But what would you say in order to describe the region and define the region? What is the region? Is it just former Yugoslavia? Or it goes even broader?

It's just part of the world, and I live in -- like Rade knows. We live -- most of part of the year, we spend in Los Angeles. And I realized, when I was 20 plus, that we are so -- I mean, we are same. It doesn't matter where you're coming from or it's -- what you believe here and how you act, how you approach. For me, I have a lot of friends all around the world and..

Region is the whole...

Exactly. This is my homeland. I love it. But the world is my country. I think it's talking about specifically about people that lives in this area of the world. We like to and we have a tendency to take a lot of excuses. It's always something. We always should take charge of what I can do to make this theater or city or country better, what I can provide, not to wait for somebody else to do it. It's about us.

We should be the power of change. It's also a question for you. When we talked just a little bit a few days before this happening, you said something which is it almost doesn't matter from where did you start. It could have been a garage, in a park, right? Or -- so from that point of view and in this new entrepreneurship in which you are living, in which you created, how would you define the region? Is it even [ rather just ] almost that it's not so important? Important is what we have inside. So then every region is your region. But how would you describe this region?

I mean, definitely, my generation and especially younger ones are now -- they are not bind by borders.

Citizens of the world, right?

Exactly. So things are becoming -- at one hand, they are becoming more accessible, but it's becoming a bit more scary as well. So I think handling these 2 things, it's a task we all in business should take care of because you can easily make a mess if you don't pay attention. What I did learn coming from the region is that our, I would call it, inferiority complex, it's a good joker to have because it takes you a long way because like Vlade said, you always count only on yourself. This is what we realized, that we never -- even going abroad and hiring now -- we have more than 100 people in the company, we never relied on somebody else to solve our problems because I think we are -- in the region, we are really good at doing this. Not just the region, but if there is something that we are good at, I think it's that because -- our competitors get funding of 100 million, and they are on the same level as we are. So do the math. Don't do the math.

Actually, since -- I mean, the message is that the region is so resilient and probably because we've seen it all. That's why we, from this region, are kind of more ready to adopt some new circumstances, even if you go from the basketball player in this country or a great artist and then go to a completely new market or go from zero to hero. Mr. Šerbedžija, I would like to finish with your message and your definition of region. One of the CEOs, Mr. Bitenc from Petrol, said we have beautiful landscapes here. That's just one of the facts. And he said you can jump in the sea in the middle of the night and have a good [ evening ], which is not the case in Los Angeles, right? So your definition on this beautiful region.

You know what? The [ other time ] I was the most proud of all this region called Yugoslavia or Balkan, even our neighbors Bulgaria, Romanians, Hungarian, people from these Greeks from this region. Then when war happened in my country, what I never believe that would be possible, I was so unhappy and stopped to be proud of my region. But I'm still proud on many fronts, on many talented sportsmen and people and artists in my country. And I just think -- and I want to say one thing, that we deserved all these years, last 30 years, better politicians.

Thank you. As Mr. [indiscernible] said, leadership will act leadership. Okay. Gentlemen, thank you very much. We are so honored that you devoted your time for us on this stage. Thank you once again, and thank you for the opportunity to listen to your advices.

Thank you.

Thank you.

Thank you. Okay. So the one who started this whole event should be the one to close it. So ladies and gentlemen, the CEO of NLB, Mr. Blaž Brodnjak.

Dear all, I hope you realized that you are in the center of Europe, that we share the same values and that we share creativity, innovativeness and ambition. Rade said he was proud. I'm belonging to the generation that sees the light that is shining on us in a way that we will again be enormously proud. My generation not only has a chance. It has the responsibility to put things again right. We see this region really authentically and genuinely as the region of opportunities. And as I said at the beginning, it is not only right. It is also just to give the whole region a chance to really accelerate [ accession ] to the European Union [ via ] that secure, stability, prosperity and peace, and then you all will be proud of us. Thank you very much.