OTP Bank Nyrt. (OTP) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the OTP Bank Fourth Quarter 2023 Conference Call. This conference will be recorded. [Operator Instructions]. May I now hand you over to Laszlo Bencsik, Chief Financial and Strategic Officer. Laszlo, Please go ahead.

Thank you, and good morning or good afternoon, depending where you are. Thank you for joining us today on OTP Group's 2023 full year results presentation. As usual, the presentation that I'm going to use is available on the website for you to download, but we are also kind of proacting it parallel to the discussion, what we have in my presentation. As usual, we go through -- and first, I try to go through better quickly this presentation, which is the kind of usual structure, and then we have -- we can have Q&A. So the highlights of the group. We had a good year last year in Hungary and outside Hungary. And in general, I mean, this is probably not a surprise because most of the banks had a quite good year in '23. But nevertheless, in terms of OTP history, I think this is a kind of major milestone where we as we exceeded EUR 100 billion balance sheet and exceeded EUR 2.5 billion profit after tax. And we kind of fully defied our position in the region as one of the dominant multinational banking groups. And certainly, we have a unique position in a sense that we are pretty much the only one of the banking groups across the region who actually originated from the region and come from the region. So we have strong positions in the -- in 5 countries, which was strengthened last year by the -- especially with the acquisition in Slovenia, our second acquisition, and we entered a new country in case of Uzbekistan and -- not last year, but at the end of January, early February this year, we signed an agreement to sell our Romanian businesses which is also kind of hasn't been a big part of the group. But strategically, it was a kind of difficult decision to make, but I think we made the right decision. And certainly, the financial impact of that decision has already been reflected in the '23 numbers. Profitability was quite good, I think. I mean, 27% all-in compared to the around 14%, 15% expected return level, and somewhat declining expected to return level given the -- especially in half rates there, has been a strong decline in the risk-free rates. There's some normalization in the cost of capital as well. And very stable kind of foundations in terms of liquidity, in terms of capital, both of these positions strengthened considerably last year. Liquidity coverage ratio around 250%. That's 2.5x higher than the requirement. And we managed to strengthen our capital position despite doing these 2 rather sizable acquisitions in Slovenia and Uzbekistan. So the year-end common equity tier 1 ratio was 16.6%, and that means 20 bps improvement year-on-year, including the acquisitions that we have made. And we managed to meet and somewhat exceed the MREL requirements as well. So the year-end ratio was 25.1%. And from January 1, the new increased requirement was, or has been 24%. So this has been a quite fast exercise because we have to issue a lot of bonds, which we didn't need for our kind of normal business activities or from a liquidity point of view, but only for this purpose to meet these new type of capital requirements when we have met them. And portfolio quality remains quite stable with decent coverage levels and lower risk costs. So I think, overall, this is a pretty strong picture and we remain committed strategically to ESG's targets. Well, let's look at a bit into the numbers themselves in the group level. First of all, if you just look at the bottom line headline number, EUR 990 billion half after-tax profit, that's almost 3x as much as in 2022. Now, on this page on the right floor corner, you can see the so-called adjustments. And these items changed a lot from one to another, whereas in '22, we were -- we had like minus EUR 245 million, '23, it was minus EUR 18 million. So the big difference in these so-called adjustments contributed most of the difference between the 2 years, or it was a major contributor. It wasn't most, but there was a major contributor to the difference. And if you go line by line, the acquisition -- effect of acquisitions was positive in '23, and that's coming from the NKBM and Ipoteka acquisition, which were both positive, and the Romanian bank sale, which had a negative impact on our P&L. We kind of reported this when we had -- we signed a deal early February. So the impact here is minus EUR 29.5 billion, and that's included in this EUR 64.9 billion positive number on the acquisition line. The special the bank taxes primarily in Hungary, but decline, and that's a good thing, and then we expect further decline next year -- sorry, this year in '24. Interest rate cap was extended into the end of June this year for variable mortgages and till the end of March for SMEs, so that have still these extensions cost us one-offs, including the last one in the fourth quarter last year. Not just Hungary, but the Serbian cap was also accounted for. And the other line where there's a considerable change year-on-year is the effect of the Russian-Ukraine war in '22, we had big losses here. And in '23, it was close to 0. And on the other line, we had a positive number, and that's this last year, EUR 15 billion. Most of this like EUR 10 billion was related to the reversal of the provisions that we made due to the kind of reversal of the losses that we had, what we booked in '22 due to the Beer bank default and the subsequent resolution actions. We moved the loss in '22, and we reversed that in '23 because it did not manifest in the end. Now, if you look at the kind of bid one-offs with that adjustment items numbers on the last lower quarter, is still quite a strong growth, 70% year-on-year growth, which was well-driven by various factors. Number one, we included the P&L contribution of the 2 acquisitions that we made last year, and their combined contribution was EUR 74 billion, EUR 96 million was positive was NKBM and minus '22 was Ipoteka. And overall, if you look at the ratios, net interest margin improved from 3.5% to almost 4%, and that came primarily from outside Hungary countries, especially those in the Eurozone or preseason countries, and we clearly benefited from the higher euro rates, whereas we did not benefit, it's quite contrary. The extremely high rates in Hungary actually were negative marginally for us in Hungary. And the credit risk cost rate was quite low in general, but especially compared to '22, '22 was the year when the war started, and we provisioned kind of excessively, especially in Russia and Ukraine, but in all the other countries as well because we had to increase coverage ratios for the countries for the other countries as well, given the worsening economic expectations. So that resulted in EUR 178 million risk costs in '22. And these factors did not manifest in '23. In fact, the whole risk cost was SEK 39 billion negative. And that included the 22 -- sorry, the EUR 52 billion risk costs that we booked during the second half of the year in Uzbekistan in Ipoteka. I'm going to talk about this in more detail later. Looking at the consolidated P&L, I think maybe a few -- I mean, a few highlights, the 28% without acquisitions and FX adjusted to all income growth. I think that's quite good, growing organically 28%, and that resulted in actually 37% growth in operating profits. So just in 1 year, we grew operating profits more than 1/3 organically. And maybe the -- on a quarter-on-quarter comparison, I think is a net interest income growth, which is quite prominent and important. Looking at the lower growth trend on Page 5, we love this chart apparently. It keeps coming back. But I think this is important and it keeps reminding us how much we have grown over the kind of last period, the last 7 years, we tripled the size of the group in terms of toll assets. And in terms of loan volumes, it was even higher growth, and we kind of reached this above EUR 100 billion level. Put it this into another context, 10 years ago in 2003. The group was EUR 10 billion altogether. So it's like 10x growth in 20 years. Any other very important change in the structure of the group that now kind of 2/3 of the group is coming from outside Hungary, both in terms of profits and in terms of exposures. On Page 6, we start a few pages detailing the Hungarian performance. Again, if you just look at the bottom line number, then is kind of 10x improvement compared to '22. And here, I think it's safe to say that most of the changes come from the so-called adjustment items. So it is going through them one by one. The windfall tax is the profit tax declined, as you can see here. The special bank tax increase. That keeps increasing. By the way, this is the tax which have been with us since 2010. So you could argue why we put it into the adjustments and the one-offs, and we are kind of reconsidering this. And just to -- I don't want to scare you, but starting from '24, we are going to substantially reduce these one-off, these adjustment items, and will reserve this category all into items, which are related to the actual buying or selling of assets of banks, or other assets, and everything else will go into the normal kind of profit. So we are not going to show this special items. But more about this when we present the first quarter. So the kind of special bank tax, which -- this is the one which was introduced in 2010. That keeps increasing because this is -- here, the tax basis is related to the sub-consolidated Hungarian assets that we have. And since those are growing, this number is growing, and will continue to grow in the future. For this year, we expect around kind of close to EUR 30 billion, whereas for the windfall tax, which was introduced in '22, and already decreased from the 10 to 2 level to the EUR 36 billion in '23. It is going to be -- is going to decrease, and this is in the legislation actually further down to possibly around EUR 6.5 billion, assuming that we are going to buy the necessary government bonds, and we intend to reduce it down to this level. On the interest rate gap here, we talk about that. There was no effect coming -- negative effect coming from the Russian war. So the Ukrainian -- the war in Ukraine, Russia and Ukraine. But on the other hand, in the other line, we had a big plus. Now this is somewhat confusing because this is actually -- these are items which don't appear typically on the consolidated level. $80 billion of this is specific to the stand-alone view of the Hungarian bank. And this is related to the investments into the subsidiaries, and the value of these investments, and the impairment reversals on these investments into subsidiaries, including the reversal of impairment on the -- or the kind of -- or the revaluation impact on the Romanian bank. I mean, on a consolidated level, the sale of the Romanian bank had a negative P&L impact because we saw this at 0.7x local book, right? Value below the local book, which we -- book value while we had in Romania. But in the Hungarian book, the book value, the asset, the value of the investment of the Romanian subsidiary was much less, was already impaired compared to the book value of the Romanian bank. So actually -- and therefore, the sales price was actually higher than the value of the Romanian bank in our books in Hungary. So actually, we had to book on the Hungarian stand-alone level, bank level 37 billion plus. And there were other impairment reversals on investments to subsidiaries, including our Serbian bank, EUR 21 million. So all these together added up to $80 billion plus, which only appears on this -- on the Hungarian numbers and not in the consolidated one. So that's somewhat confusing, but I hope it was clear. And there's another kind of technical element, which we talk about when we detail the other income development in the group, but maybe it's worth talking about here. The accounting treatment of the subsidized retail structures like the Baby and the Chalk subsidized mortgage structure is such that we have to fair value adjust them. So when we -- when there are kind of strong movements in the rate environment and/or they change the subsidy structure of the newly issued loans, we have to revalue the existing book, and the existing book is quite big. So this revaluation, positive revaluation last year was PHN87 billion. And after tax, it was EUR 79 million. So out of this SEK 303 billion adjusted profit in Hungary, which grew 18% compared to 22%. Actually, that was EUR 79 million related to this. So that was the kind of one-off boost. This is not unique to OTP. I mean, Erste Bank, a few days ago published their numbers, and they reported that they booked SEK 43 billion plus due to this fair value adjustment, evaluation of subsidized loans. So just these 2 banks together, OTP and Erste in Hungary booked EUR 130 billion of kind of one-off accounting policy related positive number . So we estimate that maybe the whole banking sector might have booked around EUR 200 billion positive last year. And this is actually a very substantial boost to the earnings of the Hungarian banking sector. And this is probably, I mean, obviously, unlikely to be repeated, put it this way this year. On a more kind of fundamental level, the improvement last compared to 22% happened in our case, in basically in the kind of yearly -- if you look at the quarterly developments of the NIM, there is a strong improvement here. Year-on-year, the NIM actually declined because in this very high-rate environment, this is not what we optimize our balance sheet for. And you can see that after the rate environment started to fall, starting from the second quarter in '23, here has been a strong -- I mean, a reasonably strong improvement in the net interest margin. Part of the improvement in the fourth quarter was technical. We also include -- talk about this in this presentation later on. So basically, 26 basis points out of this 60 basis point improvement in the fourth quarter was related to kind of one-off technicals. But even if we exclude them, the net interest margin in one quarter improved from 2.2% to 2.55%. And this improvement is structural. So this is going to stay with us. It's not going to go away. So I think this is the kind of most exciting part of the fourth quarter result in Hungary, this or one of the 2, 3 more exciting developments that really the Hungarian net interest margin started to react positively to the changing rate environment. A few more words about Hungary volumes and kind of business trends on Page 7. Looking at the mortgage market, there was a big decline in overall disbursement. So the overall on a market level of disbursements declined by 50%. They went down from IDR 1.2 trillion to CHF 600 billion in '23. And our newly disbursed volumes also declined, but only by 31%. So the decline is in our case was much less than the decline on the market. Therefore, not surprisingly, our market share in new production did grow last year. And our kind of volume growth, stock volume growth, in our case, were 4% compared to the market growth of 1.3%. So we kind of outgrew the market last year. Now, it's even bigger outperformance of the market of OTP last year as in consumer loans. So if you look at cash flow disbursement, our market share has increased even more considerably. And by the end of the year, in the fourth quarter, we reached 45% market share, which is in this kind of not subsidized market base, cash loan, and new disbursements. And in terms of volume growth, overall, stock volume growth grew 16%, whereas the market was growing by 7%. Now the other kind of exciting retail segment, the retail deposits. This was quite problematic last year and very painful for us actually because current account volumes on the entire market declined by DKK 1 trillion in the first 10 months. And this was given our kind of above 40% market share in retail current accounts was particularly hurting our profitability. And this was one of the reasons why our margins went low in the first half of the year. And the good news is that in the last 2 months, in November and December, there was EUR 500 billion increase. So this decrease in retail current account volumes turn at the end of the year. And that should have a -- and that was one of the kind of reasons behind the improving net interest margin in Hungary, next to the lower interest rate environment. Now this was, again, a specific market situation in Hungary. There was a very strong reallocation of funds by retail clients and retail government bonds, and mutual funds increased considerably why bank deposits decline. But nevertheless, in this kind of declining retail deposit market, we managed to increase our market share year-on-year last year slightly. Corporate story is somewhat different in our case. Our corporate volumes, in fact, declined last year. But if you have a closer look at previous year's growth. So in '22, we grew 32%, and most of this growth was in the second half of '22. The market in '22 grew by 15%. So our growth rate was more twice -- more than twice than the market. So what happened was that basically our clients refinance the loan demand, and we were willing to do that. So we provided them with the loans where they demanded. And therefore, there's a kind of timing of these loans, much more was done in the later part of 2022 than on the market level, and therefore, less was left for '23. And obviously, the GDP decline and the high-rate environment contributed to the overall kind of slow growth of the market. But this is clearly an item where we expect improvement this year. So we are very much hopeful that loan growth is going to come back, and this is what we prepared for in terms of corporate. Despite the overall decline in volumes in our case, we have been quite active in distributing the subsidized structures, which kept existing. So we had kind of more than 40% market share in the disbursement of subsidized volumes. The next page is our kind of usual the composition of the NII and net interest margin. Development does not -- there's no new item here. So that's basically just an update on the information, what we shared in the previous 2 quarters. I don't think there's much to say about the share. On Page 10, we have details about the performance of part of the group, which is outside Hungary. And that was really a success story last year. With the exception of Ipoteka, our new acquisition, all these banks were contributing quite strongly to overall profitability. You can see the ROE numbers and the nominal kind of volumes as well. I think quite impressive, especially Bulgaria exceeding the EUR 200 billion profit after tax level, very good improvement year-on-year. Slovenia, we rank NKBM on board, $130 billion, and Serbia was also very strong. A few years ago, Serbia was signing, right, in our case. But having done the successful acquisitions, it's one of the strongest contributors, overall group ever profits. And Russia, Ukraine, after the less good performance in '22. Both of these countries were strong profit contributors in '23. In case of Ukraine, actually, the 50% corporate tax was introduced at the end of the year. So the fourth quarter was loss-making because we -- it was retrospectively applied. So we had to pay taxes 50% on profit for the whole year, and we had to account for these additional taxes for the entire year in the fourth quarter. But even after this 50% corporate tax, the profit after tax remained SEK 45 billion which is, I think, quite remarkable given the situation, the war in the country. Now, the good news is that this 50% is not going to stay with us in '24, it's going to be 25%. So this was a kind of one-off high rate. I mean, we are usually quite critical of these bank levies and additional bank taxes. But if there's, I think, ever a situation where extra bank tax is warranted, it's the case of Ukraine. I think it is quite understandable that the tax, the bank is somewhat higher in these difficult times. And then maybe I talk about -- a bit about the situation in Uzbekistan. So we have 2 slides tailing there. We are learning this country and the bank. So we -- quarter-by-quarter, we have more information. So hopefully, we can give you better and better picture of what is going on, and maybe more intelligent answers to your questions. So where we stand now? Just showing you the performance of the second half of last year. So in terms of volumes, corporate volumes declined by 38% in 6 months. This was due to the fact that the migration to Stage 3. So these are performing lines, performing Stage 1 and 2 loan volumes declined by 38% due to migration to Stage 3. And obviously, due to the fact that we really -- I mean, we seriously kind of strengthen and made more conservative lending standards as well. So not much new lending was done in corporate. In contrast to that, in retail, we were growing quite fast. Mortgages grew 15% in 6 months and consumer loans by 120, more than doubled. I mean, these are not annualized growth rates. This is actual period-on-period growth in 6 months. And that's actually the core of our strategy in the country. Just to remind you, the reason we brought this bank was not to grow so much in corporate, but we wanted to capture the opportunity in retail segment in Uzbekistan. That's why we brought Ipoteka Bank. Ipoteka actually means mortgage. So it's a primary mortgage bank, and they have like 20-plus market share, 35-ish-percent market share in the country's suite. The core focus of our strategy or the real focus of our strategy, the retail segment was actually growing quite fast. And it continues to be -- I mean, from the levels -- from the volume levels, what we have there, potential quality demand is almost unlimited, and continues to grow. The only limitation to growth is really local currency liquidity. Unfortunately, the monetary policy environment is extremely tight. I mean the base rate is 15%. The inflation is much lower than 10%. And there's just not enough. There's a very tight local currency liquidity level in the system. And that's the biggest impediment to growth. And swap markets are not available in the local currency. So even kind of not that we would want to do that, but it's not quite possible to finance any local currency growth from kind of injecting liquidity into the country. So the only kind of limitation to growth on the retail loan side is really the deposit development. And the good news is that we actually managed to grow deposits relatively strongly in the second half of last year. So corporate deposits grew 23%, and household deposits, 15%. Again, these numbers are not annualized. These such as end of period growth range. So I mean, what's happening here? I mean, we are obviously improving the activities and the sales, techniques, and tools of the bank, and there's very strong digital share of the new floor. For instance, out of the consumer loan sales, so the cash loans worth. As you can see, in the fourth quarter, we actually sold 77% of the cash loans digitally -- and when we brought the bank in the second quarter, it was only 40%. So a much larger volume was sold and a much larger share of those were actually sold through digital channels. And this is without actually replacing the app, what they originally had. We made some tweaks and quick fixes, but a big kind of step-up in the quality of the digital services that we provide will come when we completely replace the current digital front-end, and that's going to happen somewhere at the end of this year. So this is a kind of even work in progress on the development. Now what happened in the corporate portfolio and quality. First of all, it's clear that the Stage 2, overall increase was coming from or was the result of the corporate portfolio deterioration. The retail portfolio remained quite stable, as you can see on this chart, the retail Stage 3 ratio hardly changed or even kind of decline. But the big increase was it was corporate and micro small. Now on this slide, you can actually see the industry split. So most of the Stage 3 ratios. So that's of the Stage 3 loan. So this is like the most -- more than half of these loans, which defaulted are in the cotton textile industry segment. There's another big share in fisheries and in the agri-sector, where -- and actually, the others are quite small. Now what happened? I mean, apparently, cotton prices collapsed. I mean, if you compare the peak in '22 to second quarter to the low in second quarter '23, then the price difference was actually not 30%, but 50. So cotton prices fall by 50% in 1 year. And on top of that, they had a very cold winter. The winter of '22, '23 was the coldest in the last 50 years in Uzbekistan. And this was -- this situation is exacerbated by the fact that there was not enough gas ,supply and gas subsidies were reduced. So they could not hit these kind of fish lakes or ponds where they grow the fishes, and they could not hit the kind of this greenhouse these where they grow fruits and vegetables and things like that. So the better and the waste and the kind of limited supply of gas, and more expensive gas, and therefore, no possibility to provide a right heating for what they needed in the fisheries and the agri-sector, and the cotton prices, and also the weather conditions in the cotton industry resulted in unprecedented losses. So in a way, it turns out that we seem to be unlucky with the timing of this acquisition because we just managed to buy this bank in diverse kind of external conditions here. So our understanding is improving day by day of what's happening exactly with these clients. And this is where we are at the moment. So these are probably the strongest drivers. Now, the other side of the point, obviously, is that if you look at the bank's ability to monitor and collect and do work out of corporate loans, and we compare that to the levels that we have in the other parts of the group, there's a huge difference. So there's an enormous improvement opportunity and potential in kind of basic risk management and portfolio management practices of the bank. And we have started to do that improvement since we took over the bank, but it takes some time. So we are making progress on that side. And hopefully, there will be a visible results of these improvements in the policies, procedures, people, everything basically related to managing existing problematic portfolios. Where it takes some time. And unfortunately, the relatively low level of this preparedness during last year, and this negative external environmental factors resulted in this deterioration. Now, if you look at coverage ratios, what you can see, the reported ones are not fully providing -- they don't provide you the full picture, because when we buy something, we have to net provisions to gross loans. So the beginning balance sheet -- the opening balance sheet at the end of the second quarter last year. In that, provisions were already netted out. So what you can see in the balance sheet of the bank is the kind of net amount of these nonperforming loans. And therefore, the previously created provisions disappear. Therefore, there's a difference between the reported net coverage level and the actual coverage, which compares the provisions to the kind of gross -- total provisions on the loan to the total exposure of the loan. And the latter one is adjusted, is higher. So in fact, provisioning level is 56% on the Stage 3 corporate loans, which is in line with the kind of other levels in the group. And if all goes well, we are actually hopeful that there might be some revisions or provisions later on from this, if all goes well. Okay. So that was about Uzbekistan and Ipoteka. Maybe a few thoughts, but not much about kind of the P&L line in a cross-section view. So NII, I already talked about this. I already talked about the one-off technical items in the half in Hungary in the fourth quarter, which kind of was part of the story of this strong quarter-on-quarter growth in NII. In Ipoteka, we had a reclassification which caused the decline on a quarter-on-quarter basis in an NII reclassification. Actually, the NII would have improved by 3%. Net interest margins next page, 14, reflect the same story. Again, part of this large improvement in Hungary was related to one-offs, but even without one-offs, it was strong. And otherwise, across other fronts typically improvement in margins due to the rate environment. Page 15, quarter-on-quarter loan growth. I mean, the kind of previous momentum was capped to 1%. And if you look at the year-on-year growth, 6% organic and 20%, including acquisitions. I think the most remarkable set of number here is Bulgaria, 20% growth and especially mortgage is 23% growth. And this is not just OTP Hungary, -- so overall, the market is growing fast. And that's coming from 2 factors. One is that the country is doing well. Actually 3, companies doing well, penetration ratios are low. But that's an interesting third factor, and this is something we could learn from in other countries. In Bulgaria, interestingly, retail loans are all variable. But the benchmark of these variable retailers is a benchmark which is officially published by the Central Bank, and it is the average rate of the retail deposits. And this structure, industrial structure there resulted in an interesting situation that, okay, deposit EBITDA was close to 0. So the deposit rates did not increase despite a much higher rate environment. Therefore, the variable stop rates, consumer and mortgage did not increase. And also, the new production rates did not increase. Probably, we have one of the lowest mortgage rates in Bulgaria across Europe. And the margins are quite strong, and we are not -- we don't have to be afraid that if deposit repricing happens, then we lose margins or lose NII because the benchmark of the variable retailers is the average deposit rate, retail deposit rate on the Bulgarian market. So I think this is a kind of -- I'm not sure whether this was designed with purpose, but it has been served for quite a long time for last 10, 15 years, and basically, all the banks have these structures. And this specific feature actually resulted in much higher growth in Bulgaria, which is a case Eurozone country, right? They are joining the Eurozone January next year. They are already in ERM II. So it's basically interest rate wise, it's just a kind of a euro rate environment. Now that's just a kind of small flavor on the situation there. Deposits, again, there was a very, very important development in the fourth -- on the quarter-on-quarter numbers. Unless the Hungarian retail deposits, they went up by 2%. The previous 3 quarters last year, they were negative and that -- for us, that was extremely painful. So that's a very lace development. I hope this is going to continue. Otherwise, on a kind of year-on-year change level, next Page 18 -- sorry, 17 -- I'm sorry. No. Yes, 18 yes. Overall growth was 7% without acquisitions. So kind of higher growth rate than loans and therefore, actually loan-to-deposit ratio group level slightly decline, and kind of general strong growth, except Hungary. And as you can see on a yearly comparison basis, the retail growth in Hungary deposits was negative despite the fact that in the fourth quarter, there was a 2% increase. Fee income. Despite low volume growth in Hungary and loans, and also a negative deposit growth, retail deposit growth, and actually declining GDP, we had 11% growth in fee income, and that's due to inflation. So I mean, obviously, despite a recession and declining GDP, nominal GDP, obviously, increased and fee income tend to grow with nominal GDP growth. The other 2, I mean, growth -- strong growth rates in Russia, that's related to the deposit volume increase and in Hungarian fund management. A huge increase happened in assets under management, where -- I mean, retail deposits were negatively affected by the very high rate environment and the very high yields on the retail government bonds and money market funds. Obviously, fund management and fund managers benefited a lot. A lot of retail savings move from bank deposits to meet your funds and therefore, our fund management company, which is the largest in the country, had a pretty good year. Other income. Again, on this other income line, you see this strong growth in case of Hungary, 74 billion year-on-year growth. As you can see, as we wrote it down in the comment section here on this page, and I already talked about this. In '23, we had EUR 87 billion plus revaluation result related to these loans, fair value adjustment. And yes. And in Russia, the conversion kind of revenue was strong. So that was strong to reach out as well. Operating costs, I mean, unfortunately, not just revenues increase, but costs as well quite considerably. And not surprisingly, Hungary was quite high in terms of operating expenses growth, driven primarily by personnel expenses, 30% year-on-year growth. That was due to the high inflation and high wage inflation. I mean, we had to keep pace with the -- with a very tight job market, particularly last year. There seems to be, from our perspective, some improvements. So I think this very tightly per market is getting a bit relaxed and then -- and hopefully, we can much better control in the future, the increase of personnel expenses, especially in Hungary. The Albanian strong growth year-on-year is due to the new acquisitions, that includes the acquisition. Risk costs. Typically, positive or small negative numbers, write-backs, except Ipoteka. I already talked about that. And when I talked about the bank there. So that was due to this corporate deterioration, Stage 3 growth. Overall portfolio quality, Page 23. Again, I mean pretty stable year-on-year, actually strong improvement in terms of the Phase 3 ratio. And the growth in the second half, actually that's due to Uzbekistan and Ipoteka set ratio going up quite a lot. And we keep our kind of generally high provision levels we get last year. Capital, kind of the composition of the change of the common equity Tier 1 ratio. Again, it increased last year by 20 bps, and there was a strong positive contribution from earnings, and 1.3 point was used for the acquisitions. In fact, here, you have a negative kind of number for the Romanian bank, but hence actually close the transaction, the all-in number will be positive on a common equity Tier 1 is 43 bps and the kind of capital acquisition is 52. In terms of capital adequacy ratios. I mean, again, quite much higher than the requirements. Page 25, maybe you can go, yes. There's nothing new here. Page 26 shows the MREL requirement in the year-end number. So we met the requirements. And in order to meet the requirements, we obviously issued a lot of bonds and did some bilateral deals. As you can see on Page 27. So more than EUR 2 billion prevalence was issued last year, including the bilateral deals. And the coupons, what we see here are -- I mean, these are decent and good levels compared to the market and the market environment. But from our kind of internal management point of view, these are very high rates and very high cost of funds. So the small MREL exercise is really expensive for us, and it's hurting us actually a lot because our cost of funding related to the MREL instruments is probably higher than some of the Western European banks. Page 28. I mean, there's not much change on this page, improving ratings, continuously improving ratings on ESG dimension, which is in line with our strategies. Now a few words about what we expect for this year. Now obviously, in most of the countries where we operate, we expect a better operating environment. In fact, we expect a better operating environment everywhere. It's just that the growth rate might slow down somewhere in certain countries like Montenegro, Ukraine, Russia, but marginally, they are also improved. But in the kind of biggest countries from our perspective, especially in Hungary, where after the recession last year, we expect growth -- GDP growth to come back. Our expectation is like 2.5%. The government expects I think, more than 4%. So they are right and there's a big upside share. But Bulgaria, strong Slovenia accelerate, and Croatia are extremely strong. The last quarter last year is very promising. So I think there's some upside potential in that growth rate. Serbia doing very well. Albania extremely well. I mean, Montenegro, Uzbekistan, above 5% growth. And in Russia, Ukraine, in our forecast, we did not expect much change in the operating environment. If we are lucky, we can -- or I hope that the war ends sooner than later, and then if that happens or at least freezes the actual military activity, and then we could expect a much, much higher growth, especially in Ukraine than this. Romania improving, but that's partly more relevant for us given that we sell the bank. We expect the transaction to close actually quite soon. The buyer is Banca Slovenia, and they seem to be strongly supported by the local supervisors. I don't -- we don't expect any complication or -- and we expect a quite swift closing of this transaction. Moldova, speeding up. It's amazing how fast they brought down inflation for high level, and also the rate environment high collapse. So that's in itself a very interesting story. So before going into the expectations of this year, just a quick look at what we indicated for last year. I mean, we kind of delivered what we indicated. So all these points, which were included in our guidance last year, developed according to the guidance, so that's good. And then looking at what we indicate for this year. Low volume growth. I mean, given that the all operating environment improves, GDP growth improves in most of the countries where we operate. We have a -- we expect a lower rate environment, much lower in Hungary than last year and certainly, especially in the second half of the year, decreasing rate environment in the Eurozone and Eurozone-related countries. Lower inflation. So we are hopeful that this is going to translate into somewhat higher loan demand. I think it's unlikely that we return in one year to the kind of '21, '22 levels, but the '21 level. So it will take probably more than 1 year to do that. But hopefully, we can improve on the last year growth rate, which was 6%. Net interest margin, we indicated here maybe flat compared to last year. And this is the line where there's considerable positive risk. So there's an upside potential in this, given that rates seem to kind of stay somewhat higher, somewhat longer, and also the very favorable developments in the Hungarian retail deposit current account numbers. So there might be some upside here, but we remain cautious with the guidance. I mean, to be around last year. Cost-to-income ratio of 45%, around 45%. Risk -- portfolio risk profile similar to last year. So here, I think we are reasonably convinced that the operating environment improves and the current quality of the portfolio is quite stable and good. So if there's further improvement, we don't see why the underlying portfolio quality should deteriorate. And overall, in Uzbekistan, we also expect improvement. So we are -- the exact risk cost rate is more difficult to kind of project. It might be somewhat higher than last year, but the important factor is that the underlying portfolio quality should -- we don't expect it to be different from what we have had recently, and that's quite a strong performance. Now as we keep accumulating earnings and increase capital. The leverage is going to be lower this year than last year, and that's going to have a negative impact on ROEs. So maybe ROE will be lower, some than last year. Dividends. The current indication is EUR 150 billion, and this is the likely number which is going to be decided on the Board on the 20th of March, and then suggested to the general management meeting. We already started to buy back our own shares. Early February, the National Bank approved a program of EUR 60 billion, half equivalent of share purchase, share buyback. So far, we have done -- I mean, by the end of yesterday, we brought back less than EUR 6 billion, so that's kind of 90% of this is still coming, and we are doing this gradually. So I think when you look at return to shareholders this year, you probably want to kind of add the 2 together 150 billion and 60 billion. And I mean, I cannot exclude, and I don't want to exclude the probability that there will be other phases of this share buyback. So our internal decision was on the EUR 60 billion, and we received approval for EUR 60 billion. But once we buy back the stock, we will obviously kind of revisit the capital situation of the group and make a decision accordingly on potential future buybacks. There are some future MREL at least. I mean, we did one MREL, additional MRA bond in late January this year, already EUR 600 million. And probably, there will be an add one more and maybe 2 more during the year. That also depends on our kind of volume growth in new loans. So that was pretty much the presentation I wanted to make. The disclaimers are also important. So please have a look at them. And then I would like to open the floor for questions. So please, to answer your questions.

[Operator Instructions]. The first question is from the analyst of Goldman Sachs, Mikhail Butkov.

Thank you very much for the presentation. I have a couple of questions. First was on the risk profile of the portfolio. You mentioned in the outlook, you expect it to be broadly unchanged in 2024. But just to clarify, it's not connected to the cost of risk outlook itself because it was quite -- it was strong in 2023 with 16 basis points. What could speak for stable cost of risk maybe or the increase for the next year? Then the question is also on Uzbekistan. You described quite in detail the challenges, the weather challenges last year. Assuming that these challenges will not continue into 2024. Would you expect cost of risk and provisions to be at more of the normalized level in that business? And are there some additional internal surprises, which you identified and can result in similar -- somewhat similar hikes at some point during the year? And the final question is on dividends. Yes, you have commented your reason on the dividend payments previously and on the capital allocation policy as well. But is there any change so far given that you made progress on MREL? And are there maybe any inorganic growth opportunities, which you see currently? So yes. Thank you.

The risk cost rate, I mean, the 16 basis points last year, that's quite low, right? But for a number of years, we had like 20, 30 basis point levels. Except in 2020 when we had the COVID-related additional provisioning, and in '22 when we had the war-related provisioning. So in '18, we had 23 basis points in '19, 28, in '21, 30, in the '23, 16. So I think 16 is a kind of lower end. And I think it's likely that it's going to be higher than 16. But exactly where it depends on -- again, I think where we are pretty confident is that we don't expect portfolio quality to behave differently than last year, which was quite a good kind of behavior, except in Uzbekistan, where we do expect improvement. I mean, last year, in the second half, we had like 6% risk cost-- sorry, 10% risk cost rate. In Ipoteka, the first quarter will be considerably less than that. And then for the remaining quarters, there will be further gradual improvement. That's what our expectation. And during the course of this year, we should reach a kind of normal level, which is closer to the group average, much closer. But this takes time because we really have to establish the whole kind of risk management process in the bank. There might be positive surprises coming from Uzbekistan during the second half of the year in terms of portfolio quality, because my personal view is that maybe some of these Phase 3 learners might recover and we might find solutions together with other banks and the government to address this problem. So Uzbekistan kind of especially in the forecast, but the rest of the group, again, with a good -- with the high probability, we expect similar portfolio quality development. The risk cost rates on top of that depends on 2 factors. One is growth. So the higher the volume growth, the higher the risk costs because for the new ones that produce, you have to create provisions for the performing loans. And the other one is forward expectations regarding the economic environment. So the actual coverage provision coverage on performing loans, which will be probably the strongest driver of the risk cost rate this year will depend on the expectation at the end of this year on primary GDP growth trajectories for '25 and '26. And those can move the risk frustrated with a couple of tens of basis points, right, up and down. So that's much more difficult to actually forecast -- so it's kind of difficult. And I would not -- I don't want to give a kind of point estimate of the risk for stat. I think what we can say is that, again, the portfolio -- is what we said that the kind of risk profile of the portfolio will be similar. I think it's quite unlikely that we're going to have less than 160 basis points. So it will probably somewhat more, but how much honestly. I don't think it makes a lot of sense to give a very precise point estimate. Okay. So that was the risk cost question. Second question was regarding the Uzbekistan and risk was there. I already talked about this. And the third question, dividends in organic opportunities. I mean, as usual, we keep our eyes open, and we look into every meaningful opportunity that comes up in the countries where we are interested. And then we will see. I mean, we are not going to buy something just in order to buy something that's for sure. And it's pretty much impossible to tell when the next acquisition is going to be. There's nothing in the pipeline, which would be as advanced that something could be expected immediately. But even today, we are looking into some opportunities. But it may take years to buy another bank, it may be actually within this year. I don't know. So that's quite hard to tell. We remain to be strongly motivated to continue the growth strategy what we have executed so far. So the management is quite motivated to continue acquisitions. We have capital to do that. I think, demonstrated that we have skills and experience to do acquisitions and to successfully include those new acquisitions into the group, especially given our track record during the last 7 years. So the intention, the ability, the skills, the capital is there. It just depends on the opportunities and the opportunities don't depend on us. So it's hard to tell. But nothing immediate, I would say.

The next question is from Gabor Kemeny, Autonomous Research.

Hello. First question is on your ROE guidance, please. And the way you phrased the ROE guidance, I think you said that ROE may decline -- driven by the decline in leverage. Now, can we take this as that you do not expect profits to decline significantly. Would that be a fair interpretation? And then moving to the expected decline in leverage or in other words, how do you think about capital distribution from here. The question I would have here is at what stage would you decide? Would you make a decision on doing another share buyback? A slightly technical question I have is whether you are planning to cancel the shares you buy back? And then I will have a final question a little later.

Yes, your interpretation of our guidance is a potential interpretation regarding the ROEs. I mean, we carefully phrased these questions to leave some room open for analysts to kind of sign and give the add value here. So we don't -- I mean, but I think it makes sense, what you said. In terms of capital distribution, potential other share buybacks. I mean, as I mentioned, once we conclude with the EUR 60 billion buyback, we will have -- we will reassess the situation. Our capital situation, potential acquisition opportunities. And as I said, it is possible that there will be another phase. So we kind of chose this gradual progress in buybacks. One of the reasons is that you have to deduct the entire MREL. So once we got an approval for a certain amount to be brought back on that day, we have to deduct the entire amount for -- from the regulatory capital. And that immediately increases the MREL issuance requirements, right? So, I mean, if you look at our capital adequacy ratio, Tier 1 ratio, common equity Tier 1 ratio, we are very comfortably above regulatory requirements. We are above regulatory requirements in terms of MREL requirements. But in order to remain at that level, we will have to continue to issue MREL eligible bonds, which, as I explained, we consider extremely expensive. So every share buyback we do, we have to substitute that with newly issued MREL bonds or vice versa. The less we buy back, the last we have to issue in terms of one. So that's one consideration as well. Obviously, cost of capital is much higher than the cost of the MREL bonds, from your perspective, sort kind of equity investor perspective, it's obvious what we should do, and we understand that, and we respect that, and we act accordingly. But it's not that we are -- it's not cost-free, so to say, right, to do more buybacks. And then canceling the shares, it's the same. First, we have to buy them back. And then we will this -- I mean, make a decision on this internally, what we're going to do. We have not addressed that question yet. But once we conclude with one batch of buybacks, we will consider the question of potentially canceling them. That's another long process. You need regulatory approval. You actually need AGM approval for canceling shares. So whereas we can -- we have a -- we have an AGM decision, which gives the board the opportunity to buy back more shares. For canceling shares, there has to be an AGM shareholders' meeting decision to do that. So management is not entitled to the side on that.

Okay. And just a quick one on Hungary NII, the outlook here. So if we exclude the one-offs you indicated in Q4, I think that would annualize -- Q4 would annualize on a clean basis just above EUR 500 million. And if we put on that, this kind of quicker growth you indicate for this year for the group, maybe somewhere on the high single digits. Would that be a fair outlook for your Hungarian NII in your view?

Yes. I mean, I think that's a good approach. I mean, we didn't ask -- I have not yet. I'm sure there will be discussions coming, but I preempt them, right? So the NII sensitivity or the interest rate sensitivity. I think now we have -- especially in half, the yield curve is simply kind of declining. So I think the right question is, what is the expected NII development year-on-year, assuming the current yield curve. And that means that by year-end in half, we get to -- in terms of the 3 months Interbank benchmark to that, to go down to around 5.1%, and in terms of Euro rate to go down to 265, the 3 months Euribor, kind of current implied expectation in the yield curve. So if the rate environment develops, according to the current expectations implicit in the current yield curve of half and the Euro, then half NII is expected to increase year-on-year by 30%. And the Euro NII is expected to increase by 4%. And the 2 together by 13%. So if nothing happens, no volume growth, nothing else, just the rate environment changes according to the expectations, implicit in the yield curve, we expect on a group level a 13% improvement year-on-year in NII. And in half, this is much better, much more. It's actually 30%. And that is partially reflected in the fourth quarter number. Now, on top of that, obviously, there's another level of interest rate sensitivity, right? What happens if there is a further shift in the yield curve? So what is the year-end 3-month benchmark in half will not be kind of 5.1%, but 1 percentage more or 1 percentage less. So that's another question, right? And the answer to that is that in half, it doesn't matter much. So actually, our interest rate sensitivity to changes in the expectation. So I'm not talking about the expected development, but changes compared to the expected development are relatively marginal and small. So if the kind of year-end reference rate, 3-months, BUBOR will be, I don't know, 5.5% instead of 5.1%, then we were kind of 4.8%. It doesn't really matter. We expect the same growth in annual NII, right? There will be a marginal difference. Whereas in Euro, there's a big difference. So any additional movement in the rate environment. So let's say, by year-end, the 3-months Euribor is going to be lower than 2.65, what is implied in the current yield curve, then actually, we lose EUR 16 million per 10 basis points. So if it's like EUR 255 million, then it's EUR 16 million less. And then the growth is obviously less in the year at. So we still have quite a strong sensitivity to the Euro rate development, but if the Euro rate develops according to the expectations implicit in the current yield curve, then the year-on-year NII, Euro-based NII will still continue to grow year-on-year by 4%. I'm not sure, was that clear? I mean.

Yes. I thought -- yes. Extremely helpful clarification.

The next question is from the analyst of JPMorgan Securities, Mehmet Sevim.

Thanks very much for the time. Actually, it wasn't that clear to me. I think or a bit more than me. So if I may just follow-up on that. So basically, if I understand it correctly, what you're saying is no matter what happens to 3-month BUBOR in Hungary, we will see NII 30% up this year, excluding volume impact. Is that correct? Because if that's --

In Hungary, but half related.

Half related. Yes.

Only part of the Hungarian NII, right?

Yes, yes. Of course. So if you then add volume growth to that then, basically, we're looking at a higher level, essentially overall?

Yes.

Okay. Great. Thank you so much for the clarification. So if I may ask a couple of questions on Uzbekistan. You talked about the really interesting growth trends there and how that's limited by local currency liquidity. What you know so far and taking into account all the limitations there, what kind of growth volumes should we expect there for the next few years, maybe at a subsidiary level there? And secondly, adjustment items, you made an interesting comment that you may move those back to recurring lines now. Could you give us some more information on that? So would that be for 2024? Is that in the ROE? I assume reported ROE guidance? And maybe separately, like-for-like, what kind of one-offs would you see this year? And how would you expect that to evolve in 2024 versus '23?

I mean regarding Uzbekistan, as I try to -- as I try to explain, we see almost unlimited growth potential, quality growth potential in retail lending, especially in consumer loans. Now, where the problem is and the limitation to this growth is the availability of local currency liquidity, which is very tight on the market due to very tight monetary policy. So basically, our growth in retail lending is limited by our ability to grow local currency deposits, or and potential sources of local currency wholesale funding. And here, we are talking to IFIs. But again, I mean, there's just not enough local currency in circulation. Therefore, that's a clear limit. So really it depends on the monetary policy and the Central Bank, how much we can grow. But I mean, ultimately, for a longer kind of time horizon is huge, right? I mean, multiples of the current retail loan volumes can be, especially in consumer lending can be generated in the next couple of years easily. So it is a high potential environment. Regarding the structure adjustments. And again, we have received different feedback related to how we present the numbers. We have had a certain approach so far. And then we are going to try some different approach starting from '24, starting from the first quarter this year in presenting the numbers. So we are going to have less kind of adjustment numbers. So we will save the adjustments for really acquisition-related. So bad wills, one-off risk costs at the time of acquisition or results from selling. Everything else will be in the kind of normal profit line, so to say. So there will be -- and the expectation for these type of one-offs is 0. So we don't -- again, as I said, at the moment, we don't have any process, any acquisition process in a stage that we could say that for sure, we are going to have an acquisition this year, and that's also true for selling other than the Romanian bank, which we already included in the -- in terms of the financial impact on the P&L. So in this sense, in the new structure, we don't expect actually one-offs. So there will be the adjusted and the Non-adjusted number will be the same. If you talk about the content on the adjustments, what we did last year and how we expect them to develop this year then -- and on that, I can maybe share some views. I mean, one, I think I mentioned this, but obviously, the Hungarian taxes are the big one-off items or adjustment items. We have been showing in the current structure of the last year structure. So the windfall tax is going to drop down potentially to EUR 6 billion after tax. So from EUR 36 billion, what you can see on Page 6 of this presentation, maybe it's first going there with the slide, Page 6. As you can see. Yes. So the windfall tax last year were EUR 36 billion, after tax we expect this line to go down to EUR 6 billion. That's in the legislation. I mean, in the first quarter, we had to book 12 billion after tax. And then if you buy enough government bonds to fulfill the requirements, which we will -- which we intend to. Then once we do that, we can reduce the tax burden from EUR 12 billion to EUR 6 billion. So by year-end, on this slide, we expect EUR 6 billion as opposed to $36 billion in '23. The kind of normal bank tax is going to increase because here, the tax base is the total assets of our Hungarian operations, and that keeps increasing. So this we expect to be close to SEK 30 billion as opposed to 2024. Rate caps. The 2 rate caps, the SME rate cap, and that expires at the end of March this year, and we don't expect further extension of the SME rate cap. It basically loses its relevance. The cap level is 7.7%. And the current base rate is 9%. And by April, we expect it to be -- actually April, May lower than -- by end of May, with the base rate, the reference rate definitely will be lower than the cap. So it's going to lose its relevance and we don't expect it to be extended. However, kind of retail mortgage -- I mean, variable mortgage cap, there's a cap on the benchmark is at 2%. So that 2% benchmark cap is going to be relevant in the second half of the year, because the benchmark, again, by the end of the year, we expect the BUBOR benchmark to go down between 5% and 5.5%, right? And therefore, it remains relevant. If you assume -- and there's some probability, I must submit that it will be extended till the end of the year with at a 6 months there, the variable mortgage cap, then the cost of that would be kind of EUR 6 billion after tax, EUR 6.5 billion after tax. So in this interest rate cap extension line instead of the '24, kind of bad case scenario is EUR 6 billion. The good scenario is 0, and then we have to weigh the probabilities of those 2. In fact -- I mean, and then the other 2 lines are probably not so much relevant on this slide, but we might go to Page 3, right, where we have the kind of consolidated numbers. So we had, adjustments, 18, effect-to-effect. So effect of acquisitions, the expectation here is that, I mean, this is the normal cost of the continuing merger projects, and that's basically, Slovenia, where we expect the merger to happen somewhere end of the summer, maybe early September. So this should be a kind of low negative number. Then bank tax rate cap, I talked about Russian war effects, we don't expect much. I mean, what we included here in '22 was the kind of Russia sovereign bond-related provisions what we made. We slightly increased these provisions in case of the overdue ones. And that is the 2.8%, what you see here. I think my best estimate is that there will not be further changes in the provisioning levels going forward. And the others, on the other line, I don't expect much because '23, $15 billion plus was coming primarily from this. Again, as I said, the reversal of the loss that we booked in '22 regarding the spare bank default in Hungary. Yes. So that was the expectations regarding the adjustment items in the structures that we have been using and what we still use in this presentation, right?

That's super. Thank you, Laszlo. If I may very quickly go back to the NII sensitivity comments that you made. Again, you mentioned if the current yield curve doesn't change, then the group level NII would grow 13% without volume growth. So that obviously would imply that NIMs would go up further. So how should we reconcile with your flattish NIM guidance for the group for this year? What different assumptions do you have there in addition to this, that basically keep NIMs flat at the group level?

Yes. I mean, the problem is that the NIM is not -- that's over total assets. And there's a lot of noise there.

Okay. So not directly comparable, I assume, but we should expect at least 13% NII growth?

Yes. But I suggested. I also said that there might be some positive risk in the guidance related to the NIM.

The next question is from Mate Dudas on behalf of Erste Asset Management.

Hello. My first question is regarding the Ipoteka Bank. As we have already past 2 months of this year, do you see already further drove down needs for Ipoteka? Or do you think that you are ready with the write-downs? And the other question would be, do you already use some artificial intelligence? Or do you plan to use it anywhere? That's it.

The normalization of the risk costs in Uzbekistan will be gradual. So we expect a step down in the risk cost rate compared to the 10% last second half of last year. We expect the first quarter to be much better than that, and then further improvement should happen in the second quarter. And according to what we see, we will get to a kind of more kind of normalized level by the second half of the year. So this cost will be somewhat more elevated than the normalized expectations in the first quarter. AI, yes, I mean, this is a very exciting development. We actually develop our in-house kind of language model. So we do a kind of in-house ChatGPT type of solution. We have a -- certainly in Hungary, but probably in all Central Eastern Europe, we have one of the very few supercomputers, and definitely the strongest in Hungary by far. So that's quite a big initiative. So if all goes well, quite soon we are going to have our own proprietary AI solution because the problem with the open source solution is that bank security is hard to be productive, right? If you want to use these language models in your actual banking services, providing banking services, you get to bank security, data protection question immediately, which is very difficult to fix. So we hope that we are going to actually quite soon develop a solution, which we can broadly use in our services. So yes, quite heavily in AI capabilities, yes.

[Operator Instructions]. The next question is from Simon Nellis of Citigroup.

I just have one last one on that side. The sharp rise in Stage 2 loans over the quarter. If you could elaborate on that? And if that's of any concern or is it mostly because of methodology changes, I think I saw that was the case, particularly in Bulgaria.

Yes. It's mostly methodology plus.

It's quite a large rise in Croatia though as well. Was there anything that we should be concerned about there?

Not the time of ours.

The next question is from attendee joining via phone. I open the line, you will receive an automatic message about it. [Operator Instructions].

Hello. Good afternoon, everyone. Can you hear me?

Yes.

Thanks for the presentation. Congratulations on the results. This is Robert Brzoza. I'm sorry, I'm returning back again to the topic of NII in Hungary specifically. Could you please provide us more color on the quite substantial quarterly increase in the NII in Hungary, already excluding the one of that you described in the report. I'm mostly interested whether this was coming from the deposit side. You alluded to an increase in overnight deposits in the retail segment in Hungary, or whether that was coming from the repricing of subsidized loans, which I believe is ongoing and should also let next year to a lift up in the NII core OTP, or whether there were any other factors at play, which, as I understand, these factors would be sustainable going forward later into this year?

What we have additionally is the deposit cap. They are all different caption policy interventions into our pricing. But there's a corporate deposit cap as well, a policy cap. And that started to be effective by November, December. I don't know how long it's going to be effective, but that was another kind of boost. But maybe -- but other than that, it's just the factors that you explained.

Thank you. The next question is from [ Claire ].

Can I ask, do you plan any issuance at the subsidiary level in the Eurobond market. So for example, either in Uzbekistan to finance growth or in Slovenia for MREL requirements?

Yes. Slovenia, NKBM is going to probably issue more. Uzbekistan, we will see there's a bond which matures next year. So I'm sure we will try to renew that. And again, we are trying to figure out potential ways to get local currency cost funding even in Uzbekistan, but that's difficult. We don't so much need dollar, right, because we don't want to grow so much in all our lending. Retail lending is in local currency, and it should continue to be in local currency. So our kind of liquidity needs in Vegas on our primary local currency. And that's not an international market, right? So that's -- it has to be some special solution with IFIs, or I don't know with the government. This is kind of work in progress. But the existing bond when it matures. I think it will be -- next year, it will be likely that we will do the reissuance and we'll try to renew that.

[Operator Instructions]. As there are no further questions, I hand back to the speaker.

Okay. Thank you very much for listening to the presentation, and thank you very much for your very good questions. I think the next stock exchange report will come out on the 10th of May. So I hope you will join us for that occasion as well. And until then, all the best, and goodbye.

Thank you for your participation. The fourth quarter 2023 conference call is closed now. Goodbye.