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

[Operator Instructions] May I now hand you over to Laszlo Bencsik, Chief Financial and Strategic Officer. Laszlo , you may begin.

Thank you. Good morning or good afternoon, depending on where you are. Thank you for joining us on OTP Group's 2024 Third Quarter Interim Results Conference Call Presentation. As usual, the presentation is available on the website, and we are also showing it while I talk. So you can download it from the website to you if that's more convenient for you. And as usual, I'm going through the presentation most pages, and then we can have a very exciting Q&A session as usual. So starting on the highlights page, Page #2. There hasn't been much change to this slide. I mean, we continue to be dominant in the region. Our profitability, if anything, improved from the first 6 months to the first 9 months and it's close to 25% now. And compared to last year, it is somewhat lower, but we are at much lower leverage. In fact, as you can see on this slide, our capital adequacy ratio went up above 19%. And our leverage ratio is closer to 11%. Just to remind you, the European kind of minimum requirement is 5% and most of the banks are between 5% and 6.5%. So this is -- this kind of shows the amount of capital we are running on and kind of relatively little leverage we have. And despite of all of this, we have this quite strong ROE. Liquidity remained strong and portfolio quality stable, and it has been served for, frankly, the last 8 years, despite all the events and turbulences in the economy and in the environment. Page 3 summarizes the most important financials. So the third quarter was HUF 319 billion up and the first 9 months was HUF 826 billion. But this is slightly lower than the bottom line reported number a year before with, you may well remember that last year, we had 2 large one-off positive items due to the 2 acquisitions we made in the beginning of the year in Slovenia and somewhere around the middle of the year in Uzbekistan, and both of these acquisitions were below book. So we booked badwills and those contributed positively to results. Now these type of contributions, they don't appear this year. Therefore, it makes sense to kind of adjust last year with that. So if you make that adjustment to last year figures, then we end up 19% year-on-year growth, which is, I think, quite remarkable. Again, return on equity close to 25%. Net interest margin stabilized, close to 4.3%. And it has been served for most of the time of this year and this is markedly higher than in the base period last year. Most of the difference is coming from improvement in Hungary. I'm going to talk about the Hungarian NIM development later on. Cost-to-income ratio, very nice to see that it's going lower and lower, and we are getting close to 40% and risk cost rate somewhat tied, a bit lower than last year. In this quarter, in the third quarter, there were 2 kind of important milestone events. One was that we completed in July the sale of our Romanian bank, which we had for 20 years. We acquired this bank in 2004 and closed the sale of this asset just in July. Unfortunately, this was one of the countries, Romania, which despite all of our efforts, we were unable to organically grow from a small bank existence to a mid-large banking existence. And the environment, to put it mildly, has not been very supportive for us to acquire more assets. So eventually, we had to draw the conclusion, strategic conclusion, and sell the bank. Now the impact -- the positive impact on capital adequacy appeared in this quarter when we closed the transaction. So that was 53 basis points on common equity Tier 1. And there was one remaining element from the financial, from the P&L impact to come through, that HUF 10.5 billion-plus in other income. So these 2 are the most visible results of the sale other than obviously assets and liabilities down accordingly with our assets and liabilities, which we used to have in Romania. Now the other milestone event was that we finalized -- we closed the merger in Slovenia at the end of August. And now we have one operation, one IT environment. It went very, very smoothly, on time, on budget under the very sharp eyes of ECB. This was our supervision. This was our first merger out of the, I think, probably dozen which has been done with ECB being the supervisor. And it has created additional work and effort, but ultimately probably contributed to the excellent execution of the merger. M&A other developments, I'm sure there will be questions. So we wanted to preempt the questions and formally say that currently there is no information about significant transactions to be announced publicly, which is not a big statement because if there were, we would have answered them. But nevertheless, I think that's what we can say that there's not much to say at this moment. But we keep looking. We will continue to look into every opportunity, which has a potential to create value for shareholders in the future as we have done in the past. The kind of 30%-70% split of earnings remain in the first 9 months that, that seems to be the new norm in the group that Hungary is around 30% and foreign operations, 70%. And if anything, this will probably continue to change in a way that the foreign contribution might further grow. Page 4, you can see the P&L development. And this year, not because of the acquisition, but because of selling the Romanian business, in fact, we need to adjust -- to make some adjustments in the P&L and also in the balance sheet lines in order to have the full picture. So as usual, these gray columns with gray headings show you the year-on-year FX-adjusted and organic. So with our acquisitions and with our divestitures, period-to-period changes. So year-on-year, first 9 months, total income went up 16%, cost 13% and that resulted in 18% operating profit improvement. In fact, risk costs were higher this year than last year in the first 9 months. That's mostly due to the extra provisions we booked for the Russian bonds. And therefore, together, we have 14% adjusted profit growth year-on-year. Now I think probably most important number on this slide is the very top 25% net interest income growth. I will elaborate more on this where this growth has come from. Again, this is organic and FX-adjusted. Next page shows the key highlights about the Hungarian, the core performance. It's up compared to last year by 29% because here, again, there's one item, which does not appear in the consolidated numbers group level, only at the kind of stand-alone Hungarian core level. It's a technical item related to the Slovenia merger. I mean, due to actually complicated technicalities, when we did the merger, we merged our originally bought bank SKB into the newly bought bank last year, NKBM. And during this merge, we had to mark-to-market the value of our original bank, the previously acquired bank. And therefore, the increase of its kind of fair value resulted in this one-off. But again, this appears in consolidation, and it is clearly not something which is related to normal business activities. So we have to look at the numbers without this item and all the ratios here, what you see have been calculated without this HUF 113 billion. And there was another kind of material one-off -- well, it's actually not one-off. Each quarter, we have some results coming from this baby loan and subsidized mortgage loan fair value adjustment as the shape of the yield curve changes from quarter to quarter. And it's quite a big portfolio, so it's HUF 1.5 trillion. So it's actually, in this quarter, we booked HUF 16 billion fair value adjustment on this portfolio due to the changes in the shape of the yield curve. But this is just like 1% fair value change given the overall size of the portfolio as such. So it's actually a meaningful and material number to consider when we look at the quarterly Hungarian profit, which was HUF 97 billion. However, compared to the total size of the portfolio, it is understandable that this is changing kind of the volatility of 1% per quarter. And we continue to increase impairment on Russian bonds. So there is HUF 5 billion accounted for in the third quarter. NIM. Net interest margin improved. And I think this is -- that was a major game changer, which actually happened at the end of last year. So we already started the year with this 2.8% -- around 2.8% net interest margin in the first quarter. And then since then, it has continued and actually somewhat improved on a quarterly basis -- continued to improve on a quarterly basis. But this is clearly a different ballpark. And this is the most important driver behind the group net interest margin development. There's no new news on the special taxes and windfall tax and transaction tax since the last conference call we had. We haven't got new information on these items either for this year or for next year. A bit more detail on the Hungarian business activity development. And this, on the retail side, it actually looks very, very positive. As you can see, new production of mortgages increased 2.4x compared to last year. In our case, 2.2x higher than for the whole market. And this is -- I mean, this is quite sizable and it shows that after the quite big drop last year, real estate market -- retail real estate market recovered this year and demand is actually quite strong and continues to be strong. The same is true for cash loans and consumer loans. In these volumes, there was no decline last year. So last year, we also had growth. And despite of this kind of increasing base, there was, so far this year, a 61% increase in new contractual volumes, in our case, and somewhat less in the market. So that shows that consumers are strong and retail loan demand remains strong in Hungary despite the rather, I would say, weakish overall GDP performance, which is unfortunately more reflected in the corporate loan dynamics, which is described on Slide 7. As you can see, there's some growth, 4% growth in micro small but only 1% growth so far in loans to Hungarian corporates, which kind of reflects a very low level of demand and not much new investments, not much new developments and projects starting in the country, at least, not new developments, which finance themselves from the local banking market because, in fact, the FDI remained strong in their big developments and especially in the car industry, electric car industry and traditional car industry continue, but we see on finance them from the local banking sector. Now even these slow growth levels, we managed to turn around the last year negative trend of decline in corporate market share. We, again, started to see some improvement in our corporate loan market share in Hungary, which is always a very positive news. On Page 8, you can see the kind of highlights of profitability and cost-to-income ratios and overall profit contribution of the foreign subsidiaries. And this is also a very positive picture, I believe. In most of the cases, we see nominal increases in profit contribution, and ROEs remain strong. There's a quite remarkable improvement in case of Serbia, above 20% ROE in a kind of declining rate environment. And we are very happy that Ipoteka Bank performed so well. That's our new acquisition, which we made last year. This was the first privatization process in the banking sector, and we acquire the fifth largest bank from the state. And despite a huge ongoing transformation effort and work done in the bank to modernize it as fast as possible, despite most of the focus being on that, we managed to book HUF 42 billion contribution in the first 9 months and ROE was above 34%. So we are quite happy to see this that in this early stage after the acquisition, we are already making substantial, meaningful contribution to group profitability and the returns are as good as you can see. The other good thing is that the smaller banks, I mean, in obviously, smaller countries, these are actually sizable banks -- or actually big banks, but in small countries like Montenegro, Albania and Moldova, they also performed around 20 or higher percent ROE, which is definitely positive. Ukraine continues to be a strong contributor to overall profits. And this is, I think, quite important and remarkable given the worse situation in the country. So maybe a few more detail about in a cross-section manner about the different P&L lines. So net interest income, as I said, this is probably the most kind of important or eye-catching number in the old presentation that year-on-year we manage to organically increase net interest income, 25%. And as you can see, most of this growth nominally and also in terms of growth rate came from Hungary, and that's just because of the margin recovery and the margin improvement primarily; and secondarily, also due to the fact that starting from the fourth quarter last year, retail deposit started to grow. If you may remember that between the second quarter -- end of second quarter '22 and end of second quarter '23, retail deposits declined in general in Hungary in the market and specifically, in our cases, less than on the market. So our market share increased, but nevertheless, there is around 10% decline and that was very painful in terms of our profitability and it has been without precedent. We have never seen that before. I mean this is obviously due to the high inflation, which peaked at 22% -- 25%, sorry, and due to higher rate environment, which was for quite a while at 18% and the very high-yield retail government bonds, which created an unbeatable competition for us. But now this year, especially, we have seen already 5% growth in retail deposits, which continued in the quarter. So that actually contributes to also meaningfully other than the overall changes in the rate environment to the improvement of NII in Hungary. In the Euro, I mean, Slovenia and Croatia are in the Eurozone, Bulgaria is in ERM II, quasi-Eurozone, so Eurozone rate environment, and Montenegro adopted the euro. So we have 4 countries which tactically you can consider them Eurozone. I think it's quite good that even in these countries, despite the declining rate environment, and therefore, pressure on margins, we managed to continue to grow NII in these countries between 16% and 23%. I mean that was due to primarily strong volume dynamics. Net interest margin, Page 10. I mean, this is just another way to look at the same events in a way. So as you can see, net interest margin continued to increase on a quarterly basis in Hungary, somewhat compared to the second quarter. And now this is primarily because of retail deposit dynamics that in the second quarter we had a strong retail deposit growth, and that on an average kind of quarter-on-quarter average 3% increase in volumes, and that's more or less what you can see here in this margin improvement. And as I mentioned in the euro-linked countries, we experienced margin pressure or margin contraction quarter-on-quarter and mostly also year-on-year. Next slide, further details on the margin change and the drivers of margin changes in the 3 quarters this year. There wasn't much overall change in the margin from the second to the third quarter on a group level. But as you can see, basically, margin increase in Hungary, and that increase was counterbalanced by some contraction in Slovenia and in Bulgaria. By the way, Slovenia is probably the most competitive in terms of deposit and also loan pricing at the moment across the group. So that's a difficult market from a price competition point of view. On Page 12, we start to talk about volume dynamics, quarter-on-quarter loan growth. Maybe 2 numbers, important. One is Hungarian mortgage growth, which continues to be strong. So just in one quarter, 3% growth. Consumer was actually quite strong as well, 4%, continued. And I think what's important is that you will see that the year-to-date numbers as well that this year, after 2 rather slow years, we started -- kind of restarted lending in Ukraine. So we are more kind of less conservative and more eager to start to grow our loan book in Ukraine. So based on retail and corporate, we became active in lending, and albeit from a low base, has started to grow volumes. And this is like just in one quarter, we had 10% growth. If we look at the year-to-date development, I mean, there's pretty much the same kind of highlights. First of all, it's worth looking at the total number, it's 7% in deferred growth. Again, here, you can see on the left-most column, 2 numbers. The number in the top left is the kind of reported number change and the one in the right bottom is the one which is adjusted with the sale of the Romanian bank. So as if it was not in the group at the beginning of the year. So that's the kind of organic real year-to-date performance and it's also FX adjusted as related to performing loans. So altogether, 7%. And last year, all year, we grew 6%. So I think it's safe to say now that we -- indeed, we seem to be growing faster this year than last year already in the first 9 months. We grew more than last year in the full year. And you can see here that Ukraine went up 21% in 9 months in terms of loan volumes and Hungarian mortgages 9% in 9 months. So most likely, we will be visibly above 10% growth, so double-digit mortgage growth in Hungary. And that is obviously not surprising if we think back to one of the previous slides where I mentioned that we actually contracted this year 2.4x more mortgages than last year. Deposit growth, I mean, we are not so much focusing on deposit collection in general, given that our loan-to-deposit ratio on the group level is 73%. So we are quite liquid. So we really focus on deposit collection where we make a lot of money on deposits or where it's really profitable and where the loan-to-deposit ratios are high or exceedingly high, much higher than 100%. And maybe it's better to look at the next page, which shows the year-to-date change. So overall, 5%, which means that actually in nominal volume terms, the deposit growth this year has so far been higher than loan growth despite the ratio of loan growth being 7%. So again, you can see here this 5% year-to-date growth in Hungarian retail. That is a very, very important number from the perspective of our profitability in Hungary and overall even for the whole group. The other, I think, outlying number here is Ipoteka in Uzbekistan. I think it's -- you may remember that when we bought the bank last year, the loan-to-deposit ratio was above 300%. Actually, a year ago, at the end of the third quarter last year, it was almost exactly 300%. Now due to the strong deposit growth, what we have seen so far this year, this ratio is closer now to 200%, so in fact, it was exactly 206%. So we almost improved 100% of the loan-to-deposit ratio of our bank in Uzbekistan, which obviously, this is important and strategic from our perspective and makes the bank much more sustainable structure. Page 16, some detail, again, cross-section view on net fee income overall. Divestiture and acquisition adjusted year-on-year growth, 14%, and quite strong number in Hungary. And Hungary, again, high inflation environment, high transaction volume growth. But unfortunately, as you can see, the third quarter was negative in terms of fee growth in Hungary. And this reflects the newly introduced transaction taxes in Hungary -- or not newly introduced, but increased transaction taxes in Hungary, the rate of the tax increase for transfers and for cash withdrawals by 50% basically from 0.3% to 0.45% and from 0.6% to 0.9%. And till the end of the year, we are not allowed to pass this on to retail clients, only to corporate. So this kind of retail transaction tax increase, which we have not been able to pass on through our fees to clients reflects, I mean, or resulted in this decline in Hungary. Other than that, it's mostly -- I mean, we see strong results on a quarterly basis in Bulgaria, Croatia, Albania. Those are typically the countries where tourism is strong and tourism-related transactional revenues increase. And fund management in Hungary year-on-year, 40% increase. I mean, assets under management has grown a lot, and they are close to HUF 4.5 trillion. And with this, we have almost 1/3 of the market. Our market share is 32% of assets under management in Hungary. So that's quite a strong performance and this kind of generates stable fee income. Other income, this is the line where the Hungarian subsidized baby loan and mortgage loan fair value adjustments appear. So there's a lot of noise in these years on the slide and we tried to explain here how much of this kind of year-on-year or quarterly changes are related to this in Hungary. So clearly, nominally, this is the line which makes most impact on the other income. And unfortunately, it will continue to create noise in this P&L line given the nature of the accounting treatment of this volume. Operating costs on Page 18. Overall, 13%, adjusted FX and acquisition and divestiture adjusted growth. 8% in Hungary, 7% personnel. And actually, in Hungary, we have a high level of depreciation. And that is the reflection of the investments -- of the CapEx investments we have made during the last couple of years into modernizing our IT, and this is just a reflection of that. DSK, I mean, that is very high levels of wage inflation, which is very good from a perspective of loan growth. I mean you probably saw the kind of retail lenders numbers, which are one of the -- pretty much the highest in the group. So yesterday, in Bulgaria, mortgages grew 21%; consumer volume, 17% just in 9 months, and that's partially due to the fact that major inflation is strong, consumer is strong. Disposable income -- real disposable income increases and -- but the driver of that is wage inflation. So unfortunately, this is a country where -- well, I don't know, unfortunate or not because, as I said, there's a positive side of this on the loan demand side and the loan quality side. But certainly, from a cost perspective, it's a challenge to keep reined in, in a way, our actually personnel expenses growth in Bulgaria. In Slovenia, this seemingly a large increase year-on-year is due to the fact that we are not showing any more, starting from this year, the cost of merger -- post-acquisition merger as one-off items. We show them as kind of business-as-usual cost. And this year was very heavy in Slovenia in terms of the merger activities and the associated costs. So this kind of high year-on-year growth is attributable to that and also to wage increases. And now that the merger was done, we will focus on realizing synergies. We already started to combine branches. And during the course of the next 1, 1.5 years, we intend to realize the targeted cost synergies, which are in the range of EUR 30 million, EUR 35 million annually in terms of cost savings. And in Albania, you can already see the results of the merger, what we completed there at the end of last year. So some of the cost synergies already manifested, and it's the direct result of that nominal cost actually decreased year-on-year in Albania. Risk costs on Page 19. Again, overall portfolio quality rather stable. And we increased somewhat provisioning on this Russian bond exposures in Hungary and in Bulgaria, and the coverage is now up to 62% overall. There hasn't been any change in the status of these bonds. So the still current bonds continue to pay coupons. And those coupons arrive to Hungary into OTP's bank account in Merkantil Bank, and obviously, we keep it in a close account. We don't touch it further. We actually need ulterior decision on this in order to release them in the future, but that's another story. The most important thing is that these interest payments are here in Hungary in our accounts, albeit on a closed account. If you look at the overall portfolio quality metrics on Page 20. Stage 3 ratio continued to decline, so at least 4% in the third quarter. And we continue to maintain a relatively conservative level of coverage. You can see that compared to our competitors, we have overall a higher coverage both on forming Stage 1 and 2 and nonperforming Stage 3 exposures. Capital adequacy improved quite considerably. That's due to the continuous profit accumulation, but also to this one-off event, as I mentioned at the beginning of the presentation. 53 basis point increase is attributable to the sale -- the closure of the transaction in Romania, as you can see on this picture. Basically, profit accumulation resulted in 2.9 percentage point increase in the common equity Tier 1 ratio during the first 9 months. And you can see the other effects one by one on this slide. Liquidity and bonds and maturities and call dates-wise, we had actually an eventful period. In the third quarter, we called back 2 bonds, as you can see on this page, in July, a senior preferred and a Tier 2, altogether HUF 900 million. And we issued 2 bonds since the end of the second quarter. One was a Q1 bond. The other smaller amount, HUF 300 million. And the other one in October actually, so after the third quarter. But before the reporting day today, we did EUR 500 million senior preferred. I mean last year, we'll be -- compared to this overall size, more than EUR 100 billion balance sheet in the call profile next year or the call dates, altogether, less than EUR 1 billion callable papers. So it's quite modest compared to the size of the overall operation and even to the -- if you compare it to the profit that we generate in the year, this is a rather small amount. And accordingly, our liquidity ratios, as you can see in the kind of lower left corner remained to be quite strong in themselves and in comparison to our regional competitors. A little bit about the future. We are not yet at the stage where we make guidance for next year. So I will try to resist your questions. I won't elaborate too much on that. We are in the process of finalizing or creating the plan, the budget for next year. It has not finished yet. So as usual, we will talk about '25 guidance when we present the annual results of '24 in early March. But I think it's fair to say that our overall expectation regarding the operating environment is quite positive. So as you can see, in almost every country where we are present, we expect GDP growth to accelerate or at least remain stable. So gradual improvement in the external environment. It's more remarkable in Hungary -- or most remarkable in Hungary, I would say, the improvement expectation. Unfortunately, the recent GDP numbers were somewhat discouraging and they were a negative surprise in a way. So the annual growth at the end of the third quarter was actually negative. And we kind of by year-end, it will probably improve due to base effect, but we will probably not be higher than 1%, which is certainly lower than our original expectations. For next year, the government guidance and expectation is 3.4%. They actually like to say that it's going to be between 3% and 6%, but the point expectation what they have is 3.4%. We are slightly more conservative on this. But even if this 2.5%, 2.8% manifests next year, this is definitely going to be a better environment for us. And the most obvious direct impact on our operations should be the increase in corporate loan demand because as you have seen from our numbers, corporate number was very, very low this year. In retail, actually quite decent. And if this macro environment manifests next year, then I think it's fair to expect that retail will continue to grow, at least with the current dynamics, if not more. And hopefully, corporate demand will also catch up to retail demand and we should see close to 10% or even higher percent corporate loan growth. But this is -- that's probably the biggest question mark in our hands as well regarding next year. The other countries are more or less in a kind of more predictable track, I would say. The implication of these 3 are this year guidance is that we are not changing the guidance. Now we've made one change after the second quarter results, and that was on the line of the net interest margin. Originally, we suggested maybe similar level to last year. But then we upgraded the guidance and now given -- I'm seeing the third quarter numbers, I think that was the right thing to do. It's clear that we're going to have higher margin this year than last year. We haven't made a formal adjustment to these numbers, but if we look at the other lines, given that we had 7% growth in the first 9 months, I think it's fair to assume now that our original guidance was right, but it's very likely that we will end up having more than 6% overall the whole year. Cost-to-income ratio first 9 months was 41%. I mean there's usually a seasonality in costs. Costs are typically somewhat higher in the fourth quarter, so it might happen that we end up higher than 41%. But this is, I think, still around 45%. The good thing that it's around from below and not from above. So in that sense, I think we have done a good job. Risk profile, again, portfolio remains stable so that seemed to manifest at least in the first 9 months of the year, our original guidance. And ROE, yes, it's lower than last year. And I think now it's clear for you as well that this decline is due to increasing leverage and not because of lower earnings. So that was the presentation, what we prepared and what I wanted to share with you. And I'm sure you have very good and exciting questions. So please ask them.

[Operator Instructions] The first question is from Gabor Kemeny, Autonomous Research.

My question is around questions actually around capital deployment. And if you could give us an update, please, how you think about your plans about capital distribution. I guess you are at such a very comfortable capital level at this stage. You are flagging some headwinds from Basel IV, but we are also generating capital likely in the fourth quarter. Maybe the question I could ask, shall we not expect 2025 to be a declining leverage? Yes, I wondered what your thoughts were about capital distribution around the Q4 stage, please. And the related...

There is an interruption. So shall we not expect decline in leverage next year?

No. I mean, just looking at your guidance for this year, I think it is a lower ROE because of a declining leverage. And I wondered why this may not be the case for next year as well. But in that context, it would be interesting to hear your thoughts on capital distributions around year-end. And another question on capital deployment, if you could please share your latest thoughts on M&A. I think there was a -- I think you were talking about a larger possible transaction where you were expecting some development towards year-end. And if you have any other thoughts on any other deals would be interesting.

Thank you. Indeed, very pertinent question. So I'm not in a position to share with you our plans, which we have not made formal decisions on what -- how we -- how much and how we want to distribute next year. But as you said, we are, indeed, apparently in a very comfortable position. So we have a lot to decide about. So indeed, as you mentioned, and we put it into the actual report that Basel IV we implemented 1st of January, as with all the banks across Europe. And given that we have a standard approach, for us, this is going to more or less have a one-off effect. And that one-off effect is, in our estimate, it's 80, 100 basis points on Common Equity Tier 1. So that's our best estimate. And then given that we are in standard method anyway, for us, it won't mean that we will have to kind of gradually increase the floor because, for us, we already -- I mean we do have the standard floors. Actually, 100% of the standard floor is not just 72.5% of the standard floors. But even beyond that negative one-off, it's clear that we are going to -- we are in a very comfortable equity position. And I'm sure -- I hope we won't disappoint you, our shareholders, when we announce what we are going to do with this. And that announcement will be when we present the year-end numbers early March next year, unless we start another -- I mean we are in the second phase of our buyback kind of process. If this -- if we kind of consume the approved HUF 60 billion number before that, the volume of HUF 60 billion nominal equivalent, then we might come up with a new proposal earlier, but most likely, it will be early March. Obviously, suggestion related to dividends and I wouldn't be surprised if you were suggesting other share buyback actions as well. On the M&A front, again, we try to be very precise, and therefore, we put -- it's in writing. So as you can read in the long report and also on the third page of this presentation, there's nothing we can report about regarding material transactions. Those who have sensitive ears, I think from that can infer what the situation is.

Yes, indeed.

But I'm not in a -- I cannot say more due to confidentially to and other reasons, especially not about concrete transactions and probably we have -- or impressed actually. I said already too much about one specific. So there's nothing we can talk about. And it may change. But at the moment, we don't see how it could change. So that would be a new development, I would say.

Just maybe one follow-up, please, on the capital situation. I mean how long would you be ready to run with such a level of capital surplus? So at what stage would you say that we rather distribute rather than to wait for another M&A opportunity to materialize?

My personal view is that above 19% is far too high. And I don't remember when we have been at this level. So this is certainly not where we want to be, right?

The next question is from Mikhail Butkov, Goldman Sachs.

I have a couple of questions on net interest margin. To begin with OTP Core, if we look at the dynamic, excluding the one-offs, there was some good progression from the first quarter. So in third quarter, I think there were some 11 basis points improvement. And if we could just discuss what were the components of that improvement or that some help from the lower rates, maybe some rollover of securities or anything else, like hedges? And then connect on the net interest margin topic. The rates in Europe are expected now to come lower than it was a few months ago. And so maybe you could update us on your net interest margin sensitivity to euro rates and balancing the outlook in Hungary on NIMs and in other countries net-net, do you think one will offset the other or the effect maybe of Hungary -- or the effects of one will be more than the other?

Well, Hungarian net interest margin improved mostly because in the second quarter, we had a very strong growth in deposits. And quarter-on-quarter average retail deposits, that is basically side deposits, grew 3%. And I mean we don't pay anything or very low or not much on retail deposits. And that's why I kind of said that this is a very important number to look at because if retail deposits continue to grow, with the rate what they have been usually growing. I mean, retail deposits, I mean, in a kind of normal environment, they should grow probably around nominal GDP growth, at least, or maybe 1.5 multiplier on that. So maybe 2x multiplier, it depends. But that's an important number. And the sensitivity to the HUF rate is immaterial around this 6.5%. Indeed, as you said, euro rate expectations actually declined or -- I mean the rate -- the cut -- the reduction expectations increased in case of euro. But in case of forint, it's quite the opposite. So I think very few people expect now rate cuts in HUF in the foreseeable future. So therefore, even from the rate environment, there's not much pressure in a way or not much volatility expected forward looking. But even if there is another 50 bps decrease, it would not have -- or 100 bps in HUF, it would not have a material impact. However, if retail deposits continue to grow and the pricing of these deposits doesn't change -- or don't change then that can kind of continue to have a positive contribution to the Hungarian margin NII in a meaningful way, even quarterly visible way. So that can continue. And again, the number here to follow and watch is the Hungarian deposit growth and deposit changes. The euro sensitivity, yes. I mean we are sensitive to the euro changes, and obviously, a declining rate is negative for us and this is captured in the numbers. So if you look at a net interest margin development in the countries, which are in the Eurozone or quasi-Eurozone on Page 10, maybe we can go back page and then we can see. As you can see, in Bulgaria, there's a kind of gradual decline. In Slovenia, there's also some pressure quarter-on-quarter. Likewise, in Croatia, it's not very dramatic, but it's there. And our kind of sensitivity to the euro rate remained similar to what we reported last time. So it's EUR 110 million per 1 percentage point decline in euro rate, and this is in annualized NII terms. We have -- we are doing even -- and this relates to the end of September. Since then, we have done certain additional measures. So I hope that this number will be lower by the end of the year, so maybe lower than EUR 100 million and closer to EUR 90 million. At its highest level, it was a year ago, it was EUR 190 million. So our sensitivity a year ago was much bigger. But since then, we have adjusted our suppliability positions and reduce that sensitivity, and we will continue to do that, albeit with a smaller magnitude. So that's number terms a sensitivity to your euro rate. In a good scenario, these two and maybe another third factor that we have Uzbekistan, Ukraine, countries where we -- margins are bigger and as -- and we expect kind of higher growth rate from these countries than from the rest of the group. So actually high-margin countries' contribution to the overall NII may increase given the expected growth rate and that can have positive impacts. So we have basically potential composition positive effect from higher growth of higher-margin countries in our portfolio and then positive effect coming from the hopefully growing retail deposits in Hungary. And if all these values counterbalance, yes, the expected negative contribution coming from the lower euro rate. That's a good scenario. And obviously, it also depends on the magnitude and speed of the euro rate cuts, right? So that's -- I think this is one of the risk factors in general in European banking that it can happen that the rate will decline faster and potentially more than we expected due to the rather growth performance of the core European products. On the other hand, the expected policies of the new U.S. administration seem to suggest maybe a higher rate environment and higher inflationary environment in the U.S. than otherwise expected. So that can have other directional effect on euro rates. But I'm sure you know much more about the expectations of euro rates than I have. So I don't want to go into very much detail.

Okay. Okay. Just one small follow-up on the retail deposit growth in Hungary. So is that the new volumes which come at a lower yield? Or you see rather maybe some conversion of older time deposits to the current -- to the retail deposits at the lower rate, which effectively translates into the higher loan deposit spread -- or it is rather you see the higher loan deposit spread on the new origination or new loans minus new retail deposits, if I -- yes, I may ask this question.

It's basically just liquidity is increasing in the system. Wage inflation last year was more than 10%, this year broadly close to 10%. So retail clients earn more and spend more in those inflation, so there's more money in circulation. And that's one thing. The other thing is that -- so money supply increases. The other thing is that the alternative investment yields have declined substantially. A year ago, you could still invest into Hungarian retail bonds with 16%, 19% yield. Today, it's more about kind of 6%, 7%. So the alternative investment opportunities yield decreased considerably. And therefore, competition to deposits from other products decreased. There will be this -- a large interest payment is actually coming on this retail government bond stock somewhere February, March, even January next year. So there will be like HUF 1.2 trillion, HUF 1.25 trillion interest payment on the stock of retail government bonds. So that will kind of generate another surge in liquidity in the sector, I guess. So there are various factors, which -- and obviously, loan growth that increases leverage and multiplicator . So strong retail growth is certainly also generating more liquidity in circulation. So these are important factors. So altogether, I think every factor, observable factor, is rather positive than negative in terms of our expectations to retail deposit curve.

The next question is from Máté Nemes, UBS.

I have 2 questions -- 3 questions, please. The first one is just a quick technical one, a clarification. I was just wondering if the EUR 110 million of sensitivity for 100 basis point lower rates, if that sensitivity also applies for the second 100 basis points, i.e. not just the initial impact. Should we expect somewhat higher sensitivity once the deposit facility rate crosses, I don't know, below 2.75% or 2.5%? That's the first one. The second question would be on Slovenia. I think you mentioned that the targeted savings is EUR 30 million to EUR 35 million. When do you expect this to be fully realized and how much is done by now? And the last question is perhaps a little bit broader one. Could you perhaps talk about any effects, any impact that you're seeing from a weak German macro, the automotive OEMs and supplier space that are visibly struggling? Do you see any effect in your portfolio or in your core markets, anything downstream from there? Just looking at your risk costs and asset quality metrics, it doesn't seem so. But love to hear your thoughts.

Yes. So it's EUR 110 million for the first 1 percentage point decline. The second 1 percentage point decline would result in similar numbers, somewhat less, but not very much different. So it is almost linear, somewhat less than linear. The EUR 30 million, EUR 45 million cost saving we expect after closing the merger, which was in August, as I said since August, we already combined some of our branches. So it's already underway. And it will manifest in 1.5 years. The kind of head count adjustment can only be a relatively slow process given the local regulatory environment. Your third question still the most difficult. Our direct exposure to the car industry is very limited and that includes their strategic suppliers. Car producers don't use local banking banks to finance themselves. And that's true for Germany and for Chinese car producers, they bring funding with them. So they really don't bank with local banks too much. There are some -- obviously, some exposure through their workers, but these are usually very highly skilled workers. And given the overall in other sectors tight nature of the labor market, I don't see a potential problem here even if the number of people working in the car manufacturing steadily declines in Hungary. So I don't see a big threat to our portfolio quality as such, and therefore to retail in general for retail demand or retail loan growth. I think the most sensitive to this is the GDP overall number because this is -- because, I mean, on the GDP net export, they have a huge contribution, right? They bring in some parts, assemble, they show a big added value creation in the country. They typically don't pay much taxes or low taxes they pay. So I think they have a quite material effect overall GDP growth, but much less direct impact on our immediate clients. At least that's true for kind of short term. I mean, mid to long term, obviously, and this is not just car industry. I think, core Europe, in general, more specifically Germany, Austria, in general, precision engineering in their industry structure to which extent it's competitive or not and which extent they are able to grow their exports, and therefore, grow -- they need more imports from Central and Eastern Europe, structurally, this is important long term. So I don't want to dump the kind of long-term structural importance for Europe on Central and Eastern Europe. But it is, I think, less specific to the car industry than in general to all export from Central and Eastern Europe to core Europe. And that's a concern. So it's very clear that a stagnating core European performance has a measurable negative impact, an effect on Central and Eastern European growth. But just because from the car industry having specific difficulties, I don't quite expect kind of material deterioration in portfolio quality or material impact on retail, especially retail loan demand.

The next question is from [ Bruce Lang ], Raiffeisen Research.

Great. Just a couple of questions from my side, if I may, please. First, rather technical. So there was a communication recently that you might see an increase of the Pillar 2 buffer requirement, Slide 1, but still in 2025. So in this regard, do you also expect an upward recalibration of your MREL requirement for the next year? And if yes, is there any quantitative indication you can give at this stage, please? And the second question is also related to the MREL concerning the Slovenian bank. So what is your strategy concerning OTP Banka in terms of its resolution approach? So for how long really you expect it to remain a separate resolution entity? And if this is still the case next year, should we expect further external MREL issuance from Slovenia's OTP Banka on its own basis, given there is a call option of the EUR 400 million in June, if I remember correctly? And generally speaking, there are almost EUR 900 million of MREL debt outstanding. So these are the 2 questions from my side.

NKBM resolution plan indeed because NKBM before we acquired it, was a stand-alone resolution entity directly supervised by the Single Resolution Board. It's remained that, and our bank, and our original bank, which used to be part of the single point of entry resolution group. We Merged this SKB into NKBM. So therefore, now the merged, the new entity in Slovenia is in the -- is multiple point of entry, as you rightly said. And the process is such that we have to apply for changing the treatment, the strategy regarding resolution strategy of our Slovenian bank, which is now called OTP Bank Slovenia. But that's a rather long process. So we will most likely submit such a request and then the resolution college will consider this during the course of next year and make a decision somewhere second half of next year. And then if there's a change in the resolution treatment of our Slovenian bank, then this will come into effect in '26 as the earliest. So for sure, for '25, the Slovenian bank will stay as a stand-alone resolution entity. And that means that they will have to continue to provide the MREL funds for themselves during the course of next year. And if they, in '26, they move into the group, then from that point of time, we will have to provide it from the group. Your first question was Pillar 2 guidance. Yes, we -- I mean, in the presentation on Page 21, we have this. There's a Pillar 2 guidance of 0.5%. Was that what you asked for?

Yes. Yes. So I mean there was a communication also recently saying that you will -- you may see an increase of this buffer in 2025. And since this is a direct input to the MREL formula in a default approach, so what is your expectations for the recalibration of the MREL target for the OTP Group in 2025? So technically, I would expect it should be also increased then. So the question is to what extent if you also see it the same way.

I mean, all in all, considering every factor into, we don't expect much increase in the MREL minimum requirement. So it's not going to be higher than '25.

The next question is from an attendee who joined via phone. I'll open the line. You will receive an automatic message about it. [Operator Instructions] May I ask you your name and the company, please.

This is from Robert Brzoza from PKO BP Securities. Congrats on the results. I have a question on subsidized lendings because many new programs are coming online, so to say, next year. The subsidized loans for young people, the corporate lending for SMEs. And in an environment where the rates are at above 6% level, we already learned that this doesn't change much -- doesn't change much the NII outlook for the OTP Core. But do you have any feeling how the margin, which the banks earn on the subsidized loans being offered by the state, which then the bank remediate on the market. So any feeling how the margins on the new products would look like next year compared to previous products like certain loans or baby loans, et cetera, whether they would be lower or comparable in size?

The corporate subsidized structure seem to follow the same pattern, so more or less kind of 2.5% margin for banks. The retail development is rather worrying in a way because there, in mortgages, the discussion is not about subsidies, but kind of another voluntarily cap on new production. So the government or the Ministry of Economy suggested for that bank should introduce voluntarily cap on new mortgage lending not higher than 5% rate. Now the scope of this request is not clear. And here, the banks have an opportunity to actually suggest a structure or a target segment maybe to young individuals, maybe for new houses and so on, so not to apply that for the entire production next year. And this is different from previous structures where there has been typically an actual subsidy. Here, there's no subsidies, right? It's just you are expected to sell mortgages lower than the benchmark, which is clearly negative. So this is still in negotiation and discussion. It's particularly concerning in the context of what I presented that actually mortgage growth is incredibly strong. I mean, year-on-year, we have almost 2.5x higher new production and we are going to have double-digit mortgage growth this year. And I mean, hopefully, rates are not going to be higher than next year than this year. The expectation is still somewhat lower. So there doesn't seem to be intrinsic need for boosting mortgage lending with such drastic measures, which are overall market pricing in general. So I mean, this is a problem. And there's a kind of spillover potential risk that if we -- even if it's for a kind of select group of clients, well-defined purpose, structure, if such a lower rate product exists in a market, that rates are kind of anchored for pricing for other products. So this is challenging and it's top, and it might have an impact on our kind of mid- to long-term development of margins in Hungary. I mean certainly -- I mean if this is going to become more systemic and then widespread, then we -- I mean then we have to certainly revisit our strategic considerations as well, what to do with a situation like that. I don't think we are going to go into that extreme, but we -- but certainly, this is going to be an issue next year and something to follow and watch. And it's hard to tell how aggressive the government is going to be to actually enforce this voluntarily pricing, I'm not sure or not.

I appreciate the explanation. One more follow-up, if I may. Did the government at any time, possibly seen at possible regulations pertaining to the already issued stock of subsidized lending because as I understand, the subsidies constitute some part of an expense from a budgetary fiscal deficit perspective. So it could also be a mechanism for the government to consolidate the deficit, right, if they would be able or willing to amend the mechanism, which reimburses the banks for the effort in granting those loans. So has there been any signs or hints from the government that it could be coming at some point?

No. The answer is a clear no. There has not.

The next question is from Gabor Bukta, Concorde Securities.

I have 2 questions regarding Uzbekistan. So you earlier talked about the potential normalization of provisioning in Uzbekistan and it's quite good, if I could say so. And this underpinned your previous comment. So going forward, could you give more color on the risk cost for perhaps 2025? And the second question is also in relation to these banks. So the loan-to-deposit ratio was down 30 percentage points, which you mentioned during the presentation. When do you expect this figure will land in 2025? Or what would be a desired level where you are comfortable?

Yes. Thank you. Indeed, in the third quarter, the risk cost was actually 0 due to recoveries on previously defaulted corporate loans. And in these events, hopefully, will come in the future as well. Obviously, it's difficult to predict them because if you could predict them, then we would already change the provisioning level. But we are working hard to collect as much as possible on the portfolio, which defaulted last year, second half of last year. And I think it's fair to assume that there will be other quarters where a meaningful positive contribution is going to come from recoveries of this volume. Again, I think for next year, if you allow me, I would not go as far as to give kind of exact number like guidance, but certainly, we don't see further deterioration of the corporate portfolio. And in the defaulted corporate portfolio, we believe that the provisioning level is adequate and even there might be kind of recoveries about that. In retail, we are working on the operational consolidation of the bank because, as you probably have seen, our retail loan growth was quite modest despite very strong growth on the market. So unfortunately, well, we have to spend time. So the third quarter, there was not much growth in consumer volumes, while the market -- our volumes where the market is growing quite fast. And the reason behind this is that we have to operationally fix the bank before we can really scale up consumer lending. And that's an exercise what we are working on heavily. And hopefully, the fourth quarter growth will be much better. And next year, we can have another step-up in scaling up the new production. So therefore, because we are actually selling low volumes in retail, actually, this cost is not going to be very strong in fourth or first quarter next year. But once we manage to get back to the level of new production where we want to be, then I think a risk cost rate, which is appropriate for a high APR lending activity, I mean these consumer loans' APRs are in the high 30s, low 40s. So these are kind of high APR loans, strong margin. And therefore, typically, these cost rates are also reasonably high. So I think probably by the second half of next year, I hope we will be at full capacity in terms of new production. And then risk costs will kind of normalize at the level, which is appropriate for this high net interest margin, high APR product, which is structurally higher than obviously than the group average and probably more similar to numbers -- risk cost sales where we see in, I don't know, Russian or Ukrainian consumer lending. But we are not there yet to scale up fully.

And if I may have another question. So the deposit growth in Hungary and new market share, so I've just seen in your report that your market share has lowered during the last couple of quarters in Hungary. So you mentioned that you earned such big money on deposits. What is the desired market share in Hungary which we would like to maintain going forward?

Sorry, I think I forgot to answer your second question regarding Uzbekistan, the loan-to-deposit ratio. I mean, 200% is so much better than 300%. In fact, this 200% is quite okay because most of the mortgage loans are refinanced. So they are not financed from deposits, but from subsidized funding either from the Central Bank or other state institutions. So structurally, Ipoteka will run higher than 100% loan-to-deposit ratio, and that's okay. But 200% or 300% and above when we bought the bank was somewhat not -- so this 200% is actually already okay and it actually creates room to grow more on the lending side. So now we have liquidity firepower in local currency to boost our local currency lending. Our market share in retail deposits Hungary, as you can see on the slide, has been steadily increasing, and it's at 41.5%, which is -- I mean, that's a high number. I mean, we go back on this Page 6 in the presentation to 2011 when it was 27.7%. So over the last 10 years, our market share in retail deposits grew 10 percentage points, which is very remarkable. I think that from 1/3 of the market, we can go up to more than 40% of the market. This is already an extraordinary strong level. So if we can stay at this level, that will be fantastic. But obviously, I mean, it depends on the price dynamic -- pricing dynamics of the competition. But certainly, we are very happy with this level of retail deposit market share.

The next question is from attendee who joined via phone. I'll open the line. [Operator Instructions]

Okay. Sorry. Just a short one. Can you maybe spend a word on Russia? I think you used before or in previous quarters to update on this kind of worst case, the consolidation impact on the group capital, I mean, given that I think growth has picked up in last couple of quarters, there was also, I think, increase in employees in Q3. So maybe also you -- if you can kind of give an update on let's say, the outlook for the next months or for the 2025, where do you see the performance? And what's the strategy of the bank in this respect?

Sorry for interrupting? May I ask your name and the company, please.

Jovan Sikimic from Raiffeisen.

In terms of the impact of deconsolidation, yes, we continue to calculate these numbers on a quarterly basis. So if you deconsolidated the Russian entity, it would improve our common equity Tier 1 ratio by roughly 40 basis points. And a similar number for Ukraine is 14. 4-0 plus for Russia and 1-4 plus for Ukraine. Our strategic approach to this very difficult situation that we have in Russia, that's not changed. I mean we have looked into strategic alternatives. But by now, I think it's clear for everyone that divesting these assets is not an option for any of the players in Russia. And I think Raiffeisen is a good example. Raiffeisen tried very hard and has put together a structure, which eventually didn't work and ended up with the shares being blocked in Russia. And the recent changes in local regulation, the maximum sale price decreased to 40% of market value and even in that case, there's another 35% kind of tax, which has to be paid on the transaction, or at best mathematically, one could get 5% of the market -- of the documented market value. But even that is unrealistic, given that there's no -- it is extremely unlikely to find a counterparty who's not sanctioned or would not be exposed to sanctions through the transaction. So that's the situation. In this situation, we have taken an approach where we focus on 3 factors in this order. The first and most important to all efforts around fulfilling all legal and regulatory requirements, which are applicable to the entity that we have in Russia. And then secondly, we quite proactively reduced the scope of our activities. Immediately after the war started, we altogether stopped corporate lending and our corporate loan volumes since then declined by more than 90%. So there's hardly anything left. And we were the first one of the kind of active -- more active foreign banks to stop altogether other transactions in '23 May last year. And I think you were also the first one more than a year ago to substantially limit euro transactions to European counterparties. And the third -- so -- and this is in the -- that is a strategic element when we reduce the scope. And the third pillar of our strategy in this difficult situation is to reduce our exposure to Russia. And we believe that really the only way you can really reduce the exposure to Russia is to take money out of the country. Because if you just change your activities, but you still have equity, and in the cases of banks, this means financial assets, stock in Russia, that's the real exposure. So when the war started, we had RUB 11 billion group funding terms to Russia and RUB 55 billion equity in our bank in Russia. And as early as '22, the RUB 11 billion funding was paid back. So we reduced our exposure to Russia by RUB 11 billion. And since the beginning of the war, the bank paid RUB 37 million -- more than RUB 37 billion dividends. And there might be another tranche for the rest of the year. So if all go well, by year-end, we'll go up to RUB 42 billion dividend. So this is, in our view, this is the only real avenue to reduce exposure to take money out in the form of dividends and paid back group funding. So this is what we try to continue. So these are the kind of 3 pillars of our strategy to comply with all legal and regulatory requirements to this entity, reduce the scope of activities in order to minimize the more sensitive potential or risky activities. I mean we focus on consumer lending. So that's our main activity. We sell point-of-sales loans cash flow and credit cards and car loans to mass market, retail clients in local currency in small amounts. And the third and potentially equally important that we try to reduce our exposure, as much as possible, our financial exposure, our financial assets in Russia.

So basically, we can take like what payout ratio from Russian entity, like 30%, 40%?

I mean on a quarterly basis, we submit request for approval to pay dividends and we cannot ask for more than 50% of profits.

Okay. And maybe last one. In that context, do you expect any regulatory headwinds because just I think 1 hour ago, we read that ECB is going to kind of adjust the capital requirements for UniCredit Raiffeisen because of Russia, I think. So anything similar to come or you don't think so.

I mean, yes, we have headwinds. I mean I don't know what better we could do from the perspective of the supervisor or regulator than what we have been doing. I mean, European banks, Western banks have more than EUR 10 billion equity exposure to Russia. I mean your bank is going to be more than EUR 5 billion, so kind of powerful. Our exposure is EUR 700 million at the moment. So that is what is really at stake, right? And these are -- in case of banks, these equities in financial assets. So these are -- there's actually EUR 10 billion equivalent to financial assets owned by Western banks in stock in Russia. So I think this should be the prime focus of the supervisor to salvage those financial assets because this is -- I mean for some banks, I mean, this is not a small amount of money, at least not for us. Maybe from ECB perspective, they are used to bigger numbers. That might not be a big number. But from our perspective, these are huge numbers. Now more capital requirements, I don't think they -- in what way they contribute to reducing this exposure, I don't fully understand. But I don't have to understand everything. That's true.

The next question is from Beata Fojcik [Operator Instructions]

It's Beata Fojcik from S&P Global Market Intelligence. I have a few questions, one question again is on Russia. I noticed in your financial report a drop in the Stage 3 loan ratio in the third quarter in the Russian unit, and I wanted to ask for the reason behind that drop. How do you explain that? And my second question is on Ukraine. The lending trends and also the Stage 3 loan trends. You said yourself that the lending in your client has been picking up. And I wanted to ask what are the segments where you see the biggest revival in lending? And what kind of strategy do you pursue in Ukraine in terms of -- to increase lending? Do you have any special strategy that you pursue? I also wanted to ask about your forecast or predictions for the lending growth in Ukraine and also for the Stage 3 loan ratio in Ukraine. With the new lending growing, do you also expect the Stage 3 loan ratio to pick up again in Ukraine?

In Russia, again, the only activity we do in lending is this kind of consumer lending car loans. These are high APR loans, high-margin loans. And therefore, there's a kind of normal level of risk cost is relatively high. And therefore, if you look back the last couple of years, you have seen that Stage 3 ratios are structurally higher than elsewhere in the group, and that's fairly normal. Quarterly changes typically come from sales. In Russia, we sell nonperforming loans after certain days past due. So we don't -- we only do the soft collection ourselves and hard collection work we don't. So these sales happen in batches and they are not uniformly distributed over the year. So it just really Stage 3 ratios depend on how much we sold in that given quarter to work at companies in Russia. Ukrainian lending, I mean, structurally, we are more corporate, much more corporate in Ukraine than retail and we are very strong in leasing in equipment leasing. And these are in equipment leasing, we see strong demand and this is really the type of product where we are the most confident to increase our volume. So that's most of the corporate loan growth you see is actually equipment leasing. And then the other one is just unsecured consumer lending, POS loans, cash loans. Likewise, we see strong demand and actually quite not just strong in terms of kind of magnitude, but also in terms of credit quality. So the lending we do in Ukraine and the increasing lending we do in Ukraine, we do with the strong conviction that actually portfolio quality is going to be quite decent. So no, we don't expect spikes in Stage 3 ratios in Ukraine.

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

Thank you very much. Thank you very much for joining us today. Thank you for listening to the presentation, and thank you for your very good questions. I hope you will join us when we present the full year results. I think it's on the 7th of March, it's the first Friday of March. And until then, all the best. Take care, and goodbye.

Thank you for your participation. The first 9 months 2024 conference call is closed now.