ProCredit Holding AG (PCZ) Earnings Call Transcript & Summary

Good afternoon from Frankfurt and a very warm welcome to our first Capital Markets Day. My name is Nadine Frerot, and I'm a member of the ProCredit Holding Investor Relations team. I will lead you through the presentation this afternoon. The event will be a virtual one this time due to the still ongoing COVID-19 pandemic. Of course, we would have much preferred to meet you all in person today. And we hope there will be an opportunity to do so in the future. The event will be held completely in English. And after the event, a replay will be available on our website, which we will add by the end of the week. Today's presentations are already available on the website. For our first Capital Markets Day, I'm joined today by the full management team of ProCredit Holding, Dr. Gabriel Schor, Sandrine Massiani, Dr. Gian Marco Felice and Christian Dagrosa, who will take you through the key aspects of our business strategy, and as you can see in today's agenda. The final presentation of the day will be by our colleagues from ProCredit Bank Bulgaria.They will take you on the ground, provide color on how they work in the Bulgarian market and what makes us different. [Operator Instructions] Please be reminded that we record the event and that we will make the recording available on our Investor Relations website. Before we start, let me also provide you with the usual warning to pay particular attention to the cautionary statements regarding forward-looking comments that you will find at the end of each presentation. As I hand over to Gabriel and Christian for the first presentation, ProCredit strategy and business model, let me briefly introduce both of them. Gabriel has been with the group since the very beginning when the first ProCredit banks were founded. He is a long-time member of the management team. His responsibilities cover the area of finance, supervision, reporting and Investor Relations. Christian Dagrosa joined the group in 2017 in the area of reporting and controlling. He is a manager since 2019, and his responsibilities include Investor Relations, reporting and controlling. Gabriel and Christian, the floor is yours.

Thank you. Thank you, Nadine. And let me also welcome everybody to today's Capital Markets Day. We welcome indeed this opportunity to provide more detailed insight into our business strategy that is normally possible in our quarterly calls. We feel it is a good time for this first event, an intensified communication with our capital market partners. We are coming through the pandemic with good results, good prospects. These results and prospects are a consequence of the key features of our business model, which we would like to cover in detail today. Christian and I will take you through the overall business strategy of the group. I will start with a few introductory slides to ensure there is a common understanding of the fundamentals of our model. Most of what I have to say is not going to be new to you. And some of these slides are more familiar than others. Nevertheless, it is important that the fundamentals of our models are clear since they guide our performance. And by the way, they guide our presentations today. Christian will then cover competitors' benchmarking as well as the financial results of the models and the guidance. Let me start with our mission. The words underlying of this slide like positive development impact, being the leading SME bank in the countries in which we work, and sustainable returns are ones they will come back again and again through all this afternoon's presentation. They're going to come back under different aspects, but again and again. Our mission sets out that we are ambitious both in impact and commercial terms. Indeed, for us, the 2 aspects cannot be separated. The ones drives the other. And we will give weight to both in the presentation today. Let me start with the overall strategy and the group profile. These slides give you the snapshot of our unique positioning as a group of banks in our Eastern European markets. As you are aware, the 2 basic pillars of our business strategy can be summarized at the Hausbank for SME and the ProCredit Direct Bank for private clients. Our strategy has been and will continue to be strong organic growth, no acquisition in both areas whilst maintaining high portfolio quality. Our ability to manage credit risk effectively in the volatile markets in which we work is central to our approach. And it's something, Sandrine will focus on it today. Our business model relies on relationship banking based on high skilled staff on the one hand, and the intelligent use of scalable technology on the other. Gian Marco will cover the strengths in detail today. This strength underpin a consistent track record of solid growth, very good portfolio loan quality and sound profitability. As you know, you can see in the boxes on the right, that in the first 6 months of the year, we have already achieved 7% growth and an annualized return on equity of 9.1%, which is encouraging, and Christian will cover those results with more detail. Impact and ESG considerations are central to how we think about strategy and success. ProCredit banks were founded more than 20 years ago in order to have a positive development impact in emerging markets. Today, impact remains as important as ever and certainly not something that has appeared in response to any of the current ESG hypes. First, this is manifesting our commitment to working with SMEs, who have the potential to create jobs and wealth. We reject, as you know, aggressive, intransparent consumer lending, which is common in our market. Secondly, environmental responsibility is central to what we do. ESG criteria guide, client selection, and we have a focus on financing SMEs, investing in green technologies. Our fastest-growing segment has been in green loans, which already accounts for nearly 20% of our loan portfolio. Staff. Staff are at the heart of our business strategy. A commitment to diversity and a value-based approach to staff development are inherent in our business model. We have a fair and transparent salary structure, which is linked to training and does not rely on bonuses. The way we work with staff is right for our people and it is central to how we implement best practices consistently across the group. Our combined commitment to social impact, environmental responsibility and staff, results in a growing, sustainable business model, which means we enjoy loyal, long-term relationship with high potential SME clients, who typically do all or most of all of their banking businesses with us and with whom we manage credit risk in partnership. This translates into steady, reliable growth and profitability without great volatility despite the markets in which we work. This slide provides more detail to the points I have already made. Now it's too much detail. You can take a look perhaps later and separately. With this Hausbank for SME slide, I wanted to remind you that loans to SME account for 93% of the group loan portfolio. Our target clients are particularly the growing forward-looking businesses, who are investing in innovation and in green technology. This strong focus on SME makes us unique in our local market context. It has allowed us to build specialized and experienced staff, able to work with this segment and in a highly efficient and effective manner. This has allowed us to grow ahead of market in most countries, whilst maintaining a loan portfolio quality well ahead of the banking sector as a whole. This has been particularly striking over the last 18 months of the pandemic. In the last 12 months, we did grow by 12%, and this is a firm foundation for growth looking forward, we believe. ProCredit Direct is also an approach -- ProCredit Direct is also an approach we have often covered in our quarterly calls. We provide a highly transparent digital service packages for middle income earners, particularly those associated with our SME clients. Here too, we believe we have reached a turning point, having invested in digitalization and restructuring our private client base. We are now growing with our target clients. And in the last 12 months, we achieved 13% of growth. We expect this trend to continue. The high level of digitalization has allowed us to create a streamlined infrastructure whilst at the same time, improving outreach and the quality of services we provide. Gian Marco will provide more color on the group approach to technology and the significant advantages of having a well-established in-house technology provider for the whole group. Our focus and efficient approach has allowed us to achieve a good track record on profitability through the economic cycles, which characterize our markets. You can see on this slide that even in the first phase of our development, we were profitable even in the aftermath of the financial sector crisis of 2008, 2009, which hit our markets, particularly strongly. We can also see that we believe we are now emerging from the second phase of our development, a period of strategic refocusing and restructuring, when we exited the very small loan segment and some countries to focus on larger SMEs and in Eastern Europe. Our confidence in the future is reinforced by the successful completion of this phase of transformation. Throughout, we have strongly grown our core business whilst reducing branch and staff number. We are now done, if I may say so, well positioned in our market. Emerging from the pandemic, our half year results give us confidence about our midterm targets. Looking forward, we believe we can continue to grow at a stable operational basis. This slide provides more detail of the successful group restructuring efforts. You can take a look at it with more detail and time a bit later. Our confidence looking forward is also rooted in our strong long-term presence across Eastern and Southeastern Europe, stretching from Georgia in the East to Bosnia and Albania in the West Balkans. These are countries we know very well. Our loan portfolio is well diversified across the 12 countries we operate in. The largest single bank, Bulgaria, as you are going to see, accounts only 21% of total loan portfolio. We do not have a large home market and we brought all our head office energies to implementing best practices across the group. They are countries with attractive growth potential and where our impact is meaningful. The market in which we work are fast growing with expected GDP growth rate of 4% in coming years. Despite the impact of COVID on our market, general confidence about macroeconomic prospects remains. Furthermore, banking sector penetration is still relatively low in our market. For example, private lending to GDP at about 50% comparing to 100% in Western Europe. And SMEs play a vital socioeconomic role in those countries, accounting for over 70% of employment and over 60% GDP. This makes our market attractive from a business and from an impact perspective. Our model is designed to make the most of these opportunities. The elements of the business model I have described clearly differentiate ProCredit in their market. The way we do banking is simply very different to how other banks work in our market. So let me wrap up this introduction summarizing what makes us different. We have a long-term commitment to our focused region. Our comprehensive impact orientation is unique in our countries. Unlike other banks, we have a clear focus on SME, particularly those innovative companies investing in greener technologies. Our purely digital direct bank offer for private clients is strong, and it illustrates how consequent we are in embracing the digital transformation. And above all, our skilled loyal staff makes ProCredit banks stand out in our market. Unlike most banks in our region, we invest heavily in staff development and strong client relations. And with that, let me pass to Christian to look more closely what those elements in terms of performance and how we do compare to banks in the region.

Indeed, thank you very much, Gabriel, for the introduction, Nadine, and welcome, everyone, also now from my side, and thank you for your interest and tuning in today. Three things I want to focus on the next 15, 20 minutes. One, what Gabriel already mentioned, we prepared a peer analysis that really focuses on everything that Gabriel just presented, the focused strategy, the push forward in terms of digitalization, the long-term client relationships, we manage, the conservative approach towards credit risk, and the focus on staff development. How all of this and more, how this translates really into a very concrete, tangible and quantifiable competitive advantages. Second, I want to look at the financials, the most recent financials, which are as of June. I will not dwell on this topic since they are new -- since they're not new to most of you, and we're already in preparation of our Q3 financials. And lastly, we want to look at the -- at our medium-term guidance and the strategic initiatives that will keep us busy in the next few years. But let's start really with the very first point, which is the peer analysis that Gabriel already mentioned in the beginning. What we did here is we aggregated the stand-alone financial data of our 10 banks in Eastern Europe, and compared their performance against the performance of banks, of peer groups operating in the very same markets as we do. Let's start lightly with the first slide, which simply shows where are the assets invested and what kind of assets are we talking about. The left-hand chart shows the geographic dispersion of the largest loan portfolio. In our case, this is only 20% in the country of Bulgaria. Other banks or other peers in this case, they all have one thing in common, and that is one strong home market, typically a Western or Central European home market, which oftentimes drives both business and financial performance. ProCredit on the other hand, operates on a very homogeneous and standardized way across all its markets. That means business strategy, risk strategy, client profile, AML reporting requirements, credit risk procedures, approach towards staff, et cetera, et cetera, anything you can name is highly standardized across all banks, which means if you know one ProCredit bank, you basically know all of them. On the right-hand chart, we see the type of assets that the respective banking groups are investing in, here defined by the counterparty. Gabriel already mentioned 93% of our assets are to small and medium-sized enterprises, whereas peers rely much more heavily on business with private individuals. Our private individual portfolio amounts to 7% and is almost entirely housing and renovation loans, highly collateralized in nature. The PI shares of other banks are not only much larger, but they also consist of significant shares of consumer loans. Typically, loans to low-income households, not collateralized at all, and subprime in nature. Gabriel already touched on this issue. We rejected both from a business and credit risk point of view, but also from an impact point of view. The focus on small- and medium-sized enterprise, it is a very niche market. The fact of not focusing on PI so much and not catering to the needs of corporate loans creates 2 distinctive competitive advantages. One, the ability to generate and grow new business; and two, the ability to effectively manage credit risk in the process. We have 2 slides for these topics. Let's start with generating business. The left-hand chart shows how our 10 European -- Eastern European banks have grown in the last 18 months in the segment of business loans, 17% over the last 18 months compared to peers that typically are significantly lower. On the right-hand chart, we looked at the growth rates of selected banks -- of our banks against the banking sectors in which they operate. Here also, we see that our banks consistently outperformed the local banking sectors in which they operate. Let's move on to the second point, after growing business, that is the management -- the effective management of credit risk. Those of you who have followed us for a longer time know that ProCredit distinguishes itself through its very, very low share of nonperforming loans, 2.3% in our Eastern European markets, 2.5% on a consolidated level, more or less the same. And we see that peer groups operate with a significantly higher share of these defaults. On the right-hand chart, we see, again, selected markets. The default rate of our banks in these markets against the banking sector levels. Here also, we see that our banks are structurally outperforming these local markets. These low default rates, it is worth highlighting that we achieved them not by writing off nonperforming loans. The long client relationships that we foster, they actually result in organically lower number and volumes of default. And we see in the bottom right-hand chart, the average net write-offs that we have incurred throughout the financial cycle. We see a slightly more elevated level throughout the years of the financial crisis, but the average is 0.7%, which is significantly below that of what other banks have to display. And especially in the last few years, net write-offs have been consistently low and close to 0%. Managing credit risk tightly translates into yet another competitive advantage that I will go into now, and that is incurring lower costs for credit risk. On this slide, we look at 2 indicators, 2 metrics. One is the net interest margin, and second is the cost of risk. Both these indicators, we have analyzed now on a consolidated group level, not on this individual stand-alone financial data. Looking at both the net interest margin and the cost of risk together makes sense, because they should correlate. The net interest margin should cover for the expected credit risk expenses that an institution incurs. The top-hand chart shows the net interest margin, where ProCredit is in second place within the peer analysis, not the highest, but close. What distinguishes this net interest margin, it is a direct result from the Eastern European mix of countries. As -- if we think back on the first slide, our competitor banks rely on these very large home markets, which are typically in Western and Central Europe, and account for significantly lower base rates and levels of interest. The bottom chart shows the cost of risk, that means how much credit risk expenses have been incurred relative to the loan portfolio. Both these figures, we look at for the entire period 2015 to the half year 2021. So we're not looking at a point in time performance, but really throughout a longer period of time to identify structural features. Our cost of risk is again significantly below the average of that of peers. Putting both these together now, the net interest margin and the cost of risk that is subtracting the cost of risk from the net interest margin gives us the risk-adjusted margin. That means how much net interest income, am I, as an institution, able to generate on the total asset basis after accounting for interest expenses as well as credit risk expenses. And here, we see that ProCredit is outperforming peers rather significantly with 3% average over the last 6.5 years. Here, we see the clear benefits of our business strategy and our business proposal. That is operating in high-margin Eastern European countries, but managing credit risks so tightly that we're able to generate high margins, but not having the downside of higher credit risk costs. By the way, we did this analysis for 6.5 years, but these figures hold true really for any year in between. So for 2016, '17, '18, the picture does not change materially. As of the half year 2021, our risk-adjusted margin, just for your information, stands at 2.7%. Now let's close this chapter on the peer analysis with the last point, which is operational efficiency on the one hand and the potential for additional scaling effects in the future on the other hand. The top left-hand chart shows the average loan portfolio per staff member on an institutional level. That means we only took the loan portfolio and divided it by average staff numbers. We see here that ProCredit banks in Eastern Europe manage much, much more portfolio per staff than its peers. That is 50% more than the second place peer and actually 3x more than the last placed peer. The bottom chart is -- looks at operating expenses per loan portfolio. So here also the calculation is straightforward, operating expenses divided by loan portfolio to illustrate how much expenses do we incur per euro of loan portfolio invested. Here also ProCredit outperforms competitors. The catalyst for this predominantly is the high level of digitalization that has allowed us in the last years to reduce the branch network significantly from more than 500 just a few years ago, to what is essentially today 45. Gabriel already said that Gian Marco will give us the details on this later on. This operational efficiency on a bank level, we see on the right-hand chart, has not yet translated into efficiencies on a group level. The cost/income ratio, which is a typical metric for measuring cost efficiency, is for the ProCredit group on a consolidated level, still higher than for other peers. But here is exactly where we see potential for future scalability that will drive future profitability. It is also worth noting that the cost/income ratio for ProCredit has come down significantly from 70.5% in 2019 to 68% in 2020 to 64% now as of June. Very well, I think that covers the chapter on peer analysis. We will now move on to the financial results. Like I said, I will not dwell on this topic for a long time. These results are known to all of you. For those who are not aware of them, you can find our webcast from the Q2 financials on our website along with our presentation from last August. But let me give you the key highlights just for completion's sake. Over the past 12 months, we have grown our business by 12%, the loan portfolio, and we have matched this growth by deposits with a growth of 12.9%. The profit after tax is up 68% compared to last year. Obviously, last year was affected by the pandemic. I will not go into the details of what was driving it. Most of you are very much aware of this. But the current level of profitability, EUR 36 million for the half year corresponds to return on equity of 9.1%. Worth highlighting is also the positive dynamics that we're seeing today in the net interest margin. In the second quarter, the net interest margin improved against the first quarter by 20 basis points, which shows the positive developments in some of our markets in terms of base rates, but it also displays the steady improvement in the refinancing structure of most of our banks. Ultimately, on the bottom right-hand chart, we see the cost income ratio, which stands improved by more than 2 percentage points compared to last year. Let's move on to capitalization. Here also, there is nothing particularly new about this slide, but let me anyways try to make the key points here. Our CET1 ratio of 13.7% is well, well above the regulatory requirement of 8.2%. And this, keeping in mind that the dividend that we intend to pay out in this fourth quarter is already fully subtracted from our core capital on the one hand and the strong half year result of EUR 36 million that I just presented, is not yet reflected in our core capital. It is also worth highlighting that the Tier 1 requirement of 10.1% is currently fulfilled entirely through CET1 capital. That in itself means that there is still potential for capital diversification and fitting these requirements with more effective and more efficient capital instruments. Going forward, we don't see any significant pieces of regulation that will affect our levels of capitalization nor do we foresee any material changes in the capital requirements. The introduction of Basel IV in 2023 will only have a very limited impact on our group. The core item of the regulation, that is the restrictions on the use of internal models or to the extent that these internal models can reduce, risk-weighted assets, does not apply to us since we use the standardized approach for all asset classes. Let's move then to the last chapter of this presentation, the medium-term guidance and outlook. I will also not dwell on this slide very long since this is also known to you. What I want to highlight here is, again, that since our listing in 2016, we have fulfilled or sometimes even slightly exceeded all of our guidance points. And for the financial year 2021, most of you are aware that we lifted our guidance for the end of the year, early in July. We now expect a return on equity of 8% to 9.5% until year-end, cost/income ratio of approximately 65%. And due to the higher expected levels of profitability, we also expect capitalization to come in a bit higher than originally anticipated. Our medium-term guidance, we have not adjusted in July, but let's have a look on the next slide just what kind of progress we are making on each of the guided items. Starting with the loan portfolio growth, which we guide to be 10% per year. Most of you know that we have achieved this 10% with a very high level of consistency over the past years. I now see that 2020 says 9.5%. That is indeed true. But if I subtract the FX effects from this growth, the business-driven growth in 2020 was actually closer to 12%. In terms of profitability, it is clear that the past years, that is Gabriel had a view 2013 to 2019, the financial performance in these years was heavily affected by the restructuring of our group. That means the divestment of institutions in Latin America and Africa. The reduction in legacy assets, the closure of more than 90% of our branches, as well as the reduction of staff of close to 75% on a group level. 2020 was negatively affected by the pandemic, mostly credit risk expenses. You are all aware about the dynamics within the IFRS 9 expected credit risk model. But overall, we managed defaults to remain at a low level. 2021, now the half year results at 9.1%, mean that we are getting very close to reaching our medium-term financial target of 10%. Same goes for the cost/income ratio, which has been steadily coming down since 2019, since the end of our restructuring measures, and it is now at 64%. Reducing this cost income ratio further and reaching a level of less than 60% will be key in driving profitability in the future. And ultimately, we all know our focus on green loans, which have been growing at a pace of around 25% per annum over the last years. Here, our medium-term target of 20% is also very much in reach with the current share of 19.1%. What does that mean now for the next 3 years? So it is clear that given the current level of profitability and our short-term guidance, the medium-term guidance of 10% ROE is really well within reach. In the years 2022, '23, we want to solidify and consolidate this level of profitability by achieving additional scaling effects as well as improving the performance of some of our underperforming banks. For the years beyond, to be honest, higher levels of profitability will very much depend on our ability to generate further scaling effects. So that is beyond the cost/income ratio of 60%, but also on the general macroeconomic environment and inflationary trends in these years. Now what does that mean really in terms of strategic initiatives for the last -- for the next few years. To be honest, we don't have any huge strategy outlined, because we have done most of the strategic projects. We have completed them in the last years during the restructuring. Our key strategic priority is right now to grow on the currently very, very lean and efficient business structure and thereby create scaling effects. Further, we will focus on finishing up some important technology projects. Gian Marco will give you the detail. And we will also intensify on working with staff, trying to get more staff through our proven academy programs. And in terms of Investor Relations, obviously, one of our strategic initiatives will be to increase visibility of the share, which would then also drive share liquidity in the next few years. And firstly -- and lastly, not to -- lastly, but really not least important, is focus further on positive impact. Much like during the pandemic, focusing SMEs not only in times when the environment is benign, but also in difficult times, supporting SMEs throughout the financial cycle will be a priority, growing the green loan portfolio and further advancing our ESG screening criteria to also push for better ESG awareness in our markets. Nadine, that would conclude this presentation.

Thank you, Christian. Thank you, Gabriel. [Operator Instructions] Sandrine will now take you through the next presentation. Key success -- key success factor, credit risk management. Sandrine joined the group in 2003, and she has been a Management Board member since 2017. Her responsibilities include risk management, human resources and compliance. Sandrine, the floor is yours.

Thank you, Nadine. Welcome again from my side, and thanks a lot for your interest in the ProCredit Group. I'm happy today to be able to present our approach in terms of credit risk management in a bit more detail than we normally cover. We do have a track record of very high quality loan portfolio based on prudent risk management. What I would like to say really upfront is that prudent risk management has always been a key element of the strategy of ProCredit, which was presented previously by Gabriel and Christian. So the approach that I'm going to present today is actually not new. It has been with us since day 1. We apply some key fundamentals, which are really, really important and which also explain the success of this approach. On the right hand -- on the left-hand side of this slide, you see the group risk indicators. You are mostly familiar with them. However, here, you see them over a period of at least 10 years. And you see the consistently very high loan portfolio quality over the years. The default rate is today, as was mentioned by Christian already, 2.5%. You see it has even been improving in the last years, also as a result of our sharper focus on SME. During the pandemic period, there has been no significant deterioration of this indicator neither. Our net write-offs are extremely low. They reflect strong organic credit risk management. As mentioned before, this does not reflect write-offs. This also does not reflect any selling of bad loan portfolio or problematic part of our loan portfolio as it might be the case in our countries of operations. On the right-hand side of this slide, you see the consistently low risk cost. You see in 2020, it has been obviously pushed up both by the macroeconomic update in our LLP IFRS 9 model, but also, and this is very important by our very proactive approach, to monitoring potentially programmatic exposures and also the proactive restructuring approach. Christian has explained in detail, the very strong impact of having a very low cost of risk in our P&L. I would like to maybe highlight another aspect of having a very good loan portfolio quality, which is also very important for us, because it relates directly to our impact as a responsible bank. What do I mean by this? Having a very good credit risk management and, of course, loan portfolio quality means that we basically enable entrepreneurs through very well structured and wise investment to create jobs, to create, to participate to the economic growth in their country. We also, through a very prudent credit risk management, we reduce the risk of seeing these SMEs, which are critical to the countries, to fail because of over indebtedness. This is a very important aspect for us. I'm also deeply convinced that being strict in terms of credit risk monitoring our clients, also help formalization and the transparency of these SME clients. Also pushing the environmental and social governance aspect in our credit risk analysis, push also the awareness of our clients in this respect. Being also with them over a long time, help us basically to reinforce their resilience through economic cycles, be there in good times or bad times. So now I would like to really turn to the fundamentals of our approach, so that you have a concrete idea of how we deal with credit risk management. Basically, there are 2 key pillars. On the one hand, the unique focus on SME clients. On the other hand, a very strong institutional setup. Moving to our unique focus on SME sector, it translates into, first of all, a very careful selection of client. We invest upfront with clients, who are also willing to have with us a very open and constructive relationship. We basically ask a lot of questions, yes. We even sometimes challenge some of their habits. So this open and constructive relationship is very important. We also invest upfront in making sure that the client is willing to engage long term with us. It has obvious impact on business, but also from a credit risk perspective, because it allows us to build over time a very good understanding of those clients. Second, how do we assess our clients? We assess this client 360 degrees. We want to understand them fully, and we want to understand fully their business model, as well as their development potential. For this, we do not use any scoring, nor automated lending decision process. Behind each of our business, each of our clients, there is an entrepreneur with a history, with dream, with visions, with strength, weaknesses. And this, we can only capture really through our good teams, no scoring system, no automated lending decision can capture the complexity of an SME. On the second pillar, strong institutional setup. We have very consistent and standardized assessment process as well as decision-making process in what relates to lending and monitoring. As I said before, this is not only in compliance with the German requirements, in terms of credit-related banking law or risk, but it's also built years after years on our experience in our countries of operation, SMEs and staff. This translates into group-wide assessment approach backed up by a strong IT system, but also very strict monitoring approach as well as treatment of problematic loans. All this would not work, and this is the fourth pillar, without highly qualified and engaged staff. We invest, as you know, a lot in training, but we also make sure that all the lessons learned from the different countries where we operate, are fastly and efficiently exchanged between our countries of operations. So basically, these 4 elements, which are the foundation of our credit risk management, means that we apply to each of our SME clients, an approach which is normally expected for the corporate lending in terms of relationship and detail of assessment. And this is clearly for us a strong differentiating factor in our countries of operations, where classically, our competitors focus either on consumer lending with automated scoring or on relationship banking with larger tickets. We are convinced that this approach is actually the adequate one because, as I said before, there is no standard SME. And we can afford to put this effort in this analysis, because on the back end, our processes are really optimized through IT solutions. So now let's turn to each of these 4 elements, selection of client, holistic client assessment, structured lending process and qualified staff one by one. First of all, yes, I would like to explain how we select our clients. We obviously screen them against our own exclusion list, and I would like to go back to this quickly in the next slide, but we don't stop there. We go much more beyond and check also the reputation. Check the experience and the reliability of those clients in their markets. Anything like political exposure and clear ownership structure or in transparent communication are reasons good enough not to engage. We are also careful to engage in clients, which are not too large or too complex. Meaning that, our clients where we know that we will not be able to be a relevant banking partner then we prefer not to engage. Typically, we engage with clients in a very gradual way. As you see from the key metrics, half of our business clients are not loan clients, not yet loan clients. So we learn on their operations during this phase. But relatively quickly, our credit risk team already analyze what could be the total exposure for which we could engage with this client based on the potential of the client, which means that we do not wait for the request from financing from the clients, but already from the very onset of a customer relationship, we have an idea of this total credit exposure that we could go for. This is a good example of our client approach versus product approach. It is clear that in this client election, the long-term relationship is absolutely important. Over time, our BCAs, but also our credit risk team, they build through visits, through monitoring, a very strong knowledge and very deep knowledge of each of our client, which has obvious benefit from a credit risk aspect. Also, the fact that we engage majoritarily on investment loan, 2/3 of our loan portfolio is for investment loans, means that we engage also closer to the client. And we can also assess then their planning capacity as well as the ability for them to manage these type of bigger projects, which is an obvious benefit also in terms of credit risk going forward. One quick word on this unreadable slide, which is basically a copy of our exclusion list. I'm not intending at all to go through the 30 or more than 30 activities, which are listed in this list, but I just wanted to make sure that you have seen it. It's also -- it exists, it is accessible on our website. And just to give you a flavor -- a sense of what we have in this exclusion list, I would simply mention some of the activities that we have most recently added to this exclusion list. I would, for example, mention any operations related to the issuance of cryptocurrencies as well as any activity from reproduction clinics, which are either directly or indirectly involved in surrogacy services, for ethical reason, we also excluded these type of activities. This year, we have also added any operation related to hunting or trading wild life. We have also excluded all production of single-use plastic, fully in line with regulation, but well ahead of the legal regulation in our countries of operation. Let's now turn to the assessment of our clients and how do we manage to do this holistic assessment. On this slide, we see really the component of this 360 view on our clients. Here, I would really like to emphasize that all these different steps that we are going to see quickly are really part of each credit committee for each of our clients, be they are small clients or be they are part of our top 30 clients. We basically start this credit committee -- this analysis and credit committee discussions with, who is the client, what is his profile and his business model. These are really the 2 key elements where we always start. We check probably who are the owners, who are the managers, what type of experience do they have, how do they organize the company, what is the business model behind it, what are the possible concentration risk, and how does the business model fits into the market trend and the development in the countries of operations. We typically continue with the impact in the environmental and social aspect of the client and its operation. How aware are the managers, how proactive are they, in terms of labor working conditions, potential negative impact of the operations in terms of CO2 emission, in terms of pollution, et cetera. Then we move in the first step to financial situation and creditworthiness. Here, we do have extremely detailed and strict analysis in terms of liquidity, profitability, solvency. However, what is important here is that we also engage in terms of projections, trying together with our clients, but also with scenarios to project the future -- the future performance of our clients. And this we do for small and for large, medium clients equally. It's very important, because from experience, what we realize is that the past financial performance is not enough to predict the future. The performance of the company is actually much more dependent on what we have seen before, meaning the client profile, the business model and also this type of awareness on environmental and social aspect. That's why we always start with this aspect, before going into the financial situation analysis. Then comes the financing request itself, where, again, we are coming with a very holistic approach, not a product approach, and we try at this stage really to engage into the investment or to engage into understanding what type of additional working capital are requested in order to come with the best financing structure for the client. For the client but also because it reduces the credit risk attached to any lending operation. Then we look at the collateral. But I would like to say here, this plays only a secondary role in our decision. We don't do collateral-based financing. We do, however, have a very strict approach to collateral in terms of limiting unsecured exposure, but also strictly applying high conservative discount on collateral values and having our collateral being assessed even by external companies. We finish this credit committee discussion always with a review of what is the business potential as Hausbank with this client, to make sure that our strategy going forward with the client is clear for us, but is also clear to the clients. So basically, here, you have seen all the aspects and how we manage through our analysis and credit committee to have a really round and detailed view on each client. If we move now to how we take decisions, on the left-hand side of the slide, you see basically this principle in terms of credit decisions, which I've already mentioned in the slide before. What I would like to focus on now in this slide is more the right-hand side. How do we take environmental and social criteria as part of a decision-making process. Economic assessment is important. Environmental assessment is also very important. We realize when working with entrepreneurs that the more aware and proactive in terms of environmental, social governance issue they are, these type of clients tend to outperform their peers in terms of operational and financial sustainability going forward. So even from a credit risk perspective, it has a positive impact. So how do we do to integrate this element in our credit decisions. Well, it's very simple. We basically analyze each individual client. We don't zoom on some of them, which might be potentially more green than others, but we basically analyze from a social perspective each individual client, and we assess their position. We also categorize each individual client into a group developed environmental risk category system, low, medium, high. And in case of high -- high-risk client, we also analyze them further through specifically trained Environmental Risk Officer, who also visit these clients to better assess the potential risk. Based on this, we are able to integrate in our credit decisions some key covenants, which we discuss fully with the clients and which are part of a credit decision. So they will be also monitored. This process is also for us, extremely important because, as you know, we engage with SMEs, which are majoritarily in the agriculture sector or in the production sector, which means by default, these sectors are, because they are long resource and energy intensive, they are the potential to be medium or high risk environmental impact. So by doing this, we ensure a good positive impact on environment, but we also realize that we ensure an even stronger Hausbank concept with these clients, because we are really together in helping them to implement forward-looking and sustainable strategy. So this is indeed long term, again, an element which reduce our credit risk going forward. Now if we turn to the 2 other pillars, structured lending process and qualified staff. You see on this slide on the left-hand side, basically the key element of our organization throughout the group. As Christian said before, there's absolutely no differences organizationally from a standard and policy and implementation in our banks between our different banks. They are all in line with German requirements, and they are the result, as I said before, from years of experience dealing with SME. Most of these bullet points, I have mentioned them already. I would simply like to maybe focus and say a word about our very strict and systematic early warning indicator system as well as a very regular monitoring of all our exposures at least on a yearly basis on top of all the adhoc and financial monitoring, we do in case of additional financing. So this is really a key element of building further knowledge of our clients. Now let me focus on the right-hand side of the slide, which is related to our highly qualified staff. You can see here in the metrics that we do have extremely experienced staff in our credit risk teams. They have been on average 5 years in their position as credit risk specialists, but they have been, on average, almost 9 years in -- with us in ProCredit. So they have a broad knowledge and experience, which allows them to assess very well the business, but also the credit risk that we might engage into. We do pay a lot of attention to training, basically. And Gian Marco will elaborate a bit more at the group level. This is also true for credit risk staff, obviously. I mentioned before we pay a lot of attention into bringing the knowledge that we build every day in our countries to the other countries, meaning within the group. We do this through our credit risk team here in Frankfurt and a strong team of country specialists, but we also do this by organizing very regularly visits and workshops where we discuss the key issues. By the way, I just came this morning from one of the 3 days of credit risk workshop where 60 colleagues are discussing the latest development in credit risk and the next project going forward. This allows us to be always more knowledgeable, precise in our credit risk assessment. And this also allows us to be able to structure timely approach that we can then roll out in all our banks. I would like to basically finish this explanation on our credit risk management with 2 examples. One of them is the green loan portfolio. And the other one is how did we manage during the COVID-19 crisis. On the green portfolio, I will not dwell too much on this slide. It is also there for your reference. You can have a look at it later on. The key messages here is that the green loan portfolio is not only a contributor to loan portfolio growth. It's also a contributor to an even better loan portfolio risk -- quality of loan portfolio. What we realized by analyzing our green loan portfolio is that basically the asset quality metrics related to it, systematically outperform the already very good risk indicators of the non-green portfolio. And it's a good illustration of what we said before. Conscious and carefully selected clients, but also a very deep analysis with experienced credit risk staff in this type of investment, very sustainable investment and full implementation of the Hausbank concept. So indeed, the quality of the green loan portfolio is a good example of bringing all these factors together. To finish, I would like to explain how we have been going through and managing through the pandemic in the last 18 months. Basically, this very robust process that we have in place and this close customer relationship that we have been building over years has helped us enormously to react very fast at the beginning of the crisis. In the very first days, we were able -- the teams on the ground were able to communicate with each single client to see how things are going for them. At the same time, we were able, at the group level, to define a group approach, which was immediately implemented by the teams in each country in terms of application of moratoria. A structure identification of a potential risk as well as monitoring, risk classification update based on the priority that we have defined together as well as providing additional short-term financing when needed and relevant for the client and of course, restructuring timely when relevant. So all these actions have been basically designed from a group approach and also applied locally with all our clients very, very swiftly. A couple of weeks already beginning of April 2020, we were able to roll out this type of approach. On the right-hand side, you see one example of restructuring. This is one of our medium client in Kosovo engaged in Spa and Medical Center. Obviously, because of lockdowns, this client has been really impacted by the COVID in 2020. It was able to reopen partially in October last year. We have an exposure of EUR 2.5 million, EUR 2.4 million with this client. What did we do? In 2020, we have decided to grant this client a 9 months moratoria in line with what was legally permissible from the EBA. In early 2020, we felt it's still too soon for this client, so we decreased basically the installment of this client for the first 8 months of the year. And what do we see in September 2021, the client has been able to go back without any problem to a normal repayment schedule as we have discussed with him. So -- and the prospects going forward are fully in line with the projection we did with this client. So it's a good example of the importance of taking timely decisions and being close to the clients. So yes, this example is a good note to end on. And to see that, indeed, with this close customer relationship that we are able to build over time, but also with very strict and organized processes combined with high quality of staff, we feel very confident going forward that we will be able to further accompany the loan portfolio growth and ensure the continuous very high quality of the loan portfolio. That would be it from my side, Nadine.

Thank you very much, Sandrine. [Operator Instructions] The question comes from Philipp Haessler, Pareto Securities. And the question is, on your midterm strategy, do you plan to expand into any new countries, and how do you see Ecuador's future in your group?

Thank you, Philipp, for your question. The first part of your question is a simple, no. We are not planning to expand in new countries. We do still see good potentials in the countries we are working it. We are now only beginning to benefit from our new positioning of those countries. Therefore, for the midterm, we are planning, as Christian mentioned, in our guidance, still to grow by 10%, and we do see enough potential with this new position in the countries we are working. Beyond that, there are some institutions. You are asking about Ecuador. There are some institutions and which are -- we do see still potential to benefit from this position. They are lagging a bit behind other. Therefore, we do have some 2 or 3 institutions in which will support our results in the future. Referring to Ecuador, as one example of that is, yes, indeed, we focused our presentation in Eastern Europe, simply because it is a bulk. They are the bulk of our assets. But we didn't leave Ecuador when we sold our institution in Latin America, because we did see good potential in the countries for our new business model. They are a very active SME sector. Some of them are strongly involved in green lending, in green initiative, invested with on our result, 16% growth in terms of profit show that the -- for our way of doing business, we do have potential in Ecuador. Therefore, the decision, how do we see the future? We see Ecuador as part of the group, and we would like to even benefit from the potential we do see in Ecuador in the future stronger. What we do here see beyond growth, we have a challenge there in the structure of our funding, which we are working now, therefore, putting focuses in growing in terms in the share of our current accounts on saves -- FlexSave deposits, that's a focus. For the midterm, on restructuring our funding structure, we are going to see good results based on the business growth, which we are observing.

Let me add, Gabriel, maybe also to the first question. I think everything that Sandrine just presented on the very selective client selection criteria. That in itself disqualifies acquiring other banks. It also disqualifies us from acquiring other portfolios, because simply we would not be comfortable. We never feel comfortable with what we're actually acquiring. We rely on our very strict credit risk procedures and standards, and acquiring other institutions would simply undermine that process.

We always grew organically.

Yes. Nadine, is there another question?

The next question is also from Philipp Haessler, Pareto Securities. You have shown us that you outperformed your peers on many KPIs. I don't know which peers you have included, but I think that the picture looks differently on ROE. Maybe you could comment on the ROE comparison with your peers.

Indeed, Philipp, thank you very much for the question. So on ROE, we did not actually perform the analysis for one particular reason. The analysis on a bank level, we have only conducted for the last 18 months, which includes the year of the pandemic. And frankly, I think if we included that year, and benchmark us against the competitors, it would actually show a very more favorable light on us against peers, which may be overstating the truth. Because through the cycle, other peers, especially in good times, in times of macroeconomic expansion, these banks tend to generate higher levels of profitability, particularly through high-margin consumer lending. What I can add about profitability is that throughout the financial cycle and as Gabriel already presented on a consolidated level, we have never lost any money. We have never had negative financial results. And the peer groups that are also part of this analysis, they have had at least 1, if not 2 or 3 years of very significantly negative financial performance throughout the financial crisis. Also, let me repeat that the years 2013 to 2019, in our case, financial performance was more moderate due to the restructuring, which other banks have simply not performed. We analyze a number of branches, outlets, number of employees on the level of these competitors, and we basically see no movement. So they have not invested in the real digitalization like we did. And with real digitalization, I mean not only developing e-banking or M banking apps that look fancy, but really taking the real consequences out of it, reducing physical infrastructure and replacing it with digital infrastructure.

The next question is from Andreas Markou from Berenberg. Can you please give us some details on how you see ROE growing in the next few years from accelerating revenue growth from net interest income and fee income?

Thank you, Andreas, for the question. Yes, how do we intend to do this. I think we have this one efficiency indicator that was quite telling, which is the loan portfolio per staff, where we already saw that the 10 banks that we have in Eastern Europe are outperforming local peers. Within these 10 banks that we have, there are some banks that still have very low efficiency indicators, not very low compared to peers, but low compared to other ProCredit banks. That means, for example, this is just an example, but loan portfolio per staff of maybe EUR 1.4 million, EUR 1.5 billion, EUR 1.6 million. Given the fact where we see where some of our larger banks are or more efficient banks are, that includes Bulgaria, it also includes Macedonia, we see that there is still a lot of potential for these banks to grow loan portfolio without necessarily adding operational overhead. Gian Marco will later on also explain the state of our IT projects and how many years, maybe we still need to invest in the current tech projects, but there's also a natural end to this. So in essence, to answer your question, we want to grow while remaining -- while keeping operational expenses and operational overhead broadly stable. And this operational overhead stable, both on a bank level, but there's additional scaling potential for us on the group level. Because we have the software company, Quipu. We have the ProCredit Holding in Frankfurt that add a lot of expenses on a group level, but growing the banks will simply scale on this very efficient operational overhead further in the future.

The next question is from Milosz Papst from Edison. Can you discuss your access to talent? How competitive are the local labor markets at present?

We will -- yes, thank you. Thanks for the question. We will go more into detail with Gian Marco's presentation on our approach to HR. So part of the answer to these questions is -- will be -- we will present it then, but let me maybe focus on the local labor markets at present. Indeed, this is a very good question. This is something that keeps us busy. We do have a competitive labor market, not only in banking sector, but generally, other companies investing in those countries of operation and looking for very good stuff. We are very focused on building relationship with universities, we've presenting ourselves in university, attracting actually students to come and to do trainership. We have a very selective onboarding program, which lasts 6 months, meaning 6 months of investment into selecting and investing, training these new potential colleagues. I will not dwell too much into detail now, because Gian Marco will explain this in detail. We are -- we have a very different way of selecting people than other colleagues, so even -- or other employers. Even if the markets are indeed very competitive, in terms of pressure on wages, other working conditions. We also notice that in some of our countries, also young, bright graduates, they move to other -- to Western Europe or to the U.S.A. for what they think might be a brighter future. But we are extremely well positioned in finding and looking for people, who are really sharing our value. We are extremely selective there. We train them a lot. We spend a lot of time with them before they integrate the team in their respective countries. It's a huge investment, but this is absolutely necessary, because indeed, the local labor markets are competitive.

The next question is from Marius Fuhrberg from Warburg Research. Given your strict customer selection, how much of an economy's SME sector is targetable by you? In other words, what is the ratio of customer requests you reject in average?

Thanks a lot for the question again. It's -- how much of the economy SME sector is targetable by us. We have, as I explained in the presentation, we do have a niche in this SME sector in our countries of operation. Why? Because other banks have very different way of approaching this SME sector. There is a lot of very good SME and very engaged and committed entrepreneurs in our countries of operation. The issue is how to find them and how to accompany them, yes? We are very strict at the very beginning in terms of, as I said, AML issue, unclear ownership structure, in terms of when we feel that the cooperation will not work. However, because of our experience built over the years, but also because of a gradual approach, we engage with our SME, we don't refuse upfront clients where we feel they are not perfect. No, no. We exclude them when we feel that, okay, exclusion list, as I explained or when values, reputation does not match with our positioning as a very responsible bank. This is the no go. But for the bulk of our SME, entrepreneurs are very willing to improve, to engage. And here, we engage with them. So our strict customer selection should not be understood as narrowing too much of the market there. And by the way, there's a lot of SMEs present in all of our markets, but more to select the clients with whom we can really work, engage and improve together.

The next question is also from Marius Fuhrberg, Warburg Research. If every client is supported and monitored so closely, which obviously requires much personal interaction, where do you see the main source of further cost-income ratio improvement?

Yes. I think I touched on this question, Marius, already before. But let me -- because you're mentioning this personal touch again that we have the clientship, relationship that we have with our SME customers. Indeed, this is the part where at some point, we reach the limit of scalability. Our BCAs, our business client advisers, they typically manage portfolios of roughly 50, maybe up to 60 SME clients, and that is it. And then at some point, we need to find new BCAs and finding new BCAs, as Sandrine just explained, is not easy. We have to train them for years before they even become productive. So that part is really not scalable. What is scalable and Gian Marco will go more into details is the highly digitalized back-office functions that we have. This is one of the major features that allows us really to keep these high ratios of loan portfolio per staff and operating expenses per loan portfolio, these back-office procedures are essential for that on the one hand. And the second, the ProCredit Direct. The approach towards private individual clients that keeps us -- sorry, that allows us to maintain operations on the back of essentially a handful of branches per country, where peers again, manage networks of hundreds of outlets in these countries. So in this sense, this is where the true potential for further scalability and cost income ratio optimization lies.

The next question is from Milosz Papst from Edison. What do you think is the loan book per employee you can reach in the medium term at group level?

Yes, hard to say. So the -- I guess we're still exploring a bit our limits. But right now, what we observe is that our most efficient banks have a ratio of around EUR 3 million, a bit less than that. And we would also not want to push it at the risk of incurring credit risk. So; this is about the level that we can reach. And like I said, some of our smaller banks are still well, well below EUR 2 million in this ratio. And there lies a lot of potential for growth and scalability.

And this is actually our focus now in the institution, which are not reaching this level of efficient and then support and then to region. And there, we have enough to do. So our limitation we do see there, more than increasing the average portfolio in the forward-looking institution.

And even on this focus, I would say that the loan book per employee per se is not really a key objective we would try to reach within a certain time. This would be, I would say, irresponsible. We rather focus on indeed getting in the right employees and also making sure that they have all the tools to have this -- to perform this very prudent risk management to work with a client, with all the expertise they need. So of course, we follow this indicator, but it is in no way an objective. It's more of a consequence, it's how we basically analyze the consequence of our actions, keeping always in mind the quality of the loan portfolio and the quality of the services for the client. So it's more something we follow, but we try to push up.

The next question is, do you have a target CET1 ratio going forward? Can we expect the current guidance for this year of above 13% also to remain going forward, also in the light of the envisaged dividend payment?

Okay. Thank you to the person asking that question. That is indeed -- let me start maybe cleaning up a common misconception that might have come from our past financials simply, that CET1 ratio would typically hover above 13%, and we would tend to guide for the end of the year, a ratio that is above 13%. This does not mean that 13% is our target rate by all means not. We saw the CET1 requirements right now. They are at 8.2%. So we are very comfortable right now in terms of capitalization. And we see other banks here in the German banking market as well. Banks that actually account for higher combined capital buffers due to systematic significance or whatnot. And they have, for example, guidances or targets of around 12%. So we should not mistake the 13% that we have guided in the past as a target rate. There is certainly comfort. And then going forward, yes, what's -- where -- if anything, the next threshold that is closer to the current level of 13.7% is a Tier 1 requirement of 10.1%. Here also, there is still a lot of buffer. And these requirements right now, they are covered by CET1 capital. But in future, they could well be covered by other capital instruments that are more cost and capital efficient for us as a group. The dividend, that's also part of the question. The dividend is indeed already subtracted from the current core capital entirely. This is EUR 20.6 million that are not reflected in our CET1 capital. And going forward, we will continue doing the same thing. Whenever we accrue profits, interim profits, we will deduct 1/3 or more -- accrue 1/3 for dividend purposes as this is our dividend policy.

The next question is from Philipp Haessler from Pareto Securities. Sorry for a detailed question, but I am curious why hydropower plants are on your exclusion list.

Yes, indeed, that's a good question. Thanks a lot. We have basically on our exclusion list, 2 types of exclusion, first of all, related to protected areas and also related to certain size of hydropower plants, where typically in our countries of operations, the setting, the construction of this larger size hydropower plants have had a negative impact on the environmental system in which we are. That's why we are also very careful and have excluded some larger size hydropower plants in our countries of operation. This has been, yes, lesson learned also from the past. We are very careful. Renewable energy and clean energy also needs to be checked, yes. And it's not because we invest into a renewable energy projects somewhere that we should be a little bit more flexible on all the other elements that we normally looked at. We are not on the contrary. So indeed, we have excluded this from our financing possibilities over a certain size.

The strongest argument was, as you said, Sandrine, protected area.

Exactly.

That's something which has been disregarded in the past. Based on our experience, we found some projects exactly because we have to reject the protection of areas with -- it has a new focus nowadays now, not only with us but in the whole protection policy.

Yes.

The next question is, can you indicate your cost of risk level for the next year or over the cycle?

Can we? We could. No, let me try to -- so going forward, what is the expected cost of risk? I think this is a difficult question to answer to which we have yet not addressed in our projection reports in the past. And I think this is also not the setting to do this, but let me try to say something intelligent on that question is our cost of risk in the past years, let's say, 2017, '18, '19, pre-pandemic level was more or less 0. In 2017, we had some expenses. In '18, '19, we had some net releases due to recoveries from written off loans. So even that out at around 0. In 2020, obviously, our cost of risk was around 56 basis points. This was mostly driven by the forward-looking IFRS 9 expected credit risk -- expected credit loss model due to the pandemic. But also, we had some restructurings. Also, we had some defaults. If I -- if you now ask me what is the medium-term guidance for this indicator going forward, the truth lies somewhere in between the 0 that we've had in relatively good years and the 56 in what was essentially really a stress scenario and the pandemic. What I can say or what we can say, I think, with a high degree of comfort is that we will continue. We likely continue to outperform competitors on this metric because credit risk really is our strong suit, and it is highly embedded in our way of doing business, as Sandrine explained before.

And the pandemic was an important experience in that to stress this our way of doing -- having presented what we did observe no deterioration in our quality of the portfolio in fact in such a difficult cycles. It was the pandemic, reinforce our confidence in our way. We'll continue doing it. So.

This will be now the last question for our question-and-answer session. Unfortunately, we won't be able to answer all remaining questions. If your questions, therefore, hasn't been answered or if you have any additional question, please feel free to reach out to us after the capital market. The contact details of the Investor Relations team are available on our website. The last question is, can you comment more precisely what actions you want to take to increase share liquidity and visibility of PCH stock in USD terms.

Yes, indeed, as Christian was mentioning, increasing the liquidity of our shares on Investor Relations activity is the focus, is the strategic focus. Share liquidity have been gradually, very gradually increasing. We'd like to continue doing so. We still, under this level of liquidity, we do see upsize in our price if we may so of the share price. Now having emerged with strong results from the pandemic when we talked about all the results during this presentation, we would like to increase our presence in the capital market just presenting our results. As I said at the beginning, it's around timing in doing so, therefore, putting strong emphasis in Investor Relations activities would be the focus, presenting our results in conferences, road show. This first Capital Market Day is just the beginning of those activities for what we are planning. And last but not least yet, our ESG presence in the media, presenting much more strongly our ESG positions or to put it differently, the results we've got in the context of our ESG position and a stronger presence in the media that's with like are planning to do so, and we hope to see more in the future.

Thank you, Sandrine, Gabriel and Christian, and thanks to you for your questions. We'll now have a break of yes, approximately 5 minutes until 20 to 4 Frankfurt Time. [Break]

Welcome back to the ProCredit Holding Capital Markets Day. Before we continue with the next presentation, just a short reminder to feel free to post your questions anytime during the presentation, in the section below the livestream window. As mentioned before, only analysts that cover the ProCredit Holding share will be named. All other questions will be anonymous. The speakers will then answer them during the upcoming question-and-answer session. The next presentation, key enablers: Technology and staff will be held by Gian Marco. Gian Marco Felice joined the group in 2002 and became a management board member last year. After having been 9 years, the Managing Director at Quipu, our IT subsidiary. He is responsible for business support, environmental management and impact reporting as well as technology. Gian Marco, the floor is yours.

Thank you very much, Nadine. Hello to everyone from my side. In the next presentation, I will focus on technology and stuff. There is a lot to be said about the 2 topics. So I will rather focus on the objectives as well on the principles that guide us in our strategy. Both IT and staff essential to our strategy, as was discussed by my colleagues before. In fact, when you can think of our business strategy resting on 2 pillars. On one side, technology and on the other side, staff. On the technology side, we want to be a direct bank for our clients, meaning that we want to secure all of the transactions with them online, and we don't want to have any more over-the-counter transactions with our SME and private individual clients. Moreover, we want to be very automated on the back end of our systems and this will drive efficiency moving forward. Let me pause here for a second and just mention that often enough, when you talk about technology, operators tend to focus on the front-end operation, they tend to focus on electronic banking, they tend to focus on mobile banking where, in fact, this is only the tip of the iceberg. Below the surface, really, there is an enormous amount of infrastructure that ultimately dictates the quality and the scalability of the technology of the company. We managed to do that, both being a direct bank and very much automated on the back end, thanks to our natively integrated and scalable technology infrastructure. I think here, really the key word here is integrated, meaning that often enough different system address different particular aspects of our business that will be treasury, accounting or payment and is really how the information flows between the system that dictates ultimately how scalable they are. Because our system are native and they have been built bottom up by us, they speak naturally the same language and therefore, we think of the integration right from the beginning and that makes the whole technological stack quite scalable. So technology plays a key role for us. It is indeed the first pillar of our business strategy, but in and by itself is not enough. You can think of it as a necessary condition, but not sufficient for our success. In order for us to be really effective as a digital banker for SME, we have to also rely on the second pillar, which is very much focused on staff and staff development. Why? Because if you want to be -- if we want to be a strong bank with a strong relation to our customer, that relation must be driven by competent staff. And therefore, we pay a significant attention to select our staff and to train them in order to be capable to be up to this task. That drives from one side business, as Christian was saying before, meaning that we are a house bank for our SME clients, therefore, not only a lending institution, but we drive also business in terms of net fee and commission income on the assets on the liability side, payments and by having a very comprehensive view of our clients, so we can also manage credit risk properly. So technology and stuff are our 2 main pillars of operation. In a nutshell, you can think of technology as an enabler for us to reduce cost and to save time for both us and the client. In a way, it's a win-win situation for both. It clears the table of all of those day-to-day transaction, which occupy time and energy so that we can focus on high-value discussion with our customer to understand them better and to be able to give to them and to deliver to them better services. By so doing, we attract the best clients in our markets of operations. Our digital transformation is evident in the reduction on the physical infrastructure that ProCredit used to have in the past and on the number of staff. Here, I think it's worthwhile focusing for a second on the word transformation. I use the word transformation in case of ProCredit in good conscious, meaning that I think that really ProCredit today is not the same as ProCredit 8 or 9 years ago in terms of our organizational structure. We really have transformed operation from a traditional retail base to a digital direct bank as we are today. Many other banks also talk about transformation. But in many cases, I would rather speak of evolution. Meaning that they develop electronic channels in order to add them to their physical infrastructure and gradually, they try to move their clients away from their branch and over-the-counter operation into the digital channel, but they do that very slowly and very gradually. Instead, we were very radical in our transformation. As of today, we only operate with 45 branches and around 3,000 people. This has created efficiencies. And you can see here 2 key performance indicators, loan portfolio per staff and loan portfolio per branch compared to the peer group that was used before in the analysis. Let me add when we are talking about scalability, that for us in ProCredit the marginal cost of adding an additional client into our platform is negligible, it's basically 0. Meaning that this is a true skilling effect. Yes, our business model is relationship-intensive. At heart, ProCredit is a relationship bank and therefore, we spend a significant amount of time and energy in dealing with our SME companies and clients. This carries a certain cost. As Christian said before, our average portfolio by BCA is around 50 clients. And nevertheless, we can increase our income significantly compared to the cost structure of the group because ultimately, it is only those added value positions, which will drive the HR cost moving forward beside inflationary pressure on wages. At the same time, we can dedicate more attention and more time and more resources to the employees that we have in the group in order to put them in a position to be even better at doing their job. But this is the beauty of being small, that you can focus more energy resources on the few people that are around as opposed to have -- to manage an operation with thousands and thousands of people that are anonymous to most of the managers and therefore, that each individual person does not receive as much as attention as they do with us. This drives both performance as well as identification with the group. We rely on a very few small branch network. In fact, branches for us are basically obsolete. And moving forward, they will continue to be obsolete, meaning that we will continue to grow our balance sheet and business, but not our branch network. In fact, I would not even call it a branch network anymore. Our branches are more like business center. Our colleagues from Bulgaria will show you a bit later on that our branch look is very different from a traditional branch. You would see at the corner of one of the streets in one of our countries of operation and even in Western Europe, they are more like business center. We don't do any more over-the-counter operation in our branches. All of the cash transactions are put away from the branch into the 24/7 zone, which is accessible by the clients at any time. And all the cash management associated with the 24/7 operations has been outsourced to third-party company. Therefore, our colleagues are able to focus on high-quality discussion with our customers. And in the future, this will continue to strengthen our position as a house bank for SME clients. So now let's dive a little bit more into the question into the topic of technology. I would like here to share with you, again, both our objectives as well as our principal and our internal organization, how we think of IT and how we organize ourselves in order to support the banks in strengthening the position of technology. First of all, I have 3 slides where I want to give you a little bit of a sense on the priorities we have and we have had in the last couple of years, and we will continue to have in the next 1 or 2. We have digitalized all financial transactions with customers, meaning that all payment operation, all account-related operations, all operations that touch money right now are based on our digital platform. But these are not the only operations the bank perform, there are also so-called nonfinancial transaction. We do a bunch of things with our clients. We sign contracts, we receive document. We exchange certificates and all of this is based more or less on 2 principles. The first one, you need to identify the client properly. If it is a new client and you need to do your AML KYC checks. And after you identify the client properly, you need to sign ultimately a contract with this client. In order to be able to scale beyond our physical location and in order also to improve the customer experience, we have been deploying in all of our countries of operation, remote account opening technology, which is mobile first, meaning uses the mobile app and face identification technology in order to recognize the client and to onboard the client into the platform. This allows us to scale significantly beyond our physical reach. Then I want to show you a little bit where our priorities when it comes first to private clients and then to business clients. These are the 2 segments of operation we have. On private clients, the attention is mainly focused on digital payments. This is the frontier where technology plays more and more an interesting role. And when we are talking about digital payment for us, A, it's very much in line with our overall strategy. Second, it is also a trend in the market. We see a gradual but persistent shift away from cash into digital payment, and we want to be at the center of this transition, and we want, of course, very much to drive it forward. When we are talking about digital payments, there were possible in the countries of operation where the providers are already present. We work with Apple Pay and GPay, for example, in Ukraine or in Bulgaria or in Romania or in Serbia, but also we have our own electronic wallet in case those big operators are not present. But we also drive digital payment via QR codes and instant payment via a phone number and e-mail. So different formats and different way to allow clients to transfer money from one client to another in a fast and convenient and secure way in a cheap way. And then we focus again on finalizing our transition to being able to manage all nonfinancial transactions on the app. And particularly when it comes down to the relationship between the payment and the card, the card being the medium in the past that allow the clients to make payment at POS terminals, e-commerce. And now the app experience also includes the full management of the card and the full digitalization of the card to the point in which when the client opens an account, we can issue a card instantaneously to the wallet of the client. The client can use at the POS terminal, on Internet purchases or on our ATMs, so that the client can start banking with us immediately. Plus they can change the limit and do many other things related to the control that they have on their payments. When it comes down to business clients, there, we are also a direct bank for business client, obviously, meaning that all of our clients bank online with us. But we want to finalize the full integration of new financial transaction also for SME. We have done so for PI, and now we have to finish the work for SME. SME are more complex than private individuals. They have different organizational structure. They have a different level of authorizations. They have many difficult operation, international money transfer documentary business. They are not hugely difficult in and by themselves but of course, they are much more diversified than private individuals. And we want to be able to give them the ability to make all of this transaction with us online without having to physically come to one of our branches, A, not waste time again and second, not to also occupy space and to occupy the time of our colleagues. This technology or this -- the ability for us to digitalize nonfinancial transaction is based on our ability to issue to our clients' qualified digital signatures. After we have identified the client properly through our remote identification process, we can issue to those clients the digital certificates. We give them on our electronic channels, the ability to sign and therefore, we can authorize transaction and exchange documents with each other. For example, this is particularly interesting in the area of documentary business, an area that is energetic to our business model, letter of credits, the letter of guarantees, which is traditionally a very document heavy process, but not only also international payments. In our countries of operations, there are various capital control mechanisms imposed by local regulators. And therefore, a lot of paper work must be exchanged and we want to make sure that in all of our countries of operation, we are able to do so in a very yes, scalable way. Now how do we do this? How is our organizational setup? Well, we in-source our development of technology in our company, Quipu. Now Quipu is fully owned by ProCredit Holding, and is incorporated as a limited liability company here in Germany is based in Frankfurt. Let me give you a few key facts about the company. It was founded in 2004. We have around 450 employees in Quipu right now. 20% of them are based in our head office here in Frankfurt. The rest is based in 8 offices spread around the world, but mainly in our countries of operation: Ukraine, Macedonia, in Latin America. We still have an office to support our bank in Ecuador and so on. We speak 30 different languages in Quipu. So we are pretty multi-quality and we have approximately a budget of EUR 35 million this year. To give you a size of our IT operations, the annual cost is around EUR 35 million. With this money and with these resources, we do 3 things: first, we develop software. And we develop all of our software, all of our core banking systems software and electronic channels. This include, of course, the typical electronic channels you would be familiar with, e-banking, mobile banking but also our payment modules, accounting, treasury, reporting, customer relationship management, all of the software are developed by us. They are implementing on our banks by us, and they are maintained also by us. The second line of business of Quipu is card processing. We are a card processor for both Visa and MasterCard, and we manage the card portfolio of our -- for credit banks both on the issuing side as well on the acquiring side. And now it's very synergetic because in the topic of digital payments, we work very closely between our software colleagues and our processing center colleagues in order to facilitate the payment of -- yes, the payment of our mobile application by using the card as a medium. Finally, last but not least, we manage our cloud and infrastructure. We have in ProCredit and in Quipu a hybrid private public cloud environment. Since 2015, we have been working very intensively on centralizing all of the data and all of the data centers of the group into this cloud environment. The private segment of our cloud is based in Frankfurt. It is co-hosted in Equinix, which is a providers of facilities. In Frankfurt, we have 2 data centers, both on active active configuration. So we don't have any more the traditional hot and cold sites, but rather we have 2 full-blown data centers working at the same time in parallel. And on that private segment, which is owned and managed by us, we host the data of our clients and the software that makes our bank run. So we have the so-called line of business operations. On the public component, instead, we have the more classical ICT, information and communication technology, meaning that we have our Microsoft 365 environment, all of our e-mail exchanges, chat, video and files plus on the public segment, we also do our DevOps using Microsoft technology stack. This in-sourcing strategy has some cost Quipu, EUR 35 million plus the complexity of managing it, but also has many benefits. And let me focus on the benefits right now. On the first 2 points, we have now a proprietary, vertically integrated technology stack. Let me pause for a second on the statement because this is rather unique in our countries of operation. Most of our competitors buy technology from many companies, many suppliers, some of them develop also pieces of the technology in-house and they do that over many, many years. And ultimately, they end up with MS, maybe not, but with a complex environment, which often enough also leads to the problem of legacy IT system. System which have been developed in the past, but they are still part of the core technology, but they have not been migrated to newer technology and present a cost and a headache for most of financial institutions. For us, instead, we own and operate our own technology. So obviously, we took, as you can imagine, the time and also the -- we had the path to make sure that this technology was integrated and kept up speed when it came down to the various improvement or development in the field of IT. Then let me come to the next 2 points. Priorities are under our control. This is very important in technology. Usually, when we speak about IT, people focus on -- yes, on the digital part, you say on the technology part. But making IT functioning institution is very much an operational issue. You need to take this technology and you need to plug it in into your reality at the business level. And that process is actually not so straightforward. Business and IT speak different languages, and they often enough have different priorities. Because we control both the supply side of technology and as well as the demand on the bank, we can make sure everybody speaks the same language and has the priority [ aligns ]. This makes the deployment of technology for us much more agile. Now let me come to the next point, data security and cybercrime prevention. I use this as an example of the synergies that you can achieve by having a, let's say, centralized environment. I mean the fact that the cloud environment scale and decreased synergies is not new. But it is something that has a profound impact on institution. For us, for example, is the way to make sure that we can perform -- or we can spread best practices to all of our countries of operation even when individually and alone -- left alone, they will not have the capacity and the resources to really come up to speed at a level of quality. For example, although we have only 3 banks in the European Union, Bulgaria, Romania and Germany, all of our banks comply with GDPR. And this allows us also to create very strong reporting structure. Also, this is not to be underestimated. We operate in 12 different countries, 12 different jurisdictions, 12 different central banks, each one of them with their requirement, each one of them with their they say, data exchange. Plus, we need to consolidate all of this information at the level of Germany because we are regulated by BaFin and by Bundesbank. And therefore, we have strict reporting requirements, both in terms of timing and quality. And plus, we are a public institution and therefore, on top of everything else, we also have reporting requirement. Getting reporting right is key to -- not to have it as a headache and it can be a significant headache. Therefore, our system are natively integrated. Its integration allows us to collect data in a very easy way and to make sure that the data is a good quality data. Lastly, let me come to the last 2 points of this list. Cost because IT, of course, is not for free, and it's a significant investment. Now on the first point, our banks do not need to operate anymore their own IT environment because we do it for them in Quipu here in Frankfurt or everywhere in the world where we are. Now these are significant advantages. First, it creates cost transparency for them because they rent our services over a Software-as-a-Service approach, meaning that we charge them a monthly fee to consume all the technology that they need. They can predict it and they have visibility on those costs. But even more important, they don't need to worry about taking care of this very important aspect of the operation, and they can focus on business. And they can focus on quality and they can focus on clients and they can focus on stuff. And therefore, this allows them to improve their operation overall. On top of that, at the group level, and this is the last point, we have full visibility on overall IT cost at the level of the group. This is also very important because if you ask commercial banks, if you ask companies in general, financial institution, in particularly, what do they spend on IT? This can come under many items. Staff is under HR cost. Software is under license. Networking communication is under communication costs and then you have insurances. Data centers are usually depreciated and capitalized and depreciated. It's very difficult even for institutions to understand how much cost they have in IT. If you ask us how much we spend in IT, we have one number, EUR 35 million. That's the budget of Quipu, which as of now is 90% of the group IT expenses and after centralization is finished in 2022, and I come to that in a second, it will be basically 100% of our IT expenses. That also gives us the ability to plan ahead and to make sure that our costs are controlled, and we spend the money there where we want and we will need to. So I have the last slide on technology. I want to discuss with you and to show you where our priorities right now, present, in future and what will keep us occupied in also called technology road map. Before we go to the present and future, a little bit of the past, just what has been accomplished so far. Again, all of our transactions are digitalized. We are basically at the end of our centralization process. We have centralized 8 of the 12 banks plus ProCredit Holding, plus Quipu, plus Academy. So in fact, we have 4 more institutions to go and 3 are ongoing: Bosnia, Georgia and Serbia. And finally, we are fully a direct bank for private individual on financial and nonfinancial transactions. What are we focusing on now? We have 2 priorities. We need to finish what we started. We are almost there but not quite yet. We need another probably 18 months in order to complete the whole transformation of the group. We need to finish the centralization of all of our banks into our cloud infrastructure and centralize all of our technology into Quipu. And second, we need to finalize the full digitalization of nonfinancial transaction for SME. Often enough, this point is not about technology. The technology is there, and we have it and we can deploy it. It's more about local regulation. The local regulation need to go hand-in-hand with our ability to deploy this type of solution for the customers. But more and more countries are moving in that direction. Also, thanks to the pandemic that has accelerated this trend. What is the outlook for us? The outlook for us, on one hand, our technology cost is going to level off after centralization is finished, as Christian mentioned before. Now there will always be a certain amount of cost pressure on technology coming from inflation, coming from external suppliers. We also have external suppliers. The biggest external supply we have is Microsoft. It's actually one of our key technology suppliers. And we also pay a certain amount of licenses to them. But when it comes down to our own resources, in terms of software, processing center and cloud, we have reached a level of capacity that allows us to develop, to implement and to maintain the level of technology we want in our banks. So moving forward, I would assume that our cost for IT will level up in and around the number that we have now. When it comes down to technology, what does the future bring? Well, difficult to tell. Of course, we always have to be very much alerted and on top of the technological development. But my sense is that the future on IT can be defined basically by 2 words: data and security. And both of this topic will keep us very occupied in the years to come. Good. Now let's go to staff. We spoke about technology because technology allows us then to talk about staff. Our business model is based again on a strong relationship with clients. Our clients appreciate our technology, I think. They like to bank with us online, but in and by itself, it's not the reason why they come to us. They come to us because they appreciate the collaboration they have with our business client adviser, they appreciate the collaboration they have with our credit risk officers, with our environmental and social officers, with our legal adviser with all the people that are necessary in order to go deeper into the relationship with our SME clients. So now I want to discuss with you the principles we base ourselves on in order to select and train our staff and eventually to work together. I only have one slide, so it stands with content, so to say, and let me take a step by step. Let's start from selection. Now one can summarize the principle we use in selecting our clients with the following sentence. We care as much as about what you have in your heart and what you have in your brain, meaning that analytical skills are important, fine. The fact that you are able to think critically to act rationally is very important. And we have, of course, we put a lot of emphasis on the fact that who we hire are people we are capable to work with are really at the operational level. But that is not enough by far. What is important, in my opinion, in our opinion, is that our colleagues have the social competencies and communication skills and the ability to work with others to get things done. One can view it another way. In my opinion, complexity nowadays in institutions is not vertical, it's horizontal. Nobody locks themself into a room for days in a row, thinking about perform problems alone and then coming up with brilliant solution. Most of the time, what we do, we work together. On complex problems, in the sense that there are many components of the problems that need to be solved, and everybody brings their expertise and everybody brings their point of view and add values to the whole process. Now for that to happen, people need to collaborate constructively together and need to be able to understand each other. We need to be able to come up with common solution, and they require social skills and the ability to see yourself in the team and know yourself as an individual only. So when we select people, we select them with this type of character. We're selecting from a very diversified education background. Often enough, I find myself in a situation where colleagues from other banks ask me but how is it possible that you hire staff, which has humanities as a background or they come from STEM. Banks need bankers. They need people that study economics. Well, I would say that what you learn in school is not necessarily a specific subject. What you learn in school is you learn to learn. You learn to study. And if you had a sort of tool kit, then you can learn anything you want in life as long as you have the proper attitude. And in this case -- and for this point, I come to the last point in this block. You must want to learn to be part of ProCredit. You must have the proper attitude and you must also go through the proper effort to do so. You will see in a second our selection process is pretty strict and ultimately out of many people that apply only few make it to the end. But we can find those people. And once you find those people and you select them properly and you train them properly, then the outcome can be quite -- can have quite of an impact. After we select our staff, we train them. We train them, first, as my colleagues mentioned before, in our 6 months onboarding process, and we train them later on in our academies, both the 1-year academy for everybody and as well as the Management Academy, our 3-year program to -- for our present and future manager. And we continue to train them all the time through various working group seminars, occasions, both technical and -- otherwise, where we meet each other and we exchange ideas and we all learn more from one another. Maybe what I would like to emphasize more than the actual programs we have, the principle, again, that we follow when we train people. We want to train them to have the ability to be independent and to be capable of working together with others. So our training is really focus on creating those competencies such as critical thinking, ability to communicate, working teams that ultimately will be used in their day-to-day work and will make them effective. We have a curriculum that I think is very unorthodox. If you look at the curriculum of our management academy, which is public in our website and under the credit holding, you will see that we spend half of our time training our colleagues on technical issues, such as accounting, banking, financial analysis, auditing and we teach them the other half on topics which are really very on the surface, very little to do with banking. History, ethics, philosophy, science and once again, often enough, I'm confronted with these questions by others, but why do you bother teaching your staff history? Well, we teach them history because that helps them to think. And whatever helps them to think outside of the context of work where there is less pressure, when there is more freedom and ability to do things, we'll teach them how to think properly when they go back to the office and when they interact with others in front of a difficult situation, allows them to have a sense of judgment. And we want our colleagues to have a sense of judgment because finally, the way we work together is that we empower people. We empower people and we make them directly responsible for the outcome of their work. You can see this relatively clear in the organizational structure of our group. We have a bit more than 3,000 employees across our 14 institutions, the holding and the mother company has in and around 100 employees. We do not command the control. We give our colleagues the ability to deliver results independently on the ground. Of course, within the framework of a common set of values and a common set of principles that we spend a lot of time discussing about in and around our academies but not only all the time. So that we give them a compass that guides them on taking those decisions with though ultimately need to be taken close to the client and in an independent way. This not only drives performance but also drive identification and enthusiasm and also allows us to keep our colleagues in our bank because they see themselves as protagonist of the story not only as bystanders. You can see the results of our effort in numbers. Here, I would like to focus maybe on 2 or 3 of them. We had last year more than 11,000 applicants for our onboarding program. We have around 3,000 employees with a 6% turnover rate. Roughly speaking, we need to replace 150, maximum 200 people per year. So you can see that out of 11,000, ultimately will come down to 200 is quite of a selection process. We are very demanding with our staff. At the same time, we also give a lot to them. We have a very flat [ hierarchy ] and a very flat salary system, not driven by bonuses but by the performance of our clients is measured really on the overall contribution and is not driving their salaries and the rewards. This, again, in our opinion, over the long run, allows people to be motivated but more profound drivers than simply monetary ones. They see themselves into the long-term results of the group and it creates a better atmosphere when managers are not paid a multiple of 10, 20, 30 across basic -- beyond an ordinary staff. Finally, maybe awards on diversity. You see here that out of our old middle management and senior management teams of all of our management teams we have a participation -- gender participation, which is 50% men and 50% women. I think this is just the result of the fact that we look at people through meritocratic glasses. We look at people through their performance. And we, therefore, focus on their abilities and they come at in all genders in all shapes and in all forms. But to look at ProCredit just in numbers is not enough. If you really want to understand us, you need to go beyond numbers. And the best way to do that is to come and visit us in our academies, particularly the one in the [indiscernible] where we centralized all of our management training. There you can touch first and the reality of our world. You can talk to our colleagues, perhaps you can even participate to one of our history classes or ethic classes. And you can have a first-hand impression of who we are and what drives us and what are the values at the basis of our business and of our company. Until then, I thank you for your attention. And I will be looking forward to take your questions after the presentation.

Thank you, Gian Marco. Before we continue with the next presentation, just a short reminder to feel free to post your questions any time during the presentations in the section below the livestream window. The speakers will then try to answer them during the upcoming question-and-answer session. Last but not least, we are very happy to have our colleagues from ProCredit Bank Bulgaria present today to give you more color on operations on the ground. Kameliya Mineva is a management Board member of ProCredit Bank Bulgaria. She is joined by Teodor Karaivanov. He is a branch manager. Kameliya, Teodor, the floor is yours.

Thank you, Nadine. I would like to start with a short overview of the business operations of ProCredit Bank Bulgaria and also how we stand compared to other banks on the market. ProCredit Bank was established in Bulgaria in 2001, which means that we have been operating on the market for 20 years already. During this time, we have established a strong name for an impact-oriented institution, focusing on working with SME clients. Our clients work with us in terms of banking services, and financing as well, which means that we are their main financial partner, i.e., their house bank. We know the business models well as a result of our clients. We know their opportunities. We know their needs, which means that we are able to offer adequate solutions even during challenging times. We have established a trusted and long-term client relations and this is a key prerequisite in having very good loan portfolio quality. Throughout the years, we have also invested a lot in our digital channels. And nowadays, they enable us to offer our services to clients 24/7. We have a very efficient network compared to the rest of the banks on the market. And this brings very good efficiency and adequate cost structures. With our private clients, which Teodor will present later, we work completely remotely meaning that the whole process from opening an account with us to performing everyday banking transactions and even receiving financing is done completely online without any need of the client to visit our premises. In Bulgaria, we are physically present only in 6 locations in the biggest cities, where we have very modern looking branches with open space for our staff and specifically designed areas for meetings with clients. This you can see on the pictures on your left. We also have a very unique for the Bulgarian market, 24/7 zones, where clients have access during day and night to our services. Securely, they can do their transactions without the need of staff to support them. All our SME clients have Internet banking, and 100% of their transactions are performed electronically. Cash withdrawals and deposits are done by the machines in the 24/7 zones and domestic and international transfers are performed electronically. In other banks on the market, still the majority of these services for businesses are provided over the counter and as a result, during working hours. From the point you see on the map, we manage to cover the whole territory of the country. And in these points, we have only front office staff positioned, staff that work directly with clients. These are business client advisers and branch managers. Business client adviser is the main position in the bank because these are the colleagues who are involved in the acquisition of business clients as well as maintaining the relationship with the existing clients we have in the portfolio. At the head office in Sofia, we have all the back-office processes, staff and tasks located. So we rely on very high centralization, which is unusual for the Bulgarian market. Even the bigger banks, they still have quite a decentralized model with an extensive and quite costly branch network structure. This overall efficient setup allowed us to start working in Northern Greece 6 years ago. So there in Thessaloniki, we have a front office team positioned. Our digital way of working with clients gives us very good prospects to grow further with both SME clients and private individuals in both countries, Bulgaria and in Greece, without the need to expand our physical presence or to open new locations. Regarding the market in Bulgaria and the banking sector, in particular, there are 25 banks operating on the market. But our business model and the results we managed to achieve in the last years make us stand out even compared to the biggest banks on the market, which have foreign ownership and even longer group experiences. In terms of total loan portfolio, which you can observe on your left, we rank in the middle as size. Our total loan portfolio is close to EUR 1.2 billion and it means we're 10th in ranking. The top 5 banks on the Bulgarian market are: OTP Bulgaria, UniCredit Bulbank, Eurobank Bulgaria, KBC Bulgaria and Raiffeisen Bulgaria. All of these banks work as universal banks on the market, meaning that they have business clients and their portfolio is made of all categories: micro businesses, SMEs, corporates, and private clients. For some of the banks like Raiffeisen and OTP, consumer and housing loans make the biggest part of their portfolio. 50% and 37%, respectively, is their business share. Whereas in our case, it shows that we are the only specialized bank on the market with 88% of our portfolio going to business lending. We are not involved in consumer loans as a strategy. What we have with private clients in terms of lending is mostly housing loans and renovation loans. The fact that we have the biggest share of business loans in our portfolio as well translates in having the highest loan portfolio per employee. In our case, it's EUR 3.1 million, which is more than twice higher than the other banks on the market we compare with. Also, our high degree of digitalization is hereby proved when comparing the number of locations of our bank and that of the competitors. We operate with only 14 physical locations in 7 cities, whereas the branch network of the other banks ranges between 120 branches to almost 300 individual locations. The efficient network we have also puts us in a very good position in terms of efficiency parameters, like, for example, the operating expenses to average loan portfolio, we are the best compared to the 5 biggest banks on the market with 2.1%. Our cost/income ratio is also below 50%. This together with a very good and stable NPL ratio brings us to good and stable profitability. Let me add here that our NPL ratio actually has a very good track record in the past few years and it is not driven by write-offs for us. In the last 5 years, write-offs have not been more than 0.3% per year. So it is more driven by the fact that we keep close relationship with our clients and that we really thoroughly assess their business model and investment needs whenever we provide financing. This is done on a regular basis from the moment we disburse a loan and then afterwards with the regular monitorings we perform. So overall, our strategy and positioning on the market in Bulgaria for so many years brings us compared to the 5 biggest banks on the market to being the most profitable bank in 2020 in terms of return on equity. And in fact, having also the highest average return on equity for the past 4 years of 14%. But now in order to understand our business model further and in fact, how we work with clients on the ground, I pass on to my colleague Teodor.

Thank you very much, Kameliya. Today, we discussed several times about the small and medium customers hence my task today and I'll try to dive a bit in order to understand a bit better what does it mean when we are saying this term in the context of Bulgaria. In the beginning, let's have a look into the distribution of the small and medium customer sector in which their activity is done. I think that the obvious outcome, it's here is that we are not dependent from a single sector. It's quite diverse based on the sectors in which there are some that are dominant, but there is no significant difference. The most important one is the production and the [ agriculture ] that they represent, respectively, 20%, 22% following by the trade and the electricity production in which we mean renewable energy. I will confirm what the colleagues also said in the beginning, in the first set of presentations that they represent around 64% of the GDP and 74% of the employment in the country. What -- it is extremely important is that these are the core sectors of the economy in Bulgaria and these are the sectors also that they bring the development. And I think it is something that's very important to be said that most of these sectors are looking forward in order to improve the situation also in the future. That's why it's not surprising to see that the most of the financing products that we offer to them are connected with investment. So why investments? A lot of these companies, they operate on Bulgarian market, but they are also positioned in the European markets or international markets in which they compete with many companies. In order to make this transition, in order to manage to have a competitive advantage and to be profitable and sustainable, it's extremely important they to do investment. That's why I think something that's significant and different in comparison with the other banks from the market is that our investment loans are amounting to more than 74% of the total loan portfolio. In addition, the green loan part of the investment loan is also quite high. It's 30% at the moment, but this number are growing high, which shows a very good awareness and increasing awareness among the companies into the new trends on the market. And they see us competitive advantage also the investments that are done there. What it is also very important to be said is that the investment loans means also that long-term relation. They are something that also bring entirely the Hausbank concept that's of -- the banks apply, of course, in Bulgaria also. And you can see that around 80% of our small customers, they are doing their banking business, 80% of their banking business is done with us. And 60% of the medium clients, 60% of the business -- banking business of medium clients is done with us, which is something that is the aim of the bank. Here, in order to get a bit better understanding about the size of the small and medium customers in the context of Bulgaria, we made presentation of 2 parts. In the beginning, you can see the distribution about the loan clients distributed by number on the left side and on the right side by the volume based on the number of employees. I think the numbers that are important to be mentioned is that 96% of the business loan clients, they have up to 99 employees. On the other hand, this represents 82% of the total volume. Below, again, you can see the 2 pies, that they represent the same figures, so the number of business clients and the business loan portfolio by volume based on the annual turnover of the companies. Again, more than 90% by number is in the bucket between EUR 300,000 and EUR 5 million and around 72 from the volume is in the same one. So in the end, we can conclude that the typical SME customer in the context of Bulgaria is a company having up to 99 employees, and the turnover around up to EUR 5 million. I can also say that based on the potential, 80% of the companies, they are generating the turnover between EUR 0.2 million and EUR 3 million in the country, which gives a good potential for the development and a good ability for the bank to grow. Of course, important thing, it was mentioned, and I will not dwell too much on it, is that we are following a very strict selection criteria about the customers that we want to onboard in the bank, something that it is not very followed and it's not widespread on our markets, but it's something that makes us a bit of unique and something that gives us out, rather say, from a business point of view, even the competitive advantage in which we are identified among, let's say, the institutions that are having a very nice and, let's say, clean from a point of view of the ownership structure of the sustainable business, that it is backed with a good financial results. And of course, this cannot go without having a proper management with very clear goals for the investment, having in mind all of the requirements regarding the environmental and social aspect of the business and the digitalization and innovation that I don't think that the businesses that are rejecting this kind of understanding can manage to be very sustainable. On the other hand, a clear no goal are the companies that they found the exclusion list. I think I don't need to comment that. It was made very clear. But in addition to that, our companies are politically bound or with adopt for reputation. The ones that they try to hide the ownership structure all engage in a very high-risk investments and speculations that are typically sometimes even not part of the main activity of the customer, but something aside. We also -- we don't want to onboard customers and we try to limit their numbers that they reject the Hausbank concept. So the customers that are with us, only if we can provide them a very competitive service from a certain point of view. And after that, they disappear if something is happening. Here, it is just a presentation of a typical client, just to get a bit more understanding. It's a company that it is producing the lighting systems with around 50 staff members, with a turnover and total assets of around EUR 4 million or somewhere around there. 80% of the activity of the company is in European Union. So they export almost all of their production and their suppliers are reputable companies also in the sector. It's a family business, second-generation, managed from the 3 owners at the moment. And what is important to be said is that 90% of the activity of the customer is done with us. They're using the financing, EUR 2 million, and this is done in order to increase the company revenues also in the future and also to optimize costs. During COVID, company was affected. We support the customer in order to go through because there was interruption in supply chain which lead to some delays in supplies, but this managed to be overcome with the working capital financing from the bank. Until now, we spoke a lot for our business clients, but let's say a couple of words also the private clients. As it was already said is that we have selective and targeted approach towards the private customers. What does it mean? This is not something that's very typical in our markets in Bulgaria. But at the moment, 40% of our deposit base comes from the private clients because we are looking for private clients and we are trying to promote the saving culture. And only 12% of the total loan portfolio of the bank is in the private clients. And I have to say that most of them are from housing loans, which are for a first house. They are also part of the Hausbank concept for companies because employees are working for our customers that are small and medium clients. And again, they are served through electronic channels. The client profile is -- consists of several types. One are the owners of the small and medium customers and the self-employed individuals. We have middle to high-income salary receivers that typically work for our SME customers. And the very small and family businesses that are efficiently to be served here because they have not complicated business models. I just -- I'm concluding and giving you just 2 examples in order to get a sense of such customer in the Bulgaria reality. So it's customer support specialist, around 32 years old, married with children, using the housing loan from us and having a monthly income of around EUR 2,300, which in comparison with the average size of the salary in Bulgaria, which is EUR 800,000 is a bit above and it shows a bit what was said before. And the last one, it's a presentation about a very small customer who is again treated as private client, its production of traditional bread and product from 2015, and the company is with a turnover of EUR 125,000 and the assets of around EUR 30,000. The business structure is a family business, and the bank is Hausbank for this business entirely. In addition, we have a financing of EUR 50,000 used for better improvement of the cost structure. Now how we are managing to attract these customers? I give the word to my colleague, Kameliya.

Since you saw the type of clients which we have in our portfolio, we think it's very important to emphasize why they actually choose to work with us. It's not an easy task to have some of the best SME clients in our portfolio as we work in a very competitive market. So what are our main advantages? I would start that our recipe is really to have a different approach to clients from the very beginning, from the way we select and attract our clients. We do not want to start the cooperation simply by disbursing financing. On the contrary, we would like to establish a partnership with our clients. This is why from the very start, we visit actually their business premises. We will meet with the management in person. We discuss about their business model, about the sector they operate, about the challenges they face. And we also insist on starting this mutual partnership, not with financing, but with actually opening an account with us and start performing transactions. This is very different as an approach compared to other banks on the market. Usually, they're more focused on providing promotional onetime offers, usually for working capital loans at very competitive prices in order to attract the client in their portfolio. In our case, once clients start working with us with banking services, they actually experience the automated services we provide, they also see the user-friendly and very intuitive Internet banking that we have, they see the expertise of our staff, and only then and if a client needs financing, we can move on to like a lending stage. When we start reviewing the client for financing, we perform a very thorough analysis of their business model as well their investment plans. And our strategy is always not to focus on a single product, but to provide a long-term solution for our clients. This means that we define an overall maximum amount as a credit limit for the client. And then under this amount, clients can use different amounts with different products. For instance, investment loans, an overdraft or a letter of credit facility. This is very beneficial for the client because, on the one hand, it gives them predictability and, on the other hand, also flexibility when they plan their finances. In our credit risk analysis, we always also incorporate environmental and social risk assessment for each individual client, which means that we not only assess the risks, but we are able to discuss afterwards and recommend to our clients how they can improve. Once again, this is different than the approach of the other banks on the market who generally assess environmental and social risks on sector base. And so there is no individual discussions with the clients. If I need to talk about our biggest and strongest asset in order to have this approach and the way of working with our clients, it is definitely the stuff we have. Our BCAs, as I mentioned, who are the front office people of the bank, they're very experienced, very motivated. And unlike other front office positions with other banks on the market, they do a lot of different things, not only selection, acquisition and maintaining the relationship with the clients, but they are also very much involved in the credit risk analysis of the client. Together with credit risk, they also make proposals and participate in the decision of giving financing to their clients. This makes the position very responsible, and we need to have a very knowledgeable people as BCAs. What is important as well to mention here that all our BCAs in ProCredit Bank Bulgaria started as interns in the bank and they joined the 6 months onboarding program, where, from the very beginning, yes, they cover practical and technical blocks, but what is very important is that they're exposed to a very international environment because they participate with all the rest of the BCAs and other newcomers from the sister banks in ProCredit Group. Afterwards, in our branches, they have specialized mentors who support them during their learning process. And in addition, they also attend specialized courses and workshops. To give you an idea, I would say that, generally, it takes about 1.5 years for a BCA to be trained and to start working independently with clients. We also rely on a very transparent development path afterwards. So BCAs who have the potential, the capacities and, of course, the motivation to continue developing with the bank attend the ProCredit Banker Academy in Germany and then later, for management positions, the ProCredit Management Academy. I think an important point to mention here as well is that all our managers in ProCredit Bank Bulgaria, they developed within the institution. We do not take managers from other banks or other areas. So even I can say about Teodor and about me, we started as interns in the bank. And I personally think this is one of the best motivational factors to be part of ProCredit Bank Bulgaria and ProCredit Group as well. In terms of profile, we have a big diversity in the BCA's profile in terms of age, gender, education as well. What is extremely good with the onboarding program is that it is designed to accommodate really different university backgrounds, not all of our colleagues studied economics or finance. On the other hand, we really provide equal opportunities for people to develop within our institution. In terms of the motivation, I think it's important to mention that the average time of the BCAs in ProCredit Bank Bulgaria is already more than 12 years with the institution. And to give you an idea of the size of the portfolios they manage in terms of business clients, they work, on average, with 80 clients, meaning business loan portfolio per BCA of EUR 12 million and average business deposit portfolio per BCA, EUR 9 million. And last but not least, I would like to mention another main advantage which we have as a bank compared to the market in Bulgaria, this is definitely our strong focus on green and environmentally friendly measures. In the bank, we have an environmental management system in place which defines the internal measures which we take as an institution and also the impact that we have through the activities and the investments we finance of our clients. We constantly strive as an institution to improve our ecological footprint. So we do this by constantly raising the awareness of our staff. Our head office in Sofia is certified with Net Zero EDGE certificate. Because of the digital channels we have developed and we are using on daily basis, we have almost managed to abolish the usage of paper and many other measures that we take internally. We also use the chance to share our example all the time with our business clients. Hence together with the group developed methodology and well-trained staff we have, we manage to identify and to assess green investments in different areas, in renewable energy, in energy efficiency equipment and machinery and also other environmentally friendly measures. This has brought us quite some growth in the loan portfolio. We already have a green loan portfolio of more than EUR 300 million, which makes 27% of our total loan portfolio, and we believe we can definitely expand further. In the country, both in Bulgaria and in Greece, also being part of the European Union, the topics for environmentally friendly measures are raising really in terms of public awareness. Also, both countries need to comply with the EU direction and reach Net Zero Carbon by 2050. So we really foresee that a lot of investments will happen in the market in the future. We already see it happening, and it's a good point that we have the know-how, the staff and the technology in order to assess these investments and to proceed with them further. Especially with the renewable energy, we have had very good success in the last 2, 3 years. We also developed our own products in order to incentivize our clients to think in this direction. We specifically finance electric cars as well as photovoltaic installations for business premises for own consumption. In order to do this, we not only have well-trained staff in terms of BCAs and branch managers or people who are on the front line, but we also have a specialized team in our head office who are very much involved with this area. In this team, we even have environmental engineers who support the colleagues with the more technical questions, and this is definitely unique on the Bulgarian market as a strategy and as a positioning. Another point that we see developing here, not only the renewable energy, but also sustainable agriculture and bioproduction. To make things a bit more tangible, I would like to give you a short example of a client we have in this field. We managed to attract the client not because of some attractive pricing conditions, but after a number of meetings when they actually saw that we understand their business, why they're doing it and that we are on the same page when it comes to green finance. It's a company which is involved in activity quite specific for the Bulgarian market, cultivating 100% organic roses for the production of role oil and water. The whole production is exported to Asia. The company is not big, total assets are around EUR 1 million, and similar with the annual income of the client. They have 17 employees. It's a family-owned business. And not only the main activity of the client is green, but also what we financed in terms of their new investment, which is energy efficient and water-saving equipment. In this market niche of bioproduction, sustainable agriculture, renewable energies, we do see very good prospects for us as a bank, which means that they will contribute to our growth in the future of the loan portfolio. And as well, we will continue to strengthen our impact orientation and our contribution to the economy and the environment in Bulgaria and in Greece. Thank you for the attention.

Thank you, Kameliya. Thank you, Teodor. We will now start with the second question-and-answer session. [Operator Instructions] We aim to answer all questions. However, in the interest of time and to avoid repetition, we will also pool questions and might take a selection of all posted questions. In case, your question hasn't been answered, we encourage participants to reach out to us after the Capital Markets Day. The contact details of our Investor Relations team is available on our Investor Relations website. We will now start with the first question. And the first question is, can you provide some information on how the exchange of best practices work both with other ProCredit banks and with the holding?

Thank you for the question. I think it was partially touched in the first part. I can simply confirm again that it's an invariable opportunity to share experiences between the ProCredit banks and the holding during regular meetings that we have. Usually, they take place on every 2 months or 3 months basis. We also participate in seminars and workshops where we exchange a lot of ideas with the colleagues from the other banks. And of course, we're able to share our own experiences. Of course, there are certain differences between the markets where we operate. However, we also stand on the same page in terms of strategy and how we want to work with clients, so there is plenty of ideas that come up and we can use.

The next question is, we have learned that you also cover Greece by your Thessaloniki branch. Can you explain in more detail how you approach the country and the reason for not having a separate bank in Greece?

I think part of this question was touched from Kameliya in the beginning that we are using the development and the settings that were done in Bulgaria, that we can have and managed to serve the customers entirely through electronic channels. Greece, we are sharing the head office with Bulgaria. And all of the customers are managing to use only electronic channels in order to approach the bank. This gives a lot of efficiency. It gives a lot of ability to serve the customers, not only in one place, but it's gives us opportunity to serve customers in a larger area in a very efficient way because all of the processes are already organized in Bulgaria in a very efficient way. So this kind of efficiency gives the ability to focus more on the acquisition of customers hence to have quite significant speed in order to approach the market.

Thank you. The next question is, does Quipu also do services for external customer? Is Quipu wholly owned by ProCredit? And how are costs for Quipu accounted for? Is the software activated at cost?

Okay. Thank you very much for the question. Yes, we are wholly owned by ProCredit Holding 100%. How do we manage our internal cost? Well, we perform consistently activity-based cost accounting in Quipu. We do it through 3 dimensions, activities. This can be implementation versus development versus operations across product. This can be software as opposed to card processing, different type of software, different type of product that we deploy to our banks and across banks in the third dimension, of course, our end clients. And we can cross check all of those dimensions together, so to have really in-depth visibility on all the costs related to deploying our services and product to the banks. Now will we offer our services to an external customer? Perhaps, but not sooner, meaning that we are very much focused on completing the digital transformation of ProCredit. As I spoke during my presentation, we are almost there, but not quite. We have another 1, maximum 2 years, before we do this completion. And I would prefer us to stay focused and not to be distracted by other priorities. One of the strength of the group and one of the strength of Quipu, in fact, is simplicity and focus. And this is too precious to be lost. Now there are some services we already deal with external customers, particularly our processing center because they are very standardized, plug-and-play cost, and you don't need a lot of customization. Most of our clients in our processing center are not ProCredit clients and most of our volume is not ProCredit volume. And as well on the software side, most of the ProCredit banks that we deleverage from Central America, Africa continue to bank with us to this date. At the beginning, we did it because we wanted to give them a transition time. But they really appreciated our support, and they asked us to stay, and we agreed for them to use our technology. But beside that, I would wait until we are really confident that our transformation is fully completed before we engage beyond ProCredit more actively. I hope this answer your question.

The next question is from Marius Fuhrberg, Warburg Research. Could you give an indication on the additional IT costs which are included by the remaining centralization. And how large the cost savings will be once the centralization of all banks is finalized?

Yes, I can. I just recalled that you had another part on the previous question about the capitalization of our cost. Look, we have a high degrees of transparency. If you go to Quipu.de in our website, you can find all the financial statement of Quipu since historical times. And there, you can see all of the balance sheet and financials of the company evolving over time. So I think that level of degree of transparency, you would hardly get in any other company. There, you can see the level of capitalization versus expenses that we have. Now back to this question from Marius. Yes, we have basically 3 banks which we need to centralize. We are currently working on Bosnia, Georgia and Serbia. And after that, we -- to really finalize the whole centralization of the group, we will also centralize our bank in Bulgaria. Now the additional IT costs, less than 10% of the current cost of EUR 35 million. That, I would say, is the upper ceiling, and when, within a couple of years. After that, we will reach steady state. On the 3 business lines of Quipu, software and processing center, already costs are stabilized in Sears. So we have reached capacity. On the centralization, we have, again, another couple of years to go before we really bring all of the synergies here into the central operations. And then beyond that, we can continue to scale.

The next question is from Philipp Häßler from Pareto Securities. Is Quipu also open to other banks? And if not, do you plan to do so? Do you see COVID-19 as a particular risk for Bulgaria as vacancy rates are very low compared to other European countries? How do you steer the loan portfolio growth over the ProCredit Group?

I perhaps can -- again, on the first part of the question, I think I answered before. Maybe I can put some colors on the last part of the question, and then I can give to my colleagues the middle part. On the last part of the question, look, we have our consolidated group target of a growth of 10%. This growth is segmented across client groups. We discuss those objectives and those targets with our banks very actively, not only during the business planning process, but at every supervisory board meetings altogether. And we benchmark each other against both those objectives and what we have realized. This is our way to motivate each other to share experiences and, ultimately, also to generate the proper enthusiasm to be ambitious and to continue to acquire market shares and to be a relevant player for SME in our markets. Beyond that, every bank is responsible for their performance. And they push internally, of course, those results in order to be in line with the expectations.

To continue with the question regarding the risk related to COVID in Bulgaria. Well, I have to admit it's a shame that in terms of vaccination rates, Bulgaria is on the lowest level still within the European Union. And of course, COVID impacted the country, the economy, the lifestyle of the people, as it happened in most of the other European countries. Perhaps the low vaccination rate, it's also linked with the political situation in the country, which is not very stable currently. We are up for another election next month. So there is not really a strong focus from the government in this direction. However, what I can mostly speak about is how COVID influenced the bank. In the bank, the vaccination rate of our colleagues is much higher. Also, I cannot say that COVID impacted our institution as much as other banks on the market because, as presented, we were already used to working through digital channels with our clients. It was not something new that we had to implement very fast when COVID happened. Whereas this was something that other banks had to do. They did have to emphasize their digital and online channels in order to keep the safety of their staff and at the same time to continue working with clients and growing their portfolio. In our case, I can say this was a very good advantage, being prepared and already working in this way in Bulgaria. So I don't see a big risk in this direction. Also to mention, yes, we did have some clients that experienced difficulties during COVID-19. One of them was already mentioned by Teodor in his presentation. But having this close relations with our clients and trusted cooperation, we were really able to act on time to resolve the issues. So currently, we barely have any clients who are in moratorium or grace period because of COVID-19 impact. So we do not expect any worsening of the quality of the loan portfolio or the relationships which we managed to have and maintain with our clients in Bulgaria. I hope this answered the question.

The next question is from Milosz Papst from Edison. What is your approach to hybrid working? And how will it impact the utilization of your branches and, in turn, the ability to accommodate more employees per branch?

When we think about hybrid work, it's not in terms of saving cost or be more efficient in the utilization of our premises. Look, during the pandemic, obviously, we stopped traveling. And consequently, our travel costs went down quite significant in 2020, in the first part of 2021. But I'm looking forward to see those travel costs resume to normal level in the future, and we already started in August by opening our academies again. I say that mindful of the fact that that when we travel extensively both to work and as well in our internal ProCredit universe to perform all of those meetings and all of those discussions that we spoke about, we have 3 impacts. One, really monetary impact. We have a cost on our P&L. We have an impact on the environment, CO2 emission from all of those flights and all of those transportation that we have and we waste each other time on those transitions. On the other hand, I think after this presentation, you probably understood that at the heart of our group is an intensive communication and common identity that needs to be built, needs to be flourished, needs to be protected. And therefore, it is effective to work online in certain situations, when you have operational work to be done as a follow-up and there are not really principal discussion on the table. But when you have more principal discussion on the table, then you want to have people around. And in our work, we have more principal discussion around the table than operational work to worry about. So in the future, yes, we will, adjust to a certain extent, working condition to allow for a certain amount of flexibility but in a very prudent way, and we will continue to be who we are moving forward. I hope this answered the question.

The next question is, in the first segment, it appeared as if you would not be really comfortable with any kind of crypto. Looking now in the second segment about your strong plans in regards to digital payments, would it not make a lot of sense to include crypto wallet or crypto payments as well for KYZ and existing customers?

I can give you the short answer and the long answer. Let me stick to the short answer, no. The long answer is a bit more complicated. It has to do with the nature of crypto currencies. And their nature, both I mean, the way they are produced, both in the ways they are used by investors. In my opinion, it's a speculative class of assets, we should rather stay away from and we should advise our customers to stay away from. I think they are legitimate and there are perhaps other participants to the -- to our markets which want to go into it, but really not for us. I have my serious doubts about the impact that this new technology has on people and on the environment. And therefore, we decided to stay out.

This is now the last question for our first question-and-answer session. Unfortunately, we won't be able to answer all remaining questions. So if your question hasn't been answered or if you have any additional questions, please don't hesitate to reach out to us. The last question is, you highlighted the hybrid cloud environment with parts relying on the public cloud. Do you see risk of dependency on cloud providers and, as a consequence, increase in costs?

Yes, indeed, there is a risk. We depend very much on Microsoft for our public segment and, therefore, to their inflationary prices moving forward that could put pressure on our P&L. On the other side, let me mention that on the one hand, we have a hybrid cloud environment. So we have a private segment. So in case Microsoft cost increased beyond what we would consider to be reasonable, we always can fall back on our private cloud environment and we can build infrastructure there as opposed to leverage on theirs. And this also allows us a discussion with Microsoft to have a more equilibrated, yes, point of view with each other. Second, yes, Microsoft costs are relevant, around EUR 3 million per year. But in the greater scheme of things, they are not the main cost drivers in our technology. And therefore, I would say that even with the cost pressure coming from the public segment of our cloud environment, our cost overall is under control.

Thank you, Gian Marco. Thank you, Kameliya and Teodor. And thank you for your questions. This has been a stimulating afternoon and a good opportunity for the full management team to speak with you, our partners, even in this rather impersonal way. I hope the afternoon has given you new insights on and confidence in the ProCredit strategy. Your questions always help inform us where we can improve in our capital markets communication. We'll certainly strive for physical Capital Markets Day next time as we continue to strengthen our investor relations activities in what we hope will be a more normal world. And in the meantime, we look forward to the regular communications we enjoy with many of you. Our next publication will be the quarter 3 results on 11th of November. Thank you once again for your participation. The Capital Markets Day has now been concluded. You may disconnect.