ProCredit Holding AG (PCZ) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the H1 Q2 2024 results conference call. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Hubert Spechtenhauser. Please go ahead.

Thank you to EQS for organizing this call, and welcome to everybody on this call on the first half year results of 2024 for the ProCredit Group. My name is Hubert Spechtenhauser, I'm the Chairman of the Management Board. As always, I'm joined by Christian Dagrosa, our Chief Financial Officer. We plan some 30 minutes to cover today's presentation, which has been available since earlier today on our website. We will, of course, give sufficient time for any questions you may have. 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 the results presentation. We have the usual structure to today's call. I will take you through a section covering the highlights for the first half year. Christian will take you through the details of our financial results, credit risk, and asset quality indicators as well as developments on the group's balance sheet and capital. It has been in financial reporting terms half a year since we presented the group's updated group business strategy at our Capital Markets Day in March. Therefore, I would like to take a moment to show the good progress we have made on the key strategic issues that we identified and highlighted to the Capital Market 6 months ago. We laid out ambitious growth targets for us as a group, but also in particular, for some of our smaller banks with the goal of achieving material scaling effects down the road. We also underlined our goal to grow the loan portfolio in a granular way that is predominantly in our lower volume segments of micro enterprises with loans of around EUR 100,000, smaller enterprises with loans of up to EUR 750,000 as well as private individuals. These segments provide for healthy margins, a good deposit reciprocity, and lower capital intensity. We also explained that we aim this growth to be funded by local deposits and that also in this area, we would prioritize granularity and therefore, aim to increase the share of deposits from private individuals to more than 50%. I should note that much of the groundwork for the updated business strategy has been laid in the years before. Our strong deposit growth between the beginning of 2022 and the end of 2023 of more than EUR 1.7 billion has put us in a comfortable liquidity situation. And thanks to the successful issuance of EUR 125 million of green Tier 2 bonds in April this year, we now have both the liquidity and the regulatory capital, allowing us to aim high. And we once again want to emphasize that our prudent asset structure, dominated by well-managed loans to carefully selected growth-oriented and innovative SMEs has helped us last year to the best financial result in our group's history. As proof of concept that our business model works, works well and that further broadening is the next logical step. In the first half year, we have delivered strongly on all our strategic priorities. The loan portfolio grew by 6.9%, which brought us closer to our medium-term target of a loan portfolio of EUR 10 billion. At the beginning of the year, this target required us to grow by approximately EUR 4 billion in the next years. Now 6 months later, we cut that number to EUR 3.5 billion. Some 60% of our growth came from the lower volume segments and the share of medium loans, which we want to bring down from approximately 60% to 50% has now already reduced by 1 percentage point. Also, it is worth noting that much of the growth has been contributed by our smaller banks. In the markets, Georgia, Moldova, Bosnia, and Albania, we grew between 10% and 18%, making our ambitions in these markets heard. And in terms of deposits, some 90% of our 4.1% deposit growth came from a highly granular private client base. In this segment, we achieved a growth of 8.6% and the share of PI deposits in total deposits increased by almost 2 percentage points. So overall, a very successful first half of the year that gives plenty of reason to be optimistic for the future. Coming back to our regular slide deck, let me continue by briefly summarizing our highlights slide. I will not dwell on the business growth figures as we've just covered them in detail. Christian will, of course, provide details on financials, but I can already preempt that our return on equity of 11.6% is well within our expectation and guidance for the year. As our business growth increasingly drives operating income, while we are making good progress with our strategic investments in growth catalysts. These strategic investments, as expected, have led to visible cost increases and to a more elevated cost-income ratio of 64% for this half year. The cost of risk remained at a relatively low level of 18 basis points as portfolio quality is now again approaching the strong level before -- from before the Ukrainian war. Speaking of, our Ukrainian bank continues to perform well and test like last year, contributed positively to the consolidated half year results. In summary, strong business growth, good profitability, and all of this on the basis of comfortable capitalization levels, both in terms of CET1 and total capital ratio. Looking at the half year results versus guidance, we can see that we are on a growth path regarding our guidance for the financial year -- on a good path regarding our guidance for the financial year, while making important progress on the balance sheet transformation that will help us achieve our ambitious medium-term goals. Return on equity and CET1 ratio are all comfortably within the guided corridors. Our cost-income ratio is currently at the upper end of our expectations for the year, which we attribute to the good progress we have made on all strategic investments. Staff numbers are increasing at a strong pace. They are up by 10% since the beginning of the year and also on the green Tier 2 bond issuance, we overperformed against our planning, both in terms of timing and volume. Vice-versa, loan growth is showing a continued strong dynamic, and the current run rate obviously lies above our targeted growth for the year of around 10%. At this point, we confirm our outlook for the year 2024 and continue to assess upside and downside potentials for all indicators. Again, I will not dwell too much on the next 2 slides given that the business growth was amply covered at the beginning. The graphic at the top shows the good top line growth of 6.9% as well as strong growth rates in the lower volume segments, 6% for small enterprises, 24% for micro enterprises, and 18% for private individuals. Notwithstanding, we obviously also continue to develop our portfolio of loans to medium-sized enterprises, which will naturally remain central to our strategy and our positioning in our markets. Our green loan portfolio is at 3.3%, currently growing less strongly than the overall loan portfolio. There are several dynamics at play. In some of our markets, we grew strongly in loans for rooftop photovoltaics, both for businesses and private individuals in the past years. We have since then, to a large extent, satisfied the demand and simply do not receive the same volume of loan applications anymore. Furthermore, we have tightened our classification criteria for energy efficiency loans and many loans we disbursed in energy efficiency machinery are no longer classified as green. And lastly, in many of our countries, we do not classify any loans to private individuals as green, even if these loans finance energy-efficient housing due to the absence of necessary local certifications. Overall, we are well positioned in our markets for the niche of smaller renewable energy projects between 3 and 5 megawatts and start observing a bigger pipeline of projects building up. Thus, we are optimistic for the future growth of green loans as one key element of our overall growth ambitions. Turning to Slide 6. You see the continued success in our deposit strategy. In the overall growth of EUR 295 million, we have managed to reduce concentrations without the top line figure, before that the top line figure would have been even stronger. Also, we have been able to reduce more than EUR 100 million in more expensive and long-term funds since the beginning of the year on account of this good deposit growth. 90% of the deposit growth came from private individuals. Again, underlining that there already is a strong foundation in place for our updated retail strategy, which needs to be further enhanced in the next years. Many of these enhancement projects designed to maximize automation and optimize customer experience are underway, but not yet implemented. Hence, there is still plenty of upside potential to the good performance in retail of this half year. It should be noted that term deposits continue to dominate the growth pattern, but we tailor these instruments prudently with typically short maturities as interest rates could come down in the course of this year. Our deposit loan ratio stands at 113% and has increased by more than 8 percentage points year-on-year. This concludes the highlights and business update part of our presentation. You will now hear from Christian more details on the group results and regional performance.

Thank you, Hubert, and good afternoon to everyone also from my side, and welcome to our presentation. Indeed, in the next couple of slides, we will, as always, go through all the relevant financial captions and risk and capital indicators. Before that, let me repeat shortly what I explained during our Q1 call since risk business and financial indicators of ProCredit Bank Ukraine have been broadly stable for the last 18 months. We moved our regular update slide on Ukraine, which contains various bank-specific KPIs, sort of the geographic distribution of our loan portfolio to the appendix of this presentation, allowing anybody who's interested to continue to follow the development of the bank. Now let's start this part of the presentation with a high-level view on operating income and expenses. Operating income continues to grow year-on-year overall by EUR 28 million or 14.6%, driven above all by net interest income, which is up by almost EUR 25 million. We will later see that this development is increasingly attributable to the very positive growth dynamics that we were presented rather than the repricing dynamics from higher policy rates that were driving the developments last year. Net income from fees and commissions improved only marginally by around 1.6% and income from FX transactions grew by more than EUR 1 million, around 8.8%. That's more closely to the overall trajectory of our business development. Costs increased year-on-year by approximately EUR 26 million. This amount is split more or less evenly between personnel and administrative expenses. The increase in personnel expenses of around 23% is primarily driven by higher staff numbers. The average number of staff increased compared to the first half year of 2023 by approximately 14% as part of our broader strategic objectives to grow strongly and increase our footprint in our region in the coming years. Average salaries also increased by approximately 8%, accounting primarily for last year's inflationary increases, but also highlighting the increase in wage levels in our countries amid the growing scarcity of skilled professionals. Administrative costs grew primarily due to investments in the remaining 3 areas that we identified as growth catalysts. These are IT, marketing, as well as our branch network. The cost-income ratio stands at 64.1%, which is higher than last year. It is currently around the upper end of our full year guidance, mainly as a result of our good progress in strategic growth investments. For example, the strong progress we made on hiring as well as due to the overperformance in terms of volume and timing of the Tier 2 bond issue. Let's move on to net interest income. As I mentioned, net interest income continues to show positive year-on-year dynamics. Quarter-on-quarter, we only see a minor increase of around 0.5%, driven primarily by positive volume effects from the strong portfolio development, which have been largely offset by additional interest expenses coming from the green T2 notes of EUR 125 million that were issued earlier in April. These expenses are in the amount of approximately EUR 2 million. The net interest margin declined by 4 basis points, while the impact of the interest expenses from these green Tier 2 notes has been approximately 8 basis points. So accordingly, the quarter 2 net interest margin adjusted by this effect would have actually been 4 basis points above the level of quarter 1. This underlines that on the level of the banks, we see broad stability in the net interest margin, allowing volume effects to materialize in increases in net interest income. One notable exception to that statement is our bank in Ukraine with a net interest margin dropped by around 70 basis points quarter-on-quarter on account of a receding policy rate. Now let's have a look at fee income. Quarter 2, net fee income increased by EUR 1.2 million or 8.4% with respect to quarter 1. Besides the effect of a steadily increasing client base working their way through the system, this development also reflects seasonality effects that typically depressed fee income in quarter 1. With respect to the half year 2023, we recorded an only marginal increase of 1.6% in net fee income, even though fee revenues increased at a good pace of 8.5% and the more in step with the overall business development of the group. Of course, increased transactions also generate higher expenses. But beyond that, we also record increased costs for guarantees, including fees paid to multilateral investment guarantee agency for ensuring our bank's deposit with local central banks and the European Investment Fund for providing guarantees for small- and medium-sized enterprises in this position. These fee expenses have no corresponding fee income despite the development of the net fee income line item on group level appears on the surface somewhat stagnant. Needless to say, the benefits of these guarantee and insurance agreements are very tangible as they reduce our risk costs and structurally optimize risk-weighted assets thus reducing our cost of capital. Let's move on now to personnel and admin expenses. The chart at the bottom of this slide details the major source of the year-on-year cost increases of the first half year, some EUR 20 million, that's approximately 75% of the total increase of EUR 26 million comes from the areas we identified as strategic growth catalysts, staff, particularly staff numbers, IT, marketing and our branch network. With regards to personnel expenses, I already highlighted earlier that the major part of the increase is driven by higher staff numbers. The total staff count as of June 2024 is close to 4,300 people, 16% above the level of June 2023. That is almost 600 new colleagues, 500 on the level of the banks, some 80 in our IT company, Quipu, and a bit more than 20 on the level of credit holding. Marketing expenses are up as we launched multiple campaigns in our markets that have helped us achieve a good growth in these first 6 months, especially in the PI segment. Depreciation expenses are up as we opened and modernized several flagship branches in our markets, adding to our visibility as a bank for private individuals. And lastly, the increase of IT expenses of EUR 3.3 million appears relatively small as it only captures the expenses for software and services from externals. A more accurate measure for our true investments in IT is the overall operational overhead of our software company, Quipu, which as of June is up by approximately EUR 7 million. This amount includes both a large part of the EUR 3.3 million to externals as well as expenses from higher staff numbers resulting in internal development of software on the level of Quipu. Quarter-on-quarter, the dynamics are broadly similar. Average staff numbers are up by approximately 200 to quarter 1, mainly driving the increase of EUR 4.8 million. Beyond that, expenses for IT, marketing and depreciation are also up by an amount of approximately EUR 2 million in total. The cost-income ratio in quarter 2 was at an elevated level of 66.3%. That is approximately 4.6 percentage points above quarter 1. Besides the effects of higher costs, some 1.2 percentage points of that increase are conditioned by the interest expense for the green Tier 2 notes, obviously, reflected in a lower net interest income which accounted for approximately EUR 1 million per month since April this year. So that is in comparison to quarter 1, an effect of around EUR 2 million. And secondly, approximately 1 percentage point of the increase in the ratio in quarter 2 is due to seasonal effect of higher expenses for deposit insurance is reflected in the net operating income. As in some banks, these expenses cannot be amortized and are then typically incurred in quarter 2. Here, we have an effect of approximately EUR 1.8 million. I will not dwell much on loss allowances as expenses happen overall at lower levels as credit risk quality further improved from an already strong level. Loss allowances in quarter 2 amounted to EUR 5.4 million, which corresponds to an annualized cost of risk of 33 basis points for this quarter, some EUR 3.3 million of this amount is related to provisions for the Ukrainian portfolio. Year-on-year, loss allowances amount to EUR 5.7 million, driven by the growth of the loan portfolio, credit risk events on a very small scale as well as some EUR 4 million in additional management overlays of a technical nature. Recoveries from written-off loans amounted to EUR 6.7 million. It is worth noting that we have not released any management overlay so far and still hold some EUR 66 million of such overlays on balance. Moving on to loan portfolio quality. There is not much to say on this slide other than we recorded a further decrease in the share of default and a more visible decrease in the share of Stage 2 loans. A reminder here, the share of Stage 2 loans continues to be at an elevated level in absolute terms as some 50% of our Ukrainian loan portfolio continues to be reflected in this stage given the significant increase in credit risk criteria that is the major trigger for any Stage 2 transfer. Slide 14 shows the structure of our comfortable regulatory capital position. As of June 30, our CET1 ratio stands at a comfortable level of 14.3%, well above the regulatory requirement of 9.3%. Our core capital increased by EUR 52 million since the beginning of the year, mostly due to the attribution of quarter 4 and H1 '24 results, net of 1/3 of dividend accrual. Risk-weighted assets increased by 5.6% or EUR 347 million. That's slightly below our loan portfolio growth of 6.9% and some 70% of that increase comes from credit risk-weighted assets. Operational risk-weighted assets increased due to annual recalibration, which is a function of the increased operating income on the level of the group. The total capital ratio now stands at a comfortable level of 17.7%, thanks to the successful placement of the Green Tier 2 note early in April, with a buffer of 3.4 percentage points against requirements, we use these comfortable capitalization levels to delivering on our ambitious growth agenda that is central to our updated business strategy. Now let's take a quick look at the contribution of the individual segments to the group results. In Southeastern Europe, we achieved a good growth of just about 8% with particularly good development in Albania, Kosovo and Bosnia, all of which grew in excess of 10%. The ROE of the segment is at a strong level of 16.4% at the cost-income ratio at 55%. In Eastern Europe, our portfolio increased by 4.6%, though our banks in Georgia and Moldova both grew much more strongly than that, 10% and 15%, respectively. The loan portfolio of our Ukrainian bank reduced by some 3%. The segment contributed about EUR 20 million to the consolidated profit, which corresponds to return on equity on a segment level of 17.7% and the cost-income ratio was at 48%. Our Ecuadorian Bank continues to weather what is an undoubtedly challenging environment for banks, international banks in particular. The bank is making steady progress in building a portfolio of loans to small and very small enterprises, as well as private individuals and divest from loans to larger SMEs, which are subject to uneconomic price caps in the market. With these strategic measures, the bank has managed to increase the weighted average interest rate of its loan portfolio by more than 1 percentage point year-on-year. As of June 30, we only see a moderate net growth of the bank of 1.7% and a loss of EUR 4.6 million. Being on some more details on the level of the banks of the individual segments. In Southeastern Europe, we see largely stable and positive key performance indicators on the level of all lost all banks, though the cost-income ratio has increased in some of these institutions due to the significant investments in growth catalysts, all of which is well in line with our expectations. These investments allow our banks to drive business growth as evidenced by our half year figures, and we expect this to result in significant scaling effects down the road. Similarly, cost-income ratio and ROE slightly deteriorated in our Eastern Europe segment. Here also strongly declining policy rates have an additional impact on net margins. As before, these developments are well in line with our expectations and our planning. On Ecuador, I believe I have covered all important points. With this, let me conclude this assessment of our group's performance in the first half year of 2024. Hubert will wrap up with the medium-term outlook before we take your questions.

Thank you, Christian. Most of you will know that we lifted our medium-term outlook at the beginning of the year. We provided details on our growth and profitability ambitions during our Capital Markets Day earlier in March. Though there is still a long way ahead of us, we are very excited about what we have achieved thus far; strong, diversified, and impacted-oriented loan growth that underscores our aspirations in all segments, and that is entirely financed through local deposits, primarily from private individual clients. Good profitability with important investments in growth catalysts well underway and the successful placement of a Tier 2 bond, which paves the way for substantial growth and further strengthens our impact positioning. In that sense, today, I can confirm that we are on the right path towards our medium-term goals. With that positive outlook, I would now close today's call. Christian and I will now take your questions.

[Operator Instructions] The first question is from Marius Fuhrberg with Warburg Research.

The first one on the profit-to-income ratio and your outlook for the remainder of the year. So you confirmed the outlook for up around 63%, but we saw a slightly higher levels in Q2. So should we expect further cost increases to come at a slower pace? Or is your, let's say, hiring program over for now? The second question is on risk costs. Can you explain what specifically triggered the mentioned overlay for Ukraine in the second quarter? And do you expect any further additions to that in the second half of the year? And the last one on your portfolio growth. You just mentioned that your current run rate is pointing above the 10%, to be more precise here, I think it's more pointing towards 12% or 13% or even higher. So is this the level of what we should assume for the remainder of the year?

Mr. Fuhrberg, thanks for your questions. I would start with the last one, which is also linked a little bit to the cost-income ratio question. Our portfolio growth indeed to 6.9% is higher than what would lead to 10% for the whole year. So we outperformed to a certain degree on our plan. And let me just say or reiterate again what we are particularly happy about is that we outperformed in particular, in the lower volume segments, which were particularly important to us, as I said, micro, small and private individuals. So yes, indeed, 6.9% is more than half of 10%, but -- and we will continue to follow very closely how that evolves during the remainder of the year. And it is, though, for the time being, we confirm the guidance, which we have provided in the Capital Market -- slightly before the Capital Markets Day, but we will closely monitor development, the development of these metrics. It is to a certain degree linked to the cost-income ratio and to the cost-income ratio outlook because having grown much more strongly, that's also to a certain degree, reflected in the cost-income ratio, which is at the upper end of the guidance, which we provided of 63% plus minus 1% with 64.1%. We are exactly at the brand of this range. And we will, for the remainder of the year, very closely look how these 2 ratios develop because they are both slightly higher than what we anticipated.

Good, Marius, let me also take then the question on the overlays. Look, I think especially for Ukraine, we always continue to take a very conservative view. The large part of the overlays have been built in the context of 2022, which was related to the macroeconomic parameters assumed for this country, given that the initial forecast in 2022 was a reduction of the GDP in excess of 30%. Then in the next year, the forecast for the GDP suddenly became positive, which would have led to a significant release of provisions in our models. Since the situation on the ground is still essentially characterized by the war itself, meaning that the risk situation has not changed in that regard, we decided, yes, not to implement these providers, but to maintain essentially our GDP assumption of a negative GDP, not the 30-something percent from the original forecast, but still negative to reflect the current situation. So these amounts that resulted from this create the core of our management overlays. Now the additional overlays booked in this half year, they're in part of a rather technical nature that parameters continue to change and then the delta is sort of a reclassification of from stock of provisions to overlays. And on the other hand, yes, we continue to assess the behavior of loans. And when we see certain -- when it make certain observations on the loans that are not adequately captured by the IFRS 9 model, then we have additional technical overlays. Yes, this is what I would have to say this. But obviously, the amount now for this half year and overlays EUR 4 million, relatively small compared to the overall base.

Mr. Fuhrberg, if I just may, I would like to add something more to what I said about the cost-income ratio outlook. The -- what you have to keep in mind is that the number which you see in Q2 is also a little bit distorted by 2 technical effects, which have to be kept in mind. Number 1, what Christian already mentioned before, the Tier 2 bond, which was -- which came somewhat earlier than planned and which outperformed the size which we had expected and anticipated that it does lead to income or that does lead to a higher interest expense and therefore to lower income. And on the other side, the Q2 expenses are seasonally slightly higher. Christian also mentioned that in his part of the speech, due to this deposit insurance, which does not get straightened out over the whole year. So the number which you see in Q2 is, to a certain degree, also driven by seasonality effects. Therefore, for the time being, we do confirm the guidance which we have provided. As I said, we are committed to a strictly underlying cost discipline, and we'll continue to monitor very closely both cost-income ratio and growth because they are somehow linked and ultimately will decide on the outcome on the cost-income ratio in this year alongside the speed and the timing of the growth investments which we are going to do in the remainder of the year.

And just a follow-up, if I may, with regards to the portfolio growth. So you did not see specific headwinds that are preventing from exceeding the 10%. But just -- you've just been cautious on how everything evolves and therefore you'll stick with your guidance for now. Is that correct?

I'm not sure whether I captured the entire question, but the last part of question, for the time being, we stick to the same guidance which we provided at the beginning of the year or in the first quarter to a loan growth of approximately 10% for the full year.

The next question is from Knud Hinkel with Pareto Securities.

I have 2 related questions to the questions that have been posed by my colleague. In the loan book, on the growth of the loan book, I mean, my naive assumption would be that it's probably very easy to grow a loan book, but it's -- the complicated thing is to ensure that the quality is adequate. And my question would be how do you ensure that yet now in times where you have the declared goal of growing your loan book rather strongly. And the same question would also apply to the up build of personnel. I mean, you grew your workforce by 15% or 16%. I think that was the number. Yes. So if I'm looking into Western European labor markets, they are quite tight at the moment. I would characterize them. I don't know too much about the Eastern European market, but probably not so different picture. So how do you ensure that you get the people that you need for your growth strategy going forward? That would be my 2 questions.

Very good. Let me start with the question on loan quality. And in a way, that's related to your second question because our processes in terms of credit risk, especially in the SME segment, they remain essentially unchanged, right? And we have achieved loan growth of similar magnitudes essentially with great consistency in the years before the Ukrainian war, 2018, '19, '20, '21. We've grown 10% or even more. So this type of growth is not new to us. Our existing processes are designed for a very thorough 360-degree view on the clients where we discuss with managers, with owners, but we visit where we do on-site visits where we, yes, try to project financials and the business and broader into the future to make assumptions about the client's payment capacities and be very conservative about this also in the future. And with all the understanding that comes with the analysis to tailor loan products that are designed to the needs of the specific client. So none of this has changed with the updated strategy. The more pronounced growth in the private individual segment, this is indeed something that we have not seen in the past. Here, I can say, so far, we are -- much of this growth continues to be in the housing segment, where we have also grown in recent years. So these are highly collateralized housing loans. So yes, down the road, there is no compromising on loan quality, and we don't foresee any downside effects from the strong growth. And the buildup of staff obviously has also to do with this, the staff numbers, they are broadly divided equally in front and back office, meaning we have new people to drive business, but we have also new people to strengthen back-office processes and procedures and to ensure thereby also continued high levels of loan portfolio quality.

Thank you so much for your question. Actually, I would like to use similar wording than the one Christian used about the loan quality, if you talk about personnel quality. Actually, also there, we rely on a very strong and careful selection of the people who join us, and we do provide very extensive training in our in-house academies, so to make sure that people have the same mindset and the same set of values. On the pure numbers, it is so that we're actually having hired more than approximately 600 new colleagues in the last 12 years. We outperformed a little bit what we had planned. We were a little bit more timely and more and quicker than we had anticipated. So yes, indeed, I do agree with you there is tightness in different labor markets, also in the countries in which we operate. But broadly speaking, we managed to attract a sufficiently high number of people. And we did so even a little bit quicker than we had anticipated in our planning. That in this regard, we did not sacrifice on our selection criteria. And we continue, as I said, to train everybody who joins us the same way as we did in the past. May we see a certain degree of a shift that we have had a higher number of direct hires from -- of experienced personnel from competitors because we saw the need to attract more external know-how, a better understanding of market practices from competitors and the like. And as I said in the beginning, without making any compromises on the quality, we managed to attract them.

The next question is from Milosz Papst with Edison Group.

My first question is on your deposit-to-loan ratio. So can you talk us through your expectations for 2024 in comparison to end of 2023, right? The ratio at group level was 116.5%, and more specifically, in the Southeastern Europe segment, right? Where you, in the first half, your loan book has grown by around 8% where the deposits grew by 3.6%. And my next question will be on the Ukraine sovereign debt restructuring negotiation and the recently signed law allowing the government to suspend foreign debt payments until 1st of October. Do you see any particular implications of these developments for the local banking sector? And finally, maybe you can shed some of the highlight on your investments in the tech infrastructure to support your updated strategy. So you've highlighted that there are several automations which are yet to be implemented. So maybe you can talk us through the progress and the potential time line for the integration of the automated loan origination with lending decisions or the rollout of digital client onboarding.

Mr. Papst, thank you so much for your question. On the deposit-to-loan ratio, yes, indeed, they reduced from 116 at the group level to EUR 113 million at the -- EUR 116 million at the beginning of the year, EUR 113 million now at the end of the second quarter, but still, we feel very comfortable with this number. Number one, this number strongly increased on a year-and-year comparison and the year-on-year comparison does also include the fact that there is a high degree of seasonality in our markets. Typically, the second half of the year is strong in deposit cost in the first half of the year. And actually, if you look at the numbers which we planned with, we outperformed both loan growth and deposit growth. Actually, we outperformed more on the deposit growth. So we are very comfortable with that number. We consider, indeed, broadly speaking, a number of 113% already is very good, but it's important to look at it at a bank-by-bank level as you did looking at the individual segments. What's even more important for us than the pure and exclusive top-line deposit-to-loan ratio is the composition of the deposits. And here, it was utmost important for us to have this higher emphasis on the contribution of the retail sector. Our private individual clients have contributed, as I said, broadly speaking, 90% of the overall deposit growth, and that was most important to us. As I also indicated, we reduced our long-term institutional funding year-on-year by approximately EUR 100 million. We could do so at the basis of this overall strong number in deposit loan. So as I said, number one, it's a little bit cyclical in the year. We feel comfortable with the EUR 113 million. And still, we would expect it to increase in the course of the year and down the road. Most important is, in our view, the composition of the -- on both sides, actually, of the balance sheet, the composition, the granularity of the loan book, but also the composition, the origin and the regularity of the deposit side. And in this, say, more broadly, in this transformation of our balance sheet we made, in our view, very substantial progress already last year, but even more so in the first half of this year. Now on the Ukraine sovereign debt restructuring that does refer or also the downgrade that we saw from Fitch, does refer particularly to foreign currency that of the Ukraine sovereign. We do not have foreign currency debt of the Ukraine sovereign. All our exposure to the Ukraine sovereign is in local currency.

Yes. And Milosz, very quickly on the IT projects. I mean, you pointed it out as indeed the most important project on digitalization, both front and back office mostly for the -- within the PI segment or to, yes, automizing processes to really increase the number of new clients to automize loan processing to minimize processing times, is the bulk of the projects, there are also continued projects that are not necessarily new to the strategy to increasing IT resilience, but I guess this is an issue in all banks. But like I said, the bulk of it is related to the new strategy and the target of increasing client numbers and loan volume.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Hubert for any closing remarks.

Thank you, and thank you for all your interest and participation in our analyst call covering our half year 1 results. We hope to have given you as much transparency as possible. If you have any additional questions, please do not hesitate to contact Nadine. The next scheduled conference call will take place when we publish our quarter 3 results on November 14. Thank you again, once again, for your participation and interest. Thanks.