Raiffeisen Bank International AG (RBI) Earnings Call Transcript & Summary

Both of the countries, we also give an insight to the respective subsidiary to the respective entity, so hopefully, you enjoy it and you get a good understanding when we're talking about our MPE MREL approach. I would now like to move to the Page #3 to swiftly introduce you to RBI again. Many of you anyway know RBI quite well. We're acting in certain different CFE markets. We are serving 17 million clients. We have a top 5 position in many of our countries, meaning 12 of the countries. We have a very solid capital position, summing up to 13.6% total capital ratio, 18.4%, and external ratings is also confirming our approach. In Moody's terms, it's an A3 and in S&P terms it's an A-. The reason why I'm so heading through the slides is also just to let you know because we have quite a big slide deck and it's more important that you have the occasion to better understand the countries. Let me move on. I think what is also very important, and there's a clear commitment from RBI towards our sustainable finance approach. RBI has been the largest Austrian issuer of green bonds. And if you look at the league tables, we can claim the #2 in book running the different sustainable issuances in our home market. We also have signed the global principles for responsible banking and, therefore, being the first Austrian bank to commit to the UNEP FI Principles for Responsible Banking. We issued a completely new thermal coal policy supporting those who are still depending on the coal -- thermal coal that they can leave this way of producing energy by latest 2030, but we are also extremely restrictive to customers who had a revenue towards the thermal coal business is the dominating one and where there's no clear strategy available to phase out. ESG topic is very important to us. I can confirm that each RBI Group Board member has a clear KPI towards ESG. On the lower part of the table, you can see that our commitment ambition is also externally recognized. Now let me come to the resolution strategy of RBI Group. RBI has chosen a multiple point of entry because we are strongly convinced that this is the most suitable resolution strategy for RBI. And you can see on this slide, on this colorful slide that we're having 7 independent ring-fenced resolution groups. And we do have a strict intragroup limit system and metrics available to mitigate certain contagion risk from 1 resolution group to another one. Ratings are fluctuating between A- to Baa2. This also depends, of course, on the country rating of the respective country. So here, you can see the 7 different resolution group. It's the resolution group from Czech Republic, Slovakia, Hungary, Croatia, Romania, and Bulgaria, and last but not least, Austria. The new -- the non-EU subsidiaries outside the scope of the EU MREL regulation: Russia, Ukraine and Belarus, Serbia, Albania, Bosnia & Herzegovina and Kosovo. So what is the strategy about? And how did we calibrate the different targets? The NPE is based on the principle that different resolutions can be resolved, and that's very important, resolved separately, if necessary, in line with our RBI's group governance model. The respective resolution group is aiming to develop the required loss-absorbing capacity. We have Austria, Slovakia Bulgaria and Croatia in the resolution group, of course, directly remedied by the Single [ supervisory ] Resolution Board. Czech Republic, Romania, Hungary, resolution groups under the clear responsibility of the local national resolution authorities. The Single Resolution Board and also the national resolution authorities have approved our MPE approach for RBI in 2020, February. What is very important, how do we calibrate the MPE approach? We have MPE add-ons. We have limits on an intragroup level. And then you have certain adjustments and -- to be added on the loss absorption capacity and the needed recapitalization amount. So we start off with what we call clean RWAs, which is the customer business, and you also have to add the MREL funding to the subsidiaries and senior funding towards the non-EU subsidiaries. Then we add geared on towards the EU resolution group and further on the add-on towards the EU network units. I think the number, the Slide #7 is quite obvious for you. Here, you see the cash flow priority on the left-hand side shown in the [ style of ] factor. Of course, we commit that we also do externally to our CET1 guidance. Somewhere around 13%. Michael Höllerer will talk about this in more detail 2 slides later. And of course, then you have the sequence on how you would mitigate, if you see a certain deterioration on your capital plan, is it the preparation and prevention phase, going concern, where you have your limits, then you could start seeing an early intervention phase and the implementation of a recovery plan if needed. And then you see, of course, a pronounced distance between the statutory point of non-viability. Resolution for me as a CEO is very difficult, even to commit to have it over my lips. But this would be the sequence how the current rules and regulation are working. And of course, since we are a prudent banker, we are well prepared, and you can see it on the right-hand side, again, showing how the cash flow priority would look like. Michael, this so far through the intros. Now do the details when talking about Austria and the Austrian Resolution Group, Michael, please.

Thank you very much, Hannes. I want to give you an overview of the Resolution Group Austria before I would give you also a short overview of our capital steering. And then afterwards, we go into the details for 3 of our network banks. The Resolution Group Austria is, of course, the most -- the biggest one, the most material one with our RWA of EUR 41.5 billion. They overwhelming parties here covered by Raiffeisen Bank International AG. The figures here also contain, for example, our branch in Poland and other equity participations in subsidiaries we hold as RBI. When you look at the other members of this Resolution Group Austria, you can see that these are our specialized -- bank specialized entities for the Austrian business to name here the Bausparkasse or also Centrobank. In the chapter of others with EUR 2.5 billion of RWAs, you can find, for example, our pension fund activities, you can find some leasing purpose vehicles filling up the figures of up to EUR 41.5 billion. Looking at the MREL stock of this resolution group, the total eligible instruments amount to EUR 16.3 billion. When we look on the subordinated part that you can see below, you see the huge part of CET1, followed then by the other capital instruments we have issued and other subordinated liabilities. And then on top the senior preferred part of EUR 4.4 billion. I think what is very important to mention for the Resolution Group Austria is that in terms of its size, in terms of business activities and also in terms of its role as, let me say, the central issuance vehicle for the group for many years. We have here also looking to the whole resolution regime, a very convincing, very well capitalized, very well-funded situation you can see. This brings me also on the next slide on the MREL target and starting from our current ratio where we have above 39% and the subordinated ratio, MREL ratio of nearly 29%, underlining what I've said before to Resolution Group Austria. You can see on in 2022 for the intermediate binding target and then on the indicated final target 2024 that, in this respect, the targets are already very well covered by the current MREL ratio. In this respect, also RBI AT is not intending to issue any senior nonpreferred issuances instruments for MREL purposes so far. But of course, especially also in 2022 senior preferred issuances for business development for growth reasons. When we are also looking, and I think this is also important for Resolution Group Austria, to the new BRRD2 rules. So this led to a subordinated requirement that is, as you can also see here on the figures below, their own funds requirements for this resolution group. Recently, the Austrian Act on -- for the -- for implementing the resolution regime, the BaSAG was also amended. And so also the liquidity reserve amounting to more than EUR 7 billion, EUR 7.5 billion is also -- we'll get an equivalent -- equal treatment in bail-in and in insolvency. So that this will also potentially lower our subordination requirement. So far, these are some words to the Resolution Group Austria. Finally, I would come to our group capital steering approach. This approach is in place for the group for Austria, of course, and also for the network units. I think you are very well aware of our target capital ratio of 13%. That is our midterm target, that is the target we are dedicated to. The management buffer we have in place based on our risk assessments, our internal risk assessment and also when looking to our peers, are 2.5% of CET1. The capital allocation itself is based on our strategic ambitions -- on our strategic review we have in place every year. It's, of course, based on our market expectations and brings us finally in our budgeting process, in our allocation process via risk-adjusted returns to the targets for every network bank and every significant unit. FX management of capital positions, this is for RBI Group a very important topic. Here, we have a very proper process in place here. We are also always working on optimizing and being very much to new regulatory requirements. Here, we are managing the -- for FX volatilities through structural measures and FX hedging. Finally, 1, 2 sentences also to dividends. We are as you are also aware of, so that is also communicated, we are aiming for a payout ratio of 20% to 50% on the group level. Here, we are also actually, of course, stick to the ECP recommendation that is in place, but the target that is also here is clearly communicated and is clearly envisaged by our plans. One sentence also here to the network banks. In terms of the network banks, there are different deviating dividend payout ratios in place, of course, also caused by the local overcapitalization we see in some of our network banks. Now after giving you this short overview on the capital steering approach, I would now like to introduce on the first of our network banks presenting today, this Raiffeisen Bank Romania. And I would now ask our dear colleague, James Stewart, Board member responsible for capital markets and treasury to give you an overview. So I want to hand over to James.

Thank you, Michael. Good morning, ladies and gentlemen. We have limited time, so I'll try to get through a lot of information in a very fast way. Can we go to the first slide, please. There we go. Okay. For those of you that don't know much about Raiffeisen Romania, it's one of the leading banks in the Romanian banking sector. We're ranked in the top 5 by total assets and in the top 4 by total loans as of the end of 2020. We have roughly 10% market share in loans at the RBI group level, Raiffeisen Bank Romania ranked 3rd in 2020 in terms of its profit contribution to the overall group. Raiffeisen Bank in Romania was established in 2001 when Raiffeisen Centrobank which is the legal predecessor of RBI, acquired the state-owned bankrupt Banca Agricola from the Romanian government. At the end of 2020, the bank had a portfolio of roughly 2.2 million customers. Broken down, 2.1 million, 2 million private individuals, 100,000 SMEs and roughly 6,000 corporates. We offer them a diverse range of financial products and services from personal loans, deposits, current savings accounts, corporate lending. We have an investment bank which provides also M&A consulting and other types of solutions for our corporate customers. Jumping in a little bit on the strength of the bank. We have consistently had one of the highest return on equity on the market. We have a solid earning power driven by diverse revenue streams and good asset quality. We have sound financial standing. We have a bank deposit rating for both foreign currency and local currency for Moody's, which stands at Baa1, which is 2 notches above the Romanian sovereign rating. We believe in innovation and sustainability, they have been our top priorities. We are focusing on deepening the digital relationship with our customers and grow it in areas where we can generate value and create positive changes for all our stakeholders, clients, employees, society investors, shareholders and so on. We consistently monitoring our activity and our impact on the environment. Now we do all this with a highly engaged and a stable team operating within a strong organizational culture, which is based on our 4 values. The pillars are collaboration, proactivity, learning and responsibility. The opportunities. Now what makes Romania really an attractive destination for investors is the political stability and business -- and improvement in the business sector, in the environment. Romania is a rapidly converging EU country with positive interest rates and a high-return on equity. Financial intermediation is much below the EU average, which offers tremendous opportunities for banks such as ourselves. We have significant EU funds available for Romania within the next multinational EU budget, which carries from 2021 to 2027, roughly EUR 80 billion in nonreimbursable funds, grants and low interest rate loans to facilitate the recovery of the economy following the health care crisis as well as the transition towards a sustainable and carbon neutral economy. Next slide, please. If we move to next slide. Okay. Thank you. As Michael had mentioned, focus on sustainability. Now in line with our parent, RBI, we have established a green bond framework as part of our broader sustainability strategy with the aim to focus on assets with a positive environmental impact in order to support the necessary transition to an environmentally sustainable future. In this context, our intention is to use the requirement to build the MREL buffer as an opportunity to issue green bonds, which will support our sustainability strategy and to contribute to our goal to become the #1 green bank in Romania. The framework is aligned with the ICMA Green Bond Principles, which are a set of voluntary guidelines that recommend transparency and disclosure and promote integrity in the development of the green bond market here. Sustainalytics, a company, has validated our green bond framework and considers it to be credible, impactful and aligned with the Green Bond Principles. The 5 categories, which we have identified in our framework, where we see potential to develop our green loan portfolio in the coming years are: green buildings, including green mortgages, renewable energy, energy efficiency, clean transportation and sustainable agriculture. The eligibility criteria for the 5 categories' use of proceeds are the EU Taxonomy on a best effort basis. For the green building category, we intend to invest in commercial and residential buildings that have achieved a recognized green building certification. On the renewable energy category, we may finance assets dedicated to the transmission and distribution of renewable energy sources, including wind, solar, hydropower, geothermal, biomass, and waste-to-energy projects. Under the energy efficiency category, the framework allows for investments in energy and efficient lighting, energy storage projects, projects improving the energy efficiency of industrial production process in a factory and smart grid solutions for energy transmission. For the clean transportation category, the bank intends to invest in 0 direct emissions or low carbon vehicles and low-carbon transportation infrastructure. For the agricultural and forestry category, the framework contemplates investments in certified forest operations and sustainable agricultural practices. Now all these eligible criteria are aligned with the EU Taxonomy on a best effort basis. And we expect that our upcoming MREL bond issue will be the first of its kind in Romania. Next slide, please. As mentioned earlier, we're focusing on digital transformation. With our diversified touch customer touch points, we are able to adequately service our existing client base as well as ensure new client acquisition through our digital transformation. We have continued to scale down our physical footprint in the past years, while at the same time, increasing rapidly on the digital front. Since 2016, we have decreased by roughly 30% of the number of branches, a dynamic that's pretty much in line with our peers, up faster than the overall level of registered in the banking sector as a whole. We have a rapid increase in the number of digital customers, which has registered a compound annual growth rate of 20% over the last 4 years. We have a higher usage of online payments, which is a trend accelerated by the COVID crisis, obviously, and has enabled a gradual transformation of branches into cashless units. To give you an idea, currently, over 40% of our branches are cashless. At the end of last year, we have successfully piloted a digital end-to-end lending platform for our SME clients. And we intend to make it available this year to all of our SME customers. Also at the beginning of this year, 2021, we have launched a platform called R-Flex, which is a real-time FX platform for our customers. Next slide, please. Can we move ahead? There we go. Let's talk a little bit about the lending profile and asset quality. We are a universal bank with a diversified loan portfolio balanced between retail and nonretail exposures. Our loan portfolio recorded strong growth rates over the last 5 years, roughly a compounded annual growth rate of 7.5%. In 2020, it's -- although a difficult year, we managed to expand our loan book on all segments. In the case of consumer loans, we have registered record performance in the second half of last year, reaching a market share of 24% in our mortgage -- whereas mortgage loans had a similar development in 2019 despite the COVID impact. In the case of lending to legal entities, which is our SMEs and corporates, the focus at the onset of the crisis was our measures to provide liquidity and protection to the businesses, including through private and public moratorium. While in the second half of last year, we focused on providing various funding alternatives through working capital investment loans. Lending was supported throughout this period by governmental and supernational guarantee programs, where the bank has developed strong expertise over the past decade. Raiffeisen, the bank here in Romania, our bank, has stood out throughout the past decade as a very prudent bank, which has translated into extremely sound asset quality, a high nonperforming equity cover -- nonperforming loan coverage and low nonperforming exposures. Increase in risk costs in 2020 reflects our prudent risk management approach in the context of the challenges generated by the COVID pandemic. Our -- the industry allocation of our nonretail portfolio exhibits a defensive structure with a low share of exposures towards the most affected sectors. Some of those are towards wholesale, retail, trade, manufacturing, construction, real estate and agriculture. Can we move to Slide 5 (sic) [ Slide 16 ], please. The next slide. Talking about our capital structure and earning power. Raiffeisen in Romania has reached a record high solvability in 2020 on the back of dividend payout restrictions imposed by the ECB and the National Bank of Romania. At the end of 2020, total owned funds stood at 22.6% of risk-weighted assets. We make use of all available capital instruments, including AT1, Tier 2 in order to manage efficiently our capital position. Our sound business model translates into strong earnings power. We have had a consistent return on equity significantly higher than the local market, which has created space for us to -- in order to manage our sustainable growth in risk-weighted assets, which has been roughly 7.6% compounded annual growth rate over the last 10 years. The decrease in 2020 return on equity was driven by several factors. Poor commission performance in second quarter as a result of the lockdowns, decreasing interest rates in the local market and prudential -- prudent provisioning. Next slide, please. Next slide. Raiffeisen Bank Romania also has a very, very stable funding base and very ample liquidity. Our balance sheet funding is assured mainly via customer deposits, composed mostly from stable retail site deposits, cheap retail funding also contributes to our strong net interest margins. In 2020, it also was shown that Raiffeisen Bank Romania is perceived as an anchor of stability and safety during the crisis. Both households and companies increased their savings and Raiffeisen Bank Romania recorded a strong increase in customer deposits of roughly 21% year-on-year in 2020. Liquidity buffers are significantly above the minimum required levels. And the bank has experience also in tapping external capital markets through a virtue of 2 senior bond issues in local currency, Romanian leu in 2013 and 2014, placed primarily with local investors. We've also done a Tier 2 capital bond placed with supranational investors in 2019. Next slide, and we'll be wrapping it up with this one. Okay. Our MREL calibration. Now there are 3 entities within the resolution group in Romania, Raiffeisen Bank Romania, which makes up more than 98% of the resolution group's total assets. We have Raiffeisen Leasing, we have a Bausparkasse or mortgage lending bank called Aedificium Banca pentru Locuinte. In March 2020, RBRO, Raiffeisen Bank Romania, received its binding MREL target from the Romanian Resolution Authority, the National Bank of Romania. These targets were calibrated based on balance sheet data as of December 2017 and based on BRRD1. After the COVID crisis started, the National Bank of Romania communicated to us the target for 2020, which could be considered indicative at that stage. So the first binding targets would be the ones set from January 1, 2022. Based on the decision from March of last year 2020, Raiffeisen Bank Romania must comply with an MREL requirement equivalent of [ to 22.68% ] of risk-weighted assets. No subordination requirement was communicated to us at that time. As of 2020, the current MREL ratio of Raiffeisen Bank Romania Resolution Group stands at 20.72%, 42.72%. We expect to receive from the National Bank of Romania a new MREL requirement in 2021 based on these SRB's 2020 MREL policy and BRRD2. After the local transposition of BRRD2 will be transposed into local legislation. Subordination exemption is expected to be in line with CRR, roughly 3.5% of risk-weighted assets. The bank's funding plan already reflects the expected draft joint decision on MREL determination. For 2021, we expect the MREL issuance to be in the range of roughly EUR 300 million to EUR 550 million equivalent with a significant share made up from senior nonpreferred bonds. So that pretty much sums up my presentation right now. I'm going to turn it over to Johannes Schuster, and thank you very much, ladies and gentlemen, for your attention. Johannes?

Thank you so much. Good morning, ladies and gentlemen. This is Johannes Schuster from Bratislava. I will talk about Slovakia and Tatra banka. Please allow me to start with 2 basic comments about Slovakia. Firstly, Slovakia is well integrated into the European production chain, 85% of our exports is shipped to countries of the European Union, with Germany being the largest export market. Secondly, Slovakia became a member of the Eurozone in 2009, and our government bond yields indicates that investors perceive us as like core euro country. The corona pandemic influenced the economy in a similar way than in other countries. The recovery was very strong, particularly in the third quarter of 2020 and continued doing so in the fourth quarter of 2020. We expect that GDP growth in 2021 will be around 5%. The labor market reaction was muted due to strong government measures that helped companies to keep employees on the pay list. House prices also did not respond to COVID crisis. Buyers and sellers looked through short-term problems and the activity in the real estate market continues without any obstacles. The fiscal response from government was strong, what naturally lifted the public deficit to 7% of GDP. Public debt will reach levels of around 62% of GDP, what is from EU perspective a still very solid number. The debt management agency is able to finance the deficit easily. The next slide gives you a high-level overview of Tatra banka Group. When talking about Tatra banka Group, one understands the bank itself, Tatra banka, with its 3 total companies operating in the fields of asset management, pension fund business and leasing. Tatra banka was established in 1990 as pure greenfield operation and was the first private bank in Slovakia. Nowadays, we are the leading corporate business, private banking and premium retail as well as in asset management. But what we are really famous for and saying this, I mean not only Slovakia or not only RBI Group, but the whole CEE region is digitalization and innovation. From a balance sheet perspective, Tatra banka is currently the third largest bank in Slovakia. Being member of RBI Group, RBI is by far our biggest shareholder with roughly 79%. The rest is equally split between real third-party shareholders and the management and employees of Tatra banka. Tatra banka runs a so-called multibrand strategy in serving its customers. Regarding number of branches, we further increased especially the number of branches for Raiffeisen, which is, since years, our acquisition machine, bringing us step-by-step closer to an overall number of customers in the amount of 1 million. Year-on-year, Tatra banka shows a 7.8% asset growth in 2020 and this despite COVID. We will enjoy a robust CET1 ratio of nearly 17%, a strong Moody's rating A3, and we are regularly awarded by international media agencies especially because of our outstanding innovative and digital footprint, which brings us to the next slide. Without doubt, it was also a strong performance regarding digitalization. That approach is good result in 2020 in a very special and extraordinary environment, having only limited access to our branches. Tatra banka is capable to deliver in new significant innovation almost every year. Just to give you only 1 simple note for the digital penetration of our customers, currently already 65% of our clients use our mobile app actively. A key role on our digital path plays since 2011, biometrics. Biometrics, physical or behavioral human characteristics that can be used to digitally identify a person to grant access to systems, devices or data. The latest [ mech ] innovation in Tatra banka in this context was face biometrics. Please let me spend also a few words on our innovations and artificial intelligence. Chatbot Adam is the first banking chatbot in the Slovakia market, serving customers based on artificial intelligence by using natural language processing. Its ability of understanding the customer requirements is steadily growing and today is reaching already extraordinary 82%. Our customers are giving positive feedback, appraising positively the timeliness and the accurate answers, which is giving an ideal baseline to future exploration of chat out possibilities in exchanging human work in servicing areas. Some notes about our lending profile and asset quality, which is shown on the next slide. The major part of total assets of Tatra banka is composed of loans to customers. The compounded growth of loans to customers 2015 to 2020 is over 7%. The nonperforming exposure ratio is still very low, and this despite COVID, even though the biggest part of moratoria already expired in 2020. Capital. Next slide, please. Tatra banka shows a strong capital adequacy ratio with a significant buffer. The main source of continuous growth in equity is mainly generated by retained earnings, which enables our growth. The last capital increase to accelerate growth dates by 2011, except 2020, except last year, Tatra banka's ROE since 2015 was constantly double-digit which is, in our opinion, quite remarkable, taking into consideration, on the one hand, the development of interest rates in the Eurozone and on the other hand, the highly competitive environment in Slovakia. Similarly, as double-digit ROE, the high long-term ambition of Tatra banka is also reflected in the triple-digit profit. We consider our liquidity position, a very strong one, with customer deposits as our major funding source. Part of our wholesale funding strategy is broadening resources as well as internationalization. In 2019, we established access to international markets, doing a public placement of EUR 250 million covered bonds. Regarding MREL, we gained our first experience in 2020 with the private placement on the Slovak market in the amount of EUR 110 million, senior unsecured MREL eligible for bonds. But from the past to present and the future, also in 2021, we have been already quite active. Yes, let's call it this way. We should and retained EUR 1 billion cover bonds for TLTRO purposes. But what we are very proud of is the successful establishment of the green bond framework, including second-party opinion. To our knowledge so far, Tatra banka is the only Slovak bank with such a framework already approved and published. Just to be clear, for the upcoming years, issuances in green format will be our targeted focus. Last but not least, MREL based on the draft decision 2021 of the single resolution board, the final MREL requirement for Tatra banka is 27.53%. However, we do not expect any changes regarding this decision. The draft does not contain any subordination requirements. As of today, Tatra banka, which is in general, under direct supervision of ECB, is already fulfilling the intermediate target of 21.01%. Due to final targets and growth in RWAs, we expect approximately EUR 300 million issuance per annum for the upcoming years. Our planned issuances will be in as senior preferred, what means senior unsecured MREL eligible, whereby, as already mentioned, the focus is on green format. So that's more or less all for today from the side of Tatra banka. Now I would like to hand over to my colleague in the Czech Republic. The presentation will be continued by Tomáš Jelínek, Board member for markets and investments. Tomáš, the floor is yours.

Thank you so much. Good morning, everyone. I would like to devote a few slides to Czech Republic. And if we can go to next slide. First of all, the Raiffeisen Czech Republic Group, it's the largest CEE bank in RBI and network bank by loans to customers. It's a greenfield, basically, it has been launched as a greenfield in '93 and grew through quite many successful acquisitions, just to name 2, in 2006, we acquired eBanka from PBF Group. That gave us, I would say, additional 150,000 customers. And also in 2015, we purchased a Citibank retail part of the bank that increased the number of customers by 200,000. We recently announced the 3 additional acquisitions, but there is a special slide devoted to that. So I will cover that later. Roughly in RBI, the share of Raiffeisen Czech is 11% and in shareholder risk weighted assets is 9.5. The one thing that I would like to mention is that we call it Group, because the Group is consisting of a bank, Raiffeisen Leasing, local Raiffeisen investment company. And the last one is Bausparkasse, the building society which Raiffeisen Czech purchased at the end of last year. And therefore, you can see a huge year-on-year growth on the assets, nearly 20% -- over 25%. But the reason is that we included in our balance sheet, consolidated balance sheet, the Bausparkasse assets. Without the Bausparkasse assets, the growth would be around 7%. Raiffeisen Czech Group actually contains quite the sustainable CET1 ratio, over 14%. The rating from Moody's is A3 and the loan customers is above EUR 11 billion. We have so far 120 branches, over 120 branches. And we have over 1.1 million customers. I would like to mentioned that out of this number, roughly 500,000 customers are actually from Bausparkasse. Therefore, the true banking customers are slightly over 600,000. But before we go to details, I would like to mention a few facts about Czech Republic. First of all, first, the political environment, which is kind of stable, even though the recent development of COVID was not handled very well. I have to say that the last several years, the political environment was very stable for the business. And for example, in Czech Republic, we have no banking tax yet. But even though the debt might be increasing, the probability might be increasing, but so far, there's no bank tax. We have quite reliable infrastructure in Czech Republic. And also, sometimes, a fact which is quite omitted, is the location of the Czech Republic, which is in the center of Europe, located the next biggest EU economy with Germany. And whatever happens in Germany actually happens in Czech Republic. So for example, back in 2009, where the Cash for Clunkers was introduced in Germany, it helped a lot to Czech economy as well. We have quite high private sector saving and low private indebtedness, having a big opportunity to further business and growth of the loans. We have really low government debt right now, 42%, even after the COVID measures. It might actually reach close to 50% and but still, it will be considered as a very, very good number in the EU. We have stable and fully convertible currency, which is helping us in the bad times where, for example, in 2013, Czech National Bank actually weakened the currency and then helped actually the export economy. We have one of the best ratings in CEE. We have one of the -- not one, but I think the lowest unemployment rate in Europe, which before COVID reached 3 -- actually went below 3%. Right now, it's increasing because of the COVID crisis, around 4%. And we have independent central bank with a positive key rate. One -- a few sentences about the macro. Actually, the Czech economy showed quite a surprising resilience last year because the drop was less than 6%, and we assume that the growth rate this year will be are roughly about 2.5%. As mentioned, the unemployment is one of the lowest in Europe and right now is reaching 4%, might be about -- above 5%, but still -- this is really, really good number. In 2020, actually, Czech National Bank cut rates by 2%. Currently, the reported rate is 0.25%, but we see that the probability that the first hike will happen either end of the year or beginning of next year, is very, very high. Actually, the market now has 2 hikes by the end of the year, which we think it might be too aggressive. But definitely, first year, we see first movement in the interest rates up. There is a quite huge fiscal support. So we're not -- even in Germany has fiscal support, we have fiscal support as well, roughly 25% of a GDP. And also, there is quite a huge European Union support with a grant of EUR 7.1 billion, which is roughly 3% of GDP. So this is about Czech Republic, and I would like to really deep dive in the -- in Raiffeisen Bank. In the nutshell, I might say the Raiffeisen Bank has a cross-sell machine supported by the digital capabilities. In our portfolio, we have 89% active customers that use digital channels. That has been improving quite a lot. There has been increase by 14% in 2020, partly connected with over the lockdown situation. And 95% of the banking services are available digitally. We have really good capabilities in cross-sell. And according to the Finalta study, we are the highest number of products per client. We have the highest loan balance per client. We are the second highest in sales productivity. Actually, in 2021, we even launched the real-time multichannel CRM that actually tackles the instant offer for our clients and give them tailored individual needs. And in 2020, because of the crisis, all the banking sector declined roughly by 50%, including Raiffeisen Czech Republic. And because of that, we immediately applied the measures where we cut personnel expenses by 15%. We closed roughly 18% of our branches. We decreased the headquarter space by 23% and realized other savings as well. I already mentioned that we purchased last year, the Raiffeisen Building Society, the Bausparkasse, and we are now in the full integration into our bank. Still, the Bausparkasse has to remain as a separate entity because the license can be -- cannot be owned by the bank. So they will be still separate entities, but we realized around EUR 10 million of synergy in OpEx and in gross incomes. If I may go to our next slide please. Thank you. And here, I would like to talk about the 3 acquisitions that were announced in the first quarter. And those acquisitions, no one slide back, one slide back, please. Thank you. One of the biggest one is acquisition of Equa Bank which has almost 500,000 clients, which half of them are active on a monthly basis, has 300,000 digital users and all the sales is done 50% by -- digitally. The bank has roughly EUR 2 billion in assets where a 30% is consumer loans, 43% is mortgages and 27% are corporate loans. In Raiffeisen terms, it would be [ between micro and SC ], so it will be a [ lot of retail ]. So the... [Audio Gap]

It appears Tomáš has disconnected. Please bear with us one moment while we get him back on the line. [Technical Difficulty]

So colleagues, I will jump in now for the remaining 3 resolution groups we want to present to you today. These are rather very, very short presentations in sake of completeness and showing you of the work and efforts we are running also in Hungary, Croatia and Bulgaria. I hope that Tomáš can step in later on. Coming to Raiffeisen Bank, Hungary, which is the longest lasting member of our CEE network banks, ranked fifth largest bank in Hungary with than 0.5 million of customers and a very strong deposit driven funding position. Here, you can see the MREL ratio, the current MREL ratio. And all these figures I'm presenting to you now for all of those 3 countries. They are all so based on the newly established frameworks and regulations. The current MREL ratio at 21%. They are subordinated ratio as well. For Hungary, we are intending to issue, to have the first issuance in the second half of 2022. In this year, there is no intention to do, though, as there are also no binding requirements in this place. When we will execute this issuance, we expect a EUR 250 million senior preferred format for the public international market or in private placements. Coming to the next country, coming to Croatia. Our network bank in Croatia is also ranked fifth on the market, also with more than 0.5 million of customers, also with a very strong deposit-driven funding, funding base with assets of more than EUR 5 billion. The MREL, the current MREL situation shows a ratio of MREL as well as subordinated MREL ratio of nearly 25%. Croatia. And later on, Bulgaria, are the 2 countries that are also under the direct remit of the single resolution [ part ] in -- different to Hungary that is really locally supervised. Looking at the funding plans for the next years, you can see here the amounts of EUR 160 million we intend to place in 2021. This is too small for international issuance and so we want to meet this requirement with private placements, together with supranational institutions and selected institutional investors. For 2022 and 2023, then we will -- we are working also on international benchmark issuances. What is for Croatia and afterwards also for Bulgaria in the focus, is ESG and green bond frameworks that we are currently working on. This is really one of our focus areas. And as Johannes Schuster for Tatra banka already mentioned, the colleagues there are very, very excellent, on track. We are also focusing here in these network banks on these frameworks. Coming to the last country coming to Bulgaria, in Bulgaria, we have more than 600,000 customers, an asset base of around EUR 5 billion and also a very strong deposit-driven funding side. The MREL ratio, the current ratio that is identical with the subordinated ratio, these are 23.74%. Here we are envisaging as well as we are doing in Croatia on the issuing side. A rather small issuance in 2021 together with supranational institutions and selected institutional investors. And then in the upcoming years to execute it while an international benchmark issuance. So that was it in sake of completeness for the 3 remaining resolution groups. And now I hope it works. I will hand over back to Tomáš Jelínek that he can finalize his presentation on Raiffeisen Czech Republic. Tomáš.

Thank you, Michael. And apologies to everyone. I was kicked out of the call. So hopefully, I will be able to finish the presentation. I was on -- still on the acquisitions slide, where I mentioned that we recently signed a deal with Equa Bank, which will give us almost 0.5 million clients to our portfolio. The size of the loan book is 2 billion also, we just recently signed recontracting agreement with the ING, which is another true acquisition. But since ING is ending its businesses in Czech Republic, we agreed that they will refer our services to their clients, where we assume we will have roughly 150,000 customers that might be recontracted to our base. And last announced acquisitions, but they are small, it's Akcenta, which are epayment and FX institution. Unlike those 2 already mentioned, Equa and ING, we would like to basically migrate our clients. So our system here, Akcenta will stay totally independent, and we will use it as an additional product feature for our customers. Now regarding the bank lending profile, the total assets over EUR 15 billion. The -- we are here talking about only the bank without the Bausparkasse, so you can see the growth of 7.5 -- 7.4%. Roughly speaking, 1/3 of our asset book is securities and bonds, mostly deposits in the Czech National Bank, 2/3 are customer loans that are split quite -- almost evenly between corporate and retail businesses were in the retail. Most of the assets are coming from mortgages, quite small part is coming from personal loans, but this will be very soon enlarged by the Equa transaction where in Equa, the personal loans contains 30% of the total book. In the corporate, we have EUR 2.7 billion investment in project finance and around EUR 2 billion of working capital or -- and overdraft. From an asset quality, yes, we had some risk cost increase in 2020 because of the COVID situation, but still the NPE ratio was below 2% in 2019 and grew to 2.3%, but still, the coverage ratio is about 50%. So this is quite a substantial number. And case of the customer loans, we have annual growth of 7% in 2015. There was a slight decline in 2020, but very small. We can go to a next slide. From a capital point of view, Raiffeisen Czech Republic has quite a comfortable capital ratio, of total capital of 19%, which is well above capital requirements going to CET1 above 14%. Most of it, about 2/3 are cumulative return earnings. So if we look at the life today share capital, the cash that was invested by Czech -- sorry, by RBI to Raiffeisen Bank, it will be -- we will basically triple the equity. And overall, the net income since the launch was more than EUR 1.2 billion. From return on equity point of view, we were roughly around 12% and reaching almost 15% in 2019. Of course, in 2020 because of the COVID situation, this is dropped to 6%, but this can be seen on the entire banking sector in Czech Republic. From [ CET1 ] ratio, we can see small decline of the requirements, which is caused by the countercyclical buffer that was reduced by Czech National Bank. Otherwise, our CET ratio is continually increasing. From a risk-weighted assets point of view, we have a growth of 4%. There was a decline in 2015 that was caused by the securitization deal that decreased risk-weighted assets by EUR 600 million. And I think we can go to funding. Raiffeisen Czech Republic is a self-funded completely bank, which is funded mainly through retail and corporate deposits that represent almost 90% of the funding. Our liquidity ratio, LCR comfortably around 200% and NSFR around 130%. The loan deposit ratio is continually decreasing actually since the acquisition of Citibank retail part. Deposit growth is very strong and was especially accelerated last year in 2020 where the annual growth actually has picked up to 13%. We have covered bond program as a supplementary to funding but it's mainly euro, where the euro funding is weak. Therefore, we're using the covered bond program to supplement that. And we can go to our next slide, finally to MREL, I think. Yes. I will start from the left-hand side, the MREL ratio is 19%. On the right-hand side, the target is 23.6%. Our aim is this year issuance roughly around above EUR 400 million, where EUR 60 million to EUR 160 million will be domestic issuance in Czech koruna and the international issuance will be roughly between EUR 250 million and EUR 350 million, where we are continuing in 2023 roughly EUR 100 million and 2024 by EUR 550 million. The Resolution authority is Czech National Bank. The minimum requirement is seeing the class of senior nonpreferred. The targets are not concerned yet, these are just the preliminary but it would be reconfirmed during the summer. The -- all the MREL will cover Raiffeisen Bank Leasing or Raiffeisen building society, Bausparkasse, but also all the new acquisitions, especially Equa Bank. And finally, the international program will be governed by German law, will be listed in the Clearstream and the expected international issuance is second quarter this year, probably aiming at May. We'll have ratings of the individual issuance, not the whole program. And we would like to have a green framework which will be published in the second quarter 2021. So thank you for your interest. And then I think we -- at the end of the presentation, again, apologizing for the technical problems.

Ladies and gentlemen, thank you very much for your participation and for your interest today. If you have questions or if you wish to speak to any of the presenters today, please get in touch with the Investor Relations department. Thank you, and have a great day.

We would like to thank you for your participation and we'll now conclude today's conference call.