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

Good afternoon, ladies and gentlemen, and welcome to the Full Year 2021 Conference Call of Raiffeisen Bank International. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Johann Strobl, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Welcome to all of you on this February 2, 2022 at 2:00. You see, I appreciate the favor my colleagues did to me. Sometimes we find numbers which we love. And I hope that you will also love the numbers what we report to you. It's our full year still preliminary result. But what you see from the numbers is we have changed our processes. So we are definitely faster than what we had been in the past, and I'm very happy that we also achieved that. The numbers, EUR 1.372 billion, this is above the prepandemic result. And what we see is after a slow first quarter, we are encouraged by the progress shown every quarter in lending, in revenues and in customer acquisition. And more importantly, the strong fourth quarter confirms the strong trends from Q3 and gives us a great momentum heading into 2022. The net interest income increased by 7% year-on-year, reflecting not only the better rate environment but also a very strong demand for loans in both corporate and retail. We're also very pleased that with another record quarter in fee and commission income, which was EUR 561 million, and this was driven by an excellent business trend. But the very good core revenues growth has brought our cost income ratio down to 53.5%. While we have some exceptional integration costs in 2022 relating to the acquisitions we made in '21, we continue to focus on scale and efficiency across the organization. Our loans to customer grew by 15% last year, with strong organic growth in all our key markets, and this includes also the acquisition of Equa Bank. We expect the strong loan growth to continue in 2022, also perhaps not at such a high rate. Our CET1 ratio stands at 13.1%, and the consolidated return on equity is 10.9%, just below our midterm target of 11%. I now move to the next slide, #5. And in light of these good results, but also in consideration of the good growth prospects for the coming year, the board will propose a dividend of EUR 1.15 per share at the upcoming shareholder meeting. This represents a payout of 28% on the consolidated profits. And so our last investor call, we have announced the sale of our Bulgarian bank and expect it to close towards midyear. This was not an easy decision. And we are very proud of the work done by our Bulgarian colleagues to build one of the best banking franchises in the country. We believe that we fully realize the value of our subsidiary in Bulgaria and the capital generated by this transaction will allow us to accelerate our growth in other key markets. I would also like to highlight the very good progress we have made in retail and specifically in driving the digital transition across our markets. We have reached or exceeded our '21 target and have now set ourselves further ambitious targets for 2023. We have over 7 million digitally active customers, many of which are active on mobile, and we now aim to reach 10 million by 2023. Mobile penetration is in line with our target. And more importantly, we have significantly increased the mobile penetration in our lowest scoring market. Our share of digitally initiated sales has continued to improve throughout '21 and more than half of our personal loans are initiated online by the customers. As we look ahead, we will focus on fully end-to-end digital sales across all core retail products. Finally, in '21, we have signed the United Nations Principles for Responsible Banking. This is an important first step towards integrating ESG in our steering and risk framework. We have performed the impact analysis of our portfolio, and we have chosen to focus on climate change and resource efficiency as these are the impact areas most relevant to RBI. Next, we will set our targets in line with the science-based targets in 2022. We will, of course, update you on our progress in this regard. I'll now move to the next slide. And here, we have the traditional quarter-on-quarter results. And I think what I should rather than talk a little bit more in detail on the next slide is on the net interest income and the net fee and commission income. I mean what you also have seen here is substantial increase of OpEx. This comes from some staff increases, but also quite a lot of marketing expenses in some of our markets, TV and online marketing. And of course, we had higher consultancy fees given our late M&A activities than what we usually have in the head office. If I may move now to the next slide, then here, I have to focus your intention on the fantastic NII in the quarter. But yes, you have to be aware that after a detailed discussion what we have within our finance division, we came to the conclusion that our preferred approach -- so to count the bonus, what we get from the TLTRO over the full period might not hold in any audit by the external ones. And so we came to the conclusion that the best way is to consume it, unfortunately, I have to say, in the fourth quarter. This had a positive impact of EUR 61 million, and this also means that EUR 41 million, which were relating to 2022 to 2024, we already consumed in the fourth quarter. And one has to be aware that in addition to that, we had some positive impacts like FX this time was positive on the NII from ruble and from the [indiscernible]. We had significant loan growth, which adds more than EUR 20 million. And of course, the rate increases were also contributing well above EUR 30 million to the overall improvement. The other thing what we like very much is also the NFCI, where you can see that we are well above the pre-COVID level as Q1 2020 was still a year we fought a quarter, we fought COVID. And so we are very happy that in all the areas, we were able to improve substantially. Moving to the next slide. Here, I have to report on the exposures what we have, which are related to the geopolitical tensions what we face. I think this in a very, very, very positive environment is, let's say, the focus point, which might somehow have a negative impact on the -- in the near-term future, we'll see. It's mainly about the sanctions. If they will come and if they will come and in which way they will come. So you are aware that we have -- over the years, unfortunately, we got quite a lot of experience how to deal with sanctions operationally, technically. Currently, we can only monitor the sanction language, what we see from the U.S. and the Europeans. And on the other hand, of course, we closely monitor what's going on in the countries itself. But just as an update for you, we have a loan portfolio in Russia, which is EUR 11.6 billion. And you see in the lower part of Slide #8, how it's split. So we have a considerable volume in households and SME. We have half of it in the corporate private sector. And if we follow the sanction language of international community, then you see that we also have some exposure with potential targeted legal entities in Russia. Our own exposure, so RBI direct exposure is as the bank in the country is fully funded, is mainly the capital, which is equity plus some additional Tier 1 and subordinated, it's EUR 2.4 billion. The bank in Ukraine is substantially smaller with a loan portfolio of EUR 2.2 billion. Our equity exposure is EUR 320 million. But here, you have to be aware that 30%, which is not included here is owned by EBRD. Both banks, you know this from the numbers already. Both banks have been doing very well in the recent years and especially last year, contributing substantially to the overall consolidated profit of the group. If we move to the next slide, then there is the second pain point what we have in our portfolio, which is the Swiss franc mortgage in portfolio in Poland. Here, the current situation is, and many of you are well aware of it. So the exposure is around EUR 2 billion in euro terms. It's close to 29,000 loans with an amortization of about EUR 100 million a year, so a long-term portfolio. The litigation got quite a lot of attention. The law firms and the funding units for these litigations are well organized, which leads to more than 7,000 cases already at court at the end of December. And we see a strong inflow. So also for the coming quarters, months, we expect another 300 per month. This huge inflow and some changes also in the rulings at court made us change our assumptions what we use. So we have a model. And of course, input factors have to be adjusted from time to time. So we did it by the year-end. And this led to a substantial increase of the litigation provisions by another EUR 133 million in Q4. So the current exposure is now -- so the current litigation provisions, the stock is now EUR 364 million. I mean this is a substantial burden in the P&L, but also if we consider the provisions be it from the impairments or the litigation and the high RWA impact, what we have from the portfolio itself, but also from the related op risk, this adds up to already EUR 1 billion in total of capital, which is more or less allocated to this portfolio, which is substantial. And it's especially substantial, given that the overall performance of the portfolio is still a very good one. If we now move to the next slide, #10. You see that also in the last quarter, loans to customer grew by another 4%, and this was the positive impact I have been mentioning already before. What you see is a continuous improvement in the long-term corporate loan demand. What we face here is indeed more investments, but also at least an ectopically the one or the other who considers a high inflation and rather wants to have a little bit more of leverage because of that reason. There is a very good and stable development in retail, unsecured and mortgage loans at relatively stable levels and historically also relatively high. It's -- since a couple of quarters, a statement and where I have nothing to add that the liquidity situation is very good. Moving to the next slide. You can see here our capital ratios, given the very good loan demand at the CET1 ratio is at 13.1%. Pillar 2 requirement as of February 1 is [ 2.2 ] and the Pillar 2 guidance of [ 1.25 ] now is solely covered by the CET1. I do not go into detail for the combined buffer regime. It's more for the reading. If you look at the waterfall to the capital, you see a very balanced approach. We had this nice growth. We -- in the loan portfolio, we had a couple of offsetting activities like securitization, which you probably know quite well, and retained earnings help us to be above the 13%. Moving to Slide 13. Here is an outlook what we expect in our issuing activities. You know that we are now in the process to build the MREL requirements. So what we plan to do in 2022, you see the 5 countries here, Czech Republic, Slovakia, Hungary, Croatia, Romania and also the quality of what we have, what we want to do, and Romania could also be denominated in RON. And of course, also in head office function, we will have some further activities. In the lower part, again, just for reading, you see the current MREL ratio requirements. Moving to the next Slide 14. Here, we share with you our current expectations on the loan growth in the markets, which is somewhere around 7% to 9% in the core markets, which gives us a quite positive outlook also for this year. And -- next slide. This loan growth is based on a solid GDP development. And here, I do not even have to go into the details as more or less all the countries in Central Europe and South Europe are in the range of 4% to 5%. And the East Europe is back to the growth potential at around 1.5%. Belarus suffering a little bit from the sanctions, what we have already and hopefully, Ukraine will do fine. Moving to the next slide, we decided because of the special impact to differentiate between 2022 guidance and the medium-term targets. In 2022, we expect that also the NII will grow by high single-digit percent and the net fee and commission income. We still believe that the mid-single-digit percent is possible. I already mentioned the loan growth, which will be in the range between 7% to 9%. We face pressure on OpEx for a couple of reasons, but for sure, wage pressure, also some digital investments, what we still continue. And in addition to this high single-digit percent OpEx growth, you have to be aware that because of the integration of Equa and Credit Agricole, a Serbia entity, by additional EUR 100 million. And so we expect that if we would exclude the one-off integration costs, our cost income ratio could be again back to the 55%. Talking about risk costs, Hannes will talk in more detail about it here just to be complete, we expect around 40 basis points. And this would mean that if we consider also the sale that the proceeds from the Bulgarian sale, the ROE might be or should be above the 11% and the CET1 ratio will be again around or above the 13%. And if we then move to my last slide, is the midterm target. So here, I can only confirm what you know quite well. So the 55% cost income ratio, the 11% consolidated ROE, the CET1 ratio of 13% and the payout ratio in the well-known range, 20% to 50%. And with this, I hand over to Hannes. Hannes, please.

Thank you, Johann. Good afternoon, ladies and gentlemen. From my side as well, let me wish you all warm welcome, and thank you for joining us today. I hope you're healthy and I know that you are looking forward to the end of this pandemic as much as I am. As usual, I would like to start with giving you an overview where we are and when reflecting on 2021. Risk cost amounted to EUR 295 million in 2021, and this would translate itself to provisioning ratio of 30 basis points. Stage 3 would consume EUR 173 million. So you see that we again made use of Stage 2 mainly. We have received one other release on Stage 1. Retail Stage 3 is consuming EUR 140 million and very well supported a very strong employment market and a very healthy consumer spending in our markets. When looking at 2021, we also have increased our precautional provisions for sanctions and geopolitical risk in Eastern Europe by EUR 73 million. And additionally, we have added another EUR 81 million when it comes to potential COVID-19 effects. What is now important for me, if you look at it, we have now an accumulated stock of EUR 450 million of provisions, including EUR 150 million for sanction and geopolitical risk and EUR 250 million for nonretail book. You know it, but just to reemphasize it. The quality of our portfolio remains very strong, measured posed by the record low NPE ratio of 1.6% and the very prudent Stage 3 coverage ratio of above 60%, having a very strong and low [ BD ] of our portfolio. As you have heard from our CEO, we have grown our loan book nicely this year and I'm satisfied that this has been done without any compromise to our underwriting statements and standards. Since I may assume that any way there will be the one other question when talking about Russia and Ukraine. Maybe I could already cover the one of these questions up front and let us remind ourselves and you know it very well, those who are following us closely. We always and we did so to manage our overall exposure to Eastern Europe in a way, which is consistent with our risk appetite in terms of capital allocated, liquidity and risk management approaches. Secondly, in both Russia and Ukraine we started the year with an excellent portfolio quality, again measured by [ BDs ] in our loan portfolio and as well as you can see with a very low NPE ratio and with a good coverage ratio. Throughout the second half of the last year, we have increased our FX hedging to protect our CET1 ratio from the FX volatility. It goes without saying that in situations like this, you beef up your liquidity and business contingency measures are being introduced and executed. I have mentioned the additional provisions we already have taken for sanction geopolitical risk. And of course, we do regularly review our assumption for the risk cost sensitivity to [ DB ]. Just to remind, in total, we have now a stock of EUR 150 million in this specific bucket. Lastly, I would also like to give you a hint on what we have done since 2018. We have included in our loan documentation, also sanction clauses, which would allow either not to further provide financing or even to accelerate the repayment. Moving on to the credit outlook. And listening to our CEO and the macro forecast, I can confirm the very positive trends I have shared with you last time. When talking to our custom -- corporate customer, and also looking, of course, to industry surveys, we see continuous and good filled order books, also strong confidence. Supply chain disruption seems to have lower impact from time to time going on. When thinking about our retail portfolio, employment is back on the prepandemic level. And in some countries, we are nearly at full employment. Consumers are spending and we expect to build up savings to continue to support demand in the coming years. It goes without saying -- and I am -- I have to do this. Let me make you aware also of the wildcards, inflation, energy prices and geopolitic tensions. Last word on the risk cost guidance. Of these 40 basis points, they are being inspired and derived based on this very strong economic development. We do not consider in this 40 basis point guidance, any escalation and further tension on the Russian Ukrainian situation since we hope that this situation can be resolved through diplomacy and without any further escalation. I would now move on to the next page. I'm now on Page 20. And talking and spending a couple of words when talking about ESG. What you may assume and expect from a bank in our size that we have, of course, deeply analyzed our portfolio when it comes to ESG. And I can confirm that we have done an ESG scoring on the total portfolio level. You noticed 4 different quadrants when it about brown assets, transition assets and green assets. This is what we have done. This is available, and this is being rolled out towards in the RBI group. Last year, my colleagues convinced me that it's good if we are a first mover calculating our [ financed emissions ]. It was a tough and a bumpy exercise, but we succeeded. We deployed and employed the new methodology for 2022, and you will find more when we are talking about our sustainability report. Also, as announced, we have signed and committed to the principles of responsible banking. Let me move on to Page 21 and talking about the exposure. We have currently an exposure of EUR 232 billion, demonstrating a nice growth momentum of plus 14.5%. I will not walk you through the details because you anyway have or looked at them by yourself. Let me spend a couple more words when it comes to the RWA development. Of course, consistent with the strong and solid loan demand, of course, also RWA have increased. In addition, please consider that with the acquisition of Equa, which we are very happy about, also EUR 1.4 billion of RWA came in. At the same time, in Q4, a securitization was conducted, bringing us a relief of EUR 1.5 billion. Op risk at RWAs are being very much moved and motivated by the [ indexed ] provisions we have done in the Swiss franc Zloty situation. Market risk is stable and also on the FX side, because of the strengthening of ruble, U.S. dollar [indiscernible] has experienced an increase. IFRS 9 provisions in Q4 and also the full year. Stage 1, Stage 2. Given this very strong economic environment had experienced an uplift in a migration up concluding to releases of provision year-to-date of EUR 32 million quarter-on-quarter by minus EUR 39 million. I was talking about the sanction risk bucket. We have added in Q4 EUR 46 million. In the full year, it would sum up to EUR 73 million. And now you can ask yourself, "Hey, why is this guy talking about the EUR 150 million." And of course, you know that we already have done something in 2019 when it comes to the sanction risk. On the bucket, when it comes to special risk factors and post-model adjustments year-to-date, we would reflect EUR 81 million. Stage 3, I was talking about EUR 173 million. And on the Q4, we have seen the single default I always was talking about when talking to you and guiding, right? I was flagging that maybe we could see 1 up to 3 cases, which would not yet be on our agenda. On the COVID post-model adjustment, I think the affected industries we have well flagged to you is the hotel sector and some of the car suppliers. My final page before taking your questions is well known to you. It's the NPE ratio and NPE coverage ratio. I would just repeat 1.6% of NPE ratio, all-time low and a very solid coverage ratio of 62.5%. We are now more than happy to take your questions.

[Operator Instructions] Our first question comes from Mehmet Sevim of JPMorgan.

Congratulations on the strong results. I have a question on NII, please. Can you please walk us through the assumptions behind your high single-digit percent growth guidance for 2022? And I'm asking because it does look a little conservative given the current rate backdrop as well as the 7% to 9% loan growth expectation that you have for this year? And also, if you were to simply just take the 4Q NII and annualize it, that would already be some 10% growth on 2021. So if you have any more detailed color on this, that would be very helpful.

Thank you for the question. Yes, the starting point is a very positive one. So here we fully highlighted, the 2 of us. And yes, I mean the core question is how will the -- and of course, the loan growth per se, what I have mentioned, and if we assume a NIM of 2% or so should support us nicely. And what you are also referring to is some tailwind from the not fully covered in the Q4 results from other rate increases. On the other hand, I have to assume that in a couple of countries, where the Central Bank rates are relatively high that -- and liquidity will be maybe an issue over time that margins could not be fully consumed by the banks. But given also we shared with the depositors, this might be the case in countries like Russia, Ukraine, also Czechia. So maybe you are right that at the end of the year, it will look a little bit conservative what we have said now. But I mean, there has been -- and if you just take the Q4 then, of course, you have a couple of special impacts what you already deducted as well. So yes, there is some upside. There is some upside and maybe, as you said, it's conservative from today's perspective, depending also a little bit on the competition, what we will see in the markets I have mentioned.

Okay. Great. And maybe just one follow-up on Bulgaria in your comments earlier. Do you have any specific plans on how to utilize the excess capital? And are you still looking at any M&A opportunities across the region? Or would that be more an idea of deploying this on an organic basis with your current franchise that you have?

Yes, it's -- as you have seen the loan growth in the last year and also the good outlook. So I think it's relatively simply to use it organically. Nevertheless, if in 1 of the, let's say, 2 or 3 markets, what we always explored for M&A target would be available within, let's say, the next 6 to 9 months, we would be ready to do so. And to look at it -- and depends also on the competition. Cost consolidation now is in the interest or is a core focus of many competitors as well. So maybe it's also not so easy that you win the one or the other transaction, but the markets what we are looking at is still Czechia also they are very busy. If the right fit would come up to the market, then it could be in Slovakia as well. And Romania would be also highly appreciated if we could do so.

And our next question is from Izabel Dobreva of Morgan Stanley.

Firstly, I wanted to ask you a follow-up question on NII. And how you're thinking about the deposit betas or the deposit pass-through of the higher rates on to the depositors. Because at the moment, the forward rate outlook is a little bit mixed in that there is an overshoot of the policy rate over 2022 and then it kind of comes down back again. So how do you think that's going to drive the competitive behavior in the deposit beta? Is it likely that deposit betas might stay low as a result because the banks are expecting that the kind of policy rate overshoot is not really sustainable. So that's the first question. Then on the fees, so it's similar to the earlier question, NII in that if you sort of annualize the fees very simply, you end up with a growth rate, which is much higher than the mid-single digits that you have guided us through. So could you walk us through your expectations by product fee stream and how you expect those to develop as we sort of normalize into 2022 after a very strong growth year. And then the final question I had was a follow-up on the M&A. So you mentioned the countries where you would consider doing deals. But I wanted to ask you, are there any regions where you are open to disposals?

Thank you for your questions. Starting with your first one to the NIIs. Maybe we have to differentiate, and my rule of thumb is that what's going to happen is, first, there is a new structure on the liability side, which will appear. So the -- in the last couple of quarters, most of the money was at the current accounts because it's everywhere 0. And what we see now is that the rate increases take Czechia but take also some others. It now gets more attractive for the customers to move into deposits and saving accounts. And of course, in the deposits, at some point, you're back in the normalized way where you can keep a certain margin, but you have to adjust whenever then there is a further rate hike because it's risk-free. It's attractive to deposit whatever you collect at the Central Bank. It does not have a risk weight that you can keep some margin you fight for your customers. And as long as you don't have the -- too long maturities and customers here, when I see except 6 months, 12 months then you can afford it to pay what's required. And this is why, yes, the sensitivity now is back in some of the markets, and I have mentioned already, Czech Republic, Russia, Ukraine. Probably in Ukraine and Russia also that given the overall environment and the Central Bank policy, then there is no over-liquidity, but it's rather yes, a healthy normal competition what we have in these markets. So I still, as I confirmed before, maybe the NII assumption is conservative, but on the other hand, don't expect too much anymore because of the competition in the larger countries, what I have said. When talking about the fees, then what we have to be aware is that there is seasonality in these numbers. The starting point, given our regional footprint, but also the way private individuals as well as Corporate Act is the first month in the year is slow. It's a slow start usually. And the second one is this element, what we have from the fees from the loan business that it's not -- it does not always work that you link it fully 1:1 to the loan growth, you always have some fees from early repayments, given the higher rates, I don't expect so much early repayments anymore. So I think this pattern will change as well. I'm still positive on the funds business. I mean, of course, under the assumption that equity markets hold up as we all hoped for. And yes, in the FX part, which is an important element, it's -- yes, it's -- yes -- we will see, but I assume it can hold. So the -- of course, the 5%, if I make it very simple, would mean -- could mean a EUR 2.1 billion of fee income. And your final question was, would we be also ready to sell? I mean this is a quite natural question after we were ready to divest in Bulgaria. We never excluded it. We always said if in some markets, we get an offer and now the level is rather high what we achieved in Bulgaria. If we get a decent offer, it's our obligation to the shareholder that we have a serious look at it. And as I explained in Bulgaria, it's always what is the potential of the market? What is our position in the market? And what is the competition? And in Bulgaria, for example, we came to the conclusion that probably we would not be the one who is the consolidator in that market. And if we are not the one, then probably there is a little left for us in the midterm future. And if you take these thoughts to a couple of markets then probably you might identify the one or the other, which I would not exclude. But it's -- nothing is at the table. So I cannot elaborate more -- in more detail.

Next question is by Alan Webborn of Societe Generale.

A couple of questions, if I may. Firstly, your target for sort of '22 ROE is to be I think, above your 11% midterm target. And you say it's as a result of the one-off that you'll make from the sale of Bulgaria. Would you be above 11% ex that? And can you tell us how much that gain should be? I know you've given it in terms of risk-weighted assets, but I'd be interested to see how confident you are on the current earnings in terms of your returns for '22. That was the first question. The second question, I think you've guided that you think your CET1 will be sort of flattish for -- by the time you get to the end of 2022. And I assume -- am I right to assume that, that's after the 90 bps improvement as a result of the Bulgarian sale? I can see that you've told us about a couple of the RWA increments that you expect across in 2022, including because of Poland. But could you just walk us through overall how you get to that sort of that flat level? And are you happy with that? Or do you feel that you should actually have a slightly higher buffer? And does that mean anything in the short term about dividends? And clearly, you want to be fairly generous with your EUR 1.15 that you've given today. But could you talk us through your views of capital and how that relates to sort of the dividend target for the midterm and if that's still the case for 2022, that would be that one. And then I hear what you say about there being 1 or 2 exceptional elements in terms of the NII in 4Q. But presumably, in the markets where there are -- we've seen further rate rises towards the year-end. And I'm thinking of the Czech Republic, in particular, presumably, you're expecting to see higher margins versus the Q4 level as we go through into '22?

Thank you for your questions. It's very helpful, I think, for clarification. So I think if we start with your ROE question, it will be without Bulgaria, I do not assume that we would be above the 11%. Reason for that is -- and I have to indicate that the OpEx pressure, where I said a high single-digit is the first element which creates pressure. Let me explain on that. We build up in the IT area more head count over the last couple of quarters. I tend to say that probably we, to a large extent, we have now hired what we need, maybe in one or the other area, we still need to hire something more number of people more. But overall, it's -- we have developed very well. And these people are highly paid. And you've got the first sense in Q4 for them. And the reason for that is simple that, of course, we like to talk about digital development. We like to talk about new services for our customer. But yes, it needs quite a lot of investment there. And definitely -- and probably if you look at 2019 -- sorry, 2020 and '21, you see that if you add up all the numbers, that in terms of branch reduction and reduction in the back office of people, we achieved quite a lot, but yes, these people are more expensive. So this is the one. The second is that we are also developing a pure digital bank, which is built on a new technical infrastructure. It's in the setup phase. It's not earning. So there are no revenues on it. And the third element is that compared to the cost base of 2 years ago, the investments in cybersecurity are increasing tremendously. So we are now in mid double-digit million amount what we are investing. And if you add this all together, and if you then -- because we might also have -- we probably also have throughout the year a higher capital base after the sale of Bulgaria, then -- and some slightly back to normal, not full yet in the risk cost than probably in -- without Bulgaria, it's rather 10% to 10.5% ROE, what we should expect than the 11%. So this was your first. The second, which anyhow relates very much to that is to walk you through the CET1 ratio. And probably I was not very much in detail, but what you can assume is maybe it's 20 basis points higher than what we have now. Where would it come through, and this is rather a back of the envelope calculation than any precise number, but to give you an idea, you might add 90 basis points as you said, from -- let's start with retained earnings. This could be 90 basis points from all what I have said. If you just take the gain from the sale of Bulgaria, so now I split the 90 basis points. So 50 you might add as a capital buildup. You have to deduct the Credit Agricole and some others. So if I add up these numbers, this could be 130 basis points CET1 but then if we assume a 7%, just the 7% RWA growth, which then the loan growth, 7% to 9%, this might be a EUR 7 billion RWA, which is 100 basis points. And then I think we discussed several times that there are some inorganic effects as well. The regulatory requirement for structural hedges has changed the -- there is this RP repair program and some other elements, which might cost us 30 bps. And then there is another RWA requirement from the Polish litigations, which is also another maybe 30 basis points. Yes, the RWA, what we have to consolidate from Credit Agricole. Yes, on the other hand, you have the deconsolidation impact from Bulgaria, which will be 40 basis points as we have EUR 3.3 billion of RWAs. Yes, we intend to have some securitizations. So overall, if we net this up, we have [ EUR 110 million ] from these many RWA impacts. And so this in detail or in total, is then plus 20%. So yes, it will be above. It can even be that in the first quarter with this inorganic effects, we will be even below the 13% for 1 quarter, but this is not a headache for us. And maybe also in the ROE discussion, I did not mention that probably the story in Poland is not fully over. So we added EUR 270 million this year -- for the last year, but probably also, we capital-wise, we are well covered. P&L-wise, it still might have a negative impact. And your final question was the NII -- the dividend, sorry. Thoughts on dividends, you said as well. Yes, as -- with the EUR 1.15, we feel pretty fine. And of course, here, it depends. You see that we are rather cautious. So of course, we should have a stable dividend over the coming years and as soon as we see -- at some point, there is this -- as I said before, we have reached the level of IT development sources, what we need so this should stabilize. The investment should move into revenues as well. And on the other hand, the onetime consolidation costs should disappear. So in the long run, this should give us over the time, more potential if we talk about several years now. So for sure, we aim for higher than the EUR 1.15. But this is also well reflected in the rather broad range what we have as a payout ratio. And you have one more, which is the Q4, this increasing rates yes, in that Czech Republic, probably the more -- we see another NIM improvement by 10 to 15 basis points. We'll see what we can get in Russia from this rate hikes not too much, maybe 20 basis points. Hungary, yes, another 20 basis points. Ukraine maybe a little bit more than this 20 basis points as NIM improvements.

Next question is by Máté Nemes of UBS.

Congratulations for the strong set of results. I had 3 questions, please. First is on cost inflation or a follow-up on cost inflation. You mentioned the reasons for the strong growth and strong expected growth in costs, namely, salary inflation, digital investments and cybersecurity. Now if I recall correctly, at the time of the Q3 conference call, you expected cost inflation on an underlying basis of around 5%, 6% at that time. So I'm just wondering what has changed since then? Presumably, you were fully aware of the digital investment needs and in cybersecurity. So I'm just wondering, is the delta essentially coming from higher-than-expected wage growth? Or is there anything else beyond that as well? And related to the cost side, I see the EUR 16 million increase in costs quarter-on-quarter in Russia. And apologies if I missed anything, but if you could provide some color on that pickup. The second question is on Poland. Could you perhaps help us understand if the current provisions that you've set aside now do cover the expected inflow of new cases. I think you mentioned 300 cases per month expected in 2022. Or if that is the case, you would still have some sort of baseline provisions set aside per month or per quarter? And finally, just a qualitative question. I think the -- in the second half of last year, we were talking a lot about the nature of new lending on the corporate side in CEE and Eastern Europe. Mainly those loans were related to working capital financing and shorter term in nature. I'm just wondering if you're seeing a change in that environment or the nature of the demand? Are we seeing more investment type of loans? If you could comment on that, that would be really helpful.

Yes, thank you for your questions. Indeed, indeed, what we had hoped for, what we said in Q3 is the EUR 100 million, I think this is what we confirm for the integration of the 2 entities, Equa and Credit Agricole Serbia. So this has not changed. At that time, the 5% to 6% growth on the OpEx was -- what we see 2 things is the ones is yes, in some areas like IT in some countries, it's above the 6%. So the average what we have built in all the countries. So the 5% to 6% was an average over the cost base of all the wages we see in all the countries, some more pressure, which makes us now more cautious. And it's rather about 8% than the 6% what we have indicated. So this is additional pressure, which -- what we feel in these days. And the pressure is coming from almost all of the markets. So in most of the markets, we are rather at the upper end of the range what we had in the Q3 call or maybe even above that. And another example is Russia, which is -- when you ask where did this huge increase come from? Several issues. So the one is, in Russia, we usually have or maybe this time more in the group as well, quite a lot of seasonality. And just to give you one number, the Russians increased their marketing spend. So TV and digital marketing by EUR 25 million just in that quarter. So I mean, Russia is now the market where customer growth is a function of your marketing spend. And the Russian operation in retail is, from my perspective, very successful. So they onboarded 750,000 new customers last year, and they -- I think they can increase this number even further, but you need to spend in marketing. And they hired a lot of people. This is what I was also referring to. They In a big transformation process, they now have 2,000 people in IT already. So they added another -- about 300 or so. And that's what I meant is, I now assume -- see what the market requires. But I now assume that these people -- that in terms of head count, we should be there. And what comes in the future is probably more about additional wage pressure. But these were the -- and as I said, one element, so not both neither the marketing or the additional added people would explain everything. So obviously, also, there was a seasonality. In the licenses, they have to pay. They -- it seemed that they waited rather till the year-end with paying. So this is something which is seasonality, and you do not expect it every quarter. So this was Russia and a huge increase. And when talking about Poland, I said before -- the model what we have assumes over the -- it's somehow forward-looking, and it assumes -- and 2 or 3 elements. The one is the number of new cases. We have stated that it's about 300 what we expect per month. And then there is some adjustments in the ruling what we have seen so far. So currently, it's -- that the ruling in the first instances are rather negative for banks. And also, it goes more into the direction of enrollment. There is quite a lot of uncertainty what finally would mean, and all meant but it's reflected in the higher provision litigations. And then there was your -- the nature of corporate loans, yes, Hannes will give you a flavor on that.

Well, if you're talking about Russia, we see it split in 2 parts. Part of it -- a substantial part of it was, especially in Q4 rather short term and the remaining part would go in a little bit longer term. But definitely, we would have -- or we have been willing to also provide longer-term financing. But what we have seen, especially in Q4 is very much dominated by short-term loans.

And I understood your question was further reflecting also to my presentation. And if you talk at the overall group where you have seen the significant rise in long term. So I think here, this reflects positive sentiment of our customers. Many of them now are again in an investment process. Some of them probably start to pick up. I mean this is -- that's not systematically what I say now, but anecdotically, I can share that some customers who rather would not need long-term funding. They see some inflation pressure and they -- for them to go rather long term, instead of short term is one way to make use of this inflation as they -- as their asset base is rather -- for the asset base is rather positively contributing in such an inflational environment.

Next question is by Gabor Kemeny of Autonomous.

A few follow-up questions from me, please. Firstly, on Polish FX mortgages. Yes, if you could provide some color on this up to EUR 3 billion RWA uplift, which is quite substantial, and I guess a large part of why you are not expecting meaningful capital this year. So what actions can you take to mitigate this RWA uplift? And by my very quick calculations, it would mean that you would end up allocating at least EUR 1.5 billion of capital to a portfolio of EUR 2 billion, which is not profitable at all. So I guess not ideal from a shareholder perspective. What actions can you take here? Have you considered potentially writing off some of this portfolio? And the second one is on the macro overlay provisions. If you could remind us how much do you have -- and what kind of releases do you assume in the 40 basis point provisioning guidance? And just a final clarification on NII. You talked about deposit repricing potentially, I think, in Russia, Ukraine and Czechia on the retail side. Have you actually repriced deposits so far in these countries? Or is it something which you are just expecting to come later on.

Gabor, I can start with the first couple of questions you raised to us. And I completely agree with you that, of course, this is a black hole when it comes to capital allocation. This is what we also reflect that it's a triple counting. It's not just a double whammy, it's a triple counting. So we have this high underlying risk weight of 150% for the Swiss franc mortgage portfolio, where if you would be in a standardized approach, this would demand up to 35%. The second thing is that we had to add this legal provision. So financially, we're already taking care about potential future legal claims. And because we are doing this, we are creating op risk. And if it's then exactly the EUR 1.5 billion, but as outlined by our CEO, you have seen what we already have allocated today. And we deemed it necessary to flag that because of this increased provisionings we have allocated, of course, we will also have an increase in op risk. Believe me, at this time, I would not like to give you any further insight. But of course, it's in our -- on top of our agenda that we keep on working, how we could further mitigate this strong dynamic on this part of the portfolio. On the PMA, what is very important, and you raised the flag on the PMA. Let me reiterate what is currently at hand. So we have EUR 253 million on the nonretail side, EUR 80 million on the retail side and some EUR 114 million, EUR 115 million in total amount as the sanction stock. You could say sanction [indiscernible] stock. What is now important is that in our guidance of the 40 basis points, this would be gross figures. So they would assume that we would not make use of these PMAs. Some of the retail allocated PMAs of this EUR 80 million, some of them are self-consuming. What is the background of this EUR 80 million? It has 2 main reasons. The one is in Hungary, we again had also last year another round of moratoria. And therefore, we have allocated some PMA so to say, let's see how these clients, which then already would be for a very long period of time in the moratorium like situation if there might be the need of having provisions allocated. At the same time, given this very good employment rate, this loan growth and the salary growth, also maybe here, we could see that some of these provisions even could be released. But the EUR 253 million allocated to the non-retail and the EUR 114 million, we would only consume in the case and the guidance we have shared with you is gross. So this would be -- if there would be no consumption of any PMA. I hope it helps.

And to your other question, Gabor, the deposit repricing, indeed, there was a repricing already. So in the Czech Republic and saving accounts to take just one product. There was already an increase by 90 basis points and we expect already in this month, another 100 basis point hike. Here, yes, it -- I mean this is not probably the biggest, the biggest portfolio and there might be some caps even more sensitive term deposits, which we already had a 200 basis point rate increase. So Czech customers now really get rates again. And when talking about Russia, yes, 200 basis point increases in the saving accounts area. We have there even products which are tied to most prime, and so this is not a huge number, but just to give you a flavor what's going on in the market. And term deposits are relatively sensitive. So of course, here, it depends on the customer segment as well. But this is the reason why is that there are limits after some Central Bank rate hikes where it to a large extent, goes to the customers and maybe you benefit in timing a little bit, but not that huge.

Gabor, I still owe you one more answer to your question. This is the overlay on the nonretail would sum up to EUR 29 million.

Got it. Just a small clarification. Did you mention that in Czechia long term deposit you raised rates by 200 basis points?

Yes.

And our next question is by [ Olga Veselova ] of Bank of America.

Thank you very much for a very good quarter and year. And I have 2 questions from me, if I may. My first question is about your issuance plans. You mentioned that after Q1, you will think about issuing subordinated debt. Are we talking about additional Tier 1 given the goal date in December? Or do you also consider adding some Tier 2 capital? The second question is about group corporate and markets division, fee and commissions through the year grew very substantially 28%. So I was wondering what drove that? Are there any big one-offs, or is it something like a new normal? And my third question, you just mentioned that in many cases in Poland are resolved unfavorably for banks. So how unfavorable are those resolutions? Because like forgiveness of principal and interest? Or is it a retractive conversion into Polish losses of both interest and principal with maintaining the same low rate as was contracted in Swiss francs. So how bad is that be?

Yes. Thank you. I probably will ask you then, once again, for your second question. Maybe I was a little bit distracted when we're starting already thinking about the first question but let me answer first -- the first question. So [ EUR 81 million -- EUR 81 million ], of course, given the -- yes, what we see from the sale of Bulgaria, probably is, in these days, maybe not an urgent issue, I have to say, but I can't say more. It's not fully out of consideration, but maybe not in the near term. Tier 2, there is something which is running off. So this might be considered. But as I said in my presentation, the focus is or what you for sure can expect is senior and covered funding. So this is the one. Your third question I also got this was the outcomes and the Polish courts. I think here, the real uncertainty what we have is that there are some courts who are exciting. And I hope people in Poland forgive me when I say it like this, but sometimes it looks like an automated decision. So it comes -- it's a very quick process and it ends with against the bank. This is something which -- if you look at the rulings over the last 3 to 4 years has changed significantly. And this is a big concern for us because this then -- yes, raises a couple of more questions. I think the issue what we have is that the 6 principal questions, which have been addressed by the President of the Supreme Court to the full chamber are not answered yet. So we don't have a clear direction in Poland, what finally it could be. What we are aware is that, of course, these legal firms are going for more and more and more, they would prefer to have an element and no use of capital as bankers say in terms of, let's say, legal terminology, one might say no enrichment by customers because they might have used their capital over 15 years or so. They have -- bank would have suffered from the inflation and whatever you have customers would have profited from the -- yes, real estate is inflation neutral or even inflation positive. So a couple of really substantial questions have to be answered by the European Court of Justice as well as by the Supreme Court in Poland. And so that's a broad range and quite a lot of uncertainty what we face in these days. And now I come to your second question, where I have to say I was distracted. So maybe you could repeat it.

Yes, yes, of course. So in the corporate and potential segment, you have a very large increase in net fees and commissions year-on-year, like 28% for the full year 2021. So I was wondering, are there some one-offs in that segment? Or is it sustainable that you will be earning that much like north of EUR 500 million in fees and commissions just in new corporates and markets.

Yes, we had -- yes, let me look it up. And we had a very positive issuance activities with green bonds and a couple of others. So this was substantially good. But also in the guarantee business, we had done exceptionally well. Yes. I think what one also has to consider is we had some reclassifications in the business. I hope this answers at least partly your question. But give me one second. Yes. And what I should also mention is that we had a couple of repayments, which -- yes, there are then some fees, which we collect as soon as early repayment happens. Usually, the fees are amortized over the lifetime of the loan. But if the -- but this is an accounting issue. It's paid anyhow at the inception of the loan or when you contract it. But if there is early repayment, then of course, it's accounted for at the day of the early termination. So this is a well amount, a big amount as well.

It helps a lot. A very quick follow-up on issuance. You mentioned that you covered and the senior bond, senior preferred. So you are not planning any senior nonpreferred for 2022.

Not on head office level.

Our next question comes from Andrea Vercellone, BNP Exane.

Two questions on my side. The first one is just a clarification on the restructuring charge of EUR 100 million. I just wanted to make sure that, that is purely a restructuring charge and not a restructuring charge plus the extra cost of Credit Agricole Serbia. And regardless of what the answer is, can you remind us what cost savings do you plan to unlock in future years. Because of this restructuring charge, EUR 100 million to me is quite a lot given that these 2 businesses are not gigantic, let's say. And then second question, I just wanted to go back to the operational risk linked to Swiss franc mortgages in Poland. You already have some. You flagged that there are EUR 3 billion more RWAs coming. Can you just explain us a little bit the mechanics, how long do they stay on your balance sheet? Because it's a lot. So this is a very long tail portfolio. So is it EUR 3 billion forever or for 20 years or when does it start to fall off because it does make quite a bit of a difference.

So let me start with the integration costs. So the EUR 100 million are to understand the total impact in 2022. And if you look at it in detail, then it's about EUR 58 million, which is related to Equa. And you have to be, and you are aware that in Equa, we consolidated half year. And so you have to add an additional EUR 28 million running costs. And the difference to the EUR 58 million so EUR 30 million, these are onetime integration costs, mainly IT, but also some costs for layoffs. So EUR 28 million additional running costs. And if we talk about Serbia, then it's okay, they come in [indiscernible]. It's about EUR 30 million running costs, and I think you have considered this as well. And you have EUR 12 million of integration costs in Serbia. So if I may add up for the 2 banks, you add EUR 58 million in total as running costs and you have this EUR 42 million onetime integration costs. And what you save on the running, it's about 30%, 40% of what we have from the smaller cost base usually. I think here, you can work with the basic assumption what you usually have in -- or up to 50% in most of the integrations as a rule of thumb, and we will report on that, of course, ongoingly. And op risk I mean, it's a tough question. I mean here, I would assume that it definitely will not stay forever. Now having on interest for the bank, I hope it falls off as soon as we have solved the issue because if you say it's a very specific element, which is Swiss franc mortgages, which is gone. I mean don't hope that anyone comes with an idea and says, guys, this is unrelated to any activity, and this is just because you exist or so not a bit cynical. But I would assume there is a fair chance that as soon as we have solved this issue, then it's also taken off.

And just to be added, besides that because it's very specific on this portfolio. And of course, it would not be representative to the remaining of the RBI portfolio. As you know, many other Swiss franc issues have been sorted out and latest with the introduction of the new Basel IV rules we believe that there is a new method and a new approach to be conducted. And here, we would expect changes on how these cases needs to be reflected. As I said, for me, it's a triple counting in the underlying having high risk weights than doing the provisions and then being also scrutinized on having this elevated op risk to be allocated.

Is it a simple say -- as to say that if the rules don't change as long as you have those Swiss franc loans, the risk-weighted assets, the extra risk weighted assets stay or is not as simple as that?

I mean, that's not guessing, but I assume it's not as simple as they say. As probably regulator at some point, will acknowledge that the risk is gone and then it's adjusted. But clear, as long as you neither have a ruling nor whether, but at some point, I also assume that -- look, my -- to make it very simple. My basic assumption is that at the end of the day, it will be perceived as a portfolio with various risks. And I think if I follow the way I followed the discussion in Poland where the RWAs are already discussed. So here, I would say that's exactly the approach we can expect that at some point in time, having more provision than the outstanding probably is not expected.

Next question is by Johannes Thormann of HSBC.

Just some follow-up questions on my side. First of all, on the Polish provisions, if we take a simple calculation, this is a coverage ratio of 18% of the portfolio, which seems low compared to some of your peers at least, which have doubled the coverage ratio. And listening to your remarks about those court verdicts all going against you or going against the banks at least, do you still feel comfortable with such a low ratio? Or do we have to expect something like the same burn we've seen this year as Polish of FX provisions of EUR 287 million also in the next year? And secondly, on your payout ratio, do you rather go for stable dividends and stable payout ratio? Or could you also envisage an acceleration of the payout ratio to come to the upper end of your payout ratio?

Talking about Poland, I think, the difference is that some of the banks with a higher coverage ratio, they offer settlement agreements to a broad base of customers. We only do it for some customers which -- where we also already have pending court cases. So this is the big difference. Could it be or will it be, I don't know. But could it be that maybe not at the same level? I don't hope so. But could it be that also in the next 2 years, we need further litigation provisions. Yes, in answering -- my question also is the potential ROE, why not better what somehow included that if there is not a substantial change in ruling and what we see is a further inflow of new court cases, then we have to expect maybe over the next 2 years, also maybe not at that level, but a significant amount of litigations, if that happens, we'll see. But as long as we do not come with a settlement offer, I think it's -- you have to use a model to calculate this litigation. And as I explained, this is the model which we agreed with the -- with our auditors. And yes, we would -- if we change the approach, then we would also have different litigation provisions. But currently, we keep what we have. And the reason I mentioned earlier is that we try to do some settlements, but we don't feel that any settlement, even if customer agree will give us legal certainty what we're aiming for. So I mean different to others, we would like to get a different legal framework in Poland before we come with a broad settlement proposal to customers. And for your payout ratio, I mean, here, as long as we have good growth opportunities I think we want to keep that range. I mean if you look at midterm planning and you say that the loan growth because we are moving back then to a less exciting world with maybe loan growth rather 5% than what we see now. So a little potential, then this would mean that we could increase the payout ratio as well. But I mean as long as we feel that we can create value by growing the loan portfolio. And this is, in essence, what we try to do. We sold Bulgaria because we think adding more loans and business to the current infrastructure in some of the markets is also a way to scale up our business and should be value accretive and -- but this is the range of thinking.

Our next question is by Robert Brzoza of PKO BP Securities.

I have just one question as most of other issues have been answered so far. This is on the potential sanctions against Russia regarding the cutting off the Russian banks from the SWIFT transferring system. Can you provide us with an estimate roughly what percentage of transfers and possibly FX exchange business would be affected in such a case? And secondly, whether you are preparing for any alternative solutions? For example, would you be able to utilize the Russian system of financial messages just in case the SWIFT was cut off. What's your view on the topic?

Yes. Well, let me start here, and it's a far-reaching topic anyway. And I'm sure you all know that SWIFT by itself is a messaging system. And as we always claimed, of course, the financial institutions are being an integral part of the economic dynamics and interactions. And SWIFT is a very helpful and well-established messaging system, it's not the payment system. So I think we could differentiate between 3 different circuits of payments. The one is within the country, and I'm sure you're aware of that the Russian Central Bank was introducing a payment system for the Russian market, first thing. Second thing is when it comes to standardized payment orders between RBI and Raiffeisenbank Russia, we could use our internal payment system. But then there remains the vast majority of the international payment flows. But where do these payment flows come from? We have an economic interaction with Russia and goods being exported from Russia to the rest of the world between EUR 250 billion to EUR 300 billion. And these goods must be paid. And currently, the industry is using SWIFT for this. So when talking about alternatives, I was flagging 2 of them within the country and when thinking about our own network bank, our own subsidiary. But of course, I think it would cause a tremendous impact to the inter financial world, if you would go very, very, very broad on the SWIFT topic.

And what is roughly the share of the Russian related business overall in, a very like approximate figure, is it like 20%, 30% of your total, higher?

Maybe I do not fully get it. So what I have to confirm what Hannes said is that, of course, Raiffeisenbank Russia is fully integrated in the Russian payment system and messenger system. And yes, in that way, they could deal with it. And there I don't expect any big issues. Maybe in the days tell all the customers switch to it, but this is like any system change what you have. I think what Hannes indicated is it's more about the cross-border payments where it would take probably weeks till the new systems if at all can work, but this would really be an issue. So for a huge number of transactions, maybe the smaller amounts, it will -- there will be delays till operations are set up in a different way. That important big ones you can deliver much easier. And there -- also within the group, there are some alternative ways, not from us, but there are. So to some extent, we are prepared but not in a way that we switch from one messaging system to another overnight and one would not feel any delay or disturbances or problems. I mean, if that would be the case, then probably no one would talk about sanctions at all. So here probably -- this is the powerful part of it that it will create problems.

And then the FX business, of course, it depends if it's within RBI and Raiffeisenbank Russia or if it will also include an impact to other banks. So I think this -- the topic by itself would create all this hassle entities topics we have mentioned. So the impact on the [ senior ] FX business, I think, is not the most dominant and important factor.

The next question is by Riccardo Rovere of Mediobanca.

Getting back one second to the last topic, maybe this is a question for Hannes. If you had to throw a ballpark on Russia and in Ukraine, and if I ask you, what would be the worst case from a risk management perspective, what would be the case just wiping away the whole equity you have in Russia and Ukraine? Because at the end of the day, maybe this is the way the market approaches just to find out what the or the worst case might be and then eventually the touching probabilities events. But if you could share some thoughts on this. Second question I have is, in the previous presentation, you provided useful table with NII sensitivities to write in Q3, which I haven't seen in this presentation. I might have missed it, but I haven't seen it. In case if this -- the numbers that you provided in Q3 are those still kind of valid? I would imagine so, but I want to hear that from you. Another question I have is on -- get a clarification. When you provided the 40 basis point cost -- risk cost guidance for 2022, I understood that this does not include any post-model adjustments, the allocation, the use allocation or eventually release of post-model adjustment that you charge in -- mostly in 2020. I just want to be sure I understood it correctly. And if this is the case, I remember once I read one of your report maybe was full year 2020 that according to your policy, those post-model adjustments should stay there for maximum a couple of years. So I was wondering whether this is the case. And can those be rolled over into 2023 and eventually even beyond 2023. The other question I have is on just reconnecting to a previous question, I think it was from Izabel. When she was trying to get a sense whether you consider your fee income guidance for 2022 as kind of conservative. You stated there is some level of conservatives in your NII guidance. It's not clear to me whether you can see that the guidance you gave us on fee income embedding some level of cautiousness, too. And last thing I wanted to ask you is on the Bulgarian capital gain that you will book at some point. What is more or less the amount? And would it be tax-free, taxed-out or tax deductible?

Riccardo, you gave us a nice list of deep questions or -- and if I would start and believe me, I know that many people are currently eager to explore this worst case estimate. For me, the worst cases would be if people -- human beings would be physically impacted by this very, very challenging situation. Coming to the financials. This was one of the reasons why we have added again and reminding ourselves what is the current equity position and the things what we are demonstrating here is summing up the core capital, the EUR 81 million and the Tier 2 to Russia to EUR 2.4 billion. This is one part of the equation. And there's a good research out there also, of course, saying, well, if this worst case come in, you would not just maybe lose this EUR 2.4 billion in CET1 terms, but at the same time, of course, also your RWAs would be gone. And what we did not talk too much about today, and I was indicating in my introduction. Of course, we have also heavily increased our hedging over the last couple of weeks. And here, we are now on the size of EUR 1.4 billion. So this is -- if somebody starts playing around with this worst-case assumption, please bear in mind the one is the equity. The other one is sizable hedging amount we have developed and established also RWAs would be gone. And in addition, you could, of course, ask how much of cross-border financing are you doing? And in this specific case, I would believe it is really just about those loans which are being provided from head office or from Vienna to Russia to the country. And here, we are talking low double digit numbers when it comes also to the cross-border on the corporate side. So for me, this is the maximum loss scenario if you try to explore on this one. And if you allow me, I would also take the next one on this 40 basis point risk cost use of PMAs, how long can we keep them. Yes, you're right. And I'm very happy that you are so careful in reading our material. And of course, you're right that usually the auditor, I would say, guys, listen, if there is a specific risk factor, what you would like to employ where you say, hey, it's not yet in your model, then you have 2 possibilities, either you include an interior model, or it materializes. And -- but I think given this current very specific environment and when we talked last time, I think nobody was thinking at least not hoping that we could see another lockdown in Q4, that we have now a virus with Omicron which is causing high infection numbers. So we found a straight and easy agreement with our auditor that I think we would be valid while still keeping also part of this PMAs. And the second big part of this PMA is going with the supply chain topic. And also here, we are not yet done. So the 1 to 2 years, this was when we were reflecting this in our notes saying usually, we shall not have them longer than 1 or 2 years. But I think given these circumstances, which we are facing in all stakeholders are well advised that we can still keep them. As soon as we see that the underlying factors are mitigated meaning we would see that there is a good booking order on models believe me. I'm happy being one of the first one having here the release here and there. So again, the 40 basis points would be the gross amount. Part of the PMAs, mainly on the retail side, I was flagging them this EUR 80 million. Part of these PMAs would be self-consuming because if moratoria clients, which are currently still under moratoria would not default, I would have to -- and I can and I shall release these PMAs. And as we also have done already once in Czechia, we were allocating some PMA because of the strong increasing yields. You know that we are financing on a fixed rate basis. And usually, we do mortgages on the first 5 years on a fixed rate basis. So you could say 1/5 of the portfolio is running off each and every year. And of course, given this new interest rate environment, we also have higher monthly installments. What is the mitigation? Higher salaries. And on a portfolio level, we have allocated here a little bit of these PMAs. So as soon as declines get risk -- have this new rate, and they are performing and also have to release this PMA over the next 2 to 3 years. This would be my answers to this worst case estimate and the 40 basis points of risk cost. Johann?

Okay. Thank you, Hannes. I take the other questions. One was the NII sensitivity where we talked about already that in a couple of products. Quite a lot of these rate increases will be passed on to customers. I mean, as a rule of thumb point, I might say that if you have a 50 basis point increase, then probably the least pass-through is on some of the retail accounts, the current accounts where you might assume maybe 25% to 50% whereas for corporate, it's maybe 50% or more. What you have to pass on in the other products, as I said before, so deposits and term deposits. it's rather significant part what you have to pass on and similar to Romania. So let's assume if you have a 50 basis point increase, then quite a lot of this will be passed on as well. So this is why I was rather cautious when talking about what you might see as conservative Tier 1 has. It depends on the competition as well. But that's to the sensitivity in addition to what we had said before. And I have CI guidance. The question, is it conservative? Yes, as I said before -- assuming that we have a nice market activity, then the 5% what you add to what we had last year, this is -- I should be more careful. If we assume we have EUR 500 million in Q4, so this would then be EUR 2 billion. And if we then add up to 5%, then it's -- yes, significant given the -- maybe the repayment fees what we had in the corporate loan area, what we discussed before, which probably might not come again given that everyone is rather expecting that rates will increase and probably it's better to keep it. In terms of your final question, the gain of some EUR 400 million, of course, it's taxed, but as we have a loss carryforward, it does not have a direct impact on that. So this will also improve this year our tax ratio.

Okay. So basically, on the capital gain -- the capital gain will allow you to use DTAs if I get it right. So DTAs also on the capital side should go down, the deduction related tax loss carryforward. Do I get it right?

More or less, yes. I think here, probably we take the time in the aftermath, you talked to our experts here to Johann and to really have a longer conversation than what we usually do here as this goes in detail, but to a large extent, yes.

Our next question is by Hugo Cruz of KBW.

So 3 quick questions. One, you guys are trading at below book value despite a very good ROTE. Why would you not prioritize buybacks instead of the dividend or at least have some buybacks rather than just the dividend. Second, on Poland, from reading the press, I understand you started a pilot settlement for the Swiss franc loans. Do you have any estimate for the timing of that pilot? And also, if successful, what will be the financial impact compared to the KNF proposal? And then you mentioned on the call that you've been investing a lot in the new digital bank. When can -- can you give some numbers on the amount of the investment? And when could we see a decline in the cost base as this investment runs out, if not a decline in the cost base in absolute terms, at least a decline in the growth rate of the cost base will be helpful to know.

Yes. As long as we believe that we have a good loan growth, which is supporting our development to an ROE of 11% or above, buybacks is probably not on our agenda. If the growth would stall and yes, then this could be an alternative. I mean -- but it's not discussed. Now if you would ask me, would you have technically something in the door? I would say, yes. Is it strategically on our list? Then I say, no. In terms of settlement in Poland, timing and financial impact. As I tried to explain before, we would consider a settlement if the legal certainty is created, which currently is not at all the case. That's my view, but also the view of our company. So even if you settle now, you have to -- if whatever happens then in the future, which customers might receive again is negative, then they find ways to reopen it. We had the assumption with a couple of adjustments, which we added to the annexes of the contracts when we adjusted the contracts to new little developments as well as agreements with the customer. So here, we did this and under the assumption, of course, that then it's a safe environment and nobody would discuss it. Nevertheless, we are back to the very beginning that people say, yes, whatever we agreed in the past, if at the very beginning, of the origination of the loan, the clause at that time, where you now have agreed that it's not any more relevant. If you -- at that time, it was unfair, then we still can go for an element, and this is not on our agenda today. I mean, where we do is a court issues. We, of course, here, this is -- we try to reduce the workload and also the time limitation is an issue. You probably are aware. Now if you have the very specific situation that after 3 years, after a case is brought to the court, if a decision or not, time limitation is reached you either act or without knowing what the outcome from the legal proceeding would be you have to act and offering a settlement is one way to do so. I mean talking about financial impact, as I said, it's only possible if we get clarity either by the Supreme Court or something similar so that we have a clear direction. Digital bank, this is a double-digit amount what we are going to invest. This is like a start-up one might say, fully fledged. It usually takes 5 years. This -- such a thing is breakeven. What I wanted to say is we have investments in 2 areas. One is the digital bank, which comes in addition to what we do there. But in the other areas, the benefit in the OpEx, we see over time already now, not when talking about the digital bank, but when talking about other investments, which is the core of our investments we see it gradually coming in as well. And I mean, if you look at some of our countries where we have reduced already the people in the back office by 30%, 40%. So here, we see it when you talk about number of branches, we have considerably reduced it and this process will go on further. So I think we are on a good track, and it's this combination of some new investments and this consolidation of others. But as I said, already next year, we assume that we are back on the 55% level, so cost/income ratio. And over the next 2, 3 years, it should go lower than this.

The next question is by [indiscernible].

And thank you for the presentation. So my question was more related to the potential contingency plan related to the sanction within the SWIFT bank messaging system. But I guess you answered most of them. But maybe another one, then it's more on the presentation you made on Page 8 were related to exposures to Russia. So you mentioned a total exposure of more than EUR 22 billion with sanction risks representing only 9% potentially. Can you maybe give us more clarity exactly on this point? Maybe I misunderstand, but I want to have maybe more insights and information about what it represents exactly and what are the main sources of sanction and potential impact on this side?

Well, let me start with the first part of the question. and the SWIFT suspension. I think what I was sharing with you, and I think the reason why so much -- there is so much discussion about the SWIFT is that it will cause big headache for the inter financial market. If not, it would not qualify itself for any of distinctions. So I was flagging to you 2 or 3 of them. The one is -- and this, of course, depends very much who would be impacted by this SWIFT suspension? Is it a single counterpart in the country? Is it a consistent cohort of counterparts within the country? Or is it the full industry? Depending on which scenario you would like to bend, of course, the contingency plan look different. By all means, it will create a big hassle and challenge to all participating in order to execute payments which are being needed in order to reflect real economic good transfers. So why is there payment? There is a payment because there was a delivery of goods. And suddenly, this payment cannot be executed. So as long as the counterpart is using RBI as a bank, we would have our internal payment system. And based on our internal payment system, we could wire the money, not using this standardized payment messaging service. That's the one thing what we are doing. And we also believe that we could use this in a broader extent together with our Russian colleagues in Raiffeisenbank Russia for a broader audience. Then there is a local payment system in Russia, but there are no means those 2 thoughts I was now sharing with you will mitigate all the SWIFT messages, which are flying around there on a daily basis. This is what I can share more or less reiterating what I was telling beforehand. And when talking about this one page when it comes to the exposure to Russia in sanction like counterparts. So what was our motivation to look at this one and how did we derive to this number. The way how we have derived this number is, you note that on the U.S. side, on the U.S. administration side, there are some framing lists running around where you could say, okay, is it -- these are the names which are named on this framing list. If you look and listen to the Congress, what are the proposals. This is where we have super short-term business outstanding. This is the reason why we call them up to 3%. The EUR 22.8 billion. This is very important. This is our local asset base comprising also to a big part towards our retail portfolio and also to our corporate portfolio. But would we believe, as of today, that also the National Bank or Central Bank, which is our last lender to store liquidity is on the [indiscernible] is also on the sanction list. No, we would not. So just talking about the pure corporates, this is what we have. This is what we have in mind when talking about this 3% of targets. Hopefully, this helps to give you a little bit of color. So -- and they are derived from this list of the Congress, what is being brought forward to the administration where there are certain proposals you can find name there. And we are now assessing internal high likelihood and high impact, and this would sum up to this total of this 3% we have flagged here.

Riccardo, are you still in the call? My experts told me I was even too pessimistic when telling that we use up some of the losses carried forward. Obviously, the tax structure what we have is that it's -- the gain is totally tax-free. So let me confirm that. Thank you.

As there are no further questions at this time. We will now conclude today's conference call. Thank you for your participation.

Thank you, all of you. It was a nice day with you. Thank you for the many questions. Have a good afternoon to stay healthy, all the best.

Bye.

You may now disconnect.