Good day, and thank you for standing by. Welcome to the BAWAG Group Q3 2022 results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded and a transcript thereof will be published on the company's website. I would now like to hand the conference over to your speaker today, Anas Abuzaakouk, CEO. Please go ahead. Thank you, operator. Good morning, everyone. I hope everyone is keeping well. I'm joined this morning by Enver, our CFO. Before we start with a summary of the third quarter operating results on slide two, let me address the City of Linz legal case. In August, the Austrian Supreme Court of Justice ruled that the swap contract entered between BAWAG and the City of Linz almost 15 years ago was invalid. As a result of the ruling, we took a pre-tax write-off of EUR 254 million, equal to a EUR 190 million impact after tax related to the City of Linz receivable on the balance sheet. As the write-off was fully absorbed in regulatory capital in prior years, this will have no impact on our capital distribution plans for 2022. The write-off also resulted in a reduction of 40 basis points to our NPL ratio, as the receivable was classified as an NPL in the past. For the remainder of the presentation, all earnings will be presented on an adjusted basis, excluding the City of Linz impact, as this provides a more meaningful presentation of our operating performance as well as capital distributions. For the third quarter, we delivered net profit of EUR 132 million, earnings per share of EUR 1.49, and a return on tangible common equity of 19%. The operating performance of our business was very strong, with pre-provision profits of EUR 218 million and a cost income ratio of 35%. Total risk costs were EUR 35 million, inclusive of a EUR 12 million increase in our ECL management overlay, bringing our management overlay to EUR 82 million despite sound credit performance and a record low NPL ratio of 1%. In terms of balance sheet and capital, average customer loans were flat quarter-over-quarter and up 9% year-over-year. We are seeing a slowdown in loan growth as customers grow more cautious and deal with the impact of inflation, repricing of loans, and uncertain economic environment. Customer loan growth will continue to be subdued in the quarters ahead and offset with the buildup in our securities portfolio as the widening of credit spreads provides for more attractive risk-adjusted returns. In terms of capital development, we generated approximately 60 basis points of gross capital during the quarter. Our CET1 ratio landed at 13% after deducting the year-to-date dividend accrual of EUR 207 million and the EUR 325 million share buyback program. Given the significant inflationary environment in rising interest rates, the bank is positively positioned for a rising rate environment with our retail deposit franchise. This will further add to our positive operating leverage and gradually materialize in the coming quarters. With our strong operating performance during the first three quarters of the year, and despite potential headwinds building up, we are on track to deliver on all 2022 targets. A profit before tax greater than EUR 675 million, a return on tangible common equity greater than 17%, and a cost income ratio under 38%. We plan to update our original 2025 targets at year-end as well. In terms of our existing share buyback program of EUR 325 million, we have executed approximately 65% of the buyback and expect to have this completed by end of year. We will address any further capital distributions around year-end results based on market developments and subject to regulatory approvals. Above all else, we want to make sure we are prudent in our capital distribution plans, always maintain our fortress balance sheet, and ensure we have sufficient dry powder to address potential organic and inorganic opportunities in the coming quarters. Market downturns and dislocations present unique opportunities if you have capital, liquidity, and a fortress balance sheet with solid capital generation throughout all cycles. Given the headwinds we see building up from volatility in the energy markets, persistently high inflation, subdued consumer sentiment, prolonged geopolitical conflicts, and the repricing of credit risk, we have added to our management overlay as we take a cautious and prudent approach to provisioning in the quarters ahead. Our ECL management overlay, which now stands at EUR 82 million, is equal to almost a full year of normal annual risk costs. We will look to continue and build this up in the fourth quarter as well, given the volatility and uncertainty ahead. The management overlay is specifically intended to address any severe downturn and heightened volatility in the quarters ahead, despite our very low NPL ratio of 1% and solid credit performance across the business to date. As I've stated in the past, our actions are born out of an abundance of caution, no different than how we reacted during the early days of the pandemic, or more broadly, the conservatism that underpins how we've run our business over the past decade. Moving to slide three. We delivered net profit of EUR 132 million, up 7% versus prior year. Overall strong operating performance with operating income of EUR 336 million and total expenses of EUR 118 million, up 9% and down 2% respectively, versus prior year. Pre-provision profits were EUR 218 million, up 17% versus prior year. Risk costs were EUR 35 million, up 64% versus prior year, driven primarily by the buildup of our management overlay. Tangible book value per share was EUR 31.40, down 9% versus prior year and down 1% versus prior quarter. This captures the deduction of the year-to-date 2022 dividend accrual of EUR 207 million, the EUR 325 million share buyback, and the EUR 190 million after-tax write-off related to the City of Linz receivable. Moving on to slide four. At the end of the third quarter, our CET1 ratio was 13%, up 30 basis points from 2Q, with approximately EUR 150 million excess capital above our CET1 target of 12.25%. For the quarter, we generated approximately 60 basis points of gross capital from earnings, which was offset by negative OCI movements of 10 basis points, primarily driven by widening credit spreads and a positive impact of 10 basis points in regulatory capital stemming from the City of Linz write off. The dividend accrual for the quarter was equal to approximately 30 basis points. On a year-to-date basis, we have generated 180 basis points of gross capital, offset by growth in RWAs, which consumed about 50 basis points and negative OCI hit of 50 basis points, primarily from widening credit spreads and FX movements. Despite the overall volatility we are witnessing that can impact capital in many ways, we believe we are well-positioned to address multiple market opportunities given our earnings, capital, and funding base. Our total capital distributions for the year reflect deducting the year-to-date 2022 dividend accrual of EUR 207 million, which reflects a payout ratio of 55% of adjusted net profits in 2022, the EUR 325 million share buyback, and the acquisition of a consumer loan portfolio earlier in the year. Net of all M&A and capital distributions, we land at a 13% CET1 ratio. Following our capital distribution framework, our primary focus is to deploy our capital into organic growth and value-enhancing M&A. We currently see several potential organic and inorganic opportunities that we will be assessing over the coming quarters. On slide five, our retail and SME business delivered net profit of EUR 111 million, up 17% versus prior year and generating a very strong return on tangible common equity of 33% and a cost income ratio of 33%. Average assets for the quarter were EUR 22.5 billion, up 9% versus prior year and 2% versus prior quarter. Average customer deposits were EUR 27.8 billion, up 3% versus prior year and down 1% versus prior quarter. RWAs in the segment were EUR 9.5 billion, up 18% versus prior year and 1% versus prior quarter. Pre-provision profits were EUR 172 million, up 21% compared to the prior year, with operating income up 12% and operating expenses down 2%, resulting from prior year operational initiatives with a continued focus on driving synergies across our various channels and products. Risk costs were EUR 23 million, up 51% versus prior year, driven by an incremental EUR 6 million booking of the management overlay. The underlying core retail cost run rate is at EUR 17 million per quarter, with the addition of the acquired consumer loan portfolio at the end of the second quarter. The trend in asset quality continues to hold across our customer base, with a stable low NPL ratio of 1.9%. Across the business, we will remain prudent and cautious as we've tightened our credit box given the increasing headwinds. We also continue to maintain our pricing discipline as we focus on risk-adjusted returns and price against movement in swap rates across the curve. We expect continued earnings growth across the retail and SME franchise for the remainder of 2022 and going into 2023. However, we see subdued loan growth in the quarters ahead given overall cautious consumer sentiment, impacts of inflation on daily spending, and a wait and see approach to new investments, as well as the repricing of credit. On slide six, our corporate real estate and public sector business delivered net profit of EUR 35 million, down 12% versus the prior year due to the booking of incremental management overlay, but still generating a strong return on tangible common equity of 16% and a cost income ratio of 23%. Average assets for the quarter were EUR 15.5 billion, up 10% versus prior year and down 2% versus prior quarter. Pre-provision profits were EUR 60 million, down 2% compared to the prior year. However, core revenues were up 6%. Risk costs were EUR 11 million, up 93% versus prior year, driven by the incremental EUR 6 million booking of the management overlay. The trend in asset quality continues to be solid, with our NPL ratio of 70 basis points, down 30 basis points versus prior year and flat versus prior quarter. We continue to see diversified lending opportunities with a solid pipeline and commitments that we expect to fund in the coming months. We will continue to maintain our disciplined underwriting, focus on risk-adjusted returns, and avoid blindly chasing volume growth. As the markets reprice credit risk, which we believe was long overdue, we have further tightened our credit box and adjusted our risk return criteria, given the uncertainty ahead in reflecting our disciplined approach to lending. With that, I'll hand over to Enver. Thank you, Anas. I'll continue with slide eight. Solid operating performance in the third quarter with core revenues up 2% versus prior quarter, with net interest income being up 4%, with first impacts from high interest rates and net commission income down 4% due to overall market environment and a slowdown in the advisor business. Operating expenses remained stable at EUR 118 million, with our cost income ratio landed at around 35% for the quarter. Total risk costs were EUR 35 million, inclusive of a EUR 12 million increase in our ECL management overlay, bringing it to EUR 82 million, which equals almost a full year of normal annual risk costs. On slide nine, key developments of our balance sheet. Average interest-bearing assets and risk-weighted assets remained at the same level as in Q2. Customer deposits were slightly up, while we increased our own issues by more than 11% through issuing a 1.025 billion EUR covered bond and CHF 125 million senior preferred note in Q3. CET1 capital and the CET1 ratio improved by 2% and 30 basis points respectively, mainly coming from solid earnings generation post the dividend accrual. On slide ten, core revenues. Stronger net interest income up 4% whereas the second quarter net interest margin improved to 231 basis points for the quarter, driven by mainly increasing interest rates. Our interest rate sensitivity remains unchanged with 200 basis points increase in overnight rates and three-month EURIBOR, leading to approximately EUR 200 million increase in net interest income per year. Given the refixing structure of our assets, it takes around four to five months to see the full effect of a rate increase reflected in our run rate, which means that the NII improvement will gradually materialize in the coming quarters. As mentioned before, net commission income was down 4% as we see a slowdown in our advisory business given the uncertainty and volatile market environment, which is likely to continue for the rest of the year. Having said that, we have a positive view on core revenues for the rest of the year. That is why we again updated our outlook from previously over 7% core revenue growth to around 9% growth in 2022. Moving on to slide 11. We continue to maintain operating expenses at stable levels despite significant headwinds. Cost income ratio continues to improve and stands at 35% for the quarter, which is well ahead of our 2022 target of below 38%. We'll also continue to focus on our absolute cost out target, and we are confident to achieve a net cost out of around 2% in 2022. Slide 12, risk costs. Overall, unchanged conservative prudent approach on provisioning with stable underlying trends and strong asset quality with an NPL ratio of 1%. The underlying core retail risk cost run rate is around EUR 17 million per quarter, including the portfolio acquisition in the second quarter, and the total risk cost ratio is around 20 basis points. We added EUR 12 million to our ECL management overlay, which now stands at EUR 82 million and is equal to almost a full year of normal risk costs. For the rest of the year, we expect a stable underlying risk cost ratio of around 20 basis points. In addition, we'll look to continue and build up the management overlay in the fourth quarter. On slide 13, we are confirming our 2022 outlook. With our strong operating performance during the first three quarters of the year, we are on track to deliver all 2022 targets, a profit before tax of greater than EUR 675 million, a return on tangible common equity of greater than 17% and a cost income ratio of below 38%. As mentioned earlier, we have again upgraded our core revenue growth outlook from previously greater than 7% to around 9%. Everything else remains unchanged. With that, operator, let's open up the call for questions. Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. Our first question comes from the line of Máté Nemes from UBS. Please go ahead. Your line is open. Good morning, and thank you for your presentation. I have a few questions, please. The first one is on corporate loans. It seems like corporate exposure has declined by 4% sequentially. I'm just wondering if you could share, you know, any sentiment, any commentary on what's been driving this. Is it about a lower risk appetite on your side? Is it that risk-adjusted returns are not necessarily meeting your hurdle rates, or is it simply just a matter of timing, and we could see perhaps an increase or better performance towards the end of the year? The second question is on management overlays. Could you perhaps discuss how you assess the portfolio in Q3 that resulted in the EUR 12 million of additional overlay, and what shall we expect in the next few quarters? Should we expect similar top ups as long as there's no market improvement in the macro environment? Then the last question would be on TLTRO and the investment of excess liquidity. How do you think about your TLTRO balances and potential repayments in case the ECB indeed changes the terms or the pricing of TLTRO, and what could that mean for reallocation of liquidity, perhaps to the securities portfolio or other means? Thank you. Okay. Thank you, Máté. All good questions. I'll take the corporate loans and the management overlay, and then you wanna address the TLTRO one. Sure. Máté, on the corporate loans, really nothing to read into it, just kind of subdued demand in terms of at least how we price loans. Then just the decline that you see kind of sequentially quarter-over-quarter, that's just the maturities. The pipeline in kind of traditional corporate lending is still pretty, I think, challenging. We are seeing, I think, more firm pricing in some of the indications, but you should assume it's pretty static. There's not gonna be any. When we talk about kind of the diversified opportunity or pipeline, it's more, I think, in the real estate and the public sector side. The traditional corporates, I think, is more idiosyncratic. We'll see. I think that's pretty fluid, but at least from what we see today, it's gonna be pretty static. In terms of the management overlay, so we're at EUR 82 million. That's almost 51%, I guess, of the total ECL. I would leave you with a few comments. The first is if you take our ECL of EUR 160 million, of which 50% is the overlay, and you compare that to the asset quality pre-pandemic, you see an improved overall asset quality, and I think it's best reflected in the NPL ratio, which is, I think it's now at a record low of 1%, as well as if you look at the staging in terms of stage one, two, and three. That's probably at a steady state. We don't see any deterioration there. I think your question is, what goes into the actual assumptions? We can break that out at year-end in terms of the formula. I would tell you, when we look at the severe scenario in kinda calculating our overlay, our severe assumption is more severe than the ECB severe scenario for the Euro area, as well as obviously, the IMF is less severe than ECB assumption. We tend to be pretty conservative in the assumptions that we put in to get us to our overlay to be able to build that up. We'll continue to build that up in the fourth quarter. I think, you know, we updated our core revenue guidance. I think what you should kinda take from that is we will continue, if third quarter is a good proxy, probably for the fourth quarter in terms of what we'll look to build up in the overlay, so. Again, we're just being prudent and cautious. We'll see what happens in 2023. Hopefully nothing, at least from what we see today, nothing is, we don't see any concerns or fracture in our book, but we just wanna act out of an abundance of caution as we go into 2023 and beyond. Do you wanna take the TLTRO? Yeah. The third question, Máté. On the TLTRO, although it very much depends what ECB will announce by end of the month, asking about the asset side. The excess liquidity, what we are thinking is redeploying in short-term assets, mainly on the securities side. They've been quite underinvested there. If you think after redeeming the TLTRO in such a situation, we're left with EUR 3 billion-EUR 4 billion of excess cash with the ECB. That's something that we are already proactively looking into. As I said, that would be mainly in high quality securities, very likely. Great. Thank you very much. Thanks, Máté. Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Gabor Kemeny from Autonomous Research. Please go ahead. Your line is open. Yes. Hi. A couple of questions from me. First one is on the euro rate sensitivity, where you have a useful guidance. Can you give us a sense of the impact of higher euro rates on your Q3 NII? I mean, if you could help us quantify the benefit you have from rising euro rates, and if you could give us a sense of what is a reasonable assumption for the rate rise when I treat in the fourth quarter? As I understand, it takes a few months to reprice assets at higher interest rates. The other question would be, how do you see your M&A pipeline? You talked about slowing loan growth, tighter credit underwriting. I wonder to what extent does this incentivize you to pursue inorganic growth opportunities? Perhaps in relation to that, where does the execution of the 100 million share buyback, the second tranche of the share buyback, currently sit in your pecking order? Thank you. Thanks, Gabor. You wanna take the sensitivity? Yeah, sure. I think, Gabor, for Q3, it's quite simple. I would take the EUR 10 million increase of NII, as I would mostly put it under interest rate sensitivity. For Q4, we don't provide single-line item guidance, but what we tried is by updating to core revenue growth target from over 7%-9%, that should give you some guidance, what to expect for the NII in Q4. Gabor on the M&A, let me first address. Irrespective of what happens with customer loan growth, whether it's at a high velocity growth or it's subdued, that's mutually exclusive from how we look at M&A. We'll never do a deal because one part of the business is slowing down or we're cautious. We look at each deal on a mutually exclusive basis, and it has to hit our risk-adjusted return criteria. I think we've laid that out before in terms of returns. Look, the reality is we're much more cautious on the overall environment. We've tightened our credit box on our own lending, you know, quite a bit from the pandemic, and we added to that earlier this year. Any deal that we do would have to really meet a lot of thresholds in terms of our conservatism. In the asset classes, we're pretty judicious, you know, very selective on what works and what doesn't. The reality is, anything we price will have to be reflective, if we do a deal, right, of the environment we think potentially could materialize in the next six, 12, 18 months with all the headwinds building up. I think a good proxy of how we approach things was the consumer loan portfolio that we purchased in the second quarter. That's the type of conservatism that we would probably be applying. But as I mentioned, during the call when we were going through the results, market dislocations and downturns do provide unique opportunities. If you have capital, if you have a healthy return profile that you're generating, if you have a strong funding base, and I think we have that going into whatever might materialize. Thanks, Gabor. Okay. Thank you. Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Johannes Thormann from HSBC. Please go ahead. Your line is open. Good morning, everyone. Johannes Thormann here. Three questions from my side, please. First of all, regarding the management overlay. We don't know how long this crisis lasts, but is there any target volume and probably looking at portfolio, what are the areas of special concern where you say, if bad things happen, this is the most likely outcome where we would use this management overlay. Secondly, on your corporate loans pricing, where do you think you differ from competition because other European banks are still talking about healthy demand. Is your pricing so much different? And last but not least, just on the tax rate for this year, where do you expect this to be after the one-off in this quarter? Thank you. Thanks, Johannes. All good questions as well. On the overlay, I would say, look, this second quarter, we booked EUR 6 million. We then booked EUR 18 million or EUR 12 million in the third quarter. That's probably a good proxy looking at the fourth quarter. We don't have a target volume. I will tell you this, we intend and that we have very good line of sight into delivering on our financial targets, a return on tangible common equity over 17%. Yeah, that's what we've said throughout not just 2022, but obviously going into years ahead of us. Whatever we do on the overlay, it doesn't compromise kind of our returns. I think that's one way of looking at it, and we're just being overly cautious. Your question about where do we see potential risk, I've always said this, or Enver's always said this as well, it's the unsecured portfolio. It's your consumer loans, Austria, Germany, right? That's the bulk of our consumer loans. In any downturn where you have unemployment, kind of a GDP downturn leading or translating into unemployment, higher unemployment, you'll have impacts on your unsecured. That's the one area. But look, I think, our underwriting in that respect, how we look at risk-adjusted returns, we've been pretty disciplined over the years. I think we have a good sense of how the book would materialize. The overlay is just, again, out of an abundance of caution, like we did in the pandemic. We intend to be able to achieve or hit all of our targets, irrespective of what we do on the risk side. On the corporate side, our risk-adjusted pricing is different from competitors. Not to comment on what other people are doing. I think also the price is one thing, Johannes, but also covenant and how we underwrite is also a factor. It's not always price. We've been pretty disciplined over the years. The impact of that is, you know, more subdued loan growth, but we're okay with that. We look at each individual loan on kind of an ROE basis. We try to price and think about risk throughout all cycles, not just any one particular point in time. Thank you. Tax rate is simple. 25%, I think, is a good proxy for a full year tax rate. Okay, cool. Thank you. Thanks, Johannes. Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Mehmet Sevim from JP Morgan. Please go ahead. Your line is open. Good morning. Thanks very much for the presentation. I have just a couple follow-up questions, please. First of all, can I please follow up on your NII sensitivities beyond the 200 basis points of level of guidance? Could you please help us understand maybe qualitatively what trends you'd expect to see in terms of deposit betas and other funding costs, but also asset repricing once, say, rates reach a 2% level and beyond that? My second question would be on the deployment of your excess cash position in securities, as you highlighted and mentioned before. Is that something that we can expect will become visible in your balance sheet soon, or is that, for example, depend on potential changes to remuneration by the ECB, or are you actually planning to start with that really soon? These will be my follow-ups. Thank you. Thanks, Mehmet. Goo d questions. On the deposit betas, look, the current assumption is around, I would say, around 40% deposit betas that we apply in the interest sensitivity. What we put in the presentation is new information on the refixing schedule. It takes a bit time to get the full benefit reflected, which you said takes four to five months. We also gave a bit, you know, the structural measure on our deposits, which is most of it is still kind of overnight, right? What we would expect once, you know, rates go over 200, that there will be a gradual increase in the deposit betas. What we are observing right now, we are definitely below the 40% expectation. The 200 expects 40%. Then after that, we would see a gradual increase of that. We just want to wait for kinda the second question that you had. We also want to wait for the ECB to see what the outcome of that is, because that impacts our overall balance sheet position. We would then give an update on that measure by year-end, which I think is more meaningful. On the securities, yeah, we already started deploying more cash into securities, but not to the full scale, right? It will definitely depend on what ECB decides on the remuneration, if they increase that or not. Okay, great. Thanks very much, Enver. Maybe one final question, more general in terms of the balance sheet and growth trends. Clearly, trends have slowed down this quarter, and it was a lot faster in the second quarter, and I appreciate you always look at risk-adjusted returns and pivot the balance sheet accordingly. If we were to assume that things stay as they are now or even maybe get worse, how should we expect the balance sheet composition to change, say over 2023 if everything stays the same, by the end of next year? I think things will be pretty static. When you think about subdued loan growth, and I mentioned that on the retail side, that'll be a couple of quarters. That's not just one quarter, because you can see just the overall pipeline, how we are pricing versus where the market's pricing. But I think it'll be fairly static and I think proportional in terms of retail versus non-retail business. The one thing that'll probably continue to grow as a percentage of your balance sheet will be your securities portfolio. I think the third quarter, if you kind of look at the development on it, that's probably a good proxy. It's kind of the pace that we're legging in the securities investments where we do see good opportunities. I think it's fairly static, but it is not going to impact our returns or results. Yeah. I think we feel fairly confident in the different areas they'll be able to deliver in 2023 and beyond. Great. Thanks. Thanks, Anas, for the color. Thank you. Thank you, Mehmet. Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Magdalena Stoklosa from Morgan Stanley. Please go ahead. Your line is open. Great. Thank you. Thank you very much. I've got two questions, really. One is around costs and inflation and another one on the real estate portfolio. Let me maybe start with the real estate side. You've actually grown your loans in the quarter. Could you give us a sense, you know, what sort of opportunities, you know, were out there for you to grow the portfolio? The second just, you know, just for us, can you just remind us of the kind of geographical mix of that portfolio kind of by sector and by, let's just say, LTVs, so that we kind of have a sense of how to look at it in more detail. Question number two really is on your cost because you run this extraordinary cost income ratio with also extraordinary targets. Of course, we're also operating at this kind of serious lows every month, heightened kind of inflationary times, and seriously it may last for a little bit longer. As you look into 2023, how do you assess that inflation pressure versus your kind of more structural savings that you already kind of have in mind for the next, let's just say two years? Thanks so much. Thank you, Magdalena. All great questions. Let me start, Magdalena, with the OpEx or the cost, and then we'll address the real estate. On the cost, just to remind everyone, this, our level of confidence in terms of delivering the 2% net cost up for 2022 as an example, we have that confidence because typically it's a 12- to 18-month lead time to be able to really understand your cost base for that current year. A lot of the tailwinds or kind of the positive cost developments were born out of the fact that it's initiatives that we took during the pandemic as well as in 2021, which gave us a line of sight in terms of the overall cost base. More importantly, I think that the topic that you're addressing is the impact of this significant inflationary development. It, you know, hits you in a lot of different ways. You have the wage inflation that'll be part of the collective bargaining agreement next year, and that's something that we're working through and factoring in. You have inflation with a lot of your non-personnel costs, what we call your G&A, which is tied to technology contracts, your leases, I mean everywhere that kind of has a CPI link to it. Those are all things that people should consider in their overall cost base. Those are pretty major headwinds. We're working through all of that. We'll give an update at year-end in terms of what the cost outlook is. Rest assured, Magdalena, this is something that we've been focused on from 2021 in terms of the overall cost development. We saw some of the inflationary pressures at the tail end of last year. There were things that we were able to do that I think will provide a positive lift. I think we'll have more clarity at year-end. You should see pretty consistent development on the cost base going into 2023, despite all of the points that I just made in terms of the inflationary headwinds that we're seeing. That is, you know, one of the things that we pride ourselves on that we can truly control. You do need a lead time, and you need to have a viewpoint as to how things are developing. I think that's something that we've done, I think a decent job of. On the real estate exposure, I'd say, look, we can come back to you on the split, I think of the different underlying asset classes. What we're seeing is primarily multifamily lending as far as an underlying asset class. What do we go ahead to? On page 17. On page 17, we have a split of the overall real estate portfolio of EUR 6.6 billion. Where we see opportunities is kind of multifamily. What we've done is we've adjusted our credit box or tightened our credit box in terms of advance rates, debt yields and the like. We've been pretty conservative prior to 2022, and I think we've tightened our credit box further, and we have a different threshold on risk-adjusted returns. These are pretty idiosyncratic opportunities, mix of U.S. versus Western Europe. But we feel pretty good about the loans that we're putting on at this moment. Page 17 has the split of the EUR 6.6 billion. Great. Thank you very much. Thanks, Magdalena. Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Simon Nellis from Citibank. Please go ahead. Your line is open. Hello. Thanks. Thanks very much for the opportunity. A quick question. If you could give an update on the Peak Bancorp transaction, how that's progressing. Just maybe generally, you have EUR 150 million of excess capital above your CET1 ratio. You know, come year-end, what should we expect? Are you gonna do another buyback, maybe a special? What's the plan there? Thank you. Thanks, Simon. Capital distributions, you're right. We have EUR 150 million as of Q3. We'll wait till end of year. Just, I think we'll have greater line of sight and clarity as to how things are developing, and then we'll update on overall capital distribution plans going to 2023. On the U.S. acquisition, I think in the next quarter or two quarters, hopefully. But the process is going well. I think we had said probably first quarter, probably more likely, but we'll see. There's no issues so far in the process. Just on the buyback for next year. I think you're planning EUR 100 million. When do you think you might apply for that? Yeah. Simon, on that, we just wanna wait till year-end to see how things develop in the market. Then obviously, we'll give you guys an update with year-end results in terms of updated capital distribution plans, inclusive of buyback, special dividends and the like. Plus seeing what we see happening in the fourth quarter as far as inorganic opportunities. Understood. Thank you. Thanks, Simon. Thank you. We'll now take our next question. Please stand by. Our next question comes from the line of Tobias Lukesch from Kepler Cheuvreux. Please go ahead. Your line is open. Yes, good morning. I would like to touch again on the commercial real estate portfolio. You just outlined a bit of your rationale also with regards to potential focus on multifamily business. Maybe you could again give us a bit of a flavor with regards to your geographical focus. You know, like where are the countries where you potentially do see most opportunities? In general, I mean, given that the real estate sector has been quite under pressure, assessing your portfolio, would you think that there might be some rating migration likely in 2023? Second question would be on the retail side, on the housing business here. We have especially seen price changes in the Netherlands, your recent focus, basically. I was just wondering, you know, if you see a particular country, which would be potentially most opportunistic for the next one or two years for you, to target. Finally, I mean, I appreciate your comment on the capital distribution, and I think you just mentioned that, with regards to a special dividend. I was just wondering, you know, like if there would be a consideration or a chance that we might see a payout ratio increase, if there was potentially the reasoning that you do not go for a EUR 100 million share buyback because this would have, or would need an approval by the ECB, but rather increase the payout ratio, and basically pay this out, of adjusted net profits, basically. Thank you. Thanks, Tobias. All good questions. Let me start with the capital distribution. Like I mentioned earlier, we'll wait till year-end, and I think we'll give you guys more clear picture because there's just a lot of developments that happen in the fourth quarter, organically, inorganically, in particular. And then I think we'll have better perspective as to what we can commit to. So, sorry, on that one, you have to wait till year-end. As far as the real estate, maybe I'll start with the mortgages or the housing loans. We actually added a page which hopefully provides some greater color on the overall portfolio on slide 16, just in terms of the composition of the housing loans. I think your question was, where do we see opportunities? I will tell you across the different geographies, whether Austria, Germany, the Netherlands, where we've repriced against the swap rates and maintain a certain margin. I think we are probably earlier to the game on that than others. That obviously impacts demand, but you also have just a subdued demand as a whole. In addition to the fact that we reprice probably sooner in trying to maintain that margin. That'll impact the volumes. In terms of asset quality, we feel pretty good about the portfolio, just in terms of fixed versus floating. Ours is predominantly a fixed rate portfolio. We swap out the interest rate risk. You know, our LTVs on the whole portfolio is approximately 60%. It's been pretty seasoned, so we feel pretty good about the overall portfolio, but demand is subdued across all of the geographies. That's what I mentioned earlier about kind of a static view. The real estate, the commercial real estate, it's more U.S., Western Europe, less continental Europe, as far as the opportunities. I think the slide that we have provides a good breakout. We have tightened our credit box and adjusted pricing, given just the unknowns and the headwinds that potentially could develop. With regards to a potential, I mean, stress you see with regards to rating migration, is there something you know you could envisage for 2023 already? Or do you think that you know the changes we have seen in the commercial real estate sector especially, you know, it's like do not indicate anything on the negative? You know, I would say. Look, that's one of the reasons we built up the overlay, Tobias, right? EUR 80 million, probably going to EUR 100 million, whatever the number is. More importantly, if you look at the IFRS, kind of the staging, we're at pre-pandemic levels. I think that's a good proxy that you have on page 15. If it shifts slightly, I don't think it's gonna be anything. You may now- From what we see today, credit performance is pretty robust. Again, we're just acting very conservatively and being really prudent. We'll hope for the best, obvi ously, but prepare for the worst. That's typically how we run the business. I hope that helps. Thank you. Thank you. Thank you. Thank you. Bye. There are no further questions at this time, so I'll hand the call back for clo sing remarks. Thank you, operator. Thanks, everybody, for joining our 3Q call. Look forward to catching up with you at year-end results. Take care. All the best. Bye. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.