Good day, and thank you for standing by. Welcome to the BAWAG Group Q1 2023 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. To restore your question, please press star one one again. Please be advised that today's conference is being recorded, and a transcript thereof will be published on the company website. I would now like to hand the conference over to your speaker today, CEO Anas Abuzaakouk. Please go ahead. Thank you, operator. Good morning, everyone. I hope everyone is keeping well. I'm joined this morning by Enver, as usual, our CFO. Let's start with the summary of the Q1 results on slide three. We delivered net profit of EUR 140 million, an EPS of EUR 1.69, and a return on tangible common equity of 20.5% during the Q1. The normalized return on tangible common equity was 23.5% when pro-rating the front-loaded regulatory charges in the Q1. The operating performance of our business was very strong, with pre-provision profits of EUR 248 million and a cost income ratio of 32.5%. Total risk costs were EUR 21 million, translating into a risk cost ratio of 19 basis points. We did not release any credit reserves with an ECL management overlay of EUR 100 million that was built up over the past few years and equal to almost a full year of risk costs. We have a low NPL ratio of 90 basis points and continue to see solid credit performance across our businesses. Regulatory charges for the quarter were EUR 41 million, equal to approximately 80% of full year charges. In terms of our balance sheet and capital, average customer loans were down 3% quarter-over-quarter and up 1% year-over-year. Average customer deposits were down 2% quarter-over-quarter and down 6% year-over-year. Average customer funding, which is made up of our customer deposits and AAA-rated mortgage and public sector covered bonds, was up 2% quarter-over-quarter and up 6% year-over-year. We generated approximately 70 basis points of gross capital from earnings during the quarter. Our CET1 ratio was 14.1%, up 60 basis points from year-end 2022 after considering the Q1 dividend accrual of EUR 77 million. We have a fortress balance sheet with excess capital of EUR 365 million, EUR 8.5 billion of cash, which excludes the TLTRO funds, and this accounts for 16% of our balance sheet, an LCR of 215%, and overall strong asset quality. We are targeting a buyback of up to 100 basis points, which we hope to execute during the second half of 2023, subject to regulatory approval. When we reported our year-end 2022 results in February, we were purposely maintaining dry powder for organic opportunities and potential M&A in the coming quarters. Our outlook still assumes overall static loan growth this year, but M&A opportunities have taken longer to materialize than we initially anticipated, and with this size buyback, we will have more than enough dry powder for both organic opportunities as well as potential M&A if they should materialize. Three of the past four years have felt like the Q1 has introduced a new crisis and more broadly required banks to address unique risks and volatile market conditions. As a management team, we have embraced the fact that the only constant is change, and the only way to manage risk, both known and unknown, is to take a prudent and conservative approach to how we run the business. Time and time again, we stress the merits of being a conservative commercial lender focused on risk-adjusted returns. This means our underwriting takes a through the cycle view and does not allow for credit drift or overextending ourselves during a benign credit environment. Although we never complained about negative interest rates that lasted eight years, we were sensitive to the underlying interest rate risks that lurk beneath the surface and always focused on being a credit spread lender. Ultimately, we focus on the things that are within our control, our risk appetite in underwriting, the operations of the bank, managing our cost base, and being good stewards of capital. What the most recent banking crisis has highlighted is that not all management teams and banks are the same. It is a fallacy to think that banks operate as utilities. The reality is the exact opposite. We've been a patient and disciplined commercial lender over the years dealing with negative interest rates, credit risk being mispriced, and excess liquidity driving irrational behavior in the pursuit of growth. We have been consistent in our approach to how we run the bank. We have a resilient business across all cycles with consistent earnings and capital generation that should serve us well in the quarters ahead. We have a fortress balance sheet with ample capital and liquidity, and we'll be ready to support our customers as well as take advantage of dislocations should they arise. Our performance over the past decade reflects these basic principles. With our strong operating performance during the Q1, we are reaffirming our full year targets for 2023. A profit before tax greater than EUR 825 million, return on tangible common equity greater than 20%, a cost income ratio under 34%. Given the current environment, we have provided additional pages on our commercial real estate portfolio, our investment portfolio, and the evolution of our funding stack. Okay, moving to slide four. We delivered a net profit of EUR 140 million, up 26% versus prior year. Overall, strong operating performance with operating income of EUR 367 million and total expenses of EUR 119 million, up 13% and down 1% respectively versus prior year. Total pre-provision profits were EUR 248 million, up 21% versus prior year. Risk costs were EUR 21 million. Regulatory charges were EUR 41 million. Tangible book value per share was EUR 33.55, up 6% versus prior year and 2% versus prior quarter. This assumes the deduction of the Q1 2023 dividend accrual of EUR 77 million. Moving on to slide five. At the end of the Q1, our CET1 ratio was 14.1% after deducting the Q1 dividend accrual. For the quarter, we generated approximately 100 basis points of gross capital, with approximately 70 basis points coming from earnings and approximately 30 basis points from lower RWAs, which resulted primarily from executing a securitization transaction in lower volumes. Our excess capital of EUR 365 million above our CET1 target of 12.25% provides us with the opportunity to pursue a buyback now and still have enough dry powder for potential M&A. Net of our targeted buyback of up to 100 basis points this year, our CET1 ratio will be at a minimum 13.1%. Okay, on to slide six. Our retail and SME business delivered a net profit of EUR 118 million, up 19% versus the prior year, and generating a very strong return on tangible common equity of 35% and a cost income ratio of 31%. Average assets for the quarter were EUR 22.3 billion, up 5% versus prior year and down 1% versus prior quarter. Average customer deposits were EUR 26.8 billion, down 5% versus prior year and down 2% versus prior quarter. Average retail customer funding, which is a combination of customer deposits and AAA-rated Austrian mortgage-covered bonds, were EUR 36.5 billion, up 8% versus prior year and up 2% versus prior quarter. This provides a more comprehensive view of overall customer funding and allows us to match fund longer-dated mortgage assets against longer-dated funding. Pre-provision profits were EUR 191 million, up 19% compared to the prior year, with operating income up 12% and operating expenses flat versus prior year. Risk costs were EUR 20 million, reflecting normalized risk costs with no management overlay build or releases. The trend in asset quality remains strong across our customer base, with a low NPL ratio of 1.7% and a risk cost ratio of 35 basis points. We expect continued earnings growth across the retail and SME franchise in 2023, driven by strong operating performance but muted customer loan growth given the overall economic environment. On to slide seven. Our corporate real estate and public sector business delivered net profit of EUR 37 million, down 3% versus the prior year and generating a solid return on tangible common equity of 19% and a cost income ratio of 24%. Average assets for the quarter were EUR 14.4 billion, down 2% versus prior year and down 5% versus prior quarter. Average customer deposits were EUR 5.1 billion, down 9% versus prior year and down 1% versus prior quarter. Average customer funding, which is a combination of public sector and corporate deposits as well as AAA-rated Austrian public sector covered bonds, were EUR 6.7 billion, flat versus prior year and up 2% versus prior quarter. Pre-provision profits were EUR 58 million, down 7% compared to the prior year. Risk costs were essentially zero, with no management overlay build or releases. The trend in asset quality continues to be solid, with our NPL ratio at 70 basis points. We pride ourselves on disciplined underwriting, focusing on risk-adjusted returns across all cycles, avoiding blindly chasing volume growth. We will continue to be disciplined and have the capital and liquidity to support customers and capitalize on dislocations should they arise, as we see a potential repricing of credit risk more broadly across various asset classes. On slide eight, given the overall focus on the commercial real estate sector, with a particular focus on U.S. commercial real estate, we wanted to provide more insights into the portfolio and why we feel confident about our overall real estate lending business. As a reminder, we focus on senior secured loans to high-quality counterparties. We do no mezzanine financing, no pure land financing, and we avoid markets and asset classes where we see froth and irrational behavior. The team is quite experienced, with senior members having worked together for over a decade. As we've consistently said year in and year out, we don't place volume targets on the business. If we find attractive places to lend meeting our risk-adjusted return thresholds, then we'll pursue them. If not, then we'll hold back and keep searching until we find something that fits our risk appetite. We are patient lenders who do not let our credit standards drift. This has benefited us over the years with limited losses in a stress resilient portfolio. Our portfolio has increased its focus primarily towards residential, industrial, and logistics assets over the past few years. Asset classes with positive secular trends since the pandemic. We've done very limited new lending in retail and have become much more cautious with office post-pandemic given the negative secular trends. If you look at our portfolio growth since 2020, you see the shift in focus and underlying asset composition. The growth in the portfolio has come almost exclusively from residential, industrial, and logistics assets, which comprise 65% of the total real estate portfolio. In terms of our underwriting approach, we are a senior secured lender against diverse properties that produce strong cash flows. Our weighted average LTV is below 60% and has consistently been at this level as the portfolio has turned over the past few years. We primarily finance granular multi-asset portfolios, often with multiple collateral types. The asset class diversity provides an additional margin of safety. The portfolio is primarily floating rate loans. As part of our underwriting process, risk mitigation measures were put in place as part of loan agreements. Examples include interest rate hedging requirements, interest reserves, and sponsor guarantees. Our U.S. real estate exposure, which accounts for 40% of the total real estate portfolio, has since grown over the past few years, mainly from residential, industrial, and logistics assets. These asset classes account for 70% of our U.S. commercial real estate exposure. The office portfolio, which is equivalent to EUR 490 million, accounts for 1.4% of total customer loans, 9% of total real estate loans, and 22% of total U.S. real estate exposure. The U.S. office portfolio has its geographic footprint solely in major cities and is comprised of class A buildings. The portfolio has an average senior debt yield of over 9%, has a comfortable weighted average lease term of approximately six years, solid tenants with average occupancy levels at approximately 75%, and LTVs in line with the broader portfolio under 60%. Given the underlying credit performance, we feel confident that we will address any severe downturn that may materialize. Our total loss rate since the inception of the business has been under 20 basis points, albeit the past decade has been primarily defined by a benign credit environment, excluding a few periods of stress. A good reference point for our existing portfolio under a severe stress scenario is the 2021 EBA stress test, which assumed approximately 30% reduction across all commercial real estate asset classes. Our total real estate portfolio experienced cumulative losses of just 2% over a three-year period, reflecting the significant loss absorption and collateralization levels and a good proxy for a severe stress scenario. It is important to note the portfolio composition has only improved given our focus away from office and retail and shifts to residential, industrial, and logistics assets since the last stress test. This is all before accounting for EUR 100 million of management overlay that would be used to address severe downturns and any potential stress across the balance sheet. On slide nine, an overview of our investment book and overall cash position. Our investment book or securities portfolio at quarter end was EUR 5 billion, up 1% versus the prior quarter. The investment book is 100% investment grade, of which 70% is single A or higher, and has a weighted average life of approximately 3.7 years, with solid diversification across both geography and issuers. Considering recent events and how banks manage interest rate risk, specifically in their securities portfolios, it's important to highlight that we take no interest rate risk in our AFS portfolio and almost no interest rate risk in our HTM portfolio. Our AFS portfolio is EUR 2.4 billion with a weighted average life of three and a half years. The accumulated OCI in our AFS portfolio is negative EUR 10 million, which is already deducted from both tangible equity and CET1 capital, a common sense and consistent regulatory approach across all European banks. Our HTM portfolio is EUR 2.6 billion with a weighted average life of 3.8 years. The HTM portfolio has net unrealized losses of EUR 30 million, or approximately 1%, a reflection of how we've managed interest rate risk in our securities portfolio over the years. Equally important to highlight is our investment book development since 2020, where the portfolio declined by almost a quarter from EUR 6.5 billion to EUR 5 billion, a period that combined excess liquidity with negative interest rates and extremely tight credit spreads. We consciously made the decision to sit on the sidelines, have the portfolio run off, de-risk where it made sense, and make very few investments, given we did not see attractive risk-adjusted returns. Our cash position, which includes money held with the central bank, was EUR 11.8 billion at the end of the Q1, of which EUR 3.3 billion were TLTRO funds. We have purposely maintained an excess liquidity position to address potential market opportunities over the years. At its peak, we drew down EUR 6.3 billion of TLTRO funds as we hoped to see interesting opportunities post-COVID. That never materialized, and we essentially had an inflated balance sheet the past few years. We paid down EUR 2 billion of TLTRO during the Q1, with another EUR 2.8 billion targeted during the Q2. This will leave us with approximately eight and a half billion EUR of cash, with additional funding capacity of a few billion after paying back the TLTRO funds. Today, our balance sheet is comprised of approximately 25% cash or 16% when excluding TLTRO funds. We will continue to maintain excess cash and a liquid balance sheet to address lending opportunities, portfolio opportunities, and potential M&A. Historically, this came at a cost of negative carry. It was something we were willing to accept in terms of overall balance sheet management and ensuring we always had sufficient liquidity and capital for both opportunities, as well as being conservative in managing liquidity in the event of severe downturns. With that, I will hand over to Enver. Thank you, Anas. We'll continue on slide 11. Overall, a very strong operating performance in the Q1, with core revenues up 6% versus prior quarter, with continued strength in net interest income, which was up 8%, and good net commission income, which was up almost 2%. Compared to prior year's Q1, core revenues were up 13%. With strong core revenues and almost stable operating expenses, our cost income ratio further came down and stands at 32.5% for the quarter. Risk costs of EUR 21 million show a more normalized picture with a risk cost ratio of 19 basis points, which is also in line with the underlying trend over the last couple of quarters. That is without any releases of our management overlay that stands at EUR 100 million. Regulatory charges for the Q1 were EUR 41 million, equal to approximately 80% of the full-year charges. With a return on tangible common equity of 20.5% during the Q1, we are on track to meet our return levels of greater than 20%. When pro-rating for the front-loaded regulatory charges in Q1, our normalized return on tangible common equity was actually 23.5%. On slide 12, we show key developments of our balance sheet. In terms of assets and capital, customer loans were down quarter-over-quarter by 1% and stable year-over-year. On an average basis, customer loans were down 3% quarter-over-quarter and up 1% year-over-year. We generated approximately 70 basis points of gross capital from earnings during the quarter, also supported by lower risk-weighted assets of 2%. Our CET1 ratio was 14.1%, up 60 basis points from year-end 2022, after considering the Q1 dividend accrual of EUR 77 million. On the funding side, average customer deposits were down 2% quarter-over-quarter, while our customer funding was up 2% quarter-over-quarter and up 6% year-over-year, as we continued improving our long-term funding profile through issuing AAA mortgage-covered bonds. In total, approximately EUR 5 billion since 2022. On slide 13, we added more information around our EUR 43.6 billion of customer funding, which is mostly made up of customer deposits and AAA-rated mortgage and public sector covered bonds, and also represents 95% of our total funding, excluding TLTRO. The remaining 5% is made up of senior funding, Tier 2 and Additional Tier 1, mainly to address capital and MREL requirements. Since 2020, we have been growing our customer funding by 23% or 7% on average. Today it covers all our interest-bearing assets, including our investment book of EUR 5 billion. Structurally, we saw a shift of deposits from terms overnight over the last 10 years because of the negative or low interest rate environment. This will very likely reverse, at least to some extent, over the next couple of quarters. To address that development of shortening deposit duration, we decided to increase our covered bond funding over the last couple of years. Our covered bonds have a weighted average life of eight years with almost no maturities in the coming years. This provides us today with a structured, more balanced customer funding stack and nicely matches our overall customer loan book. The split between customer deposits and covered bonds is about 80/20. On the deposit side, we have EUR 27 billion of very granular retail and SME deposits with an average size of EUR 12,000, and 80% are insured by Deposit Guarantee Scheme. EUR 5 billion of public sector and corporate deposits are largely with long-term relationship customers and mostly from transactional current accounts. Over the last decade, customer deposits have been growing in the Austrian market and our deposit base moved in line with the overall market trend at a stable market share of 8%. With that, moving on to slide 14, core revenues. As mentioned before, strong net interest income trend continues, up 8% versus Q4, despite lower customer loans. Net interest margin of 272 basis points for the quarter improved by almost 30 basis points. 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 continue to gradually materialize in the coming quarters. For the Q2, we expect a similar pace of NII growth as in the Q1. In terms of net commission income, overall good and stable performance in payments and advisory business, with customers shifting more into fixed income products. Our outlook for 2023 remains unchanged, and we expect core revenues to grow by more than 12%, mainly driven by an increase of net interest income to over EUR 1.2 billion, while we assume customer loans to be static. Slide 15, we managed to keep our operating expenses almost stable despite significant inflationary headwinds. This is a result of several initiatives we launched over the past few years that have allowed us to counter the significant inflationary pressures we are confronted with today, which otherwise would have led to a cost increase more in line with the overall inflation rate in Austria of 9%-10%. Cost income ratio continues to improve and stands now at 32.5% for the quarter, which is well on track to meet our target of being below 34%. We will continue to focus on absolute cost targets, and we are confident to manage operating expenses at +2% year-over-year after considering wage inflation of 8%-9%. Slide 16, risk costs. Overall, stable underlying trends and strong asset quality with a continued low NPL ratio of 90 basis points. The risk cost run rate stands at EUR 21 million for the quarter, which is in line with the underlying trend of the past couple of quarters and with a risk cost ratio of 19 basis points, also on track with our full year outlook of being between 20 and 25 basis points. We did not release any credit reserves. We have an ECL measurement only of EUR 100 million that we have built over the past couple of years. On slide 17, we wanted to reiterate and reaffirm all our 2023 targets. As you know, we are targeting core revenue growth of greater than 12% with a net interest income of over EUR 1.2 billion while containing operating expenses to 2% growth despite significant inflationary headwinds. Based on stable underlying trends and solid asset quality, the underlying risk cost ratio is expected to be between 20 and 25 basis points. With a strong operating leverage, we have set a profit before tax target greater than EUR 825 million, return on tangible common equity greater than 20%, and cost income ratio under 34%. We're also targeting earnings per share of greater than EUR 7.50, and a dividend per share of greater than EUR 4.10, which excludes our planned buyback of up to 100 basis points in 2023. With that operator, let's open up the call for questions. Thank you. Thank you. As a reminder, to ask a question, please press star one, one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile the Q&A roster. We will now take the first question. One moment please. It comes from the line of Máté Nemes from UBS. Please go ahead. Your line is open. Yes, good morning, thank you for the presentation with the additional details. My first question is on deposits. Could you talk a little bit about what's been driving the non-immaterial drop in corporate deposits? And also, on the retail side, could you elaborate a little bit on the trends, including what sort of pass-through rates and what sort of shift you're seeing in your deposit mix? And the second topic I wanted to ask you about is the share buyback, the up to 100 basis points in CET1 capital. Could you give us a sense on the timing here? Have you already applied for an approval from the ECB? And what sort of timing are we looking at here? Lastly, related to that, could you perhaps give us a sense, on the timing of a potential M&A transaction as well? Are we looking at perhaps the back end of the second half of this year, or this is more likely a topic for early next year? Thank you. Thanks, Máté. Enver, you wanna do the deposits and I'll do the M&A buyback? Yeah. Sure. Máté, good questions. On the corporate deposits, this is real, really more seasonal. We had very strong inflows just at the year-end numbers. If you look at the end of period numbers, that was a bit inflated at year-end. If you look at the average, which is the daily average of deposits, it was rather stable, you know, through the last couple of quarters. On corporate and public sector deposits, it could be sometimes a bit more seasonal. On the pass-through on overall deposits, it's still very low that we are seeing Q1. It starts picking up. We're still below 10%, I would say on average. Our expectation as we also said on the prior calls is it will, you know, go up to around 40% till 2024, which is kinda in line with our expectations. It also is underlying our NII targets, which we communicated. Máté on the share buyback. What's the difference on this call versus our year-end results in February? The main difference is we've always said we're gonna target up to 100 basis points of CET1, right? Without giving a specific number. The overall M&A landscape in particular, one opportunity hasn't materialized as quickly as we anticipated. That's most likely if it does materialize, if there is an opportunity, going to be second half 2023, first half 2024 event, just given the nature and timing of these things. We're still looking at a few targets. I should mention, this is in core continental Europe in our core DACH NL region, 'cause we were asked before in terms of where the opportunity is. This is not in the United States. This is something that we think could be potentially interesting, but we're gonna have to be patient. We have more than enough capital to be able to execute a buyback this year and potentially pursue M&A if again, if it materializes. We're gonna be disciplined and obviously the market has changed and we need to make sure that we're vigilant in how we manage and underwrite risk. What was the other question? Was M&A. With M&A? Okay. As far as the overall, I think you said the process on the buyback. We've done this a couple of times. We can only say so much. I'm sure you can appreciate that, but we feel confident. Hopefully we'll be able to execute in the second half of 2023, up to 100 basis points, and we'll hopefully provide more specificity in the months ahead. Thanks, Máté. Thank you. Thank you. We will now take the next question. One moment please. It comes from the line of Gabor Kemeny from Autonomous. Please go ahead. Your line is open. Thank you. Hi team. A couple of questions from me. First one on the deposits. Thank you for the clarifications here. What trends have you seen in deposit dynamics so far in the Q2? April, that would be the first question and the second one is a broader one, on whether the recent turbulence, the banking turbulence has created any business opportunities in your view. I'm asking this in the context of your M&A plans, seemingly less imminent, and the securities book, I think remaining roughly flat, over the Q1. Thank you. Thanks, Gabor. I'll go ahead and take the second part of the question, then I'll take just the deposit. Yeah. Just the trend in April. Gabor, as far as M&A, obviously we look at things through an entirely different lens, the reality is the delay was completely divorced from what's happening in the overall market, post-Silicon Valley and just this, you know, the banking crisis that we witnessed for a few weeks. This is just something operational that's gonna take a little longer. As far as the opportunity set in terms of dislocations, there was a period where you saw spreads widen significantly across certain asset classes, I think this is going to be one that is not gonna be as abrupt, and that you'll see probably coming over the coming months. You know, that's why we tried to highlight during the call that we have ample capital and liquidity if these opportunities should arise. You know, we tried to also highlight that if you look at the past three years, obviously there was a period during COVID where we were able to be active. I think it was, like, one to two months, and you saw us put on high quality securities. Really subsequent to all the stimulus that came in after the initial COVID period, the portfolio has de-leveraged because we've seen spreads tighten, negative rates, some irrational things taking place. If risk is repriced, we will be ready to be able to pursue opportunities, be it in the securities portfolio or also lending opportunities. From what we see today, it's pretty static, and pretty benign. I think we're gonna be vigilant and ready to pursue things as they come along. Okay. Yeah. Just in terms of April deposits, I would say a bit more stable than what we have seen in the first couple of months. As what we saw in the Q1 is just a continued trend in the market overall of, you know, high inflation, people saving less than before, and that is still continued, but as I said, at lower levels than what we have seen in the first couple of months. Thank you, Enver. When you say stable relative to the, to the end of the Q1 roughly? Correct. Correct. Got it. Thanks very much. Thanks, Gabor. Thank you. We will now take the next question. It comes from the line of Johannes Thormann from HSBC. Please go ahead. Your line is open. Good morning, everybody. Johannes Thormann, HSBC. Some follow-up questions, please. First of all, just on the deposits, is the fact that people probably save less than before, in line with your previous expectations? This is just qualitative feeling. Secondly, can you give us some more data how the current side deposit mix is going towards term deposits, or has this ratio stayed unchanged over the last quarters? Last but not least, on the public sector deposits, could you explain a bit more what you mean with transactional accounts? What is driving those activities? Is this really stable government money or is it coming from water or water companies, utilities, something more in this respect? Secondly, you said before, you expect NII to peak in Q3 this year. Is still your view, or would you say probably due to the four to five months delay that NII could only peak in 2024? Last but not least, probably a bit more details on the U.S. office exposure, which cities and how many properties you find and how granular this is would be appreciated. Thank you. Enver, you wanna go ahead and do the deposits, and then I'll take the commercial estate? Yeah. Spot on, Johannes. One trend that we have obviously seen in the market is this, well, a shift into fixed term. Deposits, it started picking up if you look at the overall market data, and we see it also in our customer base, but we think there's more to come in the next couple of quarters. It's, I think, very early stages of that trend. The earlier trend that we have seen at year-end and also in January, February, was that people or customers moved into fixed income products, you know, more on the just advisory side, which is an early read of what is going to happen. If you go back, you know, a few years, you see that the term deposits had a much larger share of the overall deposits in Austria than it is currently the situation. Going back to your question on transactional accounts. Just one step back, as you're familiar with, we are processing the government payments in Austria, including Social Security pension, you know, any other subsidies. As part of that business, also we have a very strong, you know, long-term relationship with these customers, which is also the majority of the deposits that we have. It's tied to that kind of, you know, process, processing payments business that we are having in the public sector, and it's rather stable. What I mentioned earlier on the call is it could be just seasonal. You know, from time to time, you might have higher incoming balances that are with us for a couple of weeks, and that just happened at year-end, where you have seen actually, you know, significantly higher deposit balance than in Q1. Johannes, as far as just the commercial real estate, this cuts across seven major cities for the most part. In terms of diversity, there's bilateral loans as well as part of kind of mixed use, so you get kind of cross-collateralization against different asset classes. I think we provided some details around kind of just the debt yields of over 9%, LTV under 60%, Occupancy levels over 75% on average. We feel pretty good about the portfolio. You know, obviously this has been a point of reference for a lot of folks, gets a lot of attention. You know, I go back to what I said during the earnings call in terms of risk-adjusted returns through the cycle. There's nothing you really can do to mitigate that risk today. The only mitigation is what's been your underwriting over the years, and we feel confident, how we've been underwriting this asset class. Even with U.S. office exposure, we feel that we're in a good place. Thank you. Okay. Sorry, just on the NII peak. Yeah. Oh, yeah. It's hard to answer, to be honest, because rates are, you know, it feels like they're, they are changing daily. You're right. If you look at the kind of, you know, expectations in the kind of next 12 months, rates are shifting higher, which means, you know, there's gonna be more benefit from rates in the coming quarters. We try to be a bit more precise giving you also a bit of guidance for the Q2. You're right, it could continue also going into 2024, that positive momentum. Thank you, gentlemen. Thanks, Johannes. Thank you. We will now take the next question. It comes from the line of Tobias Lukesch from Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Good morning. I would like to start on the fee side. I think a couple of Austrian banks are having indexed basically fees on the inflation, increased rates. I think BAWAG is increasing by midyear June or July, if I'm not mistaken, and, you know, the biggest uptick potentially between Austrian banks. I was just wondering, is that completely baked into the guidance of the core revenue development, of the fee development, or is there potentially some more upside and ultimate regards to upside on fees, and how would you look at the brokerage business, et cetera? Finally, potentially also the mix of, let's say, deposits going into securities. Is there still something, a trend you can see, positive or negative? Is there a potential dynamic you might expect potentially for the second half of the year? Secondly, on the real estate again, you mentioned that you have over 75% occupancy rate on average. I was just wondering, is that giving you a lot of comfort? I mean, the yield on debt is around 9% is quite comfortable. Could you also potentially provide some interest coverage ratios or something like that? I mean, in these class A buildings you have and in the locations, I mean, I would guess from the confidence you're trying to express basically that this is a very solid average underwriting that you did in the U.S. Thank you. Well, thanks Tobias. Do you wanna go? Yeah, very detailed. Good question on the NCI indexation. You're right. We are indexing some of our products around mid-year, mostly on the current account side. The reason for that is, we would do it, you know, annually. We paused last year because of the, you know, difficult situation, high energy prices, so we didn't want to threaten our customers. That's a bit of a catch-up of combined, you know, indexation for this year and last year, which is in line with the market. In terms of the trend, yeah, it will be, you know, probably some incremental positive to the NCI overall. It only applies to certain products, so it's not, you know, applicable to the full kind of EUR 76 million or EUR 75 million quarterly run rate. As far as the commercial real estate, I think, Tobias, we don't get into the interest coverage. We look at debt yield, which is kind of your NOI divided by just your loan balance. We think that gives us sufficient coverage, where we underwrote the asset, how things are developing now, we're in touch with obviously the sponsors in active engagement. I hope I conveyed that we feel pretty good about the portfolio. This is a portfolio that wasn't recently underwritten. We saw these negative secular trends in terms of just overall office development, so we've been pretty negative on office for the past few years. I hope all of these points just highlight that we feel pretty good about where the portfolio is. Doesn't mean you're immune, but I think, given how we underwrote these assets, we think we'll be okay. Maybe one follow-up. I mean, given the debt yield, et cetera, is the assumption right that you haven't seen really strong shifts in the portfolio over recent quarters, i.e., that things are more or less at the levels where you have underwritten it? Yeah. In terms of the underwriting, day one underwriting, correct. The one thing we have seen is we've had a few loans pay off early, redeem. That was actually, I think, a good testimony to the quality of the loan and the opportunity of the underlying asset class in office, by the way. Yes, correct. Thank you very much. Thanks, Tobias. Thank you. We will now take the next question. It comes from the line of Simon Nellis from Citi. Please go ahead. Your line is open. Hi, everyone, Simon there. Hey, Simon. Thanks for the opportunity. Hey. I'm not sure if you can actually answer this at this point, but I was hoping you could give an update on the Peak Bancorp, Inc. acquisition and a few comments on how that asset's been faring in the aftermath of the SVB collapse. Simon, good question. People forget about that as well. That's still pending regulatory approval. Nothing out of the ordinary to prolong process. Obviously, I think regulators have been probably busy. It's out of the San Francisco office as well. We've been in touch with the management team almost daily, and that's pretty robust and static in terms of just the deposits and divorced from some of the issues you're seeing with the U.S. regional banks. Those issues have not migrated to Idaho First Bank or Peak Bancorp, Inc. Good question. That's pretty much it for me. Thank you. Thanks, Simon. Thank you. We will now take the next question. It comes from the line of Mehmet Sevim from JPMorgan. Please go ahead. Your line is open. Hi, Anas. Hi, Enver. Thanks very much for the presentation. I have just a couple follow-ups left. First of all, maybe on the deposit base. Is the pass-through that you mentioned, which is still below 10%, is that similar across retail and SME as well as corporate and public sector, or are you seeing any different trends there? Maybe are you seeing any incremental pressures on deposit pricing from your customers at all, or is that basically more reactive at the moment still? Do you have any views on the market share in the Q1? I think the sector data isn't out yet, maybe you may have additional views here. That's on the deposit front. Secondly, on capital, generation is very strong. You mentioned 100 basis points already in the Q1, which is basically equal to the buyback that you want to do, and we still have three more quarters with higher expected profitability coming. I do appreciate your views on the M&A, but given that can be cyclical and should not materialize, how should we think about capital return, over and above your 55% dividend payout, beyond the 100 basis point buyback that you plan? Finally, if I may, on the CRE portfolio, thank you very much for the details that you provide. The U.S. office occupancy levels of 75%, where has this been in the past? Do you have any information on the momentum of the occupancy rates there? Is it declining or is it fairly stable? That's all from me. Thanks so much. Thanks, Mehmet. You wanna take the- I'll take the office rates. Yep. Sure. Okay. I think the first question was on the pass-through rates between retail and corporates. I would say in general, it's a bit lower still on retail SME, so that's still below 10%. Corporates is around, I would say around 20% to slightly below 20%, corporates and public sector. Pricing market has picked up. You know, we have seen that over the last couple of months. You know, it started with the online banks very early, and now the more kinda traditional banks are pricing as well. As I've said before, we will start increasing the deposit pricing in the coming weeks and months as well, and that is on track, you know, from that 10% deposits pass-through to the 40% that we anticipate for 2024. In terms of sector data, yeah, you're right. It's not disclosed yet for the full quarter. What we can see is data till February year to date from the overall perspective, and that has trended completely in line with our customer deposits, which was down 2% on a sectoral basis. Mehmet, in terms of the buyback, you're spot on. We're generating significant amounts of capital on a quarterly basis. You can do your extrapolation however you want for the full year. We're in a pretty good capital position. What we wanted to do with highlighting this particular buyback is say we can do it in parallel to a potential M&A, right? The point you've raised is absolutely spot on, which is if the M&A does not materialize, obviously we'll come back for another round of buybacks. This is in the context of a potential M&A. We just think we're in a pretty good position as far as our overall capital position. I think what was the last one? On the real estate, yeah. Yeah, the occupancy rates. Yeah. We don't disclose that specifically, I think the more important thing, Mehmet, is it's 75% when we underwrite at day one. A lot of those tenants are locked in. That's where you get the 6% average six-year average lease term. You'll see some fluctuation on different properties. Certain properties are not fully let out, that's because the sponsor wants to try to achieve a better price point. That's one I think it's pretty much in line. I'd focus more on the six-year lease term, which gives us confidence, and this is something that we're in constant dialogue with in terms of the sponsors and how the buildings are performing. I feel pretty good. Thank you. That's great. Very clear. Thanks so much. Thanks, Mehmet. Thank you. We will now take the next question. It comes from the line of Johannes Thormann from HSBC. Please go ahead. Your line is open. Hi, guys. Just a follow-up question from me. We're back, Johannes. Let me just. Yes. Sorry. I have to pester you on the U.S. real estate again. That's okay. You said the portfolio in offices wasn't recently underwritten, but covering U.S. real estate for 20 years, it's more the stuff you've underwritten three, four years ago that where you didn't know about rising rates and COVID-19 that causes the trouble. How is the NPL ratio, or is there any default business in that part of the portfolio? Thank you. Johannes, very good point. That also gives us more comfort because you obviously see the development in the trends in the underlying portfolio. There's 0 NPLs Both in U.S. as well as in Europe. Our only NPL that we have across the entire real estate portfolio is actually a retail position. That was an asset class I mentioned, the kind of the loss rates of 20 basis points over the past decade. That was an asset class that we saw some stress in, and even then, and we were able to manage it. There's no NPLs and this is something that because we've seen it over the past few years, we feel pretty decent about in terms of just the LTV and some of the credit metrics that I mentioned. That's a good point that you brought up. If I may ask, can you say the region of the retail NPL? That's in Europe. Okay, cool. Thanks. Thanks. Thank you. We will now take the next question. It comes from Tobias Lukesch from Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Hi, Enver. Sorry, I think that part of my question on the fees, with regards to brokerage was still open. Any view on that development basically? How was the catch-up in Q1, and what are your thoughts about the rest of the year? Thank you. Yeah. It was, Yeah, sorry if I missed that. Yeah, it was better in Q1. Again, still early, you know, to see how the full year will develop. What we have seen is a shift actually from, you know, more the fund business into the into fixed income, which is a bit lower margin. We might see growth in overall AUM. It also could come at an expense with lower margin. NCI, again kind of balances it out and should lead to quite stable, you know, NCI development. Do you think it's still a push from deposit, customer deposit into securities is still possible, something we've seen a couple years ago, basically? Is there no incremental new security, you know, business at the horizon currently? It was quite strong, as I said, in the Q1, also in the prior quarters, but that also has to do with the fact that, you know, overall banks have not offered fixed term products. Now, you know, banks, including us, are starting offering these. You know, I think there's gonna be more shift into term deposits versus, you know, fixed income products on the advisory side. Okay. Thank you. Thank you. We will now take the next question. It comes from the line of Jovan Sikimic from RBI. Please go ahead. Your line is open. Yes, good morning, guys. Thanks for the call. I would just have one question on costs. I did not get what we have here. Collective bargaining is at nearly 8% salary hike, you of course still guide just for 2% operating costs for this year. Can you maybe again provide some more granularity on staff and non-staff cost performance for the rest of the year if possible? Just to understand where the major savings should come from. Thank you. I'm not quite sure, Jovan, if I got the full question, but I think you did say, is the collective bargaining agreement 8%-9%? Yeah, that is true. That is a mix of both collective bargaining agreements that apply to our staff base, and that on average is somewhere between 8% and 9%. It is fully factored into our OpEx target of up 2%. In terms of staff and G&A, you know, most will happen in the staff cost line because G&A got already indexed, you know, most of the contracts over the last 12 months, and it's fully, you know, considered in our run rate. You will see a slight uptick in the Q2 because the collective bargaining, the major one only, kicks in with the 1st of April. It's gonna be still in the range of that 2%, you know. We were able to absorb most of that kind of uptick, you know, with the measures we put in place over the last kind of two years. Okay, thanks. Appreciate it. Thank you. Sure. Thanks. Thank you. I would now like to hand back over to the CEO, Anas Abuzaakouk, for final remarks. Thank you, Operator. Appreciate everybody's attendance this morning. Look forward to talking to you guys in the Q2 results. Take care. Have a nice day. That does conclude our conference for today. Thank you for participating. You may all disconnect.