Conference Call of Erste Group. My name is Laura, and I will be your coordinator for today's event. Please note, this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Thomas Sommerauer, to begin today's conference. Thank you. Today, we follow our usual conference call procedure, which means that Willibald Cernko, our Chief Executive Officer, Stefan Dörfler, our Chief Financial Officer, and Alexandra Habeler-Drabek, our Chief Risk Officer, will host this call. As usual, they will lead you through a brief pre-presentation, highlighting the major achievements and developments of the quarter, and also year to date, after which they are ready to take your questions. With this, let me also once again draw your attention to the forward-looking information disclaimer on page two. With having said this, I hand over to Willibald Cernko for the presentation. Thank you. Thank Thank you, Thomas. Ladies and gentlemen, good morning from my end as well, and welcome to our Q3 2023 Conference Call. Even at the risk of sounding repetitive, we once again present to you an exceptionally strong set of figures, both for the quarter and for the first nine months of 2023. I think it is by now fair to say that 2023 shapes up to be an outstanding year in terms of P&L performance. Let me start the presentation on page four with the development of our income statement. In short, most trends we saw in the first half of the year continued without any exception in the Q3, sorry. While revenue momentum slowed somewhat, this was mainly due to the volatile elements of our P&L, most notably net trading and fair value result. While our core revenue lines, net interest income and fees, continue to produce dynamic growth and actually again reach quarterly record levels. Operating expenses developed perfectly in line with our expectations and guidance. Risk costs saw somewhat of an increase, but this was due to parameter and FLI updates rather than due to any significant defaults. Most importantly, this does not change our strong credit risk outlook. All of this contributed to a strong bottom line performance in the first nine months of 2023, which fully underpins our capital distribution plans already announced in Q2, consisting of a very healthy regular dividend of EUR 2.70 per share, that equates to a yield north of 8%, and the share buyback in the amount of EUR 300 million, which, as we speak, is underway. All of what I just said about our P&L dynamics is very well reflected in our P&L dashboard on page five. Net interest margin edged up again slightly, but a level of around 2.5% seems to be as good as it gets for the time being. This is not really surprising, given that the slowing rate hike dynamics in the Eurozone and declining rates in certain CEE markets go hand in hand with slightly increasing deposit pass-through rates and smaller tailwinds from asset repricing. Our fees continued to perform strongly, driven by asset management and payment services. As already mentioned, net trading and fair value result was a drag this quarter, but only in relation to the exceptionally strong previous quarter. Our cost income ratio is significantly ahead of guidance for the quarter as well as year-to-date. Hence, we are confident that we will deliver on our promise also for the full year. We can also comfortably confirm our outlook for risk cost for 2023, as year to date, we booked only eight basis points of risk cost. If you add all this up, it's clear we will produce a return on tangible equity well above 15% in 2023. When it comes to the development of the balance sheet, on page 6 already, trends were less pronounced than in P&L, but, in light of an unfavorable macro backdrop, when we talk about growth or when we talk about inflation, it is still positive. We saw an uptake in underlying quarterly loan growth. This is driven by Slovakia, Croatia, and Erste Bank Österreich. While in Austria, this was mostly driven by corporate demand, growth was well balanced in Slovakia and Croatia, and even in the Czech Republic, loan demand improved, but in euro terms, was eaten up by currency depreciation this quarter. As for deposit volumes, they remained in the range we have seen throughout this year. Importantly, our core retail and SME deposits stayed by and large stable, while the more volatile corporate deposits already increased year to date. Overall volume trends are in line with our expectations, and even though we are tracking somewhat below our annual loan growth guidance, I'm confident we will get close enough, so we keep it unchanged at about plus 5%. Moving to our key balance sheet indicators on slide seven, all of them remain in excellent shape. Our loan to deposit ratio was right in the middle of its customer range of 85%-90%. Asset quality continued to go strong, with NPL ratio staying at 2% flat, while the NPL coverage, excluding collateral, was unchanged at 97%. The pro forma CET1 ratio, including interim profit and the pro rata dividend deduction, improved to just shy of 15%, while the liquidity coverage and net stable funding ratios remained almost stable. The leverage ratio, at 6.6%, remained among the best in the industry. With this, let's now have a look at the operating environment. I'm on slide nine now. The economic forecast for 2023 hardly changed since Q2. It's consensus that economic growth will be weak this year, and that inflation has clearly peaked in all our markets, but is moderating more slowly than expected earlier. This in turn means that interest rates stay higher for longer. Currency appreciation in countries like Hungary and Czech Republic support the improvement in external and fiscal balances. Labor markets are continuing to be tight, somewhat slowing the disinflationary trend, but at the end of the day, they are key for maintaining consumer demand and keeping asset quality strong. Looking into 2024, the economic picture in Central Eastern Europe should brighten, even though economists currently expect this to happen more moderately than they expected a couple of months ago. Inflation is expected to continue its downward trend, opening up the way for central banks to cut rates, and this, together with better economic growth, should support the return of tangible volume growth. Talking about volume growth, and I'm on page 10 in the meantime, let's have a look at the latest trends in our retail business. As for housing loan demand, on a consolidated level, we are still bumping around the bottom, with some bright spots in one of the other countries, such as the Czech Republic, where new business volumes are up for the Q3 in a row, or Romania, where new business volumes more than doubled quarter on quarter. But to talk about a sustainable and visible growth trend is still premature. The situation is different with consumer loans, where new business volumes remain healthy and are on an increasing trend, and that's more or less true for all geographies. On the liability side, our retail deposit base was broadly stable quarter on quarter, but as well as year to date. As regards deposit pass-through, and Stefan will be more detailed on this later, retail pass-through rates are moving up, but moderately so. Customers, while continuing to shift some overnight deposits into term and savings accounts and to investments, of course, still maintain the largest portion of their deposits in current accounts. This notwithstanding, we continue to see strong growth in the stock of security savings plans, confirming the positive trend that started in the second half of 2022. Moving to the corporates and markets business on page 11, volume trends have been mixed. While all business lines in the corporate segment managed to grow their loan books, both year-on-year as well as quarter-on-quarter. On the liability side, we saw diverging trends. Deposit volumes came down somewhat quarter-on-quarter. This is mainly driven by the usual volatility in the large corporate business, while year-on-year, they were slightly up. So all in all, given the circumstances, quite a good performance. The markets business also performed well. We were mandated in 204 bond transactions year to date and generated healthy income growth in both retail securities and corporate treasury sales. Our asset management business recorded a slight decline in assets under management to EUR 73.9 billion, but this was mostly due to the market movements offsetting positive net sales, confirming that there is a growing fee opportunity in this business. With this, I want to hand over to Stefan. Good morning, everyone. Please follow me to page 13. I want to give you a couple of details in addition to the comments we already made on retail and corporate loan volumes. Overall loan growth would, in euro terms, in Q3, have been somewhat higher if the Czech koruna, sorry, hadn't depreciated by 2.5%. That also fully explains the quarter-on-quarter decline in the Czech Republic. Slovakia and Croatia, despite being members of the Eurozone, continued to post healthy growth rates, with growth being well-balanced among the retail and corporate segments. Erste Bank Österreich enjoyed some uptick in corporate loan growth. The retail business still remains slow, impacted by regulatory measures as well as higher interest rates. Overall, we are very pleased that we can stick to our 2023 net loan growth guidance of round about 5%. As for deposits, and I'm already on page 14, we effectively have not seen any significant changes in trends in the past quarter. Our core deposit base, which includes our retail, SME, and savings banks business lines, remained very stable. The same can be said about the overall year-on-year development. Obviously, large corporate deposits tend to be much more volatile, and for Q3, this is well visible in the AT, other Austria, and the Czech segment. The retail deposit mix also remained very favorable. Unsurprisingly, we have seen a further drift towards term and savings accounts. Still, 56% of retail deposits are current accounts. Overall, our consolidated customer deposit growth base grew by 1.4% year-on-year, so that we continue to be confident about the NI contribution of our deposit base going forward. This brings me to page 15 and the net interest income. We posted another strong quarter. In fact, Q3 2023 was the eighth consecutive quarter of sequential NI growth. Quarterly NI was up 20.2% from a year ago and up 3.9% compared to Q2 2023, respectively. The key NI drivers were pretty much unchanged. We saw strong tailwinds from higher Eurozone key interest rates, particularly in our Austrian businesses, Erste Bank Österreich, and the savings banks. Higher than expected long-term interest rates pushed up our bond income, supporting our future income, given the duration of the investments. And last but not least, Willi mentioned it already, loan growth also starts to help again. On the flip side, retail deposit pass-through rates edged up a little bit. In our key markets, Austria and Czech Republic, we are now around or slightly above 20% mark. In Romania, closer to 25%. In most other markets, retail deposit pass-through rates were still significantly lower. All in all, NI performance was strong enough to raise full-year guidance once again. We now expect NI to grow in excess of 20% year-over-year. Page 16 is our slide describing fee income development. Fees continued to perform very well. That's the bottom line. They reached a new quarterly record, driven by higher income from payment services and better asset management fees. Accordingly, we increase our guidance for full-year 2023 fee growth to greater than 5%, I would call it upper single-digit, from about 5%. Looking forward, we are confident that fees will remain a major contributor to our revenue growth in future years. Let's move to costs on slide 17. All expected events till year-end are making us confident that we achieve our full year guidance of 9% cost inflation. The quarter-on-quarter lower personal expenses are attributable to higher expenses for employee share program in Q2 of this year and lower long-term employee provisions. These effects are summing up to something like EUR 24 million. And obviously, the weaker Czech koruna helped on the cost line in Q3. Looking beyond year-end, we record substantially dropping inflation and in most of our CEE countries, what certainly should slow down cost up drifts in 2024. However, please note that high 2023 inflation rates continue to have a significant impact on wage inflation via collective bargaining agreements and certain catch-up effects from a technical perspective. Moving to page 18 now, we are delivering quarterly record operating result in a row, putting us on course for an excellent operating performance in 2023. Key drivers, as already discussed, are revenue driven, primarily rate-related NI tailwinds, but also very strong fee performance and not to be forgotten, significant positive turnaround in trading and fair value contributions, as we always communicate, communicated as our assumption for 2023. With this, over to Alexandra for all key infos on credit risk. Thank you, Stefan, and once again, good morning from Vienna. We are on page 19 now. As Willi has already mentioned, credit risk continued to perform very well in the Q3. The fact that we booked risk costs of 30 basis points is partially related to our regular FLI update, which led to some allocations as the macro outlook for the forecast period is slightly weaker, mainly for Austria. In addition, we ran parameter updates, which also led to some bookings across the segments. In terms of real defaults, we continue to see only a few. Year to date, this brings us to eight basis points or EUR 128 million of risk costs. As a result of these developments, we confirm our risk cost guidance for 2023 of less than 10 basis points, and we are also confident that risk costs will stay at benign levels in 2024 as well. Let's now have a look at asset quality on page 20. As the risk costs we booked, as already mentioned, were to a large extent related to parameter updates and only minor NPL inflows, neither the NPL ratio nor the NPL coverage changed quarter on quarter. In fact, both ratios are still very close to all-time best levels. Looking towards year-end 2023, we believe that the NPL ratio and coverage will not differ materially from where we are now. If you look at the Stage split, there were no major changes, and as a reminder, the elevated Stage 2 level is a direct result of portfolio overlays and FLI provisions and not connected to asset quality issues. The slight increase in Stage 2 loans we actually saw quarter-on-quarter was mostly a result of the parameter updates already mentioned. So to cut a long story short, we continue to be in a very good shape when it comes to asset quality. And with this, I hand back to Stefan. Thank you very much. When it comes to other operating results, and with this we are at page 21, we register a strong result by historic standards with hardly any one-off so far this year, and in particular, in Q3. Quarter-on-quarter deterioration, mostly attributable to partial reversal of resolution fund payments in Q2 2023. Maybe one forward-looking remark here: please expect somewhat more movements in this position in Q4 on the back of typical end-of-year revaluations, and of course, then in Q1 2024, when the recovery and resolution contribution, as well as bank levies will be booked. All the discussed components lead to net profit, earnings per share, and return on tangible equity, as displayed on page 22. The slight drop in quarter-on-quarter net profits is due to higher risk cost bookings, as explained by Alexandra. We are very confident now to achieve the return on tangible equity target of greater than 15% for 2023, which represents an attractive premium on cost of capital. Let's now move to some information on wholesale funding and capital, starting on page 24. Overall, wholesale funding was stable as debt securities increased while interbank deposits declined. The increase in debt securities was mainly attributable to increased MREL issuance, I will talk about it in a minute, in the form of senior preferred and non-preferred instruments. The decline in interbank deposits was attributable to decline in TLTRO balance, fully in line with the communicated schedule. What is certainly worth mentioning, and is documented on page 25, is the issuance of EUR 500 million AT1, which we were able to combine with a very successful tender for the outstanding AT1. Two-thirds of the issued volume was the participation in that tender. Other than that, let me mention our benchmark issuances in 2023. We are tapping the market with two, each EUR 1 billion mortgage-covered bonds, as well as with one EUR 750 million and one EUR 500 million senior preferred bonds. The private placement channel contributed strongly to the senior preferred segment and is expected to fill the remaining MREL needs in the second... Let's say in the last quarter, there is a very little hope, I may add. I've talked about the local MREL activities in the Q2 call. On page 26, you find the overview, which shows that we have complemented the portfolio of transactions in Q3 with a EUR 500 million non-preferred senior issuance by Česká spořitelna and a EUR 300 million green preferred senior issuance by Slovenská sporiteľňa. Let me mention that we are very happy about those transactions, transactions showing the strength of our local banks. When looking at the charts for capital and RWAs on page 27, please note that CET1 capital does not include the interim Q3 profit on this chart. RWAs are primarily driven by corporate business growth, but retail also contributed on account of Sberbank integration in Czech Republic and volume growth in selected markets, such as explained already by Willi on Slovakia and Romania and Croatia to be named primarily. Portfolio effects in the form of rating upgrades and improved collateral mitigated the year-to-date RWA uplifts. All in all, I can say RWA development is very much in line with our expectation. This fact, combined with the excellent results, allowed us to continuously build capital, as you can see from the CET1 year-to-date waterfall on page 28. Our pro forma CET1 ratio, which includes profit for the first nine months and a 75% of annual dividend deduction, has almost hit 15% and will likely grow from here. Setting the management target for CET1 officially to 15% as from year-end 2023, is a reaction to higher regulatory capital requirements, and in the same moment, reflects our communication line of recent quarters. Please see page 38 for many details on these regulatory requirements. Finally, a quick update on our current share buyback. As of last Friday, we have repurchased almost six million shares, and at current market prices, there is probably another three million to go in order to get close to the EUR 300 million total value of the announced share buyback. With this, I turn it over to Willi for the outlook and conclusions. Thanks, Stefan. I'm concluding this presentation with our fine-tuned guidance for 2023 on page 30, and I'm also happy to offer a first glimpse at how we see 2024. I think there can be no doubt that we are in good shape, otherwise we would not have further upgraded key items of our 2023 guidance. We now expect NI growth to exceed 20% in 2023, and fee growth to be higher than 5%. But obviously, being great now is not enough. One also has to be confident about the future, and I firmly believe that with a projection for return on tangible equity of about 15% for 2024, we do not fall short in this respect. Looking into 2024, we see continued revenue growth, although attributable to growing fees rather than growing NI. And on the latter, we also remain constructive, mainly on account of continued loan growth and tailwinds from our bond portfolio. But we also acknowledge that interest rates will rather go down than up from here, and deposit funding costs are also skewed to the upside. Cost inflation should moderate compared to elevated 2023 levels, and for this to happen, we will put in every effort to mitigate wage inflation as much as we can through efficiency measures. All in all, we expect the cost-income ratio to deteriorate somewhat, but to put this into context, from a 2023 level, that will likely be a historic best by a long shot, and risk costs should also remain moderate for longer. And with this, we should again produce a return on tangible equity of about 15% in 2024, as already mentioned. Ladies and gentlemen, thanks for your attention. Now we are ready to take your questions. Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We'll now take our first question from Mehmet Sevim at J.P. Morgan. Your line is open. Please go ahead. Good morning. Thanks very much for the presentation, and congratulations. I have three questions, please. So first of all, on loan growth into the year-end, your guidance of 5% growth still looks quite ambitious, taking into account the nine-month delivery, I think, which is just 2%. So for Q4 loan, this would imply some 3% growth, and my question is, therefore, are you seeing a stronger pipeline specifically for Q4, or is that the underlying improvement in trends that you also mentioned during the presentation, maybe that would also extend into 2024? My second question is on the higher capital requirement. Previously, you were already communicating, 14% threshold for capital that will be excess in your eyes and eligible for distribution, despite the 13.5% capital target. So can I ask, is this now remaining the same? Fourteen percent is in line with the 14% new management target, or would that also go up with the new management target of 14%? And finally, on M&A, if I may, how has your appetite in Poland changed now that the politics basically looks to be moving back to orthodoxy, and now the big impediment to get involved looks like it is going away? Thanks very much. Okay, Mehmet, I may start with the first question. You were referring to the loan growth. Yes, 5% is pretty ambitious, but we see significant drawings during the course of Q4. So my expectation is to come close to 5% year-end, and I would say it's also the level we see for 2024. Adding to that, the third question you raised when it comes to M&A Poland, you know, we have a clear set of priorities when it comes to surplus capital. It starts always with organic growth, then to stick to our payout ratio, 40%-50%, and then whenever there is an opportunity in our core markets to look for M&A, but also share buybacks, so we would not exclude for the upcoming years. Poland, you know-... We're always looking at Poland investment opportunities. But there are a couple of prerequisites I wanna address. The first one is we are just interested in a strategic investment. We are not looking for a financial investment. Secondly, it has to be a significant M&A transaction, and it has to fit to our business model. So in case there is something on the market, we will have a closer look on that, but there is nothing that is currently on the way. I'm complementing your question portfolio, Mehmet, with the question on capital. Thanks very much for raising it also that concretely, and my answer can be very short: No. That means the definition of excess capital remains unchanged. There's nothing more to add. Thank you. Very helpful. Thanks very much. Thank you. We'll now take our next question from Benoit Petrarque at Kepler Cheuvreux. Your line, your line is open. Please go ahead. Yes, good morning. Yeah, three questions on my side. So the first one will be on the return on tangible target of 15% for 2024. I think this is an implicit of roughly EUR 2.6 billion net profit. You know, you talked about the cost of risk last quarter at around 20-25 basis points for 2024. I was wondering if that changed? And also looking maybe on the revenue side, so you know, a EUR 2.6 billion level will imply probably roughly stable NI, probably you know, higher fees for 2024. Is that something you have in mind? So could you maybe, you know, without providing too much details on individual P&L, maybe could you just update us on the main revenue and also maybe cost items. On the capital side, so 14% excess capital threshold reconfirmed. You know, I assume you will end the share buyback at around Christmas. Are you in a position to put another round of share buyback, say, close to year-end or early next year? Do you have already a kind of ECB approval for that? And then the last question will be on the NI. So you continue to see a shift from current accounts into savings and term deposits. Clearly, the mix is still very positive, with a fair amount of current accounts still. How do you see that moving in the coming quarters and also 2024? Do you expect a more significant shift out of current accounts? Thank you very much. I take the liberty, you know, to take your very first question. Well, I think you described it qualitatively very well. These are about the components we need to get to what we are indicating for 2024. Maybe let me just, on behalf of Alexandra, I'm looking over, and I'm happy for her to comment a little bit more in detail. The outlook for risk costs for 2024 are a little bit better these days, looking at all the developments than these 25 basis points that you were talking about. Nothing more concrete that we would say at this point in time, but it will probably, in our assumptions, in our budgeting, will be slightly lower. On the other components, you're perfectly right. NI will not be this dramatic positive driver anymore. We have been talking about this plateauing a couple of times. As you know, we are very positive on this still, that we can, so to say, substitute step by step the tailwind from interest rates by good loan growth again. Willi has been answering the loan growth question just before. And yes, we are very confident on fees, and then we need to manage costs in a way that we can land where you are indicating. So that's pretty much a good description of what it requires to get to a 15% roundabout return on tangible equity in 2024. So nothing to add on that end. And, maybe, if I may, I'd also take the current account to term deposit shifts. Look, we are experiencing these weeks and these months, a stronger move, a stronger shift, in Euro area, in particular in Austria. This is something which is exactly as expected, since people start realizing, on the one hand, there are better rates offered when they go for a one or two-year savings book or savings account. But what we see, and this is the great advantage of our business model, while the mix is maybe slightly deteriorating on the interest rate front, in Austria, in the same moment, it's step-by-step improving now, for example, in another very important market, Czech Republic. Where we had the hard times in 2022 and end of 2022, and up until summer 2023, here we see improvements, and I expect clearly an improvement also throughout the year 2024. So I think it's all about the total, total mix and all the components, which I'm in the interest of your time not going through all of them. For example, investment book is going to be supported. I'm sure that loan growth with slightly rates coming down in Czech Republic will be stronger, and all these things together will lead to a total, total NI expectation that is still very supportive for our total returns. And I think the share buyback- Yeah ... question, Willi, you take, yeah? Yeah. In respect of additional share buybacks, our approach is to take one step after another. So our focus is first to complete the current share buyback and then decide about a possible second round in 2024. If we look, and I mentioned it already, at capital allocation in more general terms, then our priority order is still unchanged. That means funding growth, funding of organic growth, paying a regular dividend within our target payout range of 40%-50%, looking at acquisition opportunities, and finally, considering share buybacks. This is the way we look at it, and I think, let's wait what's coming up in 2024. Great. Thank you very much. Thank you. We'll now move on to our next question from Mate Nemes at UBS. Your line is open. Please go ahead. Hi, good morning, and thank you for the presentation. I have three questions, please. The first one is on corporate loans or corporate lending. Could you give us a sense of the type of lending that you are doing these days? Are these primarily kind of shorter-term loans, or you're seeing perhaps some somewhat longer duration investment type of loans as well? And also, I'm just wondering what is your expectation, you know, going to 2024, given some concerns perhaps around the macro environment in Germany and in the region? The second question would be on the potential introduction of retail government bonds. I was just wondering if you could give us some of your thoughts regarding potential impact on deposit flows and maybe deposit pass-through rates. How would that impact your business in Austria? And the last question would be on NI. I wanted to zoom in a little bit on the 2024 NI outlook. And I was wondering if you could give us some sense of the tailwinds you're expecting from your bond portfolio in 2024. That would be the third question. Thank you. So let me start with corporate lending. There are two, let's say, sources. The first one is, yes, we're happy to say, investment loans. This has a lot to do with transformation of the economy. Everything that is related to green, to Green Deal-related activities. And secondly, it's more working capital needed. Simply, it is slightly picking up, so there is much more positive than sometimes we follow the media. So there are some really positive signals, and we are quite confident that this keeps running as expected. On your question regarding retail government bonds, and I, I would assume, and, you correct me if I'm totally wrong on that, that you are referring a little bit to the Dutch example, and the Belgian example, sorry, which was quite interesting to watch. Look, we have, we've got a little bit of experience with this in Hungary and in Croatia and also in Austria. There were a couple of, so to say, activities from the issuer. Nothing spectacular on our end. We are in very good, very good contact also with the issuers and the respective financing agencies, and, this is nothing that we expect to have a major impact on deposits overall, any particular note on Erste and Erste quality. The other question, in our outlook, and here, especially the investment book that you were referring to. Maybe let me first mention that the tailwinds, and I was referring myself to bonds before, of course, also helps on the repricing of fixed loans. Let me just give you the example of Slovakia, where the typical average duration of the repricing of mortgage bonds is somewhere between three and five years, which means that step by step, we see a good repricing on the fixed assets. I'm sure you have been observing that we didn't have this wild increase of NI in Slovakia on the one hand, these days or this year. On the other hand, we see a very positive outlook there on the repricing going forward. So, that's in terms of qualitative description. In concrete numbers, we see about EUR 20 billion of total assets repricing every year, which would result in a very nice, let's say, EUR 400 million+ positive impact. Of course, at current levels, which are not going to be the same throughout the years 2024, 2025. Against this, of course, is the repricing of the deposit base, and all of that builds into our total assumptions of NI. Thank you. Thank you very much. Thank you. We'll now take our next question from Riccardo Rovere at Mediobanca. Your line is open. Please go ahead. Thank you. Thank you very much for taking my questions. Three, if I may. The first one is on the 15% indication of a return on tangible equity for 2024. Does this rely on recalibrating the common equity tier 1 ratio closer to 14, to 14%? Or is it assumed to remain, say, like it is today, somehow 100 basis points ahead of that level, above that level? The second question I have is on deposit betas in Austria. In Czech Republic, in Czech Republic, since rates have started plateauing around 7%, at least for, at the... The data from the National Bank in Czech Republic showed no material deterioration of the deposit beta. It's like the stock, the ones who stop, right, stop going up. Is it something that you think might eventually happen in Austria and Slovakia, and Croatia eventually, too? And then the third question I have is on the digital euro. The ECB has decided to go ahead with the project. Do you see challenges, opportunities, or do you plan any particular investment on the back of this over the next few years? Thank you. Riccardo, thanks very much, and I mean it, for the very first question, and the answer is very simple. We always talk about the actual, real tangible equity, not something which is in a perspective or which something might be a target. I understand that some others have been adapting their communication there. No, the answer is not about the 14, whatever. It's always the real tangible equity that we also use for all the other calculations that we are referring to when we talk about the return. Very simple, very clear. But Stefan, sorry to interrupt you. Sorry to interrupt you. Today, the equity base of the bank is compatible with a buffer of roughly 100 basis points above 14%. The question here was: this buffer of 100 basis points, is it supposed to go away? So we're saying Common Equity Tier 1 ratio in 2024 being closer to 14% rather than 15%. You know, you see what I mean? So the equity base will basically go down, let's put it this way. I hear what you mean. This is a completely different discussion, whether it will be at whatever point in time, in 2024, 2025, at 14.2 or 15.2 or whatsoever. That's a separate discussion. Your question was about whether or not we are calculating our assumed return on tangible equity on the real tangible equity or any kind of, so to say, management target. There was my answer, that we are always referring- Correct ... to the actual and on the balance sheet, registered tangible equity and not some fantasy number or whatsoever. That's the one thing. The other question is a separate question, and I think Willi has been referring to that in terms of the use of the capital already. And it can be one quarter a little bit higher, one quarter a little bit lower, but it's always the same reference we take in the sense of calculation methodology. Okay, okay. That's clear. Good. On the—I can be sure that the deposit betas... Look, it's difficult to predict, to be honest. Yeah, we expect a bit more in Austria, as deposits are more granular. That's one very important factor that, of course, the average depositor in, let's say, Romania, holds much less actual money on his account than an Austrian would have. That's a certain indication that the pass-through at the end of the cycle might be a little bit higher. But honestly speaking, it's relatively difficult to predict because you will agree that this mix of, let me say, very much ample liquidity in the system, on the one hand, sharply rising interest rates, in a generation where, let's say, half of the population hasn't seen interest rates ever during they themselves holding some money on the accounts. It's relatively difficult to predict, and we learn month by month. And honestly speaking, my assumption would be Austria a little bit more than other countries, but nothing that would go way beyond what we saw in Czech Republic. That's my personal assumption on this one. Just, briefly on digital euro, there are no particular investments planned for the time being. I think, we're all aware now we enter into a phase of a political debate. Let's see what, what are the, potential outcomes, but for the time being, there are no investments planned. Thanks. Thank you very much. We'll now take our next question from Johannes Thormann at HSBC. Your line is open. Please go ahead. Good morning, everybody. Three questions on my side as well, Johannes Thormann, HSBC. First of all, on your savings plans, and this increase every quarter, which is probably different to patterns we see in other markets, what is driving this sales success? How much does it boost your AUM inflows? Can you provide some more color on it? Secondly, on the banking taxes, how do you see this progressing in Austria? Could you expect that politics go back to higher levels like we've seen some in 2016 or 2015? Also about Slovakia and Czech Republic, what is the state there? Last but not least, on your cost of risk in 2023 and 2024, less about the basis points, but the overall risk picture. We have still a EUR 900 million risk buffer on your balance sheet. And Alexandra said before, 20% might be used this year and 80%, taken into the next years. It still is a fair assumption, or should we expect EUR 180 million to be booked in Q4 as, because you can't take everything into 2024? Or will this- is this changing now that you can take everything in 2024, or is there something coming in 2024? Thank you very much. I will start maybe immediately with- Yeah, yeah ... with the third question. So cost of risk, you mentioned the EUR 900 million. When we take into account what we booked in Q3, with a small increase on FLI and also overlays, we would even now arrive at EUR 940 million. Out of this EUR 940 million, and you all know, ... in this macro and geopolitical environment, especially FLI, is very hard to tell. However, we plan or expect for this year that we will re-release roughly EUR 100 million of this crisis-related ECLs in 2023. So out of EUR 940 million, roughly EUR 100 million. And next year, we expect another partial release of overlays and also a partial release of the FLI provisions in the amount of EUR 250 million. Yeah, so this is our current expectation. Okay, let me come back to the first question: savings plans. We have now more than 1.1 million savings plans issued. This is a payment, a regular payment, regular savings on a monthly basis. On average, when we look at Austria, we are talking about EUR 200 per month. When we talk at CEE countries, then we talk about EUR 100 per month. So this is something that is a very sustainable, sustainable, very steady growing business. We are benefiting more and more from that initiative we have launched a couple of years ago. When it comes to the bank levy-related question, Austria, for the time being, nothing to be expected, but you never know what's going on in your neighborhood. There is always a lot of learnings around. No, for the time being in Austria, nothing to be expected. Sorry if I follow up. First of all, what is driving the continued uplift in savings plans now, whereas in other countries, people tend to cut on saving and then rather keep the money for other things, and are less committed to enter new because the number is increasing every quarter. It's a question of penetration at the end of the day. And I think it's in Austria, at least, it is well known and well established, regular savings on a monthly basis, this long-term perspective. And we should never forget, on average, let's keep aside now, the pandemic, but in Austria, normally, the savings ratio of Austrian households is always around 8%. During the pandemic, we went up to 14%. So there is, let's say, there is the necessary prerequisite given for such an initiative, and this is now also implemented and rolled out in the CEE countries, and it works. Thank you. Thank you. We'll now take our next question from Gabor Kemeny at Autonomous Research. Your line is open. Please go ahead. Hi, a few short follow-up questions from me, please. First, on the increase in the capital hurdle to 14%, I guess what drove this? I mean, we knew the O-SII buffer increase and the countercyclical buffer increase at least until the year and at the Q2 stage. So yeah, is it increased countercyclical buffer requirement expectations for next year or something else? Second, on the buybacks, I think current consensus expectation is around EUR 700 million-EUR 800 million for next year. Can you perhaps comment if this is a reasonable expectation? Then thirdly, are the NIR sensitivity to falling interest rates, if you could comment on that, please. I think, it would be really useful if you could split out the CEE rate sensitivity, and then including the Eurozone rates. Thank you. All right, Gabor. First, the increase I think I described, it's quite substantial overall increase over the last four quarters and going into 2024, that we simply reflect in our official target. That's it. Nothing more or less behind it. On the NIR sensitivities, let me distinguish here because as you very well know, we have been reacting and also positioning ourselves to the extent, of course, we could sense the market moves in the different currencies to the different directions. And we have now a positioning that would where the bank would benefit in CEE, in parts of CEE, where we expect in the year 2024 rate cuts, we would benefit from those. In particular, this is true for the Czech Republic. There, everyone... It's everyone's guess when the first rate cut will happen. You know that the Polish Central Bank was the first mover there, and there are speculations about Czech National Bank to move in November, December or January. Frankly speaking, for the full year 2024, that's not so important as the magnitude of those cuts will be. And we are positioned for lower rates in Czech Republic. The dimension, I cannot specify to you in very much detail because we don't know how the shape of the curve will develop, but it's of course, given the size of the bank, it's quite significant. On the other hand, in Euroland, we are still definitely positioned for remaining rates remaining at this level or even slightly increasing further for, let's say, the next two to three quarters. Our opinion is that the ECB is either finished or will do another step, but the long end of the curve has shown that we see quite a stickiness in the higher rates. That's why, we don't believe that the euro rates will fall sharply in the next, let's say, two quarters. And that's also our position. So all in all, we are positioned neutrally to slightly for lower rates in CE, and we are positioned for remaining or still slightly higher rates in Euroland. And that's the bottom line. It is fully reflected in our assumptions for the budgeting and our targets that we have communicated today. Gabo, when it comes to share buyback, to be honest, I can just refer to my statement I already made. That means, we want to first complete the current share buyback and then decide about the possible second round in 2024. If you look at capital allocation in more general terms, then our priority order is unchanged: funding organic growth, paying a regular dividend within our target payout range of 40%-50%, looking at acquisition opportunities, and finally, considering share buybacks. That's the way we look at it. Okay, thank you. Just a small follow-up on the rate sensitivity, please, Stefan. Is the EUR 200- 300 million sensitivity to 100 basis points you mentioned on the previous call still valid? That's still, that's still pretty okay for Euroland, but we will certainly start to adjust to, let me say, lower sensitivity when we feel the cycle of ECB rate hiking is coming to an end. So at the moment, yes, there's still a very, very good assumption for the range, but I will definitely give you a little bit of a different message than going further in the year, assuming that the current assumption of the ECB, so to say, cycle, that the market has materializes. Got it. Thank you. Thank you. We'll now take our next question from Hugo Cruz at KBW. Your line is open. Please go ahead. Hi, thank you. Just a couple of follow-up questions. One on loan growth for next year. Do you expect to see more growth on the retail or the corporate side? And in which countries do you expect to see more loan growth? And then on the OpEx growth, for next year as well, can you be a bit more firm on what kind of growth you expect, there? Thank you. When it comes to the loan growth, in 2024, the way we look at it, we see in both segments, a positive loan growth. When it comes to retail, business with housing loans is picking up. We see first positive results in a couple of countries. In more or less all countries, we see a very promising growth in consumer loans. When it comes to corporates, I already mentioned it, it has a lot to do with Green Deal, with transformation of the economy, especially those who are more exposed to all those items. They are forced to start investing in new production procedures, and also working capital facilities are more than ever used. So we see a positive environment for a positive loan growth in both key segments in all countries. With regards to our expectations in, on, on costs, let me first, repeat what I've said on, a couple of calls already, and this is very important also for, so to say, building into your models on, on 2024, expectations. The Austrian logic, very much comparable to the German one, is based on collective bargaining and collective, agreements, which are always following an average of a preceding period. Which means that even if, inflation rate, CPI, falls to, let's say, give you a number, 4%, until April or whatsoever, the reference rate, that they are referring to is the average of 2023, which we expect to be somewhere slightly north of 7%. This was helping us in the years 2022 or so, where still the basis for negotiation was a lower interest rate, sorry, a lower inflation rate, and while already the blended inflation rate was higher. So that's going against us. On the flip side, of course, we see the different reaction in CEE, where we had significant wage inflation in 2022 already, and again in 2023. Here, the wage inflation pressure is significantly easing now. Labor market still strong, but we are expecting much less there. That's the OpEx story, and I'll give you a number, a rough estimate in a minute. Second effect is that we are investing into our future. We have been really beefing up, and I think Willi was describing what's going on on the retail front, but also on corporate front. All these activities, especially into our digital footprint, are coming along with significant IT investments. We have been talking about that. We are absolutely committed to also in the future undertake these investments because they are paying back substantially on our top line. Having said this, all in all, I don't give you an exact number, but we are making up for about one-third of the, say, the blended inflation by efficiency measures, but definitely, we expect something like 5%+ also in the year 2024 for total OpEx. Everything else is unrealistic as from today's perspective, and that's of course, built in in our total operating, so to say, performance assumptions. I hope this was helpful. Thank you. Very helpful. Thank you Thank you. We'll have a follow-up question again from Riccardo Rovere at Mediobanca. Your line is open. Please go ahead. So thanks for taking a couple of follow-ups, if I may. The first one is on the risk-weighted assets in 2024, maybe... Should we expect anything particular that should make RWA growth deviating from whatever will be the loan growth in the bank? And can you please remind us what is, if any, the expected impact of Basel IV, especially at the beginning of the phasing period, so starting in 2025? The second question I have is for Alexandra. I'm not sure I understood it correctly. I got that you expected to use EUR 250 million of FLIs in 2024, which would mean that those FLIs will be kept at least partially also going into 2025. I'm not sure I understood it correctly. The last question I have is maybe on NI in Hungary. It's been rather volatile. I was just wondering what could be the run rate if what we have seen this quarter could be a decent run rate for the future? Thanks. I would start with your second question. Yes, you understood correctly. So after small partial release until year-end and another partial release of the 250 that you have rightly mentioned, we expect to take forward another part in 2025. I think developments, also the geopolitical ones of the recent weeks, have proven us right to keep this very prudent level of crisis-related overlays. And please also not forget, there's always some base on FLI. So you will always have some stock of FLI overlays. But overall, yes, you're right. You understood right what you have repeated. The second on RWA in 2024. So let's start with 2023. So in Q4 2023, we expect total RWA to remain headline stable. We expect credit risk RWA to be driven by slow business, so still by business growth, and somehow offset by our regular accuracy measures that we are applying. Portfolio quality, we also expect to remain relatively stable for this year. In 2024, the expected RWA development is not very spectacular, so nothing special to mention. It will be driven by some portfolio deterioration, partially offset also by modeling parameter effects and of course, also business growth. Basel IV, I can confidently repeat that we expect an overall neutral to even slightly positive impact out of Basel IV, so nothing has changed on this assessment. In Hungary, if you allow me to make the disclaimer, that in Hungary, always something spectacular can happen, as we saw in the last couple of years, always with the add-on that we have been managing to a total, both operating and net result to this, which was very favorable. We expect a pretty much stable NI, and 2024 is expected to be comparable to 2023. So we are talking about EUR 350- 380 million in euro terms, that you have an absolute amount as well. Thank you very much. Very clear. Thanks. Thank you. We'll now take our next question from Simon Nellis at Citibank. Your line is open. Please go ahead. Oh, thanks very much. I might have missed it, but you said that you're not expecting any special taxes in Austria, at least at present. But what about Slovakia? I think they were talking about that, if you could give us an update there. And also, what level of windfall profit tax do you expect to pay next year in Hungary? And then my last question would be, maybe if you could just provide also some color on the other division, NI, 'cause it's also been quite volatile. And if there's any sensitivity in, you know, what should we be looking for to kind of forecast other division NI? Thank you. I want to start with the bank taxes. Austria, as already mentioned, nothing to be expected for the time being. Slovakia, still unknown. Yes, there was a statement made by the new prime minister that he intends to introduce a bank levy, at what level? Still unknown. Let's see what is expected. And Hungary, it is still unchanged also for 2024. No change, 'cause I think you can, you can purchase securities, right, to reduce the impact? Yeah. Everything is unchanged in Hungary for the time being. ... Yes, that, that would have been also my just, Yeah Just checking. We don't expect, or we have no signs in the moment of any changes on bank levies in Hungary. Maybe let me mention to complete the picture, one other country where we have already kind of a good indication what is the, so to say, tax environment for next year. This is Romania. There we don't talk about an explicit bank levy or windfall tax or whatsoever. There's an adjustment in the in the overall corporate taxation. That's my understanding. And it's relatively minor. On a group level, we talk about short of EUR 35-40 million impact for the full year 2024. Confirmation is yet due in the political decision-making process, but that's so to say, rounding up the picture. I think, Willi, you have commented already on the other countries that are so to say in the focus in the moment. Czech Republic, just to complete this picture as well, nothing to be expected for this year and no signs for 2024 at this point in time either. The other question was on other divisions in NI. Can you specify please, once more? Do you talk about the Austrian other, or what do you mean? No, I guess, the other divisions. So the corporate center, the NI is quite volatile as well. If you could just give us some... kind of unpack what's driving that. Now I got you. Sorry for my, for my lack of understanding in the first place. Yes, this is the corporate center. No whatsoever major trends. It's a residual allocation from other segments. Logically, when rates are very quickly moving and the fund transfer pricing for the operating business segments like retail, markets, and corporate are, of course, adjusted to the markets conditions. There is always a bigger residual allocation to corporate center, but no trends whatsoever. I personally expect it to come down from these, this year's levels, obviously, because the residual booking on the back of the sharp moves was relatively high and elevated this year. But again, no trends that I would be able to name here. Okay. Thank you very much. Thank you. We'll now take our next question from Shane Matthews at White Oak Capital. Your line is open. Please go ahead. Thank you for the opportunity, and congrats on the great set of results. Two questions from my end. One, on the Stage 2 loans, it's inched up, little to 20%, and I understand that large part of it is due to FLI updates, macro assumptions, et cetera. But can you give us a better sense of how much would be performing, how much would be substandard and perhaps to have a more clear picture of the Stage 2 mix? And second question on Czech margins. Czech margins have been seeing some improvement in the past two quarters. How do you expect this to continue, and what do you see being the major drivers? Higher loan growth, more repricing on the loan front? Yeah. I will start with the Stage 2. So overall, the full stage two, of course, is performing. So the non-performing part you have in Stage 3, so Stage 2 is performing. And, as, as you rightly also indicated, that really a very, very large extent of the Stage 2 share, and the reason for the high Stage 2 share is due to or related to our stage two overlays, that we have been applying now for, for quite some time, as, as, since—in fact, since the COVID crisis. Maybe also to add to give some flavor on, on the outlook. For year-end, we would expect a decreasing trend, trend in stage two, so being around 17%, and a similar trend of a slight decrease we expect for 2024. So the current number of 19.6, we would consider as a peak. Yeah, and let me take your question on Czech margins. Now, if you look at the net interest margin development and the quarterly change, the most, pretty much everything in this small deterioration is due to a fixed move in this quarter. I personally expect the net interest margins in Czech Republic to stabilize at least at these levels now, since we certainly have seen a very sharp drop here. At the end of the day, it depends on the rate environment. It's a little bit hard to predict quarter by quarter, but overall, I'm very constructive on the Czech market. The combination of volume development, and stabilizing that interest margin should give us a good medium-term outlook on NI in Czech Republic. Got it. It's very clear. Thank you. Thank you. We'll now take our next question from Alan Webb at Société Générale. Your line is open. Please go ahead. Hi, thanks for taking my questions. In terms of the breakup of fee income in Q3, I mean, clearly, you know, you highlighted payment services and securities have been both doing very well. I mean, is there much seasonality in those two areas? Or maybe do you think the sort of run rate that you saw in the Q3 is something that you can run with going ahead? Because clearly, they're both very good numbers. So I wonder what you felt about that. And in general, in the payment services, is it sort of, you know, the retail customer is not that active, so what's actually generating the activity there? That would be helpful. The second question was on the debate on minimum reserve requirements. Something, a couple of changes happened there in the Czech Republic and, or they're expected to. What’s your view on that? How important is that for you, and in particular, should the ECB change what they are doing at the moment? Thanks. ... All right, Alan. Fee income, I think there is, especially for this quarter, not too much of seasonality. There is always around the year-end, if there are premiums, of achieved, volumes and so on, there is a little bit more of booking in that direction, but, but not so much in, in Q3. What certainly has been, driving our, our, dynamics there, is, so to say, the flip side of the costs. So there are a couple of services which are indexed. There are certain payment services which are indexed. I think you should see that also in the industry. But, it's, it's much better in the translation to real P&L in our case, since we are, we are combining it with, with good volume developments, especially in CEE. Going forward, we are counting on the full diversity of our fee income structure. And Willi has already been describing that we are counting on a I would say constructive macro outlook. Not fantastic, but I would say reasonably positive and definitely a better performance of our countries compared to Euroland, which should give you so to say this edge that we can outperform, let's say, peers or those who are only acting in Western European countries on fee income. Q4, Q1, you will see one or the other seasonal fee booking, which I will then describe, so thanks for the question on that then. Minimum reserve requirements. Yeah, very interesting discussion that we see here across all jurisdictions in the ECB, as well as in other central banks. I give you the hard numbers first and then one sentence of my opinion. The hard numbers are that in the year 2023, the impact will only be in Q4, obviously. On the Czech side, it will be EUR 18 million on NI, and on the Euroland side, EUR 16 million. So adding up to a total of EUR 34 million, which is simply the adjustment of the minimum reserve, so to say, technicalities in Q4. Assuming that all the rates remain the same, which we don't assume for next year, that would add up to something like EUR 120- 130 million in 2024. I don't expect this to be the case, simply because Czech rates will probably on average be lower. On Eurozone, it's your call what you think about it. Here we are definitely expecting a negative impact from minimum reserve, so to say, regime that has been introduced. Do we see measures of comparable, so to say, kind in the other currencies? Not really. Hungary has been a completely different regime in the past. The other countries are part of the Eurozone, with the exception of Romania, and Romania, I'm not aware of any kind of such discussion. And if you allow me, I will not comment politically on the thinking of the central bankers in that respect. There are others to comment. Thank you. Thanks. Thank you. We'll now take our next question from Olga Veselova at Bank of America. Your line is open. Please go ahead. Oh, thank you. I have two questions today. First question is, what part of your corporate loans have fixed versus floating interest rates? And if you, if you could give it separately for Austria and Czech Republic, that would be great. And my second question is about Hungary. Hungary recommended banks to introduce a cap on new interest on new mortgages, cap on interest rates on new mortgages. Do you follow this recommendation if it's not mandatory, or correct me if it is? And what do you think about the old cap? Do you think it will be increased, or it will be extended in its current form? Thank you. I'm not exactly sure, looking also at Alexandra and Willi. What do you mean the overall mix of fixed and floating or any particular one? Oh, corporate, corporate loans. Do you have fixed versus floating? Ah, corporate loans. Yeah, corporate. Corporate loans are 80%+, floating. Yeah? Great, thank you. The second one was, do we follow, so to say, the rules of the game in Hungary? Well, yes, we do, because otherwise we wouldn't do business there. I don't know whether this was exactly the question. Can you also repeat this Hungarian question once more? Yes. So, I guess the interest rate cap on new mortgages was a recommendation, it wasn't a legislation. If it was the case, or correct me if I'm wrong, do you follow this recommendation, or maybe it's mandatory? And also, on the old cap, which was introduced quite a while ago, do you think it will remain intact, it will be extended, or the level of cap will be increased? Yes. So on, on your question, whether we follow, a very short answer, yes, we follow it. Thank you. Thank you. We'll now take our last question from Jovan Sikimic at RBI. Your line is open. Please go ahead. Good morning. Thanks a lot for the call. I think you somewhere, you have stated somewhere in the presentation about healthy demand in commercial real estate business. Can you maybe just add a bit of details or insights, which really loan types are here standing out, and which markets are, let's say, more robust than the others? And also maybe if you give a, spend a word on residential real estate current situation on CEE in Austria. Thanks a lot. So I will take this question. Also start by confirming that overall, our commercial real estate portfolio is really very sound, and as you rightly said, also also a source of loan growth. What we are observing is that it's currently more the usage of already committed lines. Also some refinancings of fully rented and really very high quality, high quality assets. It's currently less on development of new projects. This is a situation which I think we are all very much aware, and we expect that this- Mm-hmm ... should improve and accelerate again in the upcoming periods. To your question on regions, so it's quite across the board in our region. We have commercial real estate business, also new business in Austria, in Romania, but also Hungary and Czech Republic. Rather little in Slovakia. Slovakia, the share of commercial real estate is very low, and we stick to our core region. Residential real estate, we have an extremely high share of the nonprofit housing associations, as you are aware. So overall- Mm-hmm ... the mix, the resilience of the portfolio, the high collateralization, and the low LTVs, nothing has changed from previous quarters. Okay. Appreciate your answers. Thank you. Thank you. There are no further questions in queue. I will now hand it back to Willi Cernko for closing remarks. Thank you. Thank you very much, for joining our conference call, and I should not forget to mention, to invite you to our full year preliminary results 2023 on the 29 February, 2024. Thank you for joining. Have a nice day.