Ladies and gentlemen, thank you for holding. Welcome, and thank you for joining the ProCredit Q1 2023 Results Conference Call. Throughout today's recorded call, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Hubert Spechtenhauser. Thank you. Welcome to everybody on this call on the first quarter financial results of the ProCredit Group. My name is Hubert Spechtenhauser. I am the chairman of the management board. I am joined by Christian Dagrosa, our Chief Financial Officer. We aim to spend some 40 minutes to cover today's presentation, which has been available since earlier today on our website. We will, of course, give sufficient time for any questions you may have. Let me also provide you with the usual warning to pay particular attention to the cautionary statements regarding forward-looking comments that you will find at the end of the results presentation. With this, let us turn to slide one and the focus of today's call. I will cover the highlights and notable business developments in quarter one before Christian addresses the group results and regional performance in more detail. I will close the presentation with some remarks on our outlook. You will have in mind that our priorities for the group in 2023 were to enhance financial performance with a focus on profitable growth whilst enhancing the resilience of our balance sheet by growing our granular deposit base. We aim to stabilize the performance of our bank in Ukraine whilst undertaking a targeted reduction of its loan portfolio. At the same time, we plan to complete the conversion to a stock corporation. All this also with the aim to make steady progress towards our improved midterm guidance and to strengthen our impact-oriented capital markets presence. Today, we want to focus above all on financial performance and the drivers underpinning improved financial fundamentals. We will update you on developments in Ukraine. We are all following the news and are aware that so far this year, the situation has not deteriorated dramatically, but equally that the situation remains volatile and concerning. Coming months will be critical, but the course of the conflict is difficult to predict. We remain close to our Ukrainian colleagues, and members of the management and supervisory boards have spent some time in Ukraine in recent weeks. With these opening remarks, let me turn to slide two. This slide summarizes the encouraging results we achieved in Q1 with regard to the priorities I described. The group achieved a result of EUR 29.5 million, or a return on equity of 13.3%, which is well within the range of our medium-term outlook due to positive margin development and strong credit risk performance. Specifically, our operating income increased by EUR 16.1 million or by 21%, as net interest income grew by a strong 25%, supported by improved margins, and net fee income increased by 11%. The group cost-income ratio stood at 59.7%. Adjusting for one-off, the level is rather 57%, two and a half percentage points below previous year. This encouraging result is despite having seen a significant increase year-on-year in personnel costs as we adjust salaries to inflation and add staff in key positions. It is worth noting that all ProCredit banks, including the bank in Ukraine, contributed positively to the result. In addition to Ukraine, year-on-year, ProCredit Bank Serbia and Georgia showed marked improvement in their contribution to group profit. The return on equity of our core Southeastern European segment improved to 13.7%. The group return on equity excluding Ukraine stood at 11.6%. The strong development in our P&L was combined with resilient impact-oriented development of our balance sheet. The group loan portfolio declined slightly with a targeted reduction in Ukraine and due to currency effects. As noted, we focused in Q1 on prudent and profitable growth with core small enterprise clients, whilst at the same time staying close with our clients as they adjust to the inflationary environment which prevails. Our deposit base grew in Q1, resulting as planned in an increase in our deposit-to-loan ratio. Year-on-year, the deposit-to-loan ratio has increased by 12.8 percentage points to 104.3%. Despite the unsettled macroeconomic environment, the group maintained good portfolio quality. Combined with strong recoveries, this resulted in low-risk costs for the group. The share of defaulted loans was down slightly to 3.2%, including Ukraine, and 2.3% without Ukraine. The group cost of risk is 12 basis points with a loss allowance of EUR 1.9 million. At this stage in Ukraine, the share of defaulted loans of the loan portfolio is relatively steady at 12.3%, resulting in a moderate loss allowance of EUR 3.1 million. Clearly, we are monitoring the situation in Ukraine carefully, and Christian will come back to this. Apart from the positive financial and business developments, there are a number of other notable developments we wanted to highlight in Q1. In the context of the annual supervisory review and evaluation process, we expect Pillar II requirements to be increased from 2% to 3.5%, which would yield a CET1 requirement of 9.2%. The Group CET1 ratio stood at 14.1%, 4.8 percentage points above the level of the new requirement, and 0.7 percentage point above the level of end of last year. We implemented a range of risk-weighted assets efficiency measures to achieve this improvement. The total capital ratio grew by 1.1 percentage points to 15.4%. Other points that you will be aware of are the share purchase agreement that EBRD has signed with IFC to increase its stake in ProCredit Holding and to join the group of ProCredit core shareholders, as well as the proposed conversion of legal form which has been submitted to this year's shareholders general assembly planned for June 5th. You will note from the documents available on our website in relation to our general assembly of shareholders that the aim of the legal form conversion is to enhance our capital markets presence whilst protecting our impact positioning. The proposed articles of association of ProCredit Holding AG enshrine in the purpose of the company the group's aim to have clear, positive environmental, social, and economic impact, and to refrain from any activities we deem as unethical or damaging for clients, the economy, or the society. At the same time, it is proposed to further strengthen corporate governance by increasing the number of supervisory board members from six to eight. We trust our shareholders will share our positive view on these proposals. Slide three summarizes our results relative to guidance. Our guidance for 2023 foresees medium single-digit growth in our loan portfolio. As discussed, we saw a slight decline in the loan portfolio in Q1, typically anyway, a relatively low growth quarter. We achieved a return on equity of 13.3% with a cost of risk of 12 basis points. This is clearly materially better than our guidance assumption, which was conservative in its assessment of developments in Ukraine, as well as the impact of inflation and macroeconomic uncertainty on group results. We are obviously assessing developments in the next weeks and months, particularly with regard to anticipated margin developments and risk costs. With regard to our cost-income ratio, we guided for a level broadly in line with the 64% achieved in 2022. Here also, the underlying development in our cost-income ratio is better than anticipated. We continue to monitor the impact of inflation and investments on our costs carefully. Our CET1 ratio at 14.1% and the leverage ratio at 9.1% are strong and in line with guidance. We are naturally cautious in extrapolating from one quarter results, particularly given that the conflict in Ukraine remains a significant uncertainty factor. Nevertheless, the Q1 developments underscore the strong earnings potential of the group and provide a firm foundation for positive results in 2023 and for delivering on our midterm guidance. Slide four shows the stable development in customer loan portfolio. At the group level, the portfolio declined slightly in Q1 by 0.8%, reflecting in particular targeted reduction in our bank in Ukraine, currency effects, and modest increases in most other banks. Group-wide, the focus in Q1 was on our core small business clients, working with them as they respond to current challenges, as well as on green loans, particularly in financing renewable energy projects. You can see on the lower half of the slide, the strong development in the green loan portfolio year on year to reach over 20% of our total loan portfolio. Development in green loans was flat in Q1, in line with development of the portfolio as a whole. Slide five shows the positive development in deposits, where we have put strong focus in recent months. In the light of increasing base rates and unsettled banking sector, the importance of a resilient, granular customer deposit base comes sharply into focus again. It is also an important part of our impact positioning to provide secure, transparent, and accessible deposit services for our clients. We are therefore very encouraged that year on year, deposits have increased by some EUR 800 million or 14.6%. In Q1, we achieved a deposit growth of EUR 35 million or 0.6%. Furthermore, that 40% of our year-on-year growth as well as most of our growth in Q1 2023, has come from private individual client deposits, confirming the progress made with our ProCredit Direct strategy. The group deposit to loan ratio is up 1.3 percentage points year to date and 12.8 percentage points year-on-year, with positive developments across almost all banks, with notable improvements in key banks like Serbia, which have had a lower deposit to loan ratio. Our high liquid assets and liquid coverage ratio also improved markedly year-on-year. The group LCR stands at a strong 174%. The share of sight and FlexSave deposits increased year-on-year. However, as expected in Q1, term deposit volumes increased in line with the market. Nevertheless, the increase in interest expense still lags behind interest income, supporting our positive margin development. Christian will come back to the important issue of margin development. The macroeconomic environment of our countries of operation remains influenced by accelerated inflation, high energy costs, and uncertainty created by the war in Ukraine. There has been a slight revision downwards of GDP expectations for 2023, with a median GDP growth in our Southeastern and Eastern European countries of some 2% rather than earlier estimated of 3%. Nevertheless, this remains well above the euro area trend, and we experience a relatively robust attitude from our clients. The resilience of the region is reinforced by the intact midterm GDP growth outlook of approximately 3.5%-4% PA. Inflation has been strong in 2022 across all our countries of operation, but is thought to have peaked with reduced level expected in the course of 2024. Central banks reacted in 2022 with tightened monetary policy and increased base rates. These measures have been less marked in 2023 to date. The full impact on both interest income and interest expense have yet to be felt. The increased volatility witnessed in the U.S. banking sector in recent weeks has not been felt or mirrored strongly in our markets of operation. Nevertheless, the full potential implications are not yet clear, and we remain vigilant. The resilience of our region is also supported by the strengthened international interest in the region. We have seen significantly increased momentum regarding EU accession over the last 12 months and some significant increase in foreign direct investment, for example, in Kosovo. The geopolitical importance and economic potential of our countries of operation and the central role that SME play therein remains the driving force behind the ProCredit group in terms of both our impact and our financial potential. We see our view as confirmed by EBRD's decision to invest more strongly and strategically into ProCredit. The EBRD has unique knowledge of the region, and we share a long history of cooperation and common understanding of the importance of SMEs for the region, making EBRD a very valuable partner for the group. With these strategic reflections in mind, let me now hand over to Christian. Thank you, Hubert. Let us now take a closer look at the financial performance of the group in quarter one and the major risk and capital indicators. As usual, for the last quarters, we will also do a deep dive today on our ProCredit Bank Ukraine, where indicators have stabilized significantly since last year. Hubert already provided the outline for our results. The KPIs are all on good levels and partly even very good levels as margins continue to develop positively, risk costs remain at low levels, and ProCredit Bank Ukraine is contributing positively to the consolidated result. Let us start with a high-level view on operating performance. Operating income increased strongly year-on-year by EUR 16 million, or 20.7%, due to improvements in net interest, net fee, and FX income. This development comes on top of the strong year-on-year increase recorded in 2022 of 20.6%, which you can still see on the left-hand chart. We are particularly encouraged by the fact that these are very granular improvements, which are materializing on the level of almost all ProCredit banks, showing that our business model works well in all our markets. Personnel and administrative expenses also increased by EUR 10 million or 21.8%. Net of all, we increased our profit before tax and loss allowances by EUR 6.1 million. That's around about 19%. Personnel expenses are the major driver behind the cost increase, as high inflation rates have made it necessary to revise salaries on the level of the group. In addition, many of our banks are currently increasing their staff numbers as we look to further solidify our market positioning. Otherwise, we continue to invest in IT and marketing, especially as we aim to further position ourselves as an attractive direct retail bank in our markets. The cost-income ratio remained on a good level, slightly below 60%, and it further improved on an underlying level by 2.5 percentage points to 57%, in the range of our new medium-term target for this indicator. Let's move on to the major line items, starting with the net interest income. We continue to observe the positive quarter-on-quarter dynamic of both margin and income, as our loans and investment securities continue to reprice along the new interest rate levels. Quarter-on-quarter, net interest income is up EUR 2.8 million. That's almost 4%, while the net interest margin increased by another 10 basis points since quarter four, thus overcompensating the negative base effect as well as a small quarter-on-quarter reduction of net interest income in Ukraine. Year-on-year, we see a substantial 25% increase in net interest income, to which basically almost all banks contributed in broadly similar terms on the back of a 47 basis point increase in the net interest margin. The positive dynamics shown here are ultimately a result of our prudent asset and liability structure. Loans are primarily variably priced. Investment securities, which are held for liquidity management purposes only, are mostly short-term in nature, with maturities of less than 12 months, enabling a timely repricing of instruments. Liabilities are dominated by deposits, which again show a healthy split between current savings and term deposits with maturities of usually more than one year. In the current interest rate environment, it is clear that our interest expenses are also rising as both business and private individual customers are increasingly seeking to invest in longer-term fixed deposits. The quarter-on-quarter increase of EUR 4.6 million in interest expenses was primarily driven by term deposits and has been fully offset by a EUR 7.4 million in interest income. Moving on to fee income. Net fee income increased by EUR 1.4 million with respect to quarter one 2022. That is an increase of 11%. We are indeed encouraged by the positive development of this position, which is driven by the organic expansion of our client base. The graph below mirrors the steady development and shows that the positive trends of the last quarters are supported by all revenue streams associated to this line item, including payments, cards, letters of credit, as well as account maintenance services. Quarter-on-quarter, we see a drop of net fee income of around EUR 500,000, which can be attributed to seasonality effects. Due to the holiday season in Eastern Europe, business activity tends to be muted in both the months January and February, resulting in structurally lower number of transactions on both business and private individual side. Let's move on to costs. Quarter-on-quarter, we see a significant drop in both personnel and administrative expenses due to one-off and seasonal effects in quarter four, which we explained in detail in our last call in March. Of these effects, and in order to better grasp the current dynamics in our cost base, let me make the comparison with quarters two and three of 2022. Quarter one 2023 personnel expenses are about 10% above the average of quarter two and quarter three 2022 because of higher staff numbers and increased average salaries. Administrative expenses in these previous year quarters were negatively affected by one-time consulting and legal expenses of around EUR 2 to EUR 2.5 million per period, all related to the war in Ukraine. We've covered this in detail in our last call. In this first quarter of 2023, we had a similar one-time effect of around EUR 1.9 million, which is mostly related to the planned conversion of ProCredit's legal form. Excluding these one-off effects, we see an average increase in administrative expenses of around EUR 1.5 million, which in our view reflects the true structural increase in the cost base. In March, these increases come from higher investment in IT and marketing, as well as inflationary effects on a range of different cost items. With all expenses from the anticipated conversion of the legal form reflected in quarter one, we currently do not foresee any material further one-off effects for the next quarters. Adjusted by these one-off effects, the quarter one cost-income ratio is, as previously mentioned, at a strong level of 67%, 2.5 percentage points below the figure of quarter one 2022, and on the level of our medium-term target. Loss allowances have been on relatively low level of EUR 1.9 million in quarter one. That corresponds to just around 12 basis points. It is important to be reminded of the substantial provisions that were billed last year, both in Ukraine as well as in banks outside Ukraine. In Ukraine, provisions were focused on transferring loans into Stage 2 and Stage 3. In the initial stages of the war last year, we granted moratoria in line with practices recommended by the Ukrainian Central Bank. As a result, today, all clients with repayment problems are transferred into lower risk classes and stages, the great majority of them into Stage 3. In addition, we built provisions in all stages through our ECL model last year, reflecting the substantially deteriorated macroeconomic outlook of the country in light of the war, in the bank's PD and LGD parameters. Given that the war situation has not materially changed since year-end, it is not surprising that in quarter one we only booked a small amount of loss allowance of EUR 3.1 million in Ukraine. The figure indeed includes an effect from new model parameters of EUR 2.9 million related to the most recent forecast for the Ukrainian economy. These forecasts are somewhat weaker with respect to those published in quarter four, as economists view the overall production capacity of the country in 2023 for both industrial and agricultural goods as more muted. In other banks, we booked in 2022, EUR 28.9 million in management overlays to reflect the heightened risk for clients related to changing geopolitics, inflation, and energy supply and prices. In quarter one, we have not released any of these overlays as the overall risk situation remains poorly stable with respect to the beginning of the year. Given the overall geopolitical and macroeconomic framework conditions, portfolio quality outside Ukraine has remained remarkably steady. In quarter one, the share of defaulted loans further improved by 0.1 percentage points, both for the group with and without Ukraine. For Stage 2, we've seen even more positive dynamic. Outside Ukraine, the share of default is at a strong level of 2.3%. In combination with the lower levels of write-offs, these dynamics facilitate the low cost of risk which is shown on the previous slide. Moving on to capital. Our CET1 ratio stands at 14.1%, some 0.7 percentage points above the year-end figure. Risk-weighted assets dropped by EUR 172 million, mainly due to the successful extension of the insurance agreement with MIGA that Hubert mentioned earlier. As part of the World Bank Group, MIGA can provide effective coverage of central bank balances, which for some of our countries of operation carry a risk weight of 100%. CET1 capital increased by EUR 17 million, mostly because of the two-third attribution of the year-end 2022 profit. The remaining third will be attributed after the AGM in June. Hubert already mentioned the expected new Pillar II requirements. We expect these requirements to come into effect in quarter two of this year. Our CET1 requirements would likely increase to 9.2%, our total capital requirements to 14.3%. We continue to assess our buffers based on these new requirements as comfortable. Our CET1 ratio buffer would be around 4.8 percentage points based on the current figure. Let's move to the segments, as well as our deep dive on Ukraine. Our banks in Southeastern Europe continue to achieve very convincing results. Their contribution to the consolidated profit was a strong EUR 22.6 million, averaging a return on equity of 13.7%. Cost-income ratio is, with 55%, below our group medium-term target of 57%. Our two Eastern European banks in Georgia and Moldova contributed EUR 7.5 million to the consolidated result. That corresponds to an ROE of 20.7%. Their cost-income ratio stood at an average of 49%. Lastly, South America, our Ecuadorian bank, achieved a small profit of EUR 300,000. Overall, the group's financial performance is strong. That is with or without the contribution of PCB Ukraine of EUR 3.1 million. The ROE, excluding that profit contribution from Ukraine, is at a level of 11.6%, which is 1.4 percentage points above the previous year level. Let us now take a deeper dive into the performance of our segments and the banks therein. As I mentioned, profitability of our largest segment, Southeastern Europe, continues to improve both structurally as well as in absolute terms. Higher net interest income on the back of overall stable margins helped achieve a 26% increase in operating income year-on-year. Credit risk costs were at a low level of five basis points, mostly due to the absence of any meaningful credit risk event or by strong recoveries. On a bank level, ROE and cost-income ratio improved or remained steady at strong previous year levels, with just very few exceptions. It should be clear that these indicators can occasionally also move into opposite directions in individual periods. We view the overall structural dynamics in all our banks as fundamentally positive. In Eastern Europe, we see a marked increase in operating income of 32%, including Ukraine, and also more than 30% excluding Ukraine. In both cases, the cost-income ratio improved with respect to last year 3.3 or 5.4 percentage points respectively. Our banks in Georgia and Moldova increased net profit by 50%, reaching an average ROE of more than 20%. With Ukraine also contributing now EUR 3.1 million to the segment's profit, the ROE is now at a good level of 21%. We also illustrate Ecuador on this slide, even though it is obviously a separate segment in itself. I already pointed out the minor profit contribution of EUR 300,000, which is on the same level of last year. Refinancing rates are currently increasing while lending rates are more or less capped by local regulators. Let's move on to Ukraine, for which we again prepared a special slide summarizing the main events of the year. You will see overall stable indicators, which reflect the increasingly stabilizing situation on the ground, even though the fighting in the east and seemingly indiscriminate aerial attacks on major cities continue. Since the outbreak of the war, our total staff number only declined by 21. That's around 6%. Especially in the beginning of this war, this was more a targeted reduction forced by our management and focused on trainees and juniors whose on-the-job training could not be continued for obvious reasons. Naturally, we have also lost some more senior colleagues down the line who moved abroad and found work there, but not at all to any meaningful extent. Today, ProCredit Bank Ukraine is one of the very few banks in the market that is selectively and carefully hiring again, which underlines our ambitions as we believe in also the economic upside from a potential post-war reconstruction. 11 of our colleagues are mobilized. Four of them are indeed involved in active fight at the front. As aerial attacks on peaceful Ukrainian cities continue, we have established emergency shelters in our offices, but also in one of our training facilities in Kiev to enable colleagues to work safely, but also spend the night if necessary. We continue to reduce portfolio in Ukraine in a very targeted manner, divesting above all from more critical regions, as well as selected client groups. Year-to-date, the portfolio reduced by EUR 29.5 million. Since the end of 2021, that is now more than EUR 200 million, which split almost evenly in repayments and FX effects. The high provisions from last year mean that new provisions are often offset by releases from repayments. The quarter one loss allowance of EUR 3.1 million was almost entirely driven by parameter effects, as we reflect the more subdued economic outlook for 2023 in our ECL model. In the red zone, we reduced our exposure by an additional EUR 4 million since the end of 2022. Since quarter one 2022, our red zone exposure reduced from EUR 134 million to today, EUR 55 million due to the reduction of the area, but also to ongoing repayments. Since December, our coverage in the red zone increased by 18 percentage points to 80%. Our total coverage ratios are also at strong levels of 16% for the total portfolio, 160% for the red zone, and 130% for the entire defaulted portfolio. Let me now give the word back to Hubert for a short wrap-up of this call. Thank you, Christian. Let me make some brief concluding remarks on our short and medium-term outlook. Slide 21 summarizes again our outlook for 2023. We aim for single mid-digit growth in our loan portfolio. At this stage, we are performing well ahead of our guided range of 6%-8% return on equity, which assumed a zero net profit contribution from Ukraine and a conservative cost of risk estimate of up to 70 basis points. Our cost-income ratio is guided to stay on a similar level to 2022. This projection includes a conservative estimate of the impacts of inflation on operating costs, and considers one-off costs associated with the envisioned change in the legal form. We aim to keep our CET1 capital ratio above 13% and our leverage ratio at around 9%. At the same time, we plan to return to the dividend policy to disperse one third of group profits of the year 2023. Turning to slide 22, you see our confident midterm outlook. We spent some time on the guidance in our analyst workshop in March, so I will not dwell long on them again, except to say that we feel confirmed in our confidence based on our first quarter results. We see continued steady loan growth potential in our core SME and green sectors in all markets to drive medium to high single-digit growth rates. As credit risk costs attached to Ukraine stabilize and we continue to profit from steady margins and scale effects, we see the potential for a return on equity of about 12% midterm. This assumes a cost of risks of between 25 and 30 basis points, which takes into account ongoing macroeconomic uncertainty and its full cycle impact. As we grow the loan portfolio whilst maintaining steady margins, we see good opportunities to bring our cost-income ratio below 60% to about 57%, in line with our Q1 results when cleaned of one-off effects. Our strong first quarter results, which are in line with these midterm guidance indicators and are the result of good financial fundamentals, certainly support our midterm guidance. As we are committed to combining this improved financial performance with strong development impact, we aim to increase the share of green loans to 25% of the portfolio. More broadly, if and as soon as the situation in Ukraine stabilizes, our bank there will play a valuable role in vital recovery initiatives. Equally, we look forward to supporting our SME clients to grow, formalize, and contribute to a substantial regional development in our Eastern European and West Balkan countries of operation as they accelerate their EU accession efforts. We are also confident in our long-term experience in working in volatile countries and building on their opportunities whilst managing risks intelligently. We believe this confident midterm outlook will also support our impact-oriented capital markets positioning as we undertake our legal form conversion. I shall end on this positive note. This concludes our assessment of our year-to-date group's performance. Christian and I would now take your questions. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. Once your name has been announced, you can ask a question. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. The first question is from the line of Marius Fuhrberg with Baader Research. Your question, please. Hi. Thanks for taking my questions. Some of them is for me. The first one is on your risk cost position in Q1. In more detail, could you please explain the recoveries you showed in a little more detail, is that fully stemming from Ukraine or also from other regions? Should we expect this to continue throughout the remainder of the year, or is your personal opinion that you will see elevated risk cost from Ukraine in the next quarters? More in detail also, how have things developed through Q2 so far? The second question is also on your cost, especially on the personal cost. Should we expect further salary raises, or should Q1 level be achieved for the next quarters as well? The last one is containing your ROE, which was very strong in Q1. The, I would say, unchanged situation so far in Q2 as well. When would you consider raising your guidance as you double the level you guided for the full year? From my side. Thank you, Marius. Let me start off with the first two questions on the cost of risk. The recoveries that we're mentioning are those recoveries from written-off loans. That means not recoveries of loans that are on the book, but indeed of loans that in the past have been defaulted, written off, and then we are still managing to recover some of the amounts. This amount, in quarter one was EUR 3 million, even EUR 3.1 million, which is broadly in line with the amount of recoveries that we achieve also in previous quarters. Ukraine contributed very little to that amount. The amount is largely distributed amongst a variety of banks, mostly in Southeastern Europe. Now, on the recoveries of loans that are in our books, it is difficult to project just how much of the provisions that we build in Ukraine, we can actually release. I would cautiously estimate with zero. Clients who are currently repaying, they do so according to the negotiations that we've been conducting with them. The level of provisions, we consider them as right now adequate. On your second question of personnel expenses, whether we expect them still to increase. Yes, indeed. We are still building staff capacities in many of our banks. We will conduct another salary review. Our annual salary review typically takes place in July, and we will again need to take into account the continued high levels of inflation in this salary review. Indeed, we do expect a more pronounced increase in the second half of the year. Hubert, would you like to take the third question? Yes, happy to do so. On your question on the ROE and whether we would consider at some moment in time, right, raising our guidance. Please bear in mind that we are talking now only and exclusively about the first quarter. We do see the first quarter as indeed a very good start into the year, but not more and also not less. We have clearly been performing much better than the guidance provided for the whole year 2023. This is related to a higher net interest margin, higher than expected. It is related in particular also to relatively low cost of risk and to the fact that inflationary pressure has not yet influenced our cost base to the degree we anticipated in our guidance. We still keep the guidance for the year constant because as of today, we conservatively do not see the first quarter as a good run rate for the rest of the year. As I said, we have been building our guidance on the basis of assuming a volatile and potentially difficult market environment. We would expect at some moment in time the net interest margin to narrow again. We would also expect cost of risk to be higher for the whole year, and we would expect inflationary pressure and the addition of new staff to lead to, over the year, a higher increase potentially in the personnel and administrative expenses. Therefore, as I said, we would not see as of today the first quarter as a good run rate for the rest of the year, but still we will observe the further development very carefully and see how these items in particular develop. Okay. Thank you very much. Thank you. The next question is from the line of Milosz Papst with Edison Group. Hi. Congratulations to the good results. I have two questions related to your regional banks. Firstly, when I look at the results of your banks in Bosnia and North Macedonia, I can see a quite strong increase in ROE in the first quarter. In Bosnia, actually doubles in comparison on an annual basis, doubles compared to recent quarters. Obviously, it has to do with a significant increase in net interest margin. Maybe you can comment on this and just discuss to what extent you feel this ROE level is sustainable for these banks. Secondly, can you maybe also please comment on the year-over-year decline in the loan book in Serbia and Romania, please? Thank you. Happy to, Milosz. Indeed, in Bosnia and North Macedonia, you mentioned the increase in net interest margin. Indeed, net interest margin did increase in both these banks rather strongly. It has a lot to do with local regulation, where the repricing of certain currency loans happens in the bulk twice a year. This repricing was in January. Same goes, by the way, for Serbia. In these three markets, we had a more pronounced increase in both net interest margin and net interest income in the first quarter, also compared to quarter four. Whether these increases or whether these new levels of net interest margin are long-term sustainable, the answer is the same as for the group. Right now, we would not think that in the long run, 3.4% on a group level is a good runway going forward. You have attended our analyst workshop. In this workshop, we more estimated a long-term rate of maybe 3.2%, 3.1%. 3.4% is certainly high and is indeed right now supporting the relatively high level of profitability that we see. I would not limit the good trends that we see in these banks or also on a group level only to margin development. Indeed, in all these three banks, Bosnia, Macedonia, the ones you mentioned, but also Serbia, we've made very steady progresses since 2019 in terms of operational efficiency, digitalization, but also net fee income. Especially Serbia and Bosnia account for significant increases in net fee income compared to the years 2019, 2020. That also is adding to the very positive results. To the reductions in portfolio. In 2022, we have reduced portfolio mostly in the second half of the year, not only in these two countries that you mentioned, but also in some others. Maybe in some other markets one doesn't see it so much because they had a relatively strong half year one growth. Let me highlight, especially on Serbia. Historically, in Serbia, we have grown very strongly, an average maybe 10% per year, sometimes even more. The balance sheet is relatively large in Serbia, more than EUR 1 billion. The big size that we have achieved in Serbia now also allows us to shrink selectively and optimize balance sheet structure in order to enhance profitability. This is now also adding to your first question, why is it that these banks are now also performing better? It means a much stronger focus on house bank concept. Really looking at the client base to see maybe there are some clients that outgrew us, where we can no longer vigorously apply house bank concept, where margins are low, where the reciprocity is not high, where the transaction volume is not satisfactory, and where we, from a credit risk perspective, might also no longer have the complete overview simply because the client is also transacting with other banks. Second, optimizing loan-to-deposit ratio. Optimizing loan-to-deposit ratio has been a key strategic target for us in the last 12 months, it helps reduce structurally the refinancing cost and will support a higher net interest margin going forward. Does it answer your question, Milosz? The next question is from the line of Philipp Häßler with Pareto Securities. Yes. Hello. Philipp Häßler from Pareto. I have three questions, please. Firstly, on your targeted quarter one ratio of at least 13%, will there be an impact because of the higher CET1 capital requirement, or will you keep this unchanged? Secondly, could you maybe comment a little bit on the competition for retail deposits? Have there been any changes in recent months? Do you expect any negative impact from this on your net interest margin going forward? Last but not least, on your rather, let's put it cautious outlook for the remainder of the year regarding ROE. Have I understood you correctly that you stick to the 6%-8% ROE target, not only because the situation in Ukraine remains relatively unsecure, so nobody knows how this will develop. It's also two other factors, as you were mentioning, higher inflation. You are not sure whether the NIM will remain on the high level. It's not only because of Ukraine, but also because of high uncertainty around the business outside of Ukraine. Thank you. Well, maybe I can take your questions, Mr. Häßler. On the targeted CET1 ratio, it's actually targeted to be north of 13%, so we would envision it to be at least at the level where we have it right now. It's now closer to the region of 14%. As far as competition on retail deposit is concerned, we did not have a substantial effect after the crisis in the U.S. regarding regional banks in the U.S., and we continued to increase our deposits in the first quarter, even if not as strongly as last year. Year-over-year, you have seen we had an increase of 12.8%. What we do see is a repricing on the liability side, i.e., clients shifting gradually from, say, deposits on the current accounts to term deposits. Also we see an increase in the interest rates on these term deposits. If you look at it overall, we do continue to see a quicker repricing on our asset side than on our liability side that, as Christian explained before, led to a widening of our net interest margin constantly over the last 12 months. As of today, we still see a very healthy development, and we have continued to profit from the stronger repricing on the asset side compared to the liability side, though down the road, we would expect the liability side to catch up somehow, and we would then once again assume that net interest margin might narrow again. Very difficult to say when that's going to happen. We would assume it's happening in 2024, maybe even earlier. Actually, our assumption, which is also underlying the 6%-8% return on equity guidance, does assume a narrowing of the net interest margin also in the course of the year. Rightly you say that the return on equity guidance which we provided in the short term, the 6%-8%, and where we stick to for the time being, does not only and exclusively take into account uncertainty in Ukraine, but also the fact that, more broadly speaking, our short-term guidance is based on an assumption of a less benign environment than the one which we saw now in the first quarter, which is mainly driven by three elements. Number one, a narrowing or potential narrowing of the net interest margin over time. Secondly, increased costs due to continuing inflationary pressure. Thirdly, it does also assume, as you know, a higher cost of risk for the remainder of the year. Does that answer your questions? Yes. Thank you. Maybe follow up on this. We have now middle of May. The quarter is 50% over. Have you already seen any of those risks materializing, or has this been not the case? Not in a very material form. We still see that we are benefiting from this positive environment on the net interest margin, but we have to see how things develop further. Okay. Thank you. There are no further questions, and I hand back to Hubert Spechtenhauser for closing comments. Let me thank you for your interest and participation in our analyst call covering our Q1 2023 financial year results. We hope to have given you as much transparency as possible. If you have any additional questions, please do not hesitate to contact Christian or Nadine. The next scheduled conference call will take place when we publish our quarter two results on August 14th, 2023. Thank you once again for your participation. Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day.