Dear ladies and gentlemen, welcome to the OTP Bank fourth quarter and full year 2022 conference call. This conference will be recorded. As a reminder, during the presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to László Bencsik, Chief Financial and Strategic Officer. László, please go ahead. Thank you. Good morning or good afternoon, depending where you are, and thank you for joining us today on OTP's Group 2022 fourth quarter conference call. Especially thank you that you join us when markets are such a turbulent mood. Certainly yesterday was apparently quite a difficult day for banking stocks, especially in the U.S. I hope the markets will kind of calm down. Special thanks that in this situation you devote your time to us and listen to this conference call. As usual, we have this presentation which is available on the website. We are sharing with you on this video conference. I'm going through the slides. We'll have a Q&A session. Page two, you see the annual results and the quarterly results. Overall profit after tax, so the bottom line, dropped 24% compared to 2021. That drop was driven by quite a large amount of adjustments, right? 2022 was unfortunately again a year where we had a long list of negative adjustments, and you can see them on this page. The biggest one was the bank tax and the extra profit tax in Hungary imposed by the Hungarian government. The other Hungarian Hungary related and a bigger hit was this rate cap, interest rate cap on variable mortgages and variable SME loans. Other than that, we had kind of directly related one-offs to the Russian-Ukrainian war, namely we had to make goodwill impairments related to our investments, especially in Russia. Also we wrote off our bond exposure to Russian sovereign bonds. We created a sizable provisioning on that. In the fourth quarter, we had also some one-offs. One was this HUF 26 billion, which was the extension of the interest rate cap for another six months till the end of June this year, and also the inclusion of the SME loans. You see a HUF 3.2 billion special tax on financial institutions. This is related to Croatia. Croatia introduced an extra profit tax, which is not specific to banks. It covers all the kind of mid large corporates, and this is the amount what was booked there. If we without these adjustments, profit after tax increased 19%, including Russia and Ukraine as well. Well, looking at the quarterly profit, there was again somewhat less adjustment, but nevertheless, the adjusted p rofit dropped as well, 19%. On page three, you can see the kind of more detailed P&L numbers is, and they pretty much explain this quarterly decline in earnings on the group level. While income was relatively flat, as usual last year, we had some seasonality in costs and in risk cost as well. Costs, operating expenses were higher, and total risk cost was also up somewhat higher. Revenues were flat, and that resulted in a somewhat lower profit level. If we look at the ratios, again, this is the entire group. Adjusted ROE close to 19%. The unadjusted, so just profit after tax related ROE was 11%. Margin flat year-on-year. Even kind of within the quarters there was a small difference last year. As you can see, net interest margin was rather flat on quarter-on-quarter basis across the whole group. Cost efficiency improved despite high inflation and the risk cost ratio increased. That is entirely due to Russia and Ukraine. On the coming pages you can see the performance without Russia and Ukraine. As you can see, overall the two countries had a positive contribution, especially in foreign terms. I will explain it later that despite the Russian operation in ruble terms, more than 50% decline in profitability. Actually, in HUF terms, there is an improvement, maybe we go back to the previous page, just a few words. Our original guidance was based on this view of the group without Russia and Ukraine. The war started February 2022, and we made the guidance early March. At that time, we had very little clarity on the potential impact of the war, direct impact in Russia and Ukraine. Therefore, we kind of phrased our expectations without Russia and Ukraine and the expectations which we kind of modified during the year. The latest versions were 50% performing loan growth. That was what we achieved. Improving adjusted ROE, that actually improved year-on-year. Net interest margin is stable. There was 4 basis point decline, so close to stable. Improving cost income, I mean cost efficiency, that improved. We kind of suggested similar to 2021 risk profile. That was actually better. Overall, without Russia and Ukraine, risk cost was actually quite small. Now going to sorry, a bit more detail on Russia and Ukraine. In Russia, after the war started, we changed the course of the bank. We adjusted the strategy. We pretty much stopped entirely corporate lending. As you can see, corporate loans, which by the way was even at the beginning of the year, last year, a rather small portion of the portfolio, they declined 75%. The total loan book declined 12%, and deposits increased by 19%. Profits in ruble terms declined by 57%, so less than half of the 2021 profits. In HUF terms, it's actually a different picture because we had losses in the first half of the year when the ruble was weak, and we had positive results in the second half of the year when the ruble was strong. In HUF denomination, actually we see some year-on-year improvement, but the underlying profitability in local currency declined substantially. A few more important notes here. First of all, we managed to repay the funding or get back the funding, what we had outstanding to a Russian entity. RUB 11 billion, HUF 6 billion was paid back by the Russian bank to OTP Bank Hungary. The funding, group funding is now today zero. We still have some debt outstanding which has a longer maturity. You can also see on this slide the capital. We have RUB 60 billion capital in our Russian entities. Roughly, close to half of it is above the regulatory requirements. That means that only half of it is needed for the operations. Obviously that's the kind of mid to long-term target to repatriate some of this equity to the group. The potential impact of writing off the entire operation in Russia declined a lot in line with the reduced level of group funding. Now it's just 71 basis points at year-end. In Ukraine, the profit was negative, so we made losses. However, I think if you compare the magnitude, the severity, and the drama of the situation in Ukraine, to the level of the financial loss what we incurred, I think the loss is relatively moderate. That reflects the kind of resilience of the operation and the loan book what we built over the last couple of years. This is really a kind of not shock proof, but at least quite resilient bank now. I think this is very clear in the numbers what we booked. During the course of last year, we tripled the provision levels. Total provision coverage on gross loans, so Stage one, two, three together, is 22%. That's an increase. It's a kind of three times increase during last year. We plan to percentage just seem to miss, we're missing from this slide, but it is our percentages, so close to 22% coverage. Our expectation for this year is that this is going to grow higher than 30% during the course of this year, while we keep making profits in Ukraine. There was a decline in portfolio volumes coming from kind of subdued lending activity. Deposits increased, and we kept all the outstanding group funding in Ukraine. We continue to support Ukraine as much as we can through every means. Obviously, equity somewhat declined due to the losses and the provisioning, but nevertheless, we are far above the regulatory requirements. The kind of potential worst case scenario of writing off the bank, which we don't assign any material probability, is actually very low. It's like 1 basis point. This was a heroic year for our colleagues and I try to use every opportunity to thank to all of our colleagues there and to all of our clients who stayed by us. I think our colleagues tried to do everything in Ukraine to provide high level of banking services despite the very difficult war situation in the country. We will continue to do that in the future. Page seven. The good news is that, if you look around the other, outside Hungary countries, other than Russia, Ukraine, the performance in these countries have been quite spectacular. Almost everywhere we had improvement in profits, in profitability, decent growth rates. In Bulgaria, we had 56% increase in profits. Croatia, 30%. Serbia, 15%. Slovenia, 41%. Albania, 66%. Montenegro, 2.5 times higher profits. Moldova, 50% increase in... Well, Moldova is not in an easy economic and geopolitical situation, but even in this environment, we managed to increase our profits. It's only Romania where there's no visible improvement yet. We are quite hopeful that this year performance will be much better, and the kind of efforts of the last couple of years to increase the size of the bank will bear fruits soon. Overall, very strong performance in the CEE countries, I mean, obviously that kind of contributed very positively last year to the overall group performance. The reason that kind of total bottom line profits only declined by 24% year-on-year is due to the very good performance of these countries. That very good performance somewhat counterbalanced the huge negative one-offs which we had to suffer or incur in Hungary. There's a very recent positive event in the group. Finally, after a very, very long process, we received the approval of the Slovenian competition authorities to buy the bank. It was a long but very thorough process. Now at least we can be absolutely sure that this is that there's no issue left open and it's objectively strongly supported the transaction. On the February 6th, we closed the transaction. When we report the first quarter results, you will already see the NKBM Bank being included in the consolidated group, the February PNL results and also the one-off positive impact. We estimate the one-off positive impact to be around EUR 230 million after tax. That's a potential one-off positive, which is actually very similar to the amount what we have to book in the first quarter related to the Hungarian bank tax and the Hungarian extra profit tax. Both of these one-off items will be booked in the first quarter, and they seem to it's pure coincidence, but they seem to be quite close to each other and cancel each other out almost entirely. This is a very good quality asset what we managed to acquire, and we are extremely happy. Very well-run managed bank with a exceptionally good client base and profit-generating potential. We are very excited. We already started working on the merger with full effort. We are doing the detailed planning of the process and we are going to go through the normal for us quite well known process of merging banks. It will probably take 15-18 months to complete the legal and operational and IT merge on the same date. It's expected to happen somewhere mid next year. Please. By assets, we are going to be number two, and by net loans number one in Slovenia. In the meantime, NLB acquired the leftover of this Sberbank group in Slovenia, they are also growing through an acquisition. If you present the pro forma numbers here, by local assets, they are going to be number one or continue to be number one rather. Looking at the last six years, we have been extremely active in acquisitions and, in fact, the whole group net loan volumes grew 3.4 times. That's been an extraordinarily strong growth period for us. Organic growth was on kind of average annual growth rate was above 15%. On top of that, we were growing through acquisitions. The average CAGR of customer loans for the last six year was actually 25%, including acquisitions and 15% without acquisitions, organic only growth. I think that's, if you compare this to the other regional active banking groups, this is even the organic growth part is probably twice, three or four times bigger than what their growth rate. This fast growth actually changed the group structure. As you can see on this slide, the share of the Hungarian business declined. Here you can see pro forma numbers. That including NKBM, which was closed in the deal, the transaction in February and also including Ipoteka Bank is big bank, which we expect to close the transaction in the second quarter this year. Pro forma, including these two banks, year-end 2022, the share of the Hungarian business from net customer loans went down to 30%. The share of the Eurozone and ERM II countries increased to more than 40%. I mean, that's a kind of landslide change. In fact, the 6% which we used to have in 2016 was related to Slovakia, and we sold Slovakia. We got to this 41% despite selling the 6% what we used to have, right. This is due to Croatia joining the Eurozone January this year, and our first acquisition in Slovenia, SocGen, and our second recent acquisition in Slovenia, NKBM. Bulgaria, which is in the ERM II, and it was meant originally to join the Eurozone beginning of next year, but they kind of postponed this date due to them not meeting the Maastricht inflation criteria. We expect this problem to be overcome soon and early as 26, but very likely 27. We hope they will join eventually the Eurozone, then they will be able to also benefit from the Eurozone's benefits, not just complying with all the requirements in order to get there. The share of our Russian and Ukrainian portfolios declined by half. It used to be 10% of the group in 2016. Today, it's only 5%. These are actually quite big structural changes. Again, and I think this matters from the risk profile point of view a lot, that the, again, Eurozone or quasi Eurozone countries share increased drastically. There's another positive effect here. In recently, the Eurozone rate environment also increased, and typically these operations benefit from higher rates, higher Euro rates. That's an additional kind of bonus on this one. Maybe a few words about the net interest income, because I'm sure you have noticed the quite big drop in OTP core in Hungary. Despite quarter on quarter 2% increase in that interest income, in Hungary we had a 20% decline. That certainly requires some explanation. The net interest margin was quite stable up until the end of the second quarter last year. In 2021 it was 2.85%. In 2022 first quarter it was 2.76%. In second quarter last year it was 2.84%. It started to decline. Third quarter was 2.61%, and the fourth quarter, 2.11%. During the second half of last year, starting somewhere in July, the Hungarian rate environment started to diverge substantially from the surrounding countries. Around June, July, we had 7%, 7.5% base rate. They start in a rather steep and abrupt increase, and we ended the year with 18%, more than 10 percentage point. Actually, the increase was, the big hike was in mid-October. In three months, the rate environment increased more than 10 percentage point. I mean, at the same time, the compulsory reserves requirements increased from 2%- 5%. The central bank only pays 13% on these reserves. We kind of follow the reserves. We lose 5%, or we lost 5%, starting from October last year. Plus, there's this repricing speed difference. When rates are growing so fast, corporate deposits reprice actually almost immediately, very, very rapidly. Corporate loans, pretty much the only kind of variable assets that we have, reprice with a three-six months time lag, according to their own repricing schedule. That created a kind of temporarily drop in NII just because of the kind of time difference of corporate loan and depository pricing. This alone had a HUF 6 billion negative impact during the fourth quarter. This is temporary, so this is going to come back and improve from the first quarter. This big decline is partially explained by this kind of temporarily situation and is already going to be healed by the first quarter. The majority of this decline is actually more structural, and it's related to the higher reserve requirements and the kind of fixed asset surplus in our asset liability balance. We have the kind of above a 7%, 8% rate environment we are losing when the rate increases, and we are gaining when the rate goes down. The current point sensitivity to the rate is roughly HUF 15 billion to 1 percentage point annualized. That's the difference between an 18% and a 17% rate set by [Paris] in Hungary. It's roughly HUF 15 billion annual NII difference. We are very sensitive to the rate environment, and obviously, when the rate increase, we experience a negative impact, and once the rates will go down, we will experience a positive effect where everything else being equal. The problem is that not everything else is equal since recently the Hungarian Central Bank announced that they increased the reserve requirement from 5%- 10%, plus they are not going to pay anything for 2.5%. The effective rate on the reserves, assuming 13% base rate is 9.75%. That is obviously negative for us. Even if rates moderate, these two negative factors, the increase in the reserve requirement and the lower, even lower, effective rate what we receive on the reserves, is going to have a negative impact in the second quarter. The big question of this year: Which one is going to be bigger? How fast the rate decline will be in Hungary? If it's very fast, then it can in a way counterbalance this negative impact to a great extent. If rates the kind of 18% rate level continues for a longer period, then that's going to put additional pressure on our Hungarian NII. Our expectation is that rates will moderate and that moderation will start soon. Obviously, this is related to inflation. Hungarian inflation unfortunately is quite high levels, much higher than in the neighboring countries. The peak was at 25.7% in January. The good news is that the recent February data which came out is already lower, 25.4%. It's a small improvement, but at least it shows that hopefully we are over the inflection point. Most importantly, the monthly repricing dropped from the previous 2+% down to 1.3% in February. I think we have every reason to expect a rather swift moderation of the inflation in Hungary. We already see food prices dropping. In general, consumption dropped and retail trade dropped year-over-year, actually 5%. The exchange rate appreciated compared to the weakest points last year around 420-425. Last weeks we had 370-380 levels of exchange rate. That's another strong boost to inflation decline. Most importantly, energy prices and specifically gas prices on the European market level dropped actually more than 85% compared to the peak last year. Which again is going to have a positive impact on inflation in Hungary, and not just on inflation, but also very importantly on the current account balance, which we expect to be only three, maybe 4% negative this year, which is pretty much in a kind of manageable level. Sorry for this kind of longer deliberation on this point, but probably this is the most kind of visible or important event or number in the fourth quarter. I'm sure you had a couple of questions in your mind related to this, so I kind of start spend some more time explaining this. Other than that, I mean, all the other countries did better and that actually all the other countries improvement in Hungarian foreign terms especially, but also in local currency, was more than enough to counterbalance this negative impact. In fact, quarter-on-quarter, we had a 2% increase in NII. On a group level, it was only Hungary which went down. Margin on page 12. Again, not surprisingly, Hungary was negative after this story, which I just explained, and all the other countries was positive. I mean, group level, it was almost flat. It's the same story underlying that the difference. Volume dynamics changed drastically in the fourth quarter across all the countries where we operate pretty much, except Russia, where we had an increase in the fourth quarter. I mean, that's the usual seasonality in consumer lending. All the other countries slowed down. It's not just our numbers, but in case of Slovenia, Serbia, the market was also contracting in terms of low volumes. We see a quite rapid reaction by loan demand and loan supply also in most of the countries in this kind of higher inflation and higher rate environment quite rapidly moderated loan growth. We had only kind of 1% FX-adjusted loan growth across the group. In Hungary, you can already see that mortgage loans are negative. I think this is something, again, potentially not very surprising that in this very high rate environment, mortgages which are in local currency, are quite slow, and there's very, very moderate demand in that. Now, if you look at the whole year, the picture looks much better. Group level, we had 12% growth. If we exclude Russia and Ukraine, which was negative. You see in Ukraine, 27%, in Russia, 16%. I think these are kind of strong numbers, especially Croatia, 19%, Hungary 15%, Bulgaria 16%. I think it's important to note and then draw your attention to the corporate growth. Corporate was exceptionally strong in most of the countries. Again, this is related. It was more a kind of one-off in the third quarter when inflation kind of peak went up and corporate started to increase their inventory levels when inflation was rising, and that actually resulted in much bigger working capital loan demand. Deposits. On the last quarter, we had 2% growth. This was not uniform in the group. We had quite strong deposit growth in all of the countries except Hungary, where it was negative. What happened in Hungary was that with this, I mean, 25% inflation reduces savings. When people, especially retail, saving started to decline, retail clients started to use their savings to kind of smooth their consumption and somewhat counterbalance the negative impact of inflation on their kind of living standards or spending profile. It hasn't happened for a very, very long time to have a negative, you know, retail deposit growth in Hungary and it did happen last year. In fact, last quarter, sorry, because the whole year was still overall positive. I think it's important to note here that while volumes declined, our market share from household deposits increased. During the whole year, it increased from 37.8%- 39.3%. Even during the last quarter, fourth quarter last year, it increased by 20 basis points. It's actually the market declined more than we did. Overall, retail deposits declined, and the decline in the case of OTP was less than what the market managed to achieve. One thing is that people use more of their savings to compensate for higher inflation impact on their, on their spending profile. Also, the, especially the retail sovereign bonds and the rate with-which retail clients can achieve with these so-retail sovereign bonds, which are inflation, indexed or adjusted, this is obviously very, very difficult to compete with bank deposits. They had a kind of people kind of reallocated their savings to more to sovereign papers than to bank deposits. Overall, if you look at the whole year, again, Hungary was 9% positive or the group was 14% positive. In fact, the kind of loan to deposit gap did not seem to change so much. Our net loan to deposit ratio remained pretty much flat at 74%. The liquidity situation of the group did not change. Fee income, I don't think there's so much to deliberate here. Other income also, I think the only kind of quarter and quarter difference is actually coming from the one-offs in the third quarter. We had kind of big gains on selling some of the private equity fund investments. There was a big result there in the third quarter, and that did not repeat itself in the fourth quarter. That's more a kind of base effect, the quarter-over-quarter decline. Maybe cost is something where I might spend some more time. It's a high inflation environment everywhere where we operate, and especially so in Hungary. It's not just high inflation, but also the currency weakened, and we have many of our, especially IT services, the contracts are in local currency. In Hungary, you see this kind of 19%, quite high increase in costs, but it's not personal expenses. Personal expenses grew 10%, amortization increased 10%, and the kind of this excessive high growth came from other costs. That's utility costs, a huge increase in supervisory fees, weaker currency which translated into higher IT services cost in local currency, and much higher real estate costs because we opened a new kind of headquarter building. We are in the process of consolidating the office space what we have in Hungary. For kind of limited period, that means that we're actually running two, the much bigger office capacities than needed. In terms of capital and liquidity, given the events of yesterday and maybe today on the global kind of banking markets, it's, it probably deserves somewhat more detail than usual. Our liquidity position is continues to be quite stable and robust. The net loan to deposit ratio on the group level is 74%. In fact, year-over-year it declined somewhat. It means that we have kind of 1/3 more deposits than loans. There's a big deposit surplus in the group, especially so in Hungary, where the ratio is below 55%. In Hungary specifically, we are even more liquid than on a group level in terms of the kind of loan to deposit gap. The LCR ratio, the liquidity coverage ratio, which is the kind of European standard for measuring kind of short-term liquidity position. It's 172%. 100% is the minimum, we are way above that. In nominal terms, it means that we have almost EUR 8 billion above the LCR, liquidity coverage ratio minimum, and our high-quality liquid asset portfolio is more than EUR 18 billion euro equivalent. This is at market value, all these numbers are at market value. They are calculated on the repo-able basis of securities if they are repo-able. That's after a kind of haircut or adjusted to market value or adjusted to repo-able kind of value, all these numbers. That's the situation. Plus, it has been quite stable for a number of years. Plus, we don't have external... I mean, we issued couple of bonds recently in order to fulfill the MREL requirements. As you can see, even this year, first quarter, we did a tier two. Last quarter, so the fourth quarter last year, we did a senior preferred EUR 650 million. We are quite active primarily to reach the MREL targets, which kind of kick in from January next year. We are going to continue our activity on the DCM market. We plan to do another two or three bench, at least EUR 500 million benchmark size transaction during this year in order to get to this required level of MREL funds available on a group level. The next page is about the coverage ratios. There's not much happening there. I mean, the group level Stage three ratio declined below 5%. For some reason, this seems to be an important kind of level. Five percent, I think it's rather symbolic. Anyway, we dropped below that in the group level, including Russia and Ukraine. Without Russia and Ukraine, we are down to 4.1% on the group level, there will be a further drop down once we include the NKBM portfolio in the first quarter. I think this is we are getting closer and closer to kind of low NPL level situation overall, while we keep coverage somewhat more conservative than some of our regional competitors. A few usual detailed information about Hungarian business. I mean, in general, we see a very strong slowdown in mortgage lending. In fact, kind of consumer loan lend activity in Hungary also slowed down, but not as much as mortgage lending. It seems that mortgage lending is not very at-attractive mortgage loans at this rate levels. Consumer loans, there's some decline, but not that drastic. We remain very active in selling the subsidized structures, especially if you go to the next page, you can see that the kind of most popular retail mortgage product was this kind of green housing loan, which is a subsidized structure, and our market share was almost 60% from the disbursement of this type of loan last year. Again, in corporate, we remained quite active last year up until kind of the end of the third quarter. Fourth quarter, it also slowed down, but kind of over the whole year, we had 33%-Growth in performing corporate volumes in Hungary, and that's I think this is highest ever annual growth rate. Our market share increased accordingly, so we are 20%. Again, we were last year extremely active in distributing the, the subsidized product, the Széchenyi Card GO! structure with 32% market share from this disbursement. We continue to be very active on the ESG front, and I think we now few years ago, we laid down the strategy and the, and the organization we set up and allocated strong resources. Now we're starting to see the results and they seem to be more and more measurable. We set up a green loan framework, a sustainable finance framework, green investments. Green finance is quite active. We have made substantial developments in our methodology to capture and measure ESG risks. That reflected in the improvements on our sustainability ratings as well. It seems measurable. It's a group-wide effort, so we try to share best practices across the group and we definitely make every country focus strongly on ESG dimension, well, especially CEE countries where we operate. Now a few words about expectations. Macro environment, I mean, we believe that, despite previous fears, we don't see a recession coming to Europe or to the countries where we operate. The only country where we expect negative longer GDP growth this year is Moldova. Even in Russia and Ukraine, we expect positive. Even in Hungary, we expect positive. In the other countries, there might be some slowdown compared to 2022, but still okay growth levels. That's one important factor. The other very important factor is inflation, especially in Hungary, where it has reached, I think quite, extraordinary high levels even compared to the countries around us in the region. Here we have a very clear expectation that the moderation of inflation is going to be fast, and by year-end, it's going to drop below 10%. Actually, we expect below 9% year-on-year, end of period, year-on-year inflation, by the end of the year. That is crucially important for us. A, inflation is bad, so at this level, so this, every part of the economy should do much better in a more moderated inflationary environment. Specifically, as I explained before, our earnings, our net interest income is very sensitive to rate levels. Obviously, the lower the inflation, the lower the rate environment, expectation. We definitely in line with the inflation decline we expect, especially in the second half of the year, a strong and fast decline in the rate environment from which we should benefit in terms of our NII in Hungary. With this context, a few words about actual expectation. As usual, we try to kind of carefully raise these expectations. First of all, the war continues in Ukraine and we are very hopeful that it ends soon and there will be a quick resolution and suffering will end. We still don't see that happening, and we don't know when it's going to happen, and that poses a much higher than usual level of risk on all the operations what we have in Russia, Ukraine and outside Russia, Ukraine. This is still a very kind of high uncertainty environment and situation. Please take our kind of guidance or expectations in that light. There's a higher than usual uncertainty here. With that remark, we don't expect deterioration in our in the operating environment of our banks in Russia and Ukraine. If they don't deteriorate, then in both countries we expect better performance financially than last year. In Ukraine, that better performance, meaning positive results, should be coupled with a further steep increase of provision coverage on the entire loan portfolio. Regarding Hungary, again, because of this rate sensitivity in Hungary, and the size of the business in Hungary, this is potentially the most important factor for the whole kind of group performance. How fast and how much the currently 18% rate will moderate during the year. The faster and more, the better the results will be in Hungary. Certainly, in the kind of market scenarios, if you just take the implied rate levels in market instruments, then we should have an improvement compared to last year, fourth quarter. If you kind of take the fourth quarter 2022 level compared to that, we expect improvement in NIM and in NII over the course of this year, over each quarter. Again, the lower the rates, the higher the improvement might be. There's also a kind of negative impact coming from the second quarter due to the recent increase of the reserve rate and the decrease of the interest on the reserve. It's an unlikely scenario, we believe, but it can happen that if the zero rate decrease or rates go up, then obviously this, what we wrote here may not be true. Now the one-offs in Hungary, we know that we are going to pay again this extra profit tax, despite the fact that actually our profits, our after-tax profits in Hungary without dividends from group members dropped 84% year-over-year last year. Despite of this, we will pay HUF 69 billion extra profit tax this year, plus the usual bank tax. This is all together, the two are HUF 88 billion after tax. These items we are going to book in the first quarter. When I talk to the good news is on the next page. At least this kind of extra tax one-off, which we book in the first quarter, we are most probably expected to be kind of balanced by the one-off positive impact of consolidating NKBM, Nova KBM Bank in Slovenia. There's a badwill associated with this approaching price allocation, initial risk cost. Everything all together, it's not a final number yet, but we are already quite progressed with the calculations. Actually, it was our auditor's suggestion to announce that the expected amount will be around EUR 230 million after tax, because it's quite a substantial number and there's already a high level of certainty that is going to be booked indeed with this amount in the first quarters. This is important, just to make it clear, the expectation is that this positive one-off effect will pretty much entirely counterbalance the negative one-off effect of booking the entire normal bank tax and extra profit bank tax in Hungary during the first quarter this year. In terms of loan growth, we expect slowdown. That slowdown already happened during the fourth quarter last year. I don't think there's anything surprising there. Rate levels are higher, in higher rate environments there are less loan demand, and we already started to see that last year. The expectation is that we are going to have probably low single digit, not more than 5% growth across the whole group in terms of performing loans. There will be certainly bigger differences between countries and also bigger differences between portfolios than usual. Net interest margin, again, with all this, all the story behind it in Hungary, where it's the most uncertain. If you just take the market expectations regarding the Hungarian rate development, then together with the positive effects across the group, due to higher euro rate environments, we probably could end up similar levels than last year. Portfolio quality levels seem to be stable, so we don't expect iteration there. We are facing strong cost inflation and cost pressure, so it might happen that our cost efficiency ratios may not improve this year. On the contrary, they might somewhat worsen. Again, we try to do everything to mitigate and minimize that factor. All in, adjusted ROE might be kind of at a similar level than last year, around 18%. Now, that is probably not surprising if the ratios and the loan growth goes like this. The big question is probably what one-offs, how much one-offs we are going to have or unforeseen one-offs because the foreseen one-offs again might be close to to... I mean, might be a low level, given that the big bank tax in Hungary are just about as much as this kind of one-off positive from NKBM. We are not aware of any big other one-off items. There will be, if we close the Ipoteka transaction in the second quarter, there may or may not be a positive one-off. We will see. We don't know whether the rate cap will be extended for the second half of the year. We certainly don't know. Probably they will. I think if I want to be honest, and I do want to be honest, I have to admit that it's quite probable that they will be. But the big question is at what conditions, where the cap will be, and most importantly, where the rate environment will be because again, the lower the rate, the less we lose on these interest rate caps. There's the expected level of dividends is HUF 300 per share. The board of OTP will make a decision on the March 21st about the amount they propose to the general meeting, and it will be published on the April 6th. Our preliminary assumption is that the proposal will be HUF 300 per share, and that's HUF 84 billion. I already mentioned this, but that we plan to continue our issuances of market instruments in order to meet the MREL requirements by the beginning of next year. That was the formal part of the pre-presentation, and, please, if you have questions, ask them. Thank you, ladies and gentlemen. We will now begin our question and answer session. If you have a question for our speaker, please click on raise hand icon to indicate or press star nine on your phone's dial pad. The first question is from the analyst of Concorde Securities. Hi, Táncsi. Hi. Thanks for the presentation. I have questions on three topics. The first one would be on your risk profile, you said in your guidance that you do not expect material deterioration on under this line. Should I think about the cost of risk to be similar compared to the previous year? Also because you said on group level there shouldn't be any material change. I was wondering since I guess from your talk, it seems that Russia and Ukraine should recover significantly. Is there any segment that would counterbalance this positive improvement? My second question would be on the cost efficiency. I know it's pretty hard to say now, but with regards to cost to income, do you have a number in mind? Maybe should it stay below 50% or maybe we should think about even larger worsening of the cost-income ratio? My last question would be on shareholder remuneration, because HUF 300 is quite good per share. I was wondering if you have considered or would you consider share buybacks besides or instead of dividends? Maybe not this year, but maybe in the longer term. Thanks. Risk profile, my comment was related to the whole group, right? I mean, last year the whole group had, I mean, the risk cost rate was 73 basis points. This was a result of a much higher level of risk cost rate in Russia and Ukraine, and actually a positive risk cost rate on loans, at least for the rest of the group. There was a provision release overall. Provision for impairment and loan losses, as you can see on page four of this presentation, outside Russia and Ukraine was actually positive. Page four, you see +7. The 2022 provision for impairment and loan losses was +7. On the previous page you can see the overall it was -135, and the minus was coming from Russia, Ukraine. Yeah. The expectation is that gas in Russia, Ukraine, there will be less risk cost. For the rest of the group, there will be more. That doesn't mean that we are going to see a kind of worsening of portfolio quality. It's just that, I mean, it was a special year for the rest of the group because if you remember, and I'm sure you do, in 2020, when probably teeth, we created these extra provisions, right? During the course of 2020 and 2021, we did not release these extra provisions, COVID-related provisions. Actually, COVID officially lasted until the war broke out, 2022 February. We started to release part of these COVID-related extra provisioning, which we did back to 2020 in 2022. And we partially released them. Partially, we reallocated them to provisions related to the kind of worsening economic situation and GDP trajectories across the group. So part of this kind of COVID-related extra provisions which we created in 2020, we released. Part of them we reallocated to to kind of kind of worsening economic environment related ones. And the result of this was that actually the the risk was was positive for outside Russia, Ukraine. This is not going to repeat this year. So we just expect a kind of normal level of risk cost in outside Russia and Ukraine. But... In Russia and Ukraine, we expect lower level of risk cost than in 2022. These two effects may resolve overall in a similar level of group level risk cost what we have in 2022. Around this kind of 70 basis points. At least that's our kind of best estimate at the moment. We are trying to counterbalance the impact of the inflationary environment, and we are working hard to moderate that impact. I hope the cost to income kind of if any worsening will be rather small. We cannot deny that the situation is quite tight on that front, especially because labor markets remain strong. Unemployment is not growing, which is wonderful, right? From loan demand and from loan quality point of view. It means that high inflation is coupled with high nominal wage inflation as well. We don't want to lose good people. I mean, and we are still focusing on growth, right? On organic and inorganic growth. I think the likely direction is probably up, but we hope to contain that growth as much as we can. Regarding cost, I usually don't like to make very kind of forward-looking nominal expectations because it's better to kind of show results than expectations on that front. The pressure is there. Buybacks. We would love to do buybacks with this level of share price. Now, the thing is that we are buying two big banks during the course of six months first half of this year. Our biggest ever acquisition we did just last month in Slovenia. Then Uzbekistan is coming and they are quite. I mean, they are sizable tickets, right? They do have an impact on our capital ratios. It's a kind of unfortunate situation that this low share price and very, I mean, at least for from our point of view, attractive entry point potentially is coupled with a situation where we are just paying out the price of these banks. I mean, we like to do share buybacks, but due to the timing of the acquisitions, now we focus on paying for these banks, which will create, we believe even more value than buying back shares. And then once they are done and we accumulate some earnings. Probably by that time, the share price will be at a different level, at least I hope. If not, then yes, this will come. If not, then certainly we will consider that. Okay. Thanks very much. Thank you. Thank you. The next question is from Gábor Kemény, Autonomous Research. Yes. Hi. Thanks, László, for being upfront about the uncertainties in the environment. My questions are on NII and deposits. Firstly, on the central bank reserve rules, you pointed out. Would you be able to quantify the impact on your NII under your baseline rate trajectory in Q1 and Q2? Just on the broader NII outlook, would you be able to give us a steer for the next couple of quarters on what you expect? I understand Hungary faces some headwinds and on the other hand, the rising euro rate, the uplift from the rising euro rate has been playing through pretty nicely. Would you expect to be able to grow your NII or shall we expect some kind of stabilization in Q1 and Q2? Finally, I a probably inevitable question today on deposits. Would you be able to comment on your liquidity situation in Hungary? I'm asking this in the context of you indicating a largely fixed rate asset structure in Hungary. I guess how far would you be comfortable with a declining trend in deposits there? Thank you. Yeah. Okay. Yes, I mean, the NII impact, I mean, if we look at the kind of market rate expectations for the Hungarian rate environment, then the total cost of reserves for the year is roughly HUF 50 billion. That's the difference between the central bank paying the market rate on reserves as opposed to paying the rate what they announced to pay. Part of the difference we already suffered during the fourth quarter and we will suffer it during the first quarter. There will be a step up in the second quarter when the reserve requirement doubles and when for 25% of the return requirement, they don't pay anything. Overall, the rate what they pay on reserves drops down from 13%- 9.75% on average. The difference between this scenario, what we expect, and from a very good scenario, in which the central bank paid the market rate for the reserves is HUF 50 billion. This is already included in our kind of NII and NIM expectations. This is not an extra kind of negative. This in-included when in our expectations, and this leads to your second question. If we go back to maybe the page where we had our Yep. Guidance. Second page. Yeah, the next one. We are saying that maybe we can go one. Yeah, this is. Again, we say that the net interest margin may remain stable in 2023. With all these factors considered together, we expect the group level net interest margin to be similar to last year, right? I hope it answers your question. Yes, I mean, in euro rates we have that's positive. This will have a positive impact in also in Hungary because we have euro variable assets in Hungary. Obviously in countries like Slovenia, very big positive. Bulgaria, Croatia, even Montenegro. Again, the kind of rest of the group members also have some kind of positive NIM dynamics. It's only Hungary where we have these very substantial and fast change and fast increasing extraordinary negative measures, put it this way, which push our NIM levels lower. Again, compared to the very low fourth quarter level, we expect improvement during this year, including the new, known, central bank reserve policies and assuming the kind of market expectations regarding the rate environment change during the course of this year. In terms of our kind of liquidity in Hungary and across the group, again, that's loan to deposit ratio in Hungary, 55%. We do have fixed kind of sovereign portfolio, when we calculate the LCR ratios and when during the presentation, I told you that we have close to EUR 8 billion surplus over the LCR requirement, and we have altogether close to EUR 19 billion high-quality liquid assets portfolio. These numbers are after. These numbers include and assume the market value of the sovereign bonds, what we have in Hungary and elsewhere. This is the market value, this is the collateral value when we do a repo with these bonds. There's no additional kind of haircut or market value adjustment when we talk about these liquid assets portfolios. These portfolios already include the decline in the reportable value of these assets due to the change in the rate environment. Okay. Thank you. That's all useful. Just to recap on the full year NII outlook. What you said on the NIM, I would assume is largely applicable to NII as well, because you are not assuming meaningful volume growth this year. Shall we expect then Hungarian NII to be down a bit, which is then counterbalanced by growing NII elsewhere in the euro-linked countries? Is this a fair statement or are there any other moving parts? Average volumes are growing, right? last year overall, we had 12% loan growth, this year we expect kind of less than 5%. last year growth already implies an average year-on-year growth in volumes, right? volumes are growing, but the growth rate is slowing down. I would put it this way, NII growth will slow down. Mm-hmm. Since average volume is expected to grow, plus, the NIM is expected to be more or less similar to last year, I think it's logical to expect some growth. Very important, the group is growing through acquisitions and, NKBM is a big bank and a very profitable one. That will be a quite sizable and material additional contribution from this new acquisition, which we closed in the second quarter. This is in the form of a one-off. More importantly, the contribution of NKBM will be visibly strong during the course of this year. Would you be able to comment on the magnitude of the earnings contribution from Nova KBM? We have not yet finalized the plan, so I don't want to kind of. We have a strong view, but we have not officially approved their kind of update to their budget compared to what they originally budgeted for this year when they used to be with Apollo. I would rather not do that now, but maybe when we talk about the first quarter results, I will, because already you will see the results for February and March, and I hope you will be impressed. We are very impressed. I mean, this is a very good bank. Then there's Ipoteka coming. Hopefully, the transaction will be closed second quarter. Then it means that they will be contributing to group earnings starting from the third quarter, at least according to current expectations. That's not as profitable as NKBM, but also meaningful profit contribution is expected from Ipoteka Bank already this year. Okay. That's fair enough. Thank you. Thank you. Thank you. The next question is from Máté Nemes, UBS. Yes. Good afternoon, thank you for the presentation and all the details on net interest margin in particular. I had three questions, please. The first one is on volume growth. You obviously mentioned that you would expect around up to 5% growth in 2023. I was wondering if you could give us a sense of the major operating countries in the portfolio, presumably in Hungary, somewhat more muted growth and perhaps somewhat better in countries like Bulgaria, Serbia, and so on. The second question would be on on the fixed asset repricing cadence or repricing schedule, specifically in the government securities portfolio. How much of the portfolio is perhaps maturing next year, 2024, and these amounts can be rolled into short-term assets. These should surely help, I suppose, but With NII. The last question would be on the Ipoteka Bank acquisition, specifically the defunding plan. If I just look at the cross loan book versus deposits, I see more than HUF 700 billion of higher loans. Could you talk about how you intend to fund the gap? Is that supposed to come from intragroup funding, or you have other solutions? Thank you. The first question, you just gave the perfect answer. Probably a somewhat muted growth, more muted in Hungary and maybe somewhat higher or better growth in countries like Bulgaria, Slovenia, Croatia, Serbia. You actually gave the perfect answer to your question. Maturity profile, I mean, the total sovereign book is HUF 3,200 billion. Average duration, I mean adjusted duration is three years. This year there's HUF 400 billion maturing, next year HUF 300 billion. Yes, this is certainly helping as time goes by the NII. This has already been kind of counted in when I took in our expectations regarding the Hungarian NIM kind of trajectory or the group level kind of NIM trajectory. There's kind of improvements due to maturing portfolios in Hungarian sovereign bonds and the reinvestment rate being or, I mean, just the spot rate being so much higher than the current yield. Yes, that's positive. The biggest even much bigger maturities will happen in 25, 26. Ipoteka funding, yes. I mean, the bank is funded by refinanced state kind of loans, right? These are subsidized. Behind the mortgage book, most of the mortgage book is kind of subsidized, and there's a refinancing provided by various state institutions, and they will continue. We don't have to kind of replace these funds. there's no expectation to provide, I mean, additional kind of funding other than funding additional growth if you decided to do so. there's no kind of immediate funding need to replace current funding, put it this way. we these state refinancing structures are going to continue to be there, and this is obviously one of the that's part of the deal and the agreement what we have with the government, with the seller that they will continue to be there. Can I ask the about the remaining maturity of these state-subsidized loans? Is that well beyond 12, 18, 24 months? I don't have the exact number, but yes. I mean, it's certainly well beyond 12 months. That I can say. I mean, I don't know top of my head the exact numbers, but these are longer-term structures, yes. Okay. Thank you very much. Thank you. Thank you. The next question is from an attendee joined via phone. I open the line. You will receive an automatic message about it. Please press star six to unmute. Hello. Good afternoon. I have two quick questions. One is on the speed of on the take-up of term deposits in Hungary, because currently it's about 20% of the total, whereas in the past it used to be in the range of 50%. What are the most recent trends for versus 3Q? Do you see any acceleration in the behavior of savers? That's number one question. Number two is on the cost of risk. You've mentioned that actually the fall, Q and winter wasn't so bad in economic terms. Why is it that in a number of countries you have modified your model parameters resulting in a somewhat higher provisioning charges? This seems sort of in some inconsistency between those two observations. Thank you. Deposits. I mean, in corporate deposits, as I said, we experienced a very fast repricing. Corporate deposit rates on average are close to 14%, so that. They already repriced during the second half of last year in a very fast manner. That was this kind of repricing gap which I just mentioned in my presentation. One of the reason the NII dropped so much in the fourth quarter was this kind of discontinuity between the speed of deposit repricing, corporate deposit repricing and corporate loan repricing. In retail, there's not so much repricing in retail deposits because the alternative investment opportunities are so much higher yield that it is extremely difficult to compete with them in terms of term deposit rates. What happens is that people who have longer term savings and are you looking for high yield, they go either for money market structures or money market funds or sovereign retail bonds, which are quite liquid and provide inflation plus% yield. It's no one wants to compete with deposit rates with those rates, right? It's just impossible. It's a, it's a unique situation in Hungary, and these high yield retail investment opportunities into retail bonds have been there for now, I think five, six years. People are used to that if they want to go for a high yield, they invest into retail government securities, right? That continued. Therefore, retail deposit rates and volumes are not moving so much other than because this kind of... I mean the volumes move because people live up their savings and A. B, because they don't. If they want to kind of invest into a high yield structure, they don't go for a term deposit. They go for a retail government bond. I think that's the reason why you don't see so much increase in term deposit volumes, right? It does exist. We have those, and they have higher rates. Overall, this is, as you just said, it's a small percentage. I think these are the factors behind this situation. Then your other question was related to cost of risk fourth quarter. Yeah. I mean, we continue to try to be as conservative as possible with provisioning, and we usually make another push each year-end, and we did that this year-end as well. I acknowledge your point that there's some optical inconsistency here, but if you look back to our previous track record, year-end we always try to. Despite we are always quite conservative, I think year-end we try to be extra conservative and this was just reflected here. I think that's a fair point what you said. Hello? Robert, are you still available? Okay. I think this was sufficient. Maybe we can go. Yes. Next question. The next question is from an attendee joined via phone. Again, I open the line. You will receive an automatic message about it. Please press star six to unmute. Hi. Hi, it's John from Raiffeisen. Thank you for call. Just a technical question. I mean, you include now in your guidance, in ROE guidance for this year, Nova KBM and something from Ipoteka Bank upon, of course, depending on the timing of consolidation. Is it correct? Yes. Okay. Would you be able also to provide a kind of compared to the 2022 kind of like for like ROE guidance compared to what compared to the kind of the group structure that we saw by the end of 2022? Yeah. It's somewhat lower. Okay. Based of course, on the adjusted numbers, right? These are adjusted numbers, yes. Yeah. Total group Okay. Okay. Thanks. My last one, I think government, some government representatives yesterday or the day before, mentioned the extension of windfall profit tax. Not being specific on which industry it might be negatively or positively impacted. Do you have any kind of idea where the journey might go beyond 2023 on that front? Yeah, we are also disturbed by these comments. We certainly don't have any further information other than these scattered remarks from various representatives of the government. When they introduced this tax last year, they promised that this was work for two years. It's also one of the EU requirements to kind of eliminate them starting from next year. That's one of the kind of 27 points which are the prerequisites for the EU funds to be made available for Hungary. Honestly, I don't know. I mean, this is certainly not a good news for us. I don't have any more detail on this. We are not aware of any specifics. We don't exactly understand what it means. Unfortunately, I cannot comment really on this one. Okay. Fair enough. Okay, thanks a lot. Thank you. Thank you. Thank you. The next question is from Alan Webborn, Societe Generale. Hi, and thanks for the call today. On mortgages in Hungary, could you just sort of update us a little bit about how you're managing that market in the current environment? You know, with your assumption that inflation is gonna come down, therefore rates are gonna come down as we go through the year. I mean, do you see there being an inflection point at some point, or is this year simply going to be, you know, continually downward in terms of volumes? I'd just be interested in your view of that market. I guess the sort of the other side of that is, you know, clearly at the moment it's working capital loans in Hungary that have been giving you the volumes as inflation comes down. Do you think the sort of, you know, the longer term, you know, investment type loans will come into to offset or do you think there's going to be some pressure there as well? Then in terms of your overall NII guidance, I mean, can we sort of apply that to some extent to fees as well, or do you think there are other elements at play there as well? Thank you. As I already mentioned, there was some one question related to this kind of Hungarian growth expectations between the countries, and it was rightly said that probably Hungary is going to be even relative to the other countries of our portfolio, more muted. Certainly that's what's good for mortgages. I think it's quite clear that at this rate level, demand is very thin. And I think even if rates go much lower, I mean, first of all, then I don't expect a very big pick up in mortgage lending during the course of this year. I think this is going to be relatively low level for the whole year. We actually stopped lending or issuing mortgage, variable mortgages after the rate cap. I mean, if you cannot trust in the contracts that you have with your client, then, and if the kind of regulation overrides these contracts, then the only thing you can do is to provide till maturity fixed loans. That's what we do. We only provide now fixed loans until maturity. And that, and that allows kind of still around a kind of 10% rate for mortgages, kind of till maturity fixed. Even if the kind of short-term rate mitigates very fast, this kind of till maturity rate is not. If the kind of short-term reference rate comes down to from 18%- 10%, it doesn't mean that we can I mean, the kind of long end of the yield curve is not going to decline so much, right? The actual kind of yield of this fixed maturity mortgages is not going to decline as much during the course of this year as the base rate will or expected to decline. Therefore, I think this is going to be for the whole course of the year in Hungary and hopefully kind of next year, if inflation and rates continue to abate and kind of risk and the kind of all inflationary and rate environment turns around maybe next year, whatever, I don't know when, then there might be a stronger pickup. I don't think it's quite it's likely this year. Corporate lending, I mean, yes, it already slowed down during the fourth quarter last year. So true. The inflation goes down. I don't think they will reduce the inventor, the working capital on this so much because that... I mean, inflation going down doesn't mean that there's deflation, right? No. It means that the rate of inflation slows down, but it's still a lot, right? I mean, we are going down from 25%, but if you go down to 10%, it's still kind of high inflation, right? It's certainly not deflation. I think corporate, I mean, compared to last year, I mean, grew 33%, this year will be less. Maybe, I mean, it can easily happen that corporate will be higher than 5%. I mean, even closer to 10 this year, for instance, in Hungary. Corporate is not so much directly defined by the rate environment, and they some of them benefit from inflation, and some of them can take FX loans which the retail clients cannot. That's, there are different dynamics there. Fees, in general, we think, I mean, fees tend to grow in nominal GDP growth, right? Now, when inflation is so high then fees don't grow so much because transactional volumes decline, right? As consumption declines, retail trade declines. Actually, there's a balance of kind of more transactional volumes due to inflation and the decline in the number of transactions due to less retail, less consumption. I think fee dynamics is going to continue to be strong. I mean, the rule, the kind of general rule is that actually high inflation is relatively good for fee increase. That's, so I am more optimistic on the fee side here. Okay. That's very helpful. Thank you. Thank you. Thank you. If you have a question for our speaker, please click on raise hand icon to indicate or press star nine on your phone's dial pad. As there are no further questions, I hand back to the speaker. Thank you again. Thank you for your time and for your attention. I hope this was useful, and thank you for the very good questions you asked. I hope we were reasonably able to answer them. Please come to our next kind of meeting or we see when we present the first quarter results. I think they are going to be quite interesting to see especially because you will already see the addition of NKBM to the group, which is a big step for us. A lot to be seen there as well. Normally may hope to have you back, and until then, all the best for you. Have a very nice weekend, and goodbye. Thank you for your participation. The fourth quarter and full year 2022 conference call is closed now.