Dear ladies and gentlemen, welcome to the OTP Bank Q4 2023 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. Thank you for joining us today on OTP Group's 2023 full-year results presentation. As usual, the presentation what I'm going to use is available on the website for you to download, but we are also kind of projecting it parallel to the discussion what we have on my presentation. As usual, we go through first, I try to go through rather quickly this presentation, which is in the kind of usual structure, and then we can have Q&A. So the highlights of the group: we had a good year last year in Hungary and outside Hungary. In general, I mean, this is probably not surprise because most of the banks had a quite good year in 2023. But nevertheless, in terms of OTP history, I think this was a kind of major milestone.
What we reached, we exceeded EUR 100 billion balance sheet and exceeded EUR 2.5 billion profit after tax. We kind of solidified our position in the region as one of the dominant multinational banking groups. And certainly, we have a unique position in a sense that we are pretty much the only one of the banking groups across the region who actually originated from the region, who come from the region. So we have strong positions in five countries, which was strengthened last year especially with the acquisition in Slovenia, our second acquisition, and we entered a new country in case of Uzbekistan. Not last year, but at the end of January, early February this year, we signed an agreement to sell our Romanian businesses, which is also kind of it hasn't been a big part of the group, but strategically, it was a kind of difficult decision to make.
But I think we made the right decision. And certainly, the financial impact of that decision has already been reflected in the 2023 numbers. Profitability was quite good, I think. I mean, 27% all in compared to around 14%-15% expected return level and somewhat declining expected return level given the especially in HUF rates, there has been a strong decline in the risk-free rates. So there's some normalization in the cost of capital as well and very stable kind of foundations in terms of liquidity, in terms of capital. Both of these positions strengthened considerably last year. Liquidity coverage ratio around 250%. That's 2.5 times higher than the requirement. And we managed to strengthen our capital position despite doing these two rather sizable acquisitions in Slovenia and Uzbekistan.
So the year-end Common Equity Tier 1 ratio was 16.6%, and that means 20 basis points improvement quarter-over-quarter, including the acquisitions that we have made. We managed to meet and somewhat exceed the MREL requirements as well. So the year-end ratio was 25.1%. And from January 1st, the new increased requirement was or has been 24%. So this has been a quite costly exercise because we had to issue a lot of bonds, which we didn't need for our kind of normal business activities or from a liquidity point of view, but only for this purpose to meet these new type of capital requirements, and we have met them. And portfolio quality remains quite stable with decent coverage levels and low risk cost. So I think overall, this is a pretty strong picture, and we remain committed strategically to ESG targets.
Now, let's look a bit into the numbers themselves on the group level. First of all, if you just look at the bottom line headline number, HUF 990 billion half after-tax profit, that's almost three times as much as in 2022. Now, on this page on the right lower corner, you can see the so-called adjustments. These items changed a lot from one year to another. Whereas in 2022, we had minus 245. 2023, it was minus 18. So the big difference in these so-called adjustments contributed most of the difference between the two years. Or it was a major contributor. It wasn't most, but there was a major contributor to the difference.
And if you go line by line, the effect of acquisitions was positive in 2023, and that's coming from the NKBM and Ipoteka acquisition, which were both positive, and the Romanian bank sale, which had a negative impact on our P&L. We kind of reported this when we signed the deal early February. So the impact here was -HUF 29.5 billion, and that's included in this HUF 64.9 billion positive number on the acquisition line. The bank taxes, primarily in Hungary, declined, and that's a good thing. And then we expect further decline next year sorry, this year in 2024. Interest rate cap was extended into the end of June this year for variable mortgages until the end of March for SMEs. So that ever still, these extensions cost us 1 bps, including the last one in the Q4 last year.
Not just Hungary, but the Serbian cap was also accounted for. The other line where there's a considerable change year-on-year is the fact of the Russia-Ukraine war. In 2022, we had big losses here, and in 2023, it was close to zero. On the other line, we had a positive number, and that's this last year, HUF 15 billion. Most of this, like HUF 10 billion, was related to the reversal of the provisions that were made due to the kind of reversal of the losses that we had that we booked in 2022 due to the Sberbank default and the subsequent resolution actions. We booked the loss in 2022, and we reversed that in 2023 because it did not manifest at the end.
Now, if you look at the kind of without one-offs without adjustment items numbers on the left lower corner, it is still quite a strong growth, 70% year-on-year growth, which was, well, driven by various factors. Number one, we included the P&L contribution of the two acquisitions that we made last year, and their combined contribution was HUF 74 billion. 96 was positive was NKBM, and minus 22 was Ipoteka.
And overall, if you look at the ratios, net interest margin improved from 3.5% to almost 4%. And that came primarily from outside Hungary countries, especially those in the Eurozone or Quasi-Eurozone countries. And we clearly benefited from the higher euro rates, whereas we did not benefit. It's quite contrary. The extremely, extremely high rates in Hungary actually were negative marginally for us in Hungary. And the credit risk cost trade was quite low in general, but especially compared to 2022.
2022 was the year when the war started, and we provisioned kind of excessively, especially in Russia and Ukraine, but in all the other countries as well because we had to increase coverage ratios for the countries for the other countries as well given the worsening economic expectations. So that resulted in HUF 178 billion risk costs in 2022. And these factors did not manifest in 2023. In fact, the whole risk cost was HUF 39 billion negative. And that included the 2022 sorry, the HUF 52 billion risk costs that we booked during the H2 of the year in Uzbekistan in Ipoteka. I'm going to talk about this in more detail later. Looking at the consolidated P&L, I think maybe a few I mean, a few highlights. The 28% without acquisitions and FX adjusted full income growth, I think that's quite good, growing organically 28%.
That resulted in actually 37% growth in operating profits. So just in 1 year, we grew operating profits more than one-third organically. And maybe on a quarter-on-quarter comparison, I think, is the net interest income growth, which is quite prominent and important. Looking at the lower growth trend on page 5, we love this chart, apparently. It keeps coming back, but I think this is important, and it keeps reminding us how much we have grown over the kind of last period, the last 7 years. We tripled the size of the group in terms of total assets, and in terms of loan volumes, it was even higher growth. And we kind of reached this above EUR 100 billion level. Put this into another context, 10 years ago, in 2003, the group was EUR 10 billion altogether. So it's like 10x growth in 20 years.
Any other very important change in the structure of the group that now kind of two-thirds of the group is coming from outside Hungary, both in terms of profits and in terms of exposures. On page 6, we start a few pages detailing the Hungarian performance. Again, if you just look at the bottom line number, then it's kind of 10 times improvement compared to 2022. And here, I think it's safe to say that most of the changes come from the so-called adjustment items. So just going through them one by one, the windfall tax, the extra profit tax declined, as you can see here. The special bank tax increased. That keeps increasing. By the way, this is the tax which has been with us since 2010. So you could argue why we put it into the adjustments and the one-offs. And we are kind of reconsidering this.
And just to, I don't want to scare you, but starting from 2024, we are going to substantially reduce these one-off adjustment items. We will reserve this category all into items which are related to the actual buying or selling of assets, of banks or other assets. And everything else, we'll go into the normal kind of profits. So we are not going to show this as special items. But more about this when we present the Q1. So the kind of special bank tax which this is the one which was introduced in 2010. That keeps increasing because this is here, the tax base is related to the subconsolidated Hungarian assets that we have. And since those are growing, this number is growing and will continue to grow in the future. For this year, we expect around kind of close to HUF 30 billion.
Whereas for the windfall tax, which was introduced in 2022 and already decreased from the 2022 level to the HUF 36 billion in 2023, it is going to be; it's going to decrease. And this is in the legislation, actually, further down to possibly around HUF 6.5-6 billion, assuming that we are going to buy the necessary government bonds. And we intend to reduce it down to this level. Now, the interest rate cap appear. We talk about that. There was no effect coming, negative effect coming from the Russian war or the Ukrainian war, the war in Ukraine between Russia and Ukraine. But on the other hand, in the others line, we had a big plus. Now, this is somewhat confusing because this is actually these are items which don't appear typically on the consolidated level.
80 billion of this is specific to the standalone view of the Hungarian bank. And this is related to the investments into the subsidiaries and the value of these investments and the impairment reversals on these investments into subsidiaries, including the reversal of impairment on the revaluation impact on the Romanian bank. So when I mean, on the consolidated level, the sale of the Romanian bank had a negative P&L impact because it sold it at 0.7-time local book, right, value, below the local book, which we book value that we had in Romania. But in the Hungarian books, the book value, the asset, the value of investment of the Romanian subsidiary was much less, was already impaired compared to the book value of the Romanian bank.
So actually, and therefore, the sales price was actually higher than the value of the Romanian bank in our books in Hungary. So actually, we had to book on the Hungarian standalone level, bank level, HUF 37 billion+. And there were other impairment reversals on investments to subsidiaries, including our Serbian bank, HUF 21 billion. So all these together added up to HUF 80 billion+, which only appears on these on the Hungarian numbers and not in the consolidated one. So that's somewhat confusing, but I hope it was clear. And there's another kind of technical element which we talk about when we detail the other income development in the group, but maybe it's worth talking about here. The accounting treatment of the subsidized retail structures, like the baby shower loan and the CSOK, the subsidized mortgage structure is such that we have to fair value adjust them.
So when there are kind of strong movements in the rate environment and/or they change the subsidy structure of the newly issued loans, we have to revalue the existing book. And the existing book is quite big. So this revaluation, positive revaluation last year was HUF 87 billion. And after tax, that was HUF 79 billion.
So out of this HUF 303 billion adjusted profit in Hungary, which grew 18% compared to 2022, actually, there was HUF 79 billion related to this. So that was the kind of one-off boost. This is not unique to OTP. I mean, Erste Bank, a few days ago, published their numbers, and they reported that they booked HUF 43 billion plus due to this fair value adjustment, the evaluation of subsidized loans. So just these two banks together, OTP and Erste in Hungary, booked HUF 130 billion of kind of one-off accounting policy-related positive number.
So we estimate that maybe the whole banking sector might have booked around HUF 200 billion positive last year. And this is actually a very substantial boost to the earnings of the Hungarian banking sector. And this is probably I mean, obviously, unlikely to be repeated, put it this way this year. On a more kind of fundamental level, the improvement compared to 2022 happened in our case, basically in the kind of yearly if you look at the quarterly development of the NIM, there's a strong improvement here. Year-on-year, the NIM actually declined because in this very high rate environment, this is not what we optimized our balance sheet for. And you can see that after the rate, the environment started to fall, starting from the Q2 in 2023, there has been a strong I mean, a reasonably strong improvement in the net interest margin.
Part of the improvement in the Q4 was technical. We also talk about this in this presentation later on. So basically, 26 basis points out of this 60 basis point improvement in the Q4 was related to kind of one-off technicals. But even if you exclude them, the net interest margin in one quarter improves from 2.2%-2.55%. And this improvement is structural. So this is going to stay with us. It's not going to go away. So I think this was the kind of most exciting part of the Q4 result in Hungary, this or one of the two, three most exciting developments that really the Hungarian net interest margin started to react positively to the changing rate environment. A few more words about Hungary, volumes and kind of business trends on page seven.
When we looking at the mortgage market, there was a big decline in overall disbursements. So the overall, on a market level, disbursements declined by 50%. They went down from HUF 1.2 trillion to HUF 600 billion in 2023. And our newly disbursed volumes also declined, but only by 31%. So the decline in our case was much less than the decline on the market. Therefore, not surprisingly, our market share in new production has grown or did grow last year. And our kind of volume growth in stock volume growth, in our case, was 4% compared to the market growth of 1.3%. So we kind of outgrew the market last year. Now, there's even bigger outperformance of the market of OTP last year as in consumer loans. So if you look at cash loan disbursement, our market share has increased even more considerably.
By the end of the year, in the Q4, we reached 45% market share, which is quite in this kind of not subsidized market-based cash loan new disbursements. In terms of volume growth, overall, stock volume growth grew 16%, whereas the market was growing by 7%. Now, the other kind of exciting retail segment, the retail deposits, this was quite problematic last year and very painful for us, actually, because current account volumes on the entire market declined by HUF 1.5 trillion in the first 10 months. This was given our kind of above 40% market share in retail current accounts, this was particularly hurting our profitability. This was one of the reasons why our margins went so low in the H1 of the year.
The good news is that in the last two months, in November and December, there was HUF 500 billion increase. So this decrease in retail current account volume stirred around at the end of the year. And that was one of the kind of reasons behind the improving net interest margin in Hungary next to the lower interest rate environment. Now, this was, again, a specific market situation in Hungary. There was a very strong reallocation of funds by retail clients. And retail government bonds and mutual funds increased considerably while bank deposits declined. But nevertheless, in this kind of declining retail deposit market, we managed to increase our market share year on year last year slightly. Corporate story is somewhat different in our case. Our corporate volumes, in fact, declined last year.
If you have a closer look at previous years' growth, so in 2022, we grew 32%. And most of this growth was in the H2 of 2022. The market in 2022 grew by 15. So our growth rate was more than twice more than the market. So what happened was that basically, our clients pre-financed their loan demands. And we were willing to do that. So we provided them with the loans that they demanded. And therefore, there's a kind of timing of these loans. Much more was done in the later part of 2022 than on the market level. And therefore, less was left for 2023. And obviously, the GDP decline and the high rate environment contributed to the overall kind of slow growth of the market. Now, this is clearly an item where we expect improvement this year.
So we are very much hopeful that loan growth is going to come back. And this is what we prepare for in terms of corporate. Despite the overall decline in volumes in our case, we have been quite active in distributing the subsidized structures, which kept existing. So we had kind of more than 40% market share in the disbursement of subsidized volumes. The next page is our kind of usual decomposition of the NII and net interest margin development. There's no new item here. So that's basically just an update on the information what we shared in the previous two quarters. I don't think there's much to say about this here. On page 10, we have details about the performance of part of the group which is outside Hungary. And that was really a success story last year.
With the exception of Ipoteka and new acquisition, all these banks were contributing quite strongly to overall profitability. You can see the ROE numbers and the nominal kind of volumes as well. I think quite impressive, especially Bulgaria exceeding the HUF 200 billion profit after tax level. Very good improvement year-on-year. Slovenia, with Nova KBM on board, HUF 130 billion. Serbia was also very strong. A few years ago, Serbia was tiny, right, in our case. But having done these successful acquisitions, it's one of the strongest contributors now to our overall group level profits. Russia, Ukraine, after the less good performance in 2022, both of these countries were strong profit contributors in 2023. In case of Ukraine, actually, a 50% corporate tax was introduced at the end of the year. So the Q4 was loss-making because it was retrospectively applied.
We had to pay taxes 50% on profits for the whole year. We had to account for these additional taxes for the entire year in the Q4. But even after this 50% corporate tax, the profit after tax remained HUF 45 billion, which is, I think, quite remarkable given the situation, the war in the country. Now, the good news is that this 50% is not going to stay with us in 2024. It's going to be 25%. So this was a kind of one-off high rate. And I mean, we are usually quite critical of these bank levies and additional bank taxes. But if there's, I think, ever a situation where extra bank tax is warranted, it's the case of Ukraine. I think it is quite understandable that they tax the banks somewhat higher in these difficult times.
Then maybe I talk a bit about the situation in Uzbekistan. So we have 2 slides detailing that. Now, we are learning this country and the bank. So quarter by quarter, we have more information. So hopefully, we can give you a better and better picture of what is going on and maybe more intelligent answers to your questions. So where we stand now, just showing you the performance of the H2 of last year. So in terms of volumes, corporate volumes declined by 38% in 6 months. This was due to the fact that migration to Stage 3. So these are performing loans. So performing Stage 1 and 2 loan volumes declined by 38% due to migration to Stage 3. And obviously, due to the fact that we really I mean, we seriously kind of strengthened and made more conservative the lending standards as well.
So not much new lending was done in corporate. Now, quite in contrast to that, in retail, we were going quite fast. Mortgages grew 15% in six months and consumer loans by 120%, more than doubled. I mean, just to check, these are not annualized growth rates. This is actual period-on-period growth in six months. And that's actually the core of our strategy in the country. Just to remind you, the reason we brought this bank was not to grow so much in corporate, but we wanted to capture the opportunity in the retail segment in Uzbekistan. That's why we brought Ipoteka Bank. Ipoteka actually means mortgage. So it's a primary mortgage bank. And they have like 20+ market share, 25-ish% market share in the country. So the core focus of our strategy or the real focus of our strategy, the retail segment, was actually growing quite fast.
It continues to be, I mean, from the volume levels, what we have there, potential quality demand is almost unlimited and continues to grow. The only limitation to growth is really local currency liquidity. Unfortunately, the monetary policy environment is extremely tight. I mean, the base rate is 15%. The inflation is much lower than 10%. And there's just not enough. There's a very tight local currency liquidity level in the system. And that's the biggest impediment to growth. And swap markets are not available in the local currencies. So even kind of not that we would want to do that, but it's not quite possible to finance any local currency growth from kind of injecting liquidity into the country. So the only kind of limitation to growth on the retail loan side is really the deposit development.
The good news is that we actually managed to grow deposits relatively strongly in the H2 of last year. So corporate deposits grew 23% and household deposits 15%. Again, these numbers are not annualized. These are just end-of-period growth rates. So I mean, what's happening here? I mean, we are obviously improving the activities and the sales techniques and tools of the bank. And there's very strong digital share of the new flow. For instance, out of the consumer loan sales, so the cash loan disbursement, as you can see, in the Q4, we actually sold 77% of the cash loans digitally. And when we brought the bank in the Q2, it was only 40%. So a much larger volume was sold. And a much larger share of those were actually sold through digital channels.
This is without actually replacing the app, what they originally had. We made some tweaks and quick fixes. A big kind of step up in the quality of the digital services what we provide will come when we completely replace the current digital front end. That's going to happen somewhere at the end of this year. This is kind of a work in progress under development. Now, what happened in the corporate portfolio and quality? First of all, it's clear that the stage 3 overall increase was coming from or was the result of the corporate portfolio deterioration. The retail portfolio remained quite stable, as you can see on this chart. The retail stage three ratio hardly changed or even kind of declined. The big increase was it was corporate and micro-small. Now, on this slide, you can actually see the industry split.
So most of the stage three ratios so that's of the stage three loans, sorry. So this is like more than half of these loans, which defaulted, are in the cotton textile industry segment. There's another big share in fisheries and in the agro-sector and actually, the others are quite small. Now, what happened? I mean, apparently, cotton prices collapsed. I mean, if you compare the peak in 2022 Q2 to the low in Q2 2023, then the price difference was actually not 30% but 50%. So cotton prices fall by 50% in one year. And on top of that, they had a very cold winter. The winter of 2022-2023 was the coldest in the last 50 years in Uzbekistan. And this situation was exacerbated by the fact that there was not enough gas supply and gas subsidies were reduced.
So they could not heat these kind of fish lakes or ponds where they grow the fishes. And they could not heat the kind of these greenhouses where they grow fruits and vegetables and things like that. So the weather and the kind of limited supply of gas and more expensive gas and therefore no possibility to provide the right heating for what they needed in the fisheries and the agro-sector and the cotton prices and also the weather conditions in the cotton industry resulted in unprecedented losses. So in a way, it turns out that we seem to be unlucky with the timing of this acquisition because we just managed to buy this bank in the worst kind of external conditions year. And our understanding is improving day by day of what's happening exactly with these clients. And this is where we are at the moment.
So these are probably the strongest drivers. Now, the other side of the coin, obviously, is that if you look at the bank's ability to monitor and collect and do work out of corporate loans and we compare that to the levels what we have in the other parts of the group, there's a huge difference. There's an enormous improvement opportunity and potential in kind of basic risk management and portfolio management practices of the bank. We have started to do that improvement since we took over the bank, but it takes some time. We are making progress on that side. Hopefully, there will be visible results of these improvements in the policies, procedures, people, everything basically related to managing existing problematic portfolios. But it takes some time.
Unfortunately, the relatively low level of this preparedness during last year and these negative external environmental factors resulted in this deterioration. Now, if you look at coverage ratios, what you can see, what the reported ones are not fully providing, they don't provide you the full picture because when we buy something, we have to net provisions to gross loans. So the beginning balance sheet, the opening balance sheet at the end of the Q2 last year, in that, provisions were already netted out. So what you can see in the balance sheet of the bank is the kind of net amount of these non-performing loans. And therefore, the previously created provisions disappear. Therefore, there's a difference between the reported netted-out coverage level and the actual coverage, which compares the provisions to the kind of gross total provisions on the loan to the total exposure of the loan.
And the latter one is adjusted is higher. So in fact, provisioning level is 56% on these Stage Three corporate loans, which is in line with the kind of other levels in the group. And if all goes well, we are actually hopeful that there might be some revisions of provisions later on from these if all goes well. Okay. So that was about Uzbekistan and Ipoteka. Now, maybe a few thoughts, but not much about kind of the P&L lines in the cross-section view. So NII, I already talked about this. I already talked about the one-off technical items in the HUF in Hungary in the Q4, which kind of was part of the story of this quite strong quarter-on-quarter growth in NII. In Ipoteka, we had a reclassification, which caused the decline on a quarter-on-quarter basis in NII.
Without this reclassification, actually, the NII would have improved by 3%. Net interest margins, next page 14, reflect the same story. Again, part of this large improvement in Hungary was related to one-offs, but even without one-offs, it was strong. Otherwise, across other countries, typically improvement in margins due to the rate environment. Page 15, quarter-on-quarter loan growth. I mean, the kind of previous momentum was kept to 1%. If you look at the year-on-year growth, 6% organic and 20% including acquisitions. I think the most remarkable set of numbers here is Bulgaria. 20% growth and especially mortgages, 23% growth. This is not just OTP Hungary. So overall, the market is growing fast. That's coming from two factors. One is that the country is doing well. Actually, three. Country is doing well. Penetration ratios are low. But there's an interesting third factor.
This is something we could learn from in other countries. In Bulgaria, interestingly, retail loans are all variable. The benchmark of these variable retail loans is a benchmark which is officially published by the central bank. It is the average rate of the retail deposits. This structure, industry structure there, resulted in an interesting situation that, okay, deposit beta was close to zero. Deposit rates did not increase despite the much higher rate environment. Therefore, the variable stock rates, consumer and mortgage, did not increase. Also, the new production rates did not increase. Probably, we have one of the lowest mortgage rates in Bulgaria across Europe. The margins are quite strong.
And we don't have to be afraid that if deposit pricing happens, then we lose margins or lose NII because the benchmark of the variable retail loans is the average deposit rate, retail deposit rate on the Bulgarian market. So I think this is a kind of. I'm not sure whether this was designed with purpose, but it has been served for quite a long time, for the last 10, 15 years. And basically, all the banks have these structures. And this specific feature actually resulted in much higher growth in Bulgaria, which is a quasi-Eurozone country, right? They are joining the Eurozone January next year. They are already in ERM II. So it's basically interest rate-wise, it's just a kind of euro rate environment. Now, that's just a kind of small flavor on the situation there. Deposits, again, there was a very, very important development on the quarter-on-quarter numbers.
That's the Hungarian retail deposits. They went up by 2%. The previous three quarters last year, they were negative. For us, that was extremely painful. That's a very welcome development. I hope this is going to continue. Otherwise, on a kind of year-on-year change level, next page, 18. Sorry, 17. I'm sorry. No, 18. Yeah, 18. Yeah. Overall growth was 7% without acquisitions. Kind of higher growth rate than loans. Therefore, actually, loan-to-deposit at group level slightly declined. Kind of general strong growth except Hungary. As you can see, on a yearly comparison basis, the retail growth in Hungary was deposits was negative despite the fact that in the Q4, there was 2% increase. Fee income.
Now, despite low volume growth in Hungary in loans and also negative deposit growth, retail deposit growth, and actually declining GDP, we had 11% growth in fee income. And that's due to inflation. So I mean, obviously, despite a recession and declining GDP, nominal GDP, obviously, increased. And fee income tend to grow with nominal GDP growth. The other two, I mean, strong growth rates in Russia, that's related to the deposit volume increase. And in Hungarian fund management, a huge increase happened in assets under management where, I mean, retail deposits were negatively affected by the very high rate environment and the very high yield on the retail government bonds and money market funds. Obviously, fund management and fund managers benefited a lot. A lot of retail savings moved from bank deposits to mutual funds.
Therefore, our fund management company, which is largest in the country, had a pretty good year. Other income. Again, on this other income line, you see this strong growth in case of Hungary, HUF 74 billion year-on-year growth. As you can see, as we wrote it down in the comment section here on this page, and I already talked about this, in 2023, we had HUF 87 billion plus revaluation result related to these loans, fair value adjustment. And yeah, and in Russia, the conversion kind of revenue was strong. So that was a strong contributor as well. Operating cost. I mean, unfortunately, not just revenues increased, but costs as well, quite considerably. And not surprisingly, Hungary was quite high in terms of operating expenses growth, driven primarily by personnel expenses, 30% year-on-year growth. That was due to the high inflation and high wage inflation.
I mean, we had to keep pace with the very tight job market last year. There seemed to be, from our perspective, some improvements. So I think this very tight labor market is getting a bit relaxed. And hopefully, we can much better control in the future the increase of personal expenses, especially in Hungary. The Albanian strong growth year-on-year was due to the new acquisitions. So that includes the acquisition. Risk cost. Typically positive or small negative numbers, writebacks, except Ipoteka, I already talked about that when I talked about the bank there. So that was due to this corporate deterioration, stage three growth. Overall portfolio quality, page 23. Again, I mean, pretty stable year-on-year, actually strong improvement in terms of the stage three ratio. And the growth in the H2, actually, that's due to Uzbekistan and Ipoteka, stage three ratio going up quite a lot.
We keep our kind of general high provision levels we kept last year. Capital kind of decomposition of the change of the Common Equity Tier 1 ratio, again, it increased last year by 20 basis points. And that was a strong positive contribution from earnings. And 1.3 percentage point was used for the acquisitions. In fact, here you have a negative kind of number for the Romanian bank. But once we actually close the transaction, the all-in number will be positive. On a Common Equity Tier 1 level, it's 43 basis points. And the kind of capital adequacy ratio level is 52. In terms of capital adequacy ratios, I mean, again, quite much higher than requirements, page 25, maybe we can go, yes. So there's nothing new here. Page 26 shows the MREL requirement and the year-end number. So we met the requirements.
And in order to meet the requirements, we obviously issued a lot of bonds and did some bilateral deals, as you can see on page 27. So more than EUR 2 billion equivalent was issued last year, including the bilateral deals. And the coupons, what we see here are, I mean, these are decent and good levels compared to the market and the market environment. But from our kind of internal management point of view, these are very high rates and very high cost of funds. So this whole MREL exercise is really expensive for us. And it's hurting us, actually, a lot because our cost of funding related to the MREL instruments is probably higher than some of the Western European banks. Page 28, I mean, there's not much change on this page. Improving ratings, continuously improving ratings on ESG dimension, which is in line with our strategy.
Now, a few words about what we expect for this year. Now, obviously, in most of the countries where we operate, we expect a better operating environment. In fact, we expect a better operating environment everywhere. It's just that the growth rate might slow down somewhat in certain countries like Montenegro, Ukraine, Russia. But marginally, they are also improving. But in the kind of biggest countries, from our perspective, especially in Hungary, where after the recession last year, we expect GDP growth to come back. Our expectation is like 2.5%. The government expects, I think, more than 4%. So they are right that there's a big upside risk here. But Bulgaria, strong. Slovenia, accelerating. Croatia, extremely strong. The last quarter last year was very promising. So I think there's some upside potential in that growth rate. Serbia doing very well. Albania, extremely well. I mean, Montenegro, good.
Uzbekistan, about 5% growth. In Russia, Ukraine, in our forecast, we did not expect much change in the operating environment. If we are lucky, we can or I hope that the war ends sooner than later. And then if that happens or at least freezes the actual military activity, and then we could expect a much, much higher growth, especially in Ukraine than this. Romania, improving, but that's hardly more relevant for us given that we sell the bank. We expect the transaction to close, actually, quite soon. The buyer is Banca Transilvania. And they seem to be strongly supported by the local supervisors. So we don't expect any complication. And we expect a quite swift closing of this transaction. Moldova speeding up. It's amazing how fast they broke down inflation from an extremely high level and also the rate environment, how it collapsed.
So that's in itself a very interesting story. So before going into the expectations of this year, just a quick look at what we indicated for last year. I mean, we kind of delivered what we indicated. So all these points, which were included in our guidance last year, developed according to the guidance. So that's good. And then looking at what we indicate for this year. Loan volume growth. I mean, given that the whole operating environment improves, GDP growth improves in most of the countries where we operate. We expect a lower rate environment, but much lower in Hungary than last year. And certainly, especially in the H2 of the year, decreasing rate environment in the eurozone and eurozone-related countries, lower inflation. So we are hopeful that this is going to translate into somewhat higher loan demand.
I think it's unlikely that we return in one year to the kind of 2021, 2022 levels, but it was or the 2021 level. So it will take probably more than one year to do that. But hopefully, we can improve on the last year growth rate, which was 6%. Now, interest margin, we indicated here maybe flat compared to last year. And this is the line where there's considerable positive risk. So there's an upside potential in this given that rates seem to kind of stay somewhat higher, somewhat longer. And also the very favorable developments in the Hungarian retail deposit current account numbers. So there might be some upside here, but we, I mean, remain cautious with the guidance, I mean, to be around last year. Cost-to-income ratio 45%, around 45%. Portfolio risk profile similar to last year.
So here, I think we are reasonably convinced that the operating environment improves. And the current quality of the portfolio is quite stable and good. So if there's further improvement, we don't see why the underlying portfolio quality should deteriorate. And overall, in Uzbekistan, we also expect improvement. So now, the exact risk cost rate is more difficult to kind of project. It might be somewhat higher than last year. But the important factor is that the underlying portfolio quality, we don't expect it to be different from what we have had recently. And that's quite a strong performance. Now, as we keep on accumulating earnings and increase capital, the leverage is going to be lower this year than last year. And that's going to have a negative impact on ROE. So maybe ROE will be lower somewhat than last year. Dividends. The current indication is HUF 150 billion.
This is the likely number, which is going to be decided on the board on the 20th of March and then suggested to the general management meeting. We already started to buy back our own shares. Early February, the National Bank approved a program of HUF 60 billion, half equivalent of share purchase, share buyback. So far, we have done I mean, by the end of yesterday, we brought back less than HUF 6 billion. So there's kind of 90% of this is still coming. And we are doing this gradually. So I think when you look at return to shareholders this year, you probably want to kind of add the two together, the 150 and the 60.
And I mean, I cannot exclude and I don't want to exclude the probability that there will be other phases of this share buyback. So our internal decision was on this HUF 60 billion.
We received approval for HUF 60 billion. But once we buy back this stock, we will obviously kind of revisit the capital situation of the group and make a decision accordingly on potential future buybacks. There are some future MREL, at least I mean, we did one additional MREL bond in late January this year, already EUR 600 million. And probably there will be one more and maybe two more during the year. That also depends on our kind of volume growth in new loans. So that was pretty much the presentation I wanted to make. The disclaimers are also important. So please have a look at them. And then I would like to open the floor for questions. So please ask your questions.
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 the raise hand icon to indicate or press star 9 on your phone's dial pad. The first question is from the analyst of Goldman Sachs, Mikhail Butkov .
Good day. Thank you very much for the presentation. I have a couple of questions. First was on the risk profile of the portfolio. You mentioned in the outlook you expect it to be broadly unchanged in 2024. But just to clarify, it's not connected to the cost of risk outlook itself because it was strong in 2023 with 16 basis points. What could speak for stable cost of risk maybe or the increase for the next year? Then the question is also on Uzbekistan. You described quite in detail the weather challenges last year. Assuming that these challenges will not continue into 2024, would you expect cost of risk and provisions to be at more of the normalized level in that business? Or there are some additional internal surprises which you identified and can result in somewhat similar hikes at some point during the year?
The final question is on dividends. Yeah, you have commented your vision on the dividend payments previously and on the capital allocation policy as well. But is there any change so far given that you made progress on MREL? And are there maybe any inorganic growth opportunities which you see currently? So yeah, thank you.
The risk cost rate, I mean, the 16 basis point last year, that's quite low, right? But for a number of years, we had like 20, 30 basis point levels, except in 2020 when we had the COVID-related additional provisioning and in 2022 when we had the war-related provisioning. So in 2018, we had 23 basis points. In 2019, 28. In 2021, 30. And then 2023, 16. So I think 16 is a kind of lower end. And I think it's likely that it's going to be higher than 16. But exactly there, it depends on again, I think where we are pretty confident is that we don't expect portfolio quality to behave differently than last year, which was quite a good kind of behavior, except in Uzbekistan where we do expect improvements.
So I mean, last year, in the H2, we had like 6% risk cost rate sorry, 10% risk cost rate in Ipoteka. The Q1 will be considerably less than that. And then for the remaining quarters, there will be further gradual improvement. That's what our expectation. And during the course of this year, we should reach a kind of normal level, which is closer to the group average than 10%, much closer. But this takes time because we really have to establish the whole kind of risk management process in the bank. There might be positive surprises coming from Uzbekistan during the H2 of the year in terms of portfolio quality because my personal view is that maybe some of these Stage Three loans might recover. And we might find solutions together with other banks and the government to address this problem.
So Uzbekistan is kind of special in this sense. But the rest of the group, again, with the high probability, we expect similar portfolio quality developments. The risk cost rate, on top of that, depends on two factors. One is growth. So the higher the volume grows, the higher the risk grows because for the new volumes that we produce, you have to create provisions for the performing loans. And the other one is forward expectations regarding the economic environment. So the actual provision coverage on performing loans, which will be probably the strongest driver of the risk cost rate this year, will depend on the expectation at the end of this year on primary GDP growth trajectories for 2025 and 2026. And those can move the risk cost rate with a couple of tens of basis points, right, up and down. So that's much more difficult to actually forecast.
So it's kind of difficult. I don't want to give a kind of point estimate of the risk cost rate. I think what we can say is that, again, the portfolio is what we said, that the kind of risk profile of the portfolio will be similar. I think it's quite unlikely that we're going to have less than 16 basis points. So we will probably somewhat more. But how much, honestly, I don't think it makes a lot of sense to give a very precise point estimate. Okay. So that was the risk cost question. The second question was regarding Uzbekistan and the risk cost there. I already talked about this. The third question, dividends in organic opportunities. I mean, as usual, we keep our eyes open. We look into every meaningful opportunity what comes up in the countries where we are interested.
And then we will see. I mean, we are not going to buy something just in order to buy something. That's for sure. And it's pretty much impossible to tell when the next acquisition is going to be. There's nothing in the pipeline which would be as advanced that something could be expected immediately. But even today, we are looking into some opportunities. But it may take years to buy another bank. It may be actually within this year. I don't know. So that's quite hard to tell. We remain to be strongly motivated to continue the growth strategy what we have executed so far. So the management is quite motivated to continue acquisitions. We have capital to do that.
We, I think, demonstrated that we have skills and experience to do acquisitions and to successfully include those new acquisitions into the group, especially given our track record during the last seven years. So the intention, the ability, the skills, the capital is there. It just depends on the opportunities. And the opportunities don't depend on us. So it's hard to tell. But nothing immediate, I would say.
Okay. Thank you very much for the answers. Thank you.
Thank you.
Thank you. The next question is from Gabor Kemeny, Autonomous Research.
Hello. Thanks for the presentation. First question is on your ROE guidance, please, and the way you phrase the ROE guidance. I think you say that ROE may decline driven by the decline in leverage. Now, shall we take this as that you do not expect profits to decline significantly? Would that be a fair interpretation? And then moving to the expected decline in leverage, or in other words, how do you think about capital distribution from here? The question I would have here is at what stage would you make a decision on doing another share buyback? A slightly technical question I have is whether you are planning to cancel the shares you buy back. And then we have a final question a little later. Thank you.
Yeah. Your interpretation of our guidance is a potential interpretation regarding the ROEs. I mean, we carefully phrase these questions to leave some room open for analysts and to kind of shine and give their add value here. So I mean, but I think it makes sense what you said. In terms of capital distribution, potential other share buybacks, I mean, as I mentioned, once we conclude with the HUF 60 billion buyback, we will reassess the situation, our capital situation, potential acquisition opportunities. And as I said, it is possible that there will be another phase. So we kind of chose this gradual progress in buybacks. One of the reasons is that we have to deduct the entire amount. So once we got an approval for a certain amount to be brought back on that day, we have to deduct the entire amount from the regulatory capital.
That immediately increases the MREL issuance requirements, right? So I mean, if you look at our capital equity ratio, tier one ratio, common equity tier one ratio, we are very comfortably above regulatory requirements. We are above regulatory requirements in terms of MREL requirements. But in order to remain at that level, we will have to continue to issue MREL eligible bonds, which, as I explained, we consider extremely expensive. So every share buyback we do, we have to substitute that with newly issued MREL bonds. Or vice versa. The less we buy back, the less we have to issue in terms of bonds. So that's one consideration as well. Obviously, cost of capital is much higher than the cost of these MREL bonds. So from your perspective, from a kind of equity investor perspective, it's obvious what we should do. And we understand that. And we respect that.
We act accordingly. But it's not that it's not cost-free, so to say, right, to do more buybacks. Then canceling the shares, it's the same. First, we have to buy them back. Then we will, I mean, make a decision on this internally what we're going to do. We have not addressed that question yet. But once we conclude with one batch of buybacks, we will consider the question of potentially canceling them. That's another long process. You need regulatory approval. You actually need AGM approval for canceling shares. So whereas we have an AGM decision, which gives the board the opportunity to buy back more shares, for canceling shares, there has to be an AGM shareholders' meeting decision to do that. So management is not entitled to decide on that.
Oh, clear. Thank you, László. And just a quick one on Hungary and NII and the outlook here. So if we exclude the one of you indicated in Q4, I think that would annualize Q4 on a clean basis just above EUR 500 million. And if we put on that this kind of quicker growth you indicate for this year for the group, maybe somewhere on the high single digit, would that be a fair outlook for your Hungarian NII, in your view?
Yeah. I mean, I think that's a good approach. I mean, you didn't ask about I have not yet. I'm sure there will be these questions coming. But I preempt them, right? So the NII sensitivity or the interest rate sensitivity. Now, we have a especially in HUF, the yield curve is steeply kind of declining. And so I think the right question is, what is the expected NII development quarter-over-quarter, assuming the current yield curve, right? And that means that by year-end, in HUF, we get to, in terms of the three-month interbank benchmark, to go down to around 5.1%. And in terms of euro rate, to go down to 2.65%, the three-month EURIBOR kind of current implied expectation in the yield curves.
So if the rate environment develops according to the current expectations implicit in the current yield curves of HUF and the euro, then HUF NII, ceteris paribus, is expected to increase year-on-year by 30%. And the euro NII is expected to increase by 4%. And the two together by 13%. So if nothing happens, no volume growth, nothing else, just the rate environment changes according to the expectations implicit in the yield curve, we expect on the group level around 13% improvement year-on-year in NII. And in HUF, this is much better, much more. It's actually 30%. And that is partially reflected in the Q4 number. Now, on top of that, obviously, there's another level of interest rate sensitivity, right? What happens if there's a further shift in the yield curve, right?
So what if the year-end three-month benchmark in HUF will not be kind of 5.1% but 1% more or 1% less? So that's another question, right? And the answer to that is that in HUF, it doesn't matter much. So actually, our interest rate sensitivity to changes in the expectation so I'm not talking about the expected development, but changes compared to the expected development are relatively marginal and small. So if the kind of year-end reference rate, three-month BUBOR will be, I don't know, 5.5% instead of 5.1% or kind of 4.8%, it doesn't really matter. We expect the same growth in annual NII, right? There will be marginal difference. Whereas in euro, there's a big difference.
So any additional movement in the rate environment, so let's say by year-end, the three-month Euribor is going to be lower than 2.65, what is implied in the current yield curve, then actually, we lose EUR 16 million per 10 basis points. So if it's like 2.55, then it's EUR 16 million less. And then the growth is obviously less in the euro-related. So we still have quite a strong sensitivity to the euro rate development. But if the euro rate develops according to the expectations implicit in the current yield curve, then the year-on-year NII, euro-based NII, will still continue to grow year on year by 4%. I'm not sure. Was that clear? I mean, I don't or.
Yes. I thought it's yeah. Okay. Good. Extremely helpful clarification. Thank you.
Thank you. The next question is from the analyst of JP Morgan Securities, Mehmet Sevim.
Good afternoon. Thanks very much for your time. Actually, it wasn't that clear to me. I think Gabor is a bit smarter than me. So if I may just follow up on that. So basically, if I understand you correctly, what you're saying is, no matter what happens to three-month BUBOR in Hungary, we will see NII 30% up this year, excluding volume impact. Is that correct? Because if that's the.
Not in Hungary, but Hof-related NII.
Hof-related. Yes, yes, yes. Okay.
It's only part of the Hungarian NII, right?
Yes, yes, of course. So if you then add volume growth to that, then basically, we're looking at a higher level, essentially, overall.
Yes.
Okay. Great. Thank you very much for the clarification. So if I may ask a couple of questions on Uzbekistan. You talked about the really interesting growth trends there and how that's limited by local currency liquidity. With what you know so far and taking into account all the limitations there, what kind of growth volumes should we expect there for the next few years, maybe at a subsidiary level there? And secondly, adjustment items, you made an interesting comment that you may move those back to recurring lines now. Could you give us some more information on that? So would that be for 2024? Is that in the ROE, I assume, reported ROE guidance? And maybe separately, like for like, what kind of one-offs would you see this year? And how would you expect that to evolve in 2024 versus 2023? Thank you.
I mean, regarding Uzbekistan, as I try to explain, we see almost unlimited growth potential, quality growth potential in retail lending, especially in consumer loans. Now, where the problem is and the limitation to this growth is the availability of local currency liquidity, which is very tight on the market due to very tight monetary policy. So basically, our growth in retail lending is limited by our ability to grow local currency deposits and potential sources of local currency wholesale funding. And here, we are talking to IFIs. But again, I mean, there's just not enough local currency in circulation. Therefore, that's a clear limit. So it really depends on the monetary policy and the central bank, how much we can grow. But I mean, ultimately, for a longer kind of time horizon, it's huge, right?
I mean, multiples of the current retail loan volumes can be, especially in consumer lending, can be generated in the next couple of years easily. So it is a high-potential environment. Regarding the structural adjustments and again, we have received different feedback related to how we present the numbers. We have had a certain approach so far. And then we are going to try a somewhat different approach starting from 2024, starting from the Q1 this year in presenting the numbers. So we are going to have less kind of adjustment numbers, right? So we will save the adjustments for really acquisition-related, so badwill, one-off risk costs at the time of acquisition, or results from selling an asset. Everything else will be in the kind of normal profit line, so to say. So there will be so and the expectation for these type of one-offs is zero.
So we don't again, as I said, at the moment, we don't have any process, any acquisition process in a stage that we could say that, for sure, we are going to have an acquisition this year. And that's also true for selling other than the Romanian bank, which we already included in terms of a financial impact on the P&L. So in this sense, in the new structure, we don't expect actually one-offs. So the adjusted and the non-adjusted number will be the same. If we talk about the content on the adjustments, what we did last year, and how we expect them to develop this year, then and on that, I can maybe share some views.
So I mean, one I think I mentioned this, but obviously, the Hungarian taxes are the big one-off items or adjustments items we have been showing in the current structure or the last year's structure. So the windfall tax is going to drop down potentially to HUF 6 billion after tax. So from HUF 36 billion, what you can see on page 6 of this presentation maybe it's worth going there with the slides, page 6, as you can see. Yeah. So the windfall tax last year was HUF 36 billion after tax. We expect this line to go down to HUF 6 billion. That's in the legislation.
I mean, in the Q1, we have to book HUF 12 billion after tax. And then if we buy enough government bonds to fulfill the requirement, which we intend to, then once we do that, we can reduce the tax burden from HUF 12 billion to HUF 6 billion.
By year-end, on this line, we expect HUF 6 billion as opposed to HUF 36 billion in 2023. The kind of court-to-court normal bank tax is going to increase because here, the tax base is the total assets of our Hungarian operations. That keeps increasing. This, we expect to be close to HUF 30 billion as opposed to 2024. Rate caps, the two rate caps, the SME rate cap, and that expires at the end of March this year. We don't expect further extension of the SME rate cap. It basically loses its relevance. The cap level is 7.7%. The current base rate is 9%. By April, we expect it to be actually April, May lower than by end of May, the base rate, the reference rate definitely will be lower than the cap. It's going to lose its relevance.
We don't expect it to be extended. However, kind of retail mortgage I mean, variable mortgage cap, there, the cap on the benchmark is at 2%. So that 2% benchmark cap is going to be relevant in the H2 of the year because the benchmark again, by the end of the year, we expect the BUBOR benchmark to go down to between 5%-5.5%, right? And therefore, it remains relevant. If you assume and there's some probability, I must admit, that it will be extended till the end of the year without a six-month theory, the variable mortgage cap, then the cost of that would be kind of HUF 6 billion after tax, HUF 6.5 billion after tax. So in this interest rate cap extension line instead of the 2024, kind of bad-case scenario is HUF 6 billion. The good scenario is zero.
Then we have to weigh the probabilities of this too. I mean, and then the other two lines are probably not so much relevant on this slide, but we might go to page 3, right, where we have the kind of consolidated numbers. So we had adjustments, yeah, 2018 effect, effect. So effect of acquisitions, the expectation here is that I mean, it's just the normal cost of the continuing merger projects. And that's basically Slovenia, where we expect the merger to happen somewhere end of the summer, maybe early September. So this should be a kind of low-negative number. Then bank tax rate cap I talked about, Russian war, in fact, we don't expect much. I mean, what we included here in 2022 was the kind of Russian sovereign bond-related provisions, what we made. We slightly increased these provisions in case of the overdue bonds.
That is the 2.8, what you see here. I think my best estimate is that there will not be further changes in the provisioning levels going forward. On the other line, I don't expect much because 2023, the HUF 15 billion-plus was coming primarily from this, again, as I said, the reversal of the loss what we booked in 2022 regarding the Sberbank default in Hungary. Yeah. So that was the expectations regarding the adjustment items in the structures what we have been using and what we still use in this presentation, right?
That's super. Thank you, László. If I may very quickly go back to the NII sensitivity comments that you made. Again, you mentioned if the current yield curve doesn't change, then the group-level NII would grow 13% without volume growth. So that obviously would imply that NIMS would go up further. So how should we reconcile this with your flatish NIM guidance for the group for this year? What different assumptions do you have there in addition to this that basically keep NIMS flat at a group level?
Yeah. But the problem is that the NIM is not. That's over total assets. And there's a lot of noise there.
Okay. So not directly comparable, I assume. But we should expect at least 13% NII growth within a whole year.
Yeah. That's what I suggested. I also said that there might be some positive risk in the guidance related to the NIM.
That's super helpful. Thanks very much.
Okay.
Thank you. The next question is from Maté Dudás on behalf of Erste Asset Management.
Hello. My first question is regarding the Ipoteka Bank. As we have already passed two months of this year, do you see already further drawdown needs for Ipoteka, or do you think that you are ready with the write-downs? The other question would be, do you already use somewhere artificial intelligence, or do you plan to use it anywhere? That's it. Thanks.
The normalization of the risk cost in Uzbekistan will be gradual. So we expect a step down in the risk cost rate compared to the 10% H2 of last year. We expect the Q1 to be much better than that. And then further improvements should happen in the Q2. And according to what we see, we will get to a kind of normalized level by the H2 of the year. So risk costs will be somewhat more elevated than the normalized expectations in the Q1. AI, yes. I mean, there's a very exciting development. We actually develop our in-house kind of language model. So we do a kind of in-house ChatGPT type of solution. Certainly in Hungary, but probably in all of Central Eastern Europe, we have one of the very few supercomputers and definitely the strongest in Hungary by far.
So that's quite a big initiative. So if all goes well quite soon, we are going to have our own proprietary AI solution because the problem with this open-source solution is that bank security is hard to be protected, right? If you want to use these language models in your actual banking services, providing banking services, you get to a bank security data protection question immediately, which is very difficult to fix. So we hope that we are going to actually quite soon develop a solution which we can broadly use in our services. So yeah, we'll invest quite heavily in AI capabilities, yes.
Okay. Thank you very much.
Thank you. If you have a question for our speaker, please click on the raise hand icon or press star 9 on your phone's dial pad. Yes, there is a question from Simon Nellis. The next question is from Simon Nellis, Citig roup.
Hi. Sorry, I was on mute. Thanks, László, for taking my question. I just have one last one, and that's on the sharp rise in stage two loans over the quarter, if you could elaborate on that and if that's of any concern, or is it mostly because of methodology changes? I think I saw that was the case, particularly in Bulgaria. Thank you.
Yes. It's mostly methodology plus Uzbekistan.
It's quite a large rise in Croatia, though, as well. Was there anything that we should be concerned about there?
Not that I'm aware of.
Okay. Thank you. That's it from me.
Thank you. The next question is from an attendee joined via phone. I opened the line. You will receive an automatic message about it. Please press star 6 to unmute.
Hello. Good afternoon, everyone. Can you hear me?
Yes.
Thanks for the presentation and congratulations on the results. This is Robert Brzoza from PKO BP Securities. I'm sorry. I'm returning back again to the topic of NII in Hungary specifically. Could you please provide us more color on the quite substantial quarterly increase in the NII in Hungary, already excluding one of that you described in the report? I'm mostly interested whether this was coming from the deposit side. You alluded to an increase in overnight deposits in the retail, I believe, segment in Hungary, or whether that was coming from the repricing of subsidized loans, which I believe is ongoing and should also lead next year to lift up in the NII core OTP, or whether there were any other factors at play, which, as I understand, these factors would be sustainable going forward later into this year. Thank you.
What we have additionally is the deposit cap. There are all different caps in policy interventions into our pricing, but there's a corporate deposit cap as well, a policy cap. That started to be effective by November, December. I don't know how long it's going to be effective, but that was another kind of boost. But other than that, it's just the factors what you explained.
All right. Thank you.
Thank you. The next question is from Ülle Adamson, T. Rowe Price.
Hi. Can I ask, do you plan any issuance at the subsidiary level in the Eurobond market? For example, are they in Uzbekistan to finance growth or in Slovenia for MREL requirements? Thank you.
Yes. Slovenian NKBM is going to probably issue more. Uzbekistan, we will see there's a bond which matures next year. So I'm sure we will try to renew that. And again, we are trying to figure out potential ways to get local currency wholesale funding even in Uzbekistan, but that's difficult. We don't so much need dollar, right, because we don't want to grow so much in dollar lending. Retail lending is in local currency, and it should continue to be in local currency. So our kind of liquidity needs in Uzbekistan are primary local currency. And that's not an international market, right? So it has to be some special solution with IFIs or, I don't know, with the government. This is kind of work in progress.
The existing bond, when it matures, I think next year, it will be likely that we will do a reissuance and try to renew that.
Very clear. Thank you.
Thank you.
Thank you. If you have a question for our speaker, please click on the raise hand icon or spam or press star 9 on your phone's dial pad. As there are no further questions, I hand back to the speaker.
Okay. Thank you very much for listening to the presentation, and thank you very much for your very good questions. I think the next stock exchange report will come out on the 10th of May. I hope you will join us for that occasion as well. Till then, all the best and goodbye.
Thank you for your participation. The Q4 2023 conference call is closed now.
Goodbye.