May I now hand you over to László Bencsik, Chief Financial and Strategic Officer? László, you may begin.
Thank you. Good morning, or good afternoon, depending on where you are. Thank you for joining us on OTP Group's 2024 Q3 Interim Results Conference Call Presentation. As usual, the presentation is available on the website, and we are also showing it via the web, so you can download it from the website if that's more convenient for you. And then, as usual, I'm going through the presentation, most pages, and then we can have a very exciting Q&A session as usual. So starting on the highlights page, page number two, there hasn't been much change to this slide. I mean, we continue to be dominant in the region. Our profitability, if anything, improved from the first six months to the first nine months, and it's close to 25% now, and compared to last year, it is somewhat lower, but we are at a much lower leverage.
In fact, as you can see on this slide, our capital adequacy ratio went up above 19%, and our leverage ratio is closer to 11%. Just to remind you, the European kind of minimum requirement is 5%, and most of the banks are between 5% and 6.5%. So this kind of shows the amount of capital we are running on and the kind of relatively little leverage we have. And despite all of this, we have this quite strong ROE. Liquidity remains strong, and portfolio quality is stable, and it has been so for, frankly, the last eight years, despite all the events and turbulences in the economy and in the environment. Page three summarizes the most important financials. So the Q3 was HUF 319 billion up, and the first nine months was HUF 826 billion.
Now, this is slightly lower than the bottom-line reported number a year before, but you may well remember that last year we had two large ones of positive items due to the two acquisitions we made in the beginning of the year in Slovenia and somewhere around the middle of the year in Uzbekistan. And both of these acquisitions were below book, so we booked badwill, and those contributed positively to results. Now, these types of contributions didn't appear this year. Therefore, it makes sense to kind of adjust last year with that. So if we make that adjustment to last year's figures, then we end up with 19% year-on-year growth, which is, I think, quite remarkable. Again, return on equity close to 25%.
Net interest margin stabilized close to 4.3%, and it has been so for most of the time of this year, and this is markedly higher than in the base period last year. Most of the difference is coming from improvements in Hungary. I'm going to talk about the Hungarian development later on. Cost-to-income ratio, very nice to see that it's going lower and lower, and we are getting close to 40%. Risk-to-cost rate, somewhat a tiny bit lower than last year. In this quarter, in the Q3 , there were two kind of important milestone events. One was that we completed in July the sale of our Romanian bank, which we had for 20 years, acquired this bank in 2004, and closed the sale of this asset just in July.
Unfortunately, this was one of the countries, Romania, which, despite all of our efforts, we were unable to organically grow from a small bank existence to a mid-large bank existence. And the environment, to put it mildly, has not been very supportive for us to acquire more assets. So eventually, we had to draw the strategic conclusion and sell the bank. Now, the positive impact on capital adequacy appeared in this quarter when we closed the transactions. So that was 53 basis points on Common Equity Tier 1. And there was one remaining element from the financial, from the P&L impact to come through, that's HUF 7.5 billion plus in other income. So these two are the most visible results of the sale, other than, obviously, assets and liabilities. And then, accordingly, with our assets and liabilities, which we used to have in Romania.
Now, the other milestone event was that we finalized, we closed the merger in Slovenia at the end of August. And now we have one operation, one IT environment. It went very, very smoothly on time, on budget, under the very sharp eyes of ECB. This was our supervision. This was our first merger out of the, I think, probably a dozen which has been done with ECB being the supervisor. And it has created additional work and effort, but ultimately, probably contributed to the excellent execution of the merger. How many other developments? And I'm sure there will be questions, so we wanted to preempt the questions and formally say that currently, there's no information about significant transactions to be announced publicly, which is not a big statement, because if there were, we would have announced them.
But nevertheless, I think that's what we can say, that there's not much to say at this moment. But we keep looking. We will continue to look into every opportunity which has a potential to create value for shareholders in the future, as we have done in the past. The kind of 30%-70% split of earnings remained in the first nine months. That seems to be the new norm in the group, that Hungary is around 30% and foreign operations 70%. And if anything, this will probably continue to change in a way that the foreign contribution might further grow. Page four, you can see the P&L development. And this year, not because of the acquisition, but because of selling the Romanian business.
In fact, we need to adjust, to make some adjustments in the P&L and also in the balance sheet lines in order to have the full picture, so as usual, these gray columns with gray headings show you the year-on-year effects adjusted and organic, so without acquisitions and without divestitures, period-to-period changes. Year-on-year first nine months, total income went up 16%, costs 13%, and that resulted in 18% operating profit improvement. In fact, risk costs were higher this year than last year in the first nine months. That's mostly due to the extra provisions we booked for the Russian bonds, and therefore, altogether, we have 14% adjusted profit growth year-on-year. Now, I think probably the most important number on this slide is the very top 25% net interest income growth. I will elaborate more on this where this growth has come from. Again, this is organic and effects adjusted.
Next page shows the key highlights about the Hungarian core performance. It's up compared to last year by 29% because here, again, there's one item which does not appear in the consolidated numbers, group level, only at the kind of standalone Hungarian core level. It's a technical item related to the Slovenia merger. I mean, due to actually complicated technicalities, when we did the merger, we merged our originally acquired bank, SKB, into the newly acquired bank last year, NKBM, and during this merge, we had to mark to market the value of our original bank, the previously acquired bank, and therefore, the increase of its kind of fair value resulted in this one-off, but again, this disappears in consolidation, and it is clearly not something which is related to normal business activity, so we have to look at the numbers with that.
This item and all the ratios here, what you see, have been calculated without this HUF 130 billion. There was another kind of material, one of it's actually not one of. Each quarter, we have some result coming from this baby loan and subsidized mortgage loan fair value adjustment, as the shape of the yield curve changes from quarter- to- quarter. This is quite a big portfolio. It's 1.5 trillion HUF. Actually, in this quarter, we booked HUF 16 billion fair value adjustment on this portfolio due to the changes in the shape of the yield curve. This is just like 1% fair value change given the overall size of the portfolio as such. It's actually a meaningful and material number to consider when we look at the quarterly Hungarian profit, which was HUF 97 billion.
However, compared to the total size of the portfolio, it is understandable that it's changing kind of the volatility 1% per quarter. And we continue to increase impairment on Russian bonds. So there was HUF 5 billion accounted for in the Q3 . Net interest margin improved, and I think that was a major game changer, which actually happened at the end of last year. So we already started the year with this 2.8%, around 2.8% net interest margin in the Q1 . And then since then, it was continued and actually somewhat improved on a quarterly basis, so continued to improve on a quarterly basis. But this is clearly a different ballpark. And this is the most important driver behind the group net interest margin development. There's no new news on the special taxes and windfall tax and transaction tax since the last conference call we had.
We haven't got new information on these items, either for this year or for next year. A bit more detail on the Hungarian business activity development, and this on the retail side, it actually looks very, very positive. As you can see, new production on mortgages increased 2.4 times compared to last year in our case, and 2.2 times higher than for the whole market, and I mean, this is quite sizable, and it shows that after the quite big drop last year, real estate market, retail real estate market recovered this year, and demand is actually quite strong and continues to be strong. The same is true for cash loans and consumer loans. In these volumes, there was no decline last year, so last year, we also had growth, and despite this kind of increasing base, there was so far this year 61% increase in new contractual volumes.
In our case, and somewhat less on the market. So that shows that consumers are strong, and retail loan demand remains strong in Hungary, despite the rather, I would say, weak-ish overall GDP performance, which is unfortunately more reflected in the corporate loan dynamics, which is described on slide seven. As you can see, there's some growth, 4% growth in micro small, but only 1% growth so far in loans to Hungarian corporates, which kind of reflects a very low level of demand and not much new investment, not much new developments and projects starting in the country, at least not new developments which finance themselves from the local banking market, because in fact, FDI remains strong and there are big developments, and especially in the car industry, electric car industry, and traditional car industry continue, but they don't finance them from the local banking sector.
Now, even this low growth levels, we managed to turn around the last year negative trend of decline in corporate market shares. So we again started to see some improvement in our corporate loan market share in Hungary, which is always very positive news. On page eight, you can see the kind of highlights of profitability and cost income ratios and overall profit contribution of the foreign subsidiaries. And this is also a very positive picture, I believe. In most of the cases, we see nominal increases in profit contribution, and ROEs remain strong. There's a quite remarkable improvement in case of Serbia, above 20% ROE in a kind of declining rate environment. And we are very happy that Ipoteka Bank performed so well. That's our new acquisition, which we made last year.
This was the first privatization process in the banking sector, and we acquired the fifth largest bank from the state, and despite a huge ongoing transformation effort and work done in the bank to modernize it as fast as possible, despite most of the focus being on that, we managed to book 42 billion HUF contribution in the first nine months, and ROE was above 34%, so we are quite happy to see this that in this early stage after the acquisition, we are already making substantial, meaningful contribution to group profitability, and the returns are as good as you can see. The other good thing is that the smaller banks, I mean, in obviously smaller countries, these are actually sizable banks, so they're actually big banks, but in small countries like Montenegro, Albania, and Moldova, they also perform around 20% or higher ROE, which is definitely positive.
Ukraine continues to be a strong contributor to overall profits, and this is, I think, quite important and remarkable given the war situation in the country, so maybe a few more details about in a cross-section manner about the different P&L lines and net interest income. As I said, this is probably the most kind of important or eye-catching number in the whole presentation that year-on-year we managed to organically increase net interest income 25%, and as you can see, most of this growth nominally and also in terms of growth rate came from Hungary, and that's just because of the margin recovery and the margin improvement primarily, and secondarily, also due to the fact that starting from the Q4 last year, retail deposits started to grow.
If you may remember that between the Q2 end of Q2 2022 and the end of Q2 2023, retail deposits declined in general in Hungary on the market, and specifically in our cases, less than on the market, so our markets should increase, but nevertheless, there was around 10% decline, and that was very painful in terms of our profitability, and it has been without precedent. We have never seen that before. I mean, this was obviously due to the high inflation, which peaked at 22%, 25%, sorry, and due to high rate environment, which was for quite a while at 18% and the very high yield retail government bonds, which created an unbeatable competition for us, but now, this year especially, we have seen already 5% growth in retail deposits, which continued in the quarter.
So that actually contributes to also meaningfully, other than the overall changes in the rate environment, to the improvement of NII in Hungary. In the euro, I mean, Slovenia and Croatia are in the eurozone. Bulgaria is in ERM II, quasi eurozone. So eurozone rate environment, and Montenegro adopted the euro. So we have four countries which technically you can consider them eurozone. I think it's quite good that even in these countries, despite the declining rate environment and therefore pressure on margins, we managed to continue to grow NII in these countries between 16% and 23%. I mean, that was due to primarily strong volume dynamics. Net interest margin, page 10. I mean, this is just another way to look at the same events in a way. So as you can see, net interest margin continued to increase on a quarterly basis in Hungary, somewhat compared to the Q2 .
Now this is primarily because of retail deposit dynamics that in the Q2 , we had a strong retail deposit growth, and that on an average kind of quarter-on-quarter average, 3% increase in volumes. That's more or less what you can see here in this margin improvement. As I mentioned, in the euro-linked countries, we experienced margin pressure or margin contraction quarter-on-quarter and mostly also year-on-year. Next slide. Further details, the margin change and the drivers of margin changes in the Q3 each this year. There wasn't much overall change in the margin from the second to the Q3 on the group level. As you can see, basically margin increased in Hungary, and that increase was counterbalanced by some contraction in Slovenia and in Bulgaria.
By the way, Slovenia is probably the most competitive in terms of deposit and also loan pricing at the moment across the group, so that's a difficult market from a price competition point of view. On page 12, we start to talk about volume dynamics, quarter-on-quarter loan growth. Maybe two numbers important. One is Hungarian mortgage growth, which continues to be strong, so just in one quarter, 3% growth. Consumer was actually quite strong as well, 4%, continued, and I think what important is that you will see that the year-to-date numbers as well, that this year, after two rather slow years, we started kind of restarted lending in Ukraine, so we are more kind of less conservative and more eager to start to draw our loan book in Ukraine.
Based on retail and corporate, we became active in lending, and albeit from a low base, we started to grow volumes. And this is like just in Q1 , we had 10% growth. If we look at the year-to-date developments, I mean, there's pretty much the same kind of highlights. First of all, it's worth looking at the total number. It's 7% in the first growth. Again, here you can see on the leftmost column, two numbers. The number in the top left is the kind of reported number change. And the one in the right bottom is the one which is adjusted with the sale of the Romanian bank, so as if it was not in the group at the beginning of the year. That's the kind of organic real year-to-date performance, and it's also FX adjusted. It's related to performing loans. Altogether, 7%.
Last year, whole year, we grew 6%. So I think it's safe to say now that indeed we seem to be growing faster this year than last year. Already in the first nine months, we grew more than last year in the whole year. And you can see here that Ukraine went up 21% in nine months in terms of loan volumes, and Hungarian mortgages, 9% in nine months. So most likely we will be visibly above 10% growth, so double-digit mortgage growth in Hungary. And that is obviously not surprising if we think back to one of the previous slides where I mentioned that we actually contracted this year 2.4 times more mortgages than last year. Deposit growth. I mean, we are not so much focusing on deposit collection in general, given that our loan-to-deposit ratio on the group level is 73%. So we are quite liquid.
We really focus on deposit collection, where we make a lot of money on deposits or where it's really profitable and where the loan-to-deposit ratios are high or exceedingly high, much higher than 100%. Maybe it's better to look at the next page, which shows the year-to-date change. Overall, 5%, which means that actually in nominal volume terms, the deposit growth this year has so far been higher than loan growth, despite the ratio of loan growth being 7%. Again, you can see here this 5% year-to-date growth in Hungarian retail. That is a very, very important number from the perspective of our profitability in Hungary and overall, even for the whole group. The other, I think, outlying number here is Ipoteka in Uzbekistan. I think you may remember that when we brought the bank last year, the loan-to-deposit ratio was above 300%.
Actually, a year ago, and at the end of the Q3 last year, it was almost exactly 300%. Now, due to this strong deposit growth, what we have seen so far this year, this ratio is closer now to 200%. So in fact, it was exactly 206%. So we almost improved 100% of the loan-to-deposit ratio for our bank in Uzbekistan, which obviously this is important strategic from our perspective and makes the bank much more sustainable structurally. Page 16, some detail, again, cross-section view on net fee income. Overall, divestiture and acquisition adjusted year-on-year growth, 14%. Quite strong number in Hungary. And Hungary, again, high inflation environment, high transaction volume growth. But unfortunately, as you can see, the Q3 was negative in terms of fee growth in Hungary.
This reflects the newly introduced transaction taxes in Hungary, or not newly introduced, but increase of transaction taxes in Hungary. The rate of the tax increased for transfers and for cash withdrawals by 50%, basically, from 0.3% to 0.45% and from 0.6% to 0.9%. So during till the end of the year, we are not allowed to pass this on to retail clients, only to corporate. So this kind of retail transaction tax increase, which we have not been able to pass on through our fees to clients, reflects, I mean, or resulted in this decline in Hungary. Other than that, it's mostly, I mean, we see strong results on a quarterly basis in Bulgaria, Croatia, Albania. Those are typically the countries where tourism is strong and tourism-related transactional revenues increase. Fund management in Hungary, year-on-year, 40% increased.
I mean, assets under management has grown a lot, and they are close to HUF 4.5 trillion, and with this, we have almost one-third of the market. Our market share is 32% of assets under management in Hungary, so that's quite a strong performance, and this kind of generates stable fee incomes. Other income. This is the line where the Hungarian subsidized baby loan and mortgage loan fair value adjustments appear, so there's a lot of noise in these years on this line, and we try to explain here how much of this kind of year-on-year or quarterly changes are related to this in Hungary, so clearly, nominally, this is the line which makes most impact on their other income, and unfortunately, it will continue to create noise in this P&L line, given the nature of the accounting treatment of these volumes. Operating costs on page 18.
Overall, 13% adjusted FX and acquisition and divestiture adjusted growth. 8% in Hungary, 7% personal. Actually, in Hungary, we have a high level of depreciation. That is the reflection of the investments of the CapEx investments we have made during the last couple of years into modernizing our IT. This is just the reflection of that. DSK, I mean, very high levels of wage inflation, which is in a very good from a perspective of loan growth. I mean, you probably saw the kind of retail loan growth numbers, which are one of the pretty much the highest in the group. So yesterday, in Bulgaria, mortgages grew 21%, consumer volume 17% just in nine months. That's partially due to the fact that wage inflation is strong, consumer is strong, disposable income, real disposable income increases. But the driver of that is wage inflation.
Unfortunately, this is a country where, well, I don't know, unfortunately or not, because as I said, there's a positive side of this on the loan demand side and the loan quality side. But certainly, from a cost perspective, it's a challenge to keep or rein in, in a way, our actually personnel expenses growth in Bulgaria. In Slovenia, this seemingly large increase year-on-year is due to the fact that we are not showing anymore, starting from this year, the cost of merger, post-acquisition merger as one-off items. We show them as kind of business-as-usual cost. And this year was very heavy in Slovenia in terms of the merger activities and the associated costs. So this kind of high year-on-year growth is attributable to that and also to wage increases. And now that the merger was done, we will focus on realizing synergies.
We already started to combine branches. During the course of the next one and a half years, we intend to realize the targeted cost synergies, which are in the range of EUR 30-35 million annually in terms of cost savings. In Albania, you can already see the results of the merger, what we completed there at the end of last year. Some of the cost synergies already manifested. As the direct result of that, nominal costs actually decreased year-on-year in Albania. Risk costs on page 19. Again, overall portfolio quality rather stable. We increased somewhat provisioning on these Russian bond exposures in Hungary and in Bulgaria. The coverage is now up to 62% overall. There hasn't been any change in the status of these bonds. The still current bonds continue to pay coupons.
Those coupons arrive to Hungary into OTP's bank account in Merkantil Bank. And obviously, we keep it in a closed account. We don't touch it until further. We actually need a jury decision on this in order to release them in the future. But that's another story. The most important thing is that these interest payments are here in Hungary in our accounts, albeit on a closed account. If you look at the overall portfolio quality metrics on page 20, stage 3 ratio continued to decline. So it reached 4% in the Q3 And we continue to maintain a relatively conservative level of coverage. You can see that compared to our competitors, we have overall a higher coverage both on performing stage 1 and 2 and non-performing stage 3 exposures. Capital adequacy improved quite considerably.
That's due to the continuous profit accumulation, but also to this one-off event, as I mentioned at the beginning of the presentation. 53 basis point increase is attributable to the closure of the transaction in Romania, as you can see on this picture. Basically, profit accumulation resulted in 2.9 percentage point increase in the common equity Tier 1 ratio during the first nine months. You can see the other effects one by one on this slide. Liquidity and bonds and maturities and call dates wise, we had actually an eventful period in the Q3 . We called back two bonds, as you can see on this page, in July, a senior preferred and a Tier 2, altogether EUR 900 million. We issued two bonds since the end of the Q2 .
One was a Yuan bond, the other a smaller amount, EUR 300 million, and the other one in October, actually, so after the Q3 , but before the reporting date today, we did EUR 500 million senior preferred. I mean, last year, we'll be compared to this overall size, more than EUR 100 billion balance sheet, the call profile next year, or the call dates, altogether less than EUR 1 billion callable papers, so it's quite modest compared to the size of the overall operation, and even if you compare it to the profit what we generate in a year, this is a rather small amount, and accordingly, our liquidity ratios, as you can see in the kind of lower left corner, remain to be quite strong in themselves and in comparison to our regional competitors. A little bit about the future.
We are not yet at the stage where we make guidance for next year. So I will try to resist your questions and not to elaborate too much on that. We are in the process of finalizing or creating the plan, the budget for next year. It has not finished yet. So as usual, we will talk about 2025 guidance when we present the annual results of the 2024 in early March. But I think it's fair to say that our overall expectation regarding the operating environment is quite positive. So as you can see, in almost every country where we are present, we expect GDP growth to accelerate or at least remain stable. So gradual improvement in the external environment, it's more remarkable in Hungary, or mostly remarkable in Hungary, I would say, the improvement expectation.
Unfortunately, the recent GDP numbers were somewhat discouraging, and they were a negative surprise in a way. So the annual growth at the end of the Q3 was actually negative. And we kind of by year-end, it will probably improve due to base effect, but it will probably not be higher than 1%, which is certainly lower than our original expectations. For next year, the government guidance and expectation is 3.4%. They actually like to say that it's going to be between 3 and 6, but the point expectation what they have is 3.4%. Now, we are slightly more conservative on this. But even if this 2.5-2.8% manifested next year, this is definitely going to be a better environment for us.
And the most obvious direct impact on our operations should be the increase in corporate loan demand, because as you have seen from our numbers, corporate loan growth was very, very low this year. And retail actually quite decent. And if this macro environment manifests next year, then I think it's fair to expect that retail will continue to grow, at least with the current dynamics, if not more. And hopefully, corporate demand will also catch up to retail demand. And we should see close to 10% or even higher corporate loan growth. But that's probably the biggest question mark in our heads as well regarding next year. The other countries are more or less on a more predictable track, I would say. The implication of these two are this year guidance is that we are not changing the guidance now.
We made one change after the Q2 results, and that was on the line of the net interest margin. Originally, we suggested maybe similar level to last year, but then we upgraded that guidance, and now, given I'm seeing the Q3 numbers, I think that was the right thing to do. It's clear that we're going to have higher margin this year than last year. We haven't made a formal adjustment to these numbers, but if we look at the other lines, given that we had 7% growth in the first nine months, I think it's fair to assume now that our original guidance was right, that it's very likely that we will end up having more than 6% overall the whole year. Cost-to-income ratio first nine months was 41%. I mean, there's usually a seasonality in costs, so costs are typically somewhat higher in the Q4 .
So it might happen that we end up higher than 41%. But this is, I think, still around 45%. The good thing that it's around from below and not from above. So in that sense, I think we have done a good job. Risk profile, again, portfolio remains stable. So that seemed to manifest, at least in the first nine months of the year, our original guidance. And ROE, yes, it's lower than last year. And I think now it's clear for you as well that this decline is due to increasing leverage and not because of lower earnings. So that was the presentation what we prepared and what I wanted to share with you. And I'm sure you have very good and exciting questions. So please 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 the raise hand icon or press star 9 on your phone's dial pad. The first question is from Gábor Kemény, Autonomous Research.
Oh, hi. Thank you for the detailed presentation. My question is around questions, actually, around capital deployment. And if you could give us an update, please, how you think about your plans about capital distribution. I guess you are at such a very comfortable capital level at this stage. You are flagging some headwinds from Basel IV, but you are also generating capital likely in the Q4 . Maybe the question I could ask, shall we not expect 2025 to a declining leverage? Yeah, I wondered what your thoughts were about capital distribution around the Q4 stage, please.
And the related. Wait, there is an interruption. So shall we not expect declining leverage next year?
No, I mean, just looking at your guidance for this year, I think it is a lower ROE because of a declining leverage, and I wondered why this may not be the case for next year as well, so in that context, it would be interesting to hear your thoughts on capital distributions around year, and another question on capital deployment, if you could please share your latest thoughts on M&A. I think there was a you were talking about a larger possible transaction where you were expecting some development towards year-end, and if you have any other thoughts on any other deals, it would be interesting. Thank you.
Thank you. Indeed, very pertinent question, so I'm not in a position to share with you our plans. We have not made formal decisions on how much and how we want to distribute next year. But as you said, we are indeed apparently in a very comfortable position. So we have a lot to decide about.
So indeed, as you mentioned, and we put it into the actual report that we Basel IV, we implement 1st of January as all the banks across Europe. And given that we have a standard approach, for us, this is going to more or less have a one-off effect. And that one-off effect is, in our estimate, it's 800 basis points on Common Equity Tier 1. So that's our best guess at the moment, our estimate. And then given that we are in standard method anyway, for us, it won't mean that we will have to kind of gradually increase the floor because for us, we already I mean, we do have the standard floors.
Actually, the 100% of the standard floors, not just 70%, 2.5% of the standard floors, but even beyond that negative one-off, it's clear that we are in a very comfortable equity position. And I'm sure I hope we won't disappoint you or shareholders when we announce what we are going to do with this. And that announcement will be when we present the year-end numbers early March next year. Unless we start another, I mean, we are in the second phase of our buyback kind of process. If we kind of consume the approved HUF 60 billion number before that, the volume of HUF 60 billion nominal equivalent, then we might come up with a new proposal earlier, but most likely it will be early March. Obviously, suggestion related to dividends. And I wouldn't be surprised if you were suggesting other share buyback actions as well.
On the M&A front, again, we try to be very precise. And therefore, we put it in writing. So as you can read in the long report and also on the third page of this presentation, there's nothing we can report about regarding material transactions. Those who have sensitive ears, I think from that can infer what the situation is. Yes, indeed. But I'm not in a I cannot say more due to confidentiality and other reasons, especially not about concrete transactions. And probably we have or the press actually said already too much about one specific. So there's nothing we can talk about. And it may change, but at the moment, we don't see how it could change. So that would be a new development, I would say.
Thank you, László. Just maybe one follow-up, please, on the capital situation.
I mean, how long would you be ready to run with such a level of capital surplus? So at what stage would you say that we rather distribute rather than to wait for another M&A opportunity to materialize?
I mean, my personal view is that about 19% is far too high. And I don't remember when we have been at this level. So this is certainly not where we want to be, right?
Okay. I hear you. Thanks.
Sure.
Thank you. The next question is from Mikhail Butkov, Goldman Sachs.
Yeah, good day. Thank you very much for a very detailed presentation. I have a couple of questions on net interest margin. To begin with the OTP core, if we look at the dynamic, excluding the one-offs, there was some good progression from the Q1 . So in the Q3 , I think there was some 11 basis points improvement.
If we could just discuss what were the components of that improvement, whether that's some help from the lower rates, maybe some reload of securities, or anything else like hedges. Then connect on the net interest margin topic. The rates in Europe are expected now to come lower than it was a few months ago. Maybe you could update us on your net interest margin sensitivity to euro rates and balancing the outlook in Hungary on NIMS and in other countries, net-net. Do you think one will offset the other or the effect maybe of Hungary or the effects of one will be more than the other? Thank you. Thank you.
Hungarian net interest margin improved mostly because in the Q2 , we had a very strong growth in deposits. Quarter-on-quarter average retail deposits, that is basically sight deposits, grew 3%.
I mean, we don't pay anything very low on, well, not much on retail deposits. That's why I kind of said that this is a very important number to look at because if retail deposits continue to grow with the rate what they have been usually growing. I mean, retail deposits, I mean, in a kind of normal environment, they should grow probably around nominal GDP growth at least or maybe 1.5 multiplier on that. So maybe two times multiplier, it depends. But that's an important number. The sensitivity to the HUF rate is very immaterial around this 6.5%. Indeed, as you said, euro rate expectations actually declined. Or I mean, the rate, the cut, the reduction expectations increased in case of euro. In case of forint, it's quite the opposite.
So now, I think very few people expect now rate cuts in HUF in the foreseeable future. So therefore, even from the rate environment, there's not much pressure in a way or not much volatility expected forward-looking. But even if there was another 50 basis points decrease, it would not have a or 100 basis points in HUF, it would not have a material impact. However, if retail deposits continue to grow and the pricing of these deposits doesn't change or don't change, then that can kind of continue to have a positive contribution to the Hungarian margin and NII in a meaningful way, in a even quarterly visible way. So that can continue. And again, the number here to follow is and watch is the Hungarian deposit growth and deposit changes. The euro sensitivity, yes. I mean, we are sensitive to the euro changes.
Obviously, a declining rate is negative for us. This is captured in the numbers. If you look at net interest margin development in the countries which are in the eurozone or ERM-sized eurozone on page 10, maybe we can go back one page, and then we can see. As you can see, in Bulgaria, there's a kind of gradual decline. In Slovenia, there's also some pressure quarter on quarter. Likewise, in Croatia. It's not very dramatic, but it's there. Our kind of sensitivity to the euro rate remains similar to what we reported last time. It's EUR 110 million per one percentage point decline in the euro rate. This is an annualized NII terms. We are doing even, I mean, and this relates to the end of September. Since then, we have done certain additional measures.
So I hope that this number will be lower by the end of the year. So maybe lower than 100 and closer to 90. At its highest level, a year ago, it was 190 million. So our sensitivity a year ago was much bigger. But since then, we have adjusted our asset liability positions and reduced that sensitivity. And we will continue to do that, albeit with a smaller magnitude. So that's in numeric terms, our sensitivity to euro rates. And in a good scenario, these two and maybe another third factor that we have Uzbekistan, Ukraine, countries where margins are bigger. And we expect kind of higher growth rate from these countries than from the rest of the group. So actually, high margin countries' contribution to the overall NII may increase given their expected growth rate. And that can have positive impacts.
We have basically potential composition positive effect from higher growth of higher margin countries in our portfolio. Then positive effect coming from the hopefully growing retail deposits in Hungary. If all goes well, these can counterbalance, yes, the expected negative contribution coming from the lower euro rate. That's a good scenario. Obviously, it also depends on the magnitude and speed of the euro rate cuts, right? I think this is one of the risk factors in general in European banking that it can happen that the rates will decline faster and potentially more than we expected due to the rather weak growth performance of some of the core European economies. On the other hand, the expected policies of the new U.S. administration seem to suggest maybe higher rate environment and higher inflationary environment in the U.S. than otherwise expected.
So that can have another directional effect on euro rates. But I'm sure you know much more about the expectations of euro rates than I have. So I don't want to go into very much detail here.
Okay. Thank you. Just one small follow-up on the retail deposits growth in Hungary. So is that the new volumes which come at lower yield, or you see rather maybe some conversion of older time deposits to the current, to the retail deposits at the lower rate, which effectively translates into the higher loan deposit spread? Or it is rather you see the higher loan deposit spread on the new origination, new loans minus new retail deposits, if I may ask this question?
All right. So it's basically just liquidity is increasing in the system. Wage inflation last year was more than 10%. This year, probably close to 10%.
Retail or kind of retail clients earn more and spend more because inflation. So there's more money in circulation. And that's one thing. The other thing is that the money supply increases. The other thing is that the alternative investment yields have declined substantially. A year ago, you could still invest into Hungarian retail government bonds with 16-19% yield. Today, it's more about kind of 6%-7%. So the alternative investment opportunities yield decreased considerably. And therefore, competition to deposits from other products decreased. Nevertheless, a large interest payment is actually coming on this retail government bond stock in February, March, even January next year. So there will be like 1.2-1.25 trillion HUF interest payment on this stock of retail government bonds. So that will kind of generate another surge in liquidity in the sector, I guess.
But there are various factors which suggest, and obviously, loan growth that increases leverage and multiplier. So strong retail growth is certainly also generating more liquidity in circulation. So these are important factors. So altogether, I think every factor, observable factor, is rather positive than negative in terms of our expectations to retail deposit growth. All right.
All right. Thank you very much. Very, very helpful. Thank you.
Thank you. The next question is from Máté Nemes, UBS.
Yes. Good afternoon. And thank you for the presentation. I have two questions, three questions, please. The first one is just a quick technical one of clarification.
I was just wondering if the EUR 110 million of sensitivity for 100 basis point lower rates, if that sensitivity also applies for the second 100 basis point, i.e., not just the initial impact, should we expect a somewhat higher sensitivity once the deposit facility rate crosses, I don't know, below 2.75 or 2.5%? That's the first one. The second question would be on Slovenia. I think you mentioned that the targeted savings is EUR 30 million-EUR 35 million. When do you expect this to be fully realized and how much is done by now? And the last question is perhaps a little bit broader one. Could you perhaps talk about any effects, any impact that you're seeing from a weak German macro, the automotive OEMs and supplier space that are visibly struggling? Do you see any effect in your portfolio or in your core markets, anything downstream from there?
Just looking at your risk costs and asset quality metrics, it doesn't seem so. But love to hear your thoughts. Thank you.
Yeah. This HUF 110 million for the first 1 percentage point decline. The second 1 percentage point decline would result in similar numbers, somewhat less, but not very much different. So it is almost linear, somewhat less than linear. The 30-35 million cost saving, we expect after closing the merger, which was in August. As I said, since August, we already combined some of our branches. So it's already underway. And it will manifest in one and a half years. The kind of headcount adjustment can only be a relatively slow process given the local regulatory environment. Your third question is probably the most difficult. Our direct exposure to the car industry is very limited. And that includes their strategic suppliers.
Car producers don't use local banks to finance themselves. That's true for German and for Chinese car producers. They bring funding with them. They really don't bank with local banks too much. There's obviously some exposure through their workers, but these are usually very highly skilled workers. Given the overall, in other sectors, tight nature of the labor market, I don't see a potential problem here, even if the number of people working in the car manufacturing industry declines in Hungary. I don't see a big threat to our portfolio quality as such. Therefore, to retail in general or retail demand or retail loan growth. I think the most sensitive to this is the GDP overall number. Because I mean, on the GDP, net export, they have a huge contribution, right? They bring in some parts, assemble.
They show a big added value creation in the country. They typically don't pay much taxes or little taxes they pay. But I think they have a quite material effect on overall GDP growth, but much less direct impact on our immediate clients. At least that's true for kind of short term. I mean, mid to long term, obviously, and this is not just car industry. I think core Europe in general, especially more specifically Germany, Austria in general, precision engineering and their industry structure, to which extent it's competitive or not, and which extent they are able to grow their exports and therefore grow, they need more imports from Central Eastern Europe. Structurally, this is important long term. I don't want to downplay the kind of long-term structural importance for Europe and Central Eastern Europe.
But it is, I think, less specific to the car industry than in general to all exports from Central and Eastern Europe to core Europe. And that's a concern. So it's very clear that a stagnating core European performance has a measurable negative impact and effect on Central and Eastern European growth. But just because from the car industry having specific difficulties, I don't quite expect kind of material deterioration in portfolio quality or material impact on retail, especially retail loan demand.
Thank you very much, László.
Thank you. The next question is from Ruslan, the Raiffeisen Research. Ruslan, the floor is open.
I hope you can hear me now.
Yes.
Great. Thanks. Thanks for the presentation. Just a couple of questions from my side, if I may, please. First, rather technical.
There was a communication recently that you might see an increase of the Pillar 2 buffer requirements, a slight one, but still in 2025. In this regard, do you also expect an upward revision of your MREL requirement for the next year? And if yes, is there any quantitative indication you can give at this stage, please? The second question is also related to the MREL concerning the Slovenian bank. What is your strategy concerning OTP Banka in terms of its resolution approach? For how long, really, do you expect it to remain a separate resolution entity? And if this is still the case next year, should we expect further external MREL issuances from Slovenia's OTP Banka on its own basis, given there is a call option of the EUR 400 million in June, if I remember correctly?
Generally speaking, there are almost EUR 900 million of MREL debt outstanding. These are the two questions from my side. Thank you.
NKBM resolution plan, indeed, because NKBM, before we acquired it, was a standalone resolution entity directly supervised by the Single Resolution Board. It remained that. Our original bank, which used to be part of the Single Point of Entry resolution group, we merged this SKB into NKBM. Therefore, now the merged new entity in Slovenia is Multiple Point of Entry, as you rightly said. The process is such that we have to apply for changing the treatment, the strategy regarding resolution strategy of our Slovenian bank, which is now called OTP Bank Slovenia. That's a rather long process.
So we will most likely submit such a request, and then the resolution college will consider this during the course of next year and make a decision somewhere second half of next year. And then if there's a change in the resolution treatment of our Slovenian bank, then this will come into effect in 2026, as the earliest. So for sure, for 2025, the Slovenian bank will stay as a standalone resolution entity. And that means that they will have to continue to provide the MREL funds for themselves during the course of next year. And if in 2026, they move into the group, then from that point of time, we will have to provide it from the group. Your first question was Pillar 2 guidance. Yeah. I mean, in the presentation on page 21, we have this that there's a Pillar 2 guidance of 0.5%.
Was that what you asked for?
Yeah. Yeah. So I mean, there was a communication also recently saying that you may see an increase of this buffer in 2025. And since this is the direct input to the MREL formula in a default approach, so what is your expectations for the recalibration of the MREL target for the OTP Group in 2025? So technically, I would expect it should be also increased then. So the question is to what extent if you also see it the same way.
I mean, all in all, considering every factor into, we don't expect much increase in the MREL minimum requirement. So it's not going to be higher than 25.
Okay. Okay. Clear. Thanks a lot.
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 six to unmute. May I ask your name and the company, please?
Hello. This is Robert Brzoza from PKO BP Securities. Thanks for the presentation and congrats on the results. I have a question on subsidized lending because many new programs are coming online, so to say, next year. The subsidized loans for young people, the corporate lending for SMEs. In an environment where the rates are above 6% level, we already learned that this doesn't change much. It doesn't change much the NII outlook for the OTP core.
But do you have any feeling how the margin which the banks earn on the subsidized loans being offered by the state, which then the banks intermediate on the market? So any feeling how the margins on the new products would look like next year compared to previous products like certainty loans or data loans, etc., whether they would be lower or comparable in size? Thank you.
The corporate subsidized structures seem to follow the same pattern, so more or less kind of 2.5% margin for banks. The retail development is rather worrying in a way because in mortgages, the discussion is not about subsidies, but kind of another voluntarily cap on new production. So the government or the Minister of Economy suggested that banks should introduce a voluntarily cap on new mortgage lending, not higher than 5% rates. Now, the scope of this request is not clear.
And here, the banks have an opportunity to actually suggest a structure or a target segment, maybe to young individuals, maybe for new houses, and so on, so not to apply that for the entire production next year. And this is different from previous structures where there has been typically an actual subsidy. Here, there's no subsidy, right? You're expected to sell mortgages lower than the benchmark, which is clearly negative. So this is still in negotiation and discussion. It's particularly concerning in the context of what I presented, that actually mortgage growth is incredibly strong. I mean, year on year, we have almost 2.5 times higher new production. And we are going to have double-digit mortgage growth this year. And I mean, hopefully, rates are not going to be higher next year. And this year, the expectation is still somewhat lower.
There doesn't seem to be any intrinsic need for boosting mortgage lending with such drastic measures, which overrule market pricing in general. So I mean, this is a problem. And there's a kind of spillover potential risk that even if it's for a kind of select group of clients, well-defined purpose structure, if such a low-rate product exists on the market, that rates are kind of anchored for pricing for other products. So this is challenging, and it's tough. And it might have an impact on our kind of mid to long-term development of margins in Hungary. I mean, certainly, I mean, if this is going to become more systemic and then widespread, then we have to certainly revisit our strategic considerations as well, what to do with a situation like that. I don't think we are going to go into that extreme.
But certainly, this is going to be an issue next year and something to follow and watch. And it's hard to tell how aggressive the government is going to be to actually enforce this voluntary pricing measure or not.
Got it. I appreciate the explanations. One more follow-up, if I may. Did the government at any time possibly hint at possible regulations pertaining to the already issued stock of subsidized lending? Because as I understand, the subsidies constitute some part of an expense from a budgetary fiscal deficit perspective. So it could also be a mechanism for the government to consolidate the deficit, right, if they would be able or willing to amend the mechanism which reimburses the banks for the effort in granting those loans. So have there been any signs or hints from the government that it could be coming at some point? Thank you.
No. The answer is a clear no. There has not.
Right. Okay. Thank you.
Thank you. The next question is from Gábor Bukta, Concorde Securities.
Hi. Thank you for your presentation. I have two questions regarding Uzbekistan. So you earlier talked about the potential normalization of provisioning in Uzbekistan, and the Q3 was quite good, if I could say so, and this underpinned your previous comments. So going forward, could you give more color on the risk cost perhaps for 2025? And the second question is also in relation to this bank. So the loan-to-deposit ratio was down 30 percentage points, which you mentioned during the presentation. Where do you expect this figure will land in 2025, or what would be a desired level where you are comfortable? Thank you.
Yes. Thank you.
Indeed, in the Q3 , the risk cost was actually zero due to recoveries on previously defaulted corporate loans. And these events, hopefully, will come in the future as well. Obviously, it's difficult to predict them because if we could predict them, then we would already change the provisioning level. But we are working hard to collect as much as possible on the portfolio which defaulted last year, second half of last year. And I think it's fair to assume that there will be other quarters where meaningful positive contribution is going to come from recoveries of this volume. Again, I think for next year, if you allow me, I would not go as far as to give kind of exact number-like guidance. But certainly, we don't see further deterioration of the corporate portfolio. And in the defaulted corporate portfolio, we believe that the provisioning level is adequate.
And even there might be kind of recoveries above that. In retail, we are working on the operational consolidation of the bank because, as you probably have seen, our retail loan growth was quite modest despite very strong growth on the market. So unfortunately, well, we have to spend time. So the Q3 , there was not much growth in consumer volumes, where the market our volumes, where the market is growing quite fast. And the reason behind this is that we have to operationally fix the bank before we can really scale up consumer lending. And that's an exercise what we are working on heavily. And hopefully, the Q4 growth will be much better. And next year, we can have another step up in scaling up the new production.
So therefore, because we are actually selling low volumes in retail, actually, risk cost is not going to be very strong in fourth or Q1 next year. But once we manage to get back to the level of new production where we want to be, then I think a risk cost rate, which is appropriate for a high APR lending activity, I mean, these consumer loans' APRs are in the high 30s%-low 40s. So these are kind of high APR loans, strong margin. And therefore, typically, risk cost rates are also reasonably high. So I think probably by the second half of next year, I hope we will be at full capacity in terms of new production.
And then risk cost will kind of normalize at the level which is appropriate for this high net interest margin, high APR product, which is structurally higher than, obviously, than the group average and probably more similar to numbers, risk cost rates where we see in, I don't know, Russian or Ukrainian consumer lending. But we are not there yet to scale up fully. Thank you. And if I may have another question. So the deposit growth in Hungary and your market share. So I just seen your report that your market share has lowered during the last couple of quarters in Hungary. And so you mentioned that you earn such big money on deposits. What is the desired market share in Hungary which you would like to maintain going forward? Sorry, I think I forgot to answer your second question regarding Uzbekistan, the loan-to-deposit ratio.
I mean, 200% is so much better than 300%. In fact, this 200% is quite okay because most of the mortgage loans are refinanced. So they are not financed from deposits, but from subsidized funding either from the central bank or other state institutions. So structurally, Ipoteka will run higher than 100% loan-to-deposit ratio. And that's okay. But 300% and above, when we brought the bank, that was somewhat not. So this 200% is actually already okay. And it actually creates room to grow more on the lending side. So now we have liquidity, firepower in local currency to boost our local currency lending. Market share in retail deposits Hungary, as you can see on the slide, has been steadily increasing. And it's at 41.5%, which is, I mean, that's a high number.
I mean, we go back on this page 6 in the presentation to 2011, when it was 27.7%. So the last 10 years, our market share in retail deposits grew 10 percentage points, which is very remarkable. I think that from one-third of the market, we can go up to more than 40% of the market. This is already an extraordinarily strong level. So if we can stay at this level, that would be fantastic. But obviously, I mean, it depends on the pricing dynamics of the competition. But certainly, we are very happy with this level of retail deposit market share.
Thanks for your comments.
Thank you.
Thank you. The next question is from an attendee joined via phone. I open the line. Please press star 6 to unmute. The floor is open for your questions. So please press star 6 to unmute.
Okay. Hi. Sorry. Thanks, Marco, for the call. Just a short one. Can you maybe spend a word on Russia? I think you used before or in previous quarters to update on this kind of worst-case consolidation impact on the group capital. I mean, given that I think growth has picked up in the last couple of quarters, there was also, I think, an increase in employees in Q3. So maybe also if you can kind of give an update on, let's say, the outlook for the next months or for the 2025, where do you see the performance and what's the strategy of the bank in this respect? Thank you.
Sorry for interrupting. May I ask your name and the company, please?
It's Jovan from Raiffeisen. Jovan Sikimic from Raiffeisen.
Thank you so much.
Yes. In terms of impact of deconsolidation, yes, we continue to calculate these numbers on a quarterly basis. If we deconsolidated the Russian entity, it would improve our common equity ratio by roughly 40 basis points. And the similar number for Ukraine is 14. So 40 plus for Russia and 14 plus for Ukraine. Our strategic approach to this very difficult situation, what we have in Russia, has not changed. I mean, we have looked into strategic alternatives, but by now, I think it's clear for everyone that divesting these assets is not an option for any of the players in Russia. And I think Raiffeisen was a good example. Raiffeisen tried very hard and put together a structure which eventually didn't work and then ended up with shares being blocked in Russia. And the recent changes in local regulation, the maximum sale price decreased to 40% of market value.
Even in that case, there's another 35% kind of tax which has to be paid on the transaction. At best, mathematically, one could get 5% of the documented market value. Even that is unrealistic given that it is extremely unlikely to find a counterparty who is not sanctioned or would not be exposed to sanctions through the transaction. That's the situation. In this situation, we have taken an approach where we focus on three factors in this order. The first and most important to all efforts are around fulfilling all legal and regulatory requirements which are applicable to the entity what we have in Russia. Then secondly, we quite proactively reduced the scope of our activities. Immediately after the war started, we altogether stopped corporate lending. Our corporate loan volumes since then declined by more than 90%. There's hardly anything left.
And we were the first one of the kind of more active foreign banks to stop altogether dollar transactions in 23 May last year. And I think we were also the first one more than a year ago to substantially limit euro transactions to European counterparties. And the third, and this is in the that's the strategic element when we reduce the scope. And the third pillar of our strategy in this difficult situation is to reduce our exposure to Russia. And we believe that really the only way you can really reduce the exposure to Russia is to take money out of the country. Because if you just change your activities, but you still have equity. And in the cases of banks, this means financial assets stuck in Russia. That's the real exposure.
So when the war started, we had RUB 11 billion group funding in ruble terms to Russia and RUB 55 billion equity in our bank in Russia. And as early as 2022, the RUB 11 billion funding was paid back. So we reduced our exposure to Russia by RUB 11 billion ruble. And since the beginning of the war, the bank paid more than RUB 37 billion dividends in ruble. And there might be another tranche for the rest of the year. So if all goes well, my year-end will go up to RUB 42 billion ruble dividends. So in our view, this is the only real avenue to reduce exposure, to take money out in the form of dividends and paid-back group funding. So this is what we try to continue.
These are the kind of three pillars of our strategy to comply with all legal and regulatory requirements to this entity, reduce the scope of activities in order to minimize the more sensitive potential or risky activities. I mean, we focus on consumer lending. So that's our main activity. We sell point-of-sales loans, cash loans, credit cards, and car loans to mass market retail clients in local currency in small amounts. And the third and potentially equally important that we try to reduce our exposure as much as possible, our financial exposure, our financial assets in Russia.
So basically, you can take what's payout ratio from Russian entity, like 30%-40%?
I mean, on a quarterly basis, we submit requests for approval to pay dividends. And we cannot ask for more than 50% of profits.
Okay. Maybe last one in that context, do you expect any regulatory headwinds? Because just, I think, one hour ago, we read that ECB is going to kind of adjust the capital requirements for UniCredit Raiffeisen because of Russia, I think. So anything similar to come or you don't think so?
I mean, yes, we have headwinds. I mean, I don't know what better we could do from the perspective of the supervisor or regulator than what we have been doing. I mean, European banks, Western banks have more than EUR 10 billion equity exposure to Russia. I mean, your bank has, I mean, more than EUR 5 billion, so kind of half of it. Our exposure is EUR 700 million at the moment. So that is what is really at stake, right?
And in case of banks, these equities in financial assets, so these are actually EUR 10 billion equivalent of financial assets owned by Western banks stuck in Russia. So I think this should be the prime focus of the supervisor to salvage those financial assets because this is, I mean, for some banks, I mean, this is not a small amount of money. At least not for us. Maybe from ECB perspective, they are used to bigger numbers that might not be a big number. But from our perspective, these are huge numbers. Now, more capital requirements, I don't think they in what way they contribute to reducing this exposure, I don't fully understand. But I don't have to understand everything. That's true.
Okay. Super. Thanks a lot, Marco. I appreciate this. Thank you.
Thank you. Thank you.
Thank you. The next question is from Beata Fojcik. May I ask the name you represent, the company name you represent?
Hello. It's Beata Fojcik from S&P Global Market Intelligence. Can you hear me well?
Yes, very well.
Thank you for the presentation. I have a few questions. One question is, again, on Russia. I noticed in your financial report a drop in the stage three loan ratio in the Q3 in the Russian unit. And I wanted to ask for the reason behind that drop. How do you explain that? And my second question is on Ukraine, the lending trends and also the stage three loan trends. You said to yourself that the lending in Ukraine has been picking up. And I wanted to ask what are the segments where you see the biggest revival in lending and what kind of strategy do you pursue in Ukraine in terms of to increase lending?
Do you have any special strategy there that you pursue? I also wanted to ask about your forecast or predictions for the lending growth in Ukraine and also for the Stage 3 loan ratio in Ukraine. With the new lending growing, do you also expect the Stage 3 loan ratio to pick up again in Ukraine? Thank you.
In Russia, again, the only activity we do in lending is this kind of consumer lending, car loans. These are high APR loans, high margin loans. And therefore, there's a kind of normal level of risk cost is relatively high. And therefore, if you look back the last couple of years, you have seen that Stage 3 ratios are structurally higher than elsewhere in the group. And that's fairly normal. Quarterly changes typically come from sales. In Russia, we sell non-performing loans after a certain days past due.
So we only do the soft collection ourselves and hard collection work that we don't. So these sales happen in batches and they are not uniformly distributed over the year. So it just really Stage 3 ratios depend on how much we sold in that given quarter to work at companies in Russia. Ukrainian lending, I mean, structurally, we are much more corporate in Ukraine than retail. And we are very strong in leasing, in equipment leasing. And in equipment leasing, we see strong demand. And this is really the type of product where we are the most confident to increase our volume. So most of the corporate loans growth you see is actually equipment leasing. And then the other one is just unsecured consumer lending, POS loans, cash loans.
Likewise, we see strong demand and actually quite not just strong in terms of kind of magnitude, but also in terms of credit quality. So the lending we do in Ukraine and the increasing lending we do in Ukraine, we do with the strong conviction that actually portfolio quality is going to be quite decent. So no, we don't expect spikes in stage three ratios in Ukraine.
Thank you very much.
Thank you. If you have a question for our speaker, please press 9 on your phone's dial pad or click on raise hand icon. If you have a question for our speaker, please press star 9 or raise hand icon. As there are no further questions, I hand back to the speaker.
Thank you very much. Thank you very much for joining us today. Thank you for listening to the presentation. And thank you for your very good questions. I hope you will join us when we present the full year results. I think it's on the 7th of March. It's the first Friday of March, and until then, all the best. Take care and goodbye.
Thank you for your participation. The first nine months 2024 conference call is closed now.