Ladies and gentlemen, thank you for standing by. I am Gaily, your Chorus Call operator. Welcome and thank you for joining the Banca Transilvania conference call to present and discuss the 1st quarter 2022 financial results. All participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Mr. Ömer Tetik, CEO, Mr. George Călinescu, Deputy CEO, CFO, Ms. Luminita Runcan, Deputy CEO, CRO, and Ms. Diana Mazurchievici, investor relations expert. Mr. Tetik, you may now proceed.
Hello. Good morning, good afternoon, depending on your time zone. For us, it's one of the most difficult teleconferences that we are participating because as you know, as you remember, usually I was accompanied by Mihaela our Deputy CEO, for investor relations, financial institutions, and financial markets. Unfortunately, we have lost Mihaela . She had a stroke two weeks ago and on Friday she passed away. She was an exceptional person, a perfect colleague, and a good friend. She was a good human being. We will be missing her a lot, and it's very painful sitting here doing this teleconference without her. I'm here with George , our CFO, Luminita, our CRO, and Diana, who was working closely with Mihaela. We will soon inform you also about the new contact details and directions.
We will try to accommodate your request for meetings, calls. We will try to take them over. In case we missed, because you had been trying to communicate to Mihaela and we didn't receive an answer, please resend your request, question or observation and we will take it from there. We wish that she will rest in peace, and hopefully we will take good care of the good legacy that she left. She had been working for Banca Transilvania for 24 years. In all the remarkable memorable moments of BT, from listing to stock exchange to acquisitions, handling different crisis locally or internationally, she was a key person. We owe her a lot and we will try to, as I said, take good care of what she has started with us.
As regards to presentation, I will, for the reasons that you may understand, I will try to be very succinct with the presentation and then we shall switch to Q&A. We will try to accommodate your questions, as much as we can. First definitely Romania, not only Romania, but all the world are passing through very difficult and strange days. After finishing the pandemic, when everybody, including ourselves, was ready for a new period, new era in business, in economics, in social environment. We had been hit by the news of war and volatility in markets, energy prices, higher inflation. After years of very accommodating monetary policy, a very severe changes starting with U.S., followed by many other markets, including emerging markets and Romania.
Still, we see that the employment rate all around the markets is good or unemployment rate is quite low. The inflation kind of being paid for, although it is reflected at the cost structure a bit, cost of goods sold a bit, the interest rate. Also Romania, although being closer to the war zone, benefits from increased interest from its partners, European Union, NATO, U.S., in terms of also investment, in terms of new diplomatic relations. Hopefully when the war as soon as possible, we hope that it will be over, we think that Romania will have new opportunities of development in front of us. Definitely we have been seeing very similar trends to other emerging markets, neighboring countries. Shift in the yield curve, shift in the monetary policy.
On the other hand, we also see that in Romania especially, there is the foreign direct investments, but also local investments on the company side is accelerating at a level not seen in the last couple of years. This is seen also in the loan demand and loan growth on this segment. We think that this is a good base for a later healthier growth of the economy and social wellbeing of Romanians. In the 1st quarter of the year, customer deposits started to increase, but not at the same pace as it was in the previous years. We see kind of more efficient improvement in loan-to-deposit ratio of the banks and banking system because loans have been growing as well.
Due to the volatility, initial reaction of population was moving mostly to foreign currency, especially euro deposits, but this trend also slowed down. We see the signs of normalization of reversal. On the other hand, as I said, it's good that Romanian companies and foreign investors in Romania, they had investment plans so that the loan growth was quite strong as compared to previous years. In the 1st quarter of the year, as I mentioned already, our growth above the market average, around the 4.5% loan growth of BT over 3.7% average of the market came mainly from corporate loans.
When I say corporate loans, these are companies, micro, small, medium-size, and large companies, supported by programs like IMM Invest, SME Invest, Agro SME Invest, and different grants. We see high involvement and good alignment at the coalition, surprising us in a pleasant manner. Different political parties who had been fighting with each other for the last years, they are very much aligned in supporting the economy. The messages of continuation of the coalition even after the elections in 2024 show how okay is their cooperation and how less fragile it becomes. This is a good sign. On the other hand, how to say, we hope that the trend will be continued once the war will be over.
On the other hand, we have been continuing our investments and we see, with the new trends, higher digitalization of our customers, more number of digital interactions. In the 1st quarter of this year, we have also announced the inauguration of our technology subsidiary, Code Crafters, which will definitely service BT Financial Group companies, starting with banks, with Banca Transilvania and Idea Bank, but also other businesses that we are foreseeing. We had been, as you will see in the presentation that is already in our website, we had been investing in online lending platforms, file sharing, document sharing platforms with customers and new payment systems, including BT Pay.
In terms of financial performance, although there are several items that we are proud of, the bottom line was below last year's and below last quarter's last year. Actually if you look at the operational performance, as you have already mentioned, we had been reading also the reports of several analysts, and they had been mentioning a strong growth in net interest margin and net interest income, a strong growth in fee and commission income, which is definitely impacted also by the higher increase in operational expenses, starting with staff expenses which is related to inflation. Our usual, I would say, prudential approach at the beginning of the year with a higher provisioning of our loan portfolio. We are trying to adapt our models to the ever-changing market conditions.
We wanted to be on the prudent side. In the 1st quarter of this year, our cost of risk reached 70 basis points with almost 3% net interest margin. Cost income ratio is at 50%. Actually, the impact, the negative impact, is mostly one-off. The positive developments, although it may decelerate, will continue. We are still comfortable in delivering our budget that was approved at the general shareholders meeting. In the 1st quarter, the biggest change came from the deposit contribution to the Deposit Guarantee Fund. Because our deposits had been increasing our systemic role in the system, increasing based on the calculation of the fund, our contribution had increased to RON 143 million, almost RON 60 million more than last year.
Also, the volatility and increase in the interest rate impacted our portfolio and had shown its impact slightly on the bottom line in the profitability of the bank. However, with strong growth in revenue items, which we, that's going to be quarter by quarter, bringing in new revenues, we have managed to deliver a good return in equity. If you would have actually annualized the one-off items, the numbers would be even looking better. Our loan book increased to RON 62.7 billion. Deposits from customers to RON 107 billion. With past 90, our NPL ratio past 90 below 2%. It's at 1.75%. Our total capital ratio, if you include the capital, is over 21%.
We also stay with quite good in terms of NPL coverage ratio. Almost, if you include the real estate collaterals at the liquidation value, it's close to 125%. We see that our past 90 is almost half of the market average with good coverage due to the provisions that we have been registering also during the 1st quarter and in the last couple of years. Retail banking loan book reached over RON 27 billion, almost RON 27.5 billion. We have a very good stronghold in the payment systems with cards, online payments, wallet applications, having 4.8 million cards.
Card transactions were up 7% compared to the previous period, which shows that customers are using more and more, which is also coming back in terms of salary accounts, the deposits or fee and commission income come back to our financial results. With 86,500 POSs and 1,790 ATMs, I guess we have the widest most extended network of interaction with the customers, including our branch network of more than 500 locations. SME business grew to RON 7.2 billion with over 379,000 active customers. In the 1st quarter, we have granted RON 1 billion in loans to our SME customers with new platforms and new investments as well.
In corporate banking, we have 11,400 customers, with 400 new loans granted, for a total of RON 3.4 billion. We continue our growth in especially larger SME and mid corporate segments, where we see a diversified and stable growth opportunity. We are focusing company businesses continuously, agribusiness, healthcare sector, manufacturing, utilities, fast-moving consumer goods and goods, and public sector. Our capital is much above the minimum regulatory limits. I'll say, after calculating all the buffers, we are staying at 20%, almost 21% in terms of total capital adequacy, which is covering well all the requirements of the regulatory, local and international regulatory bodies. We have also had, at the end of April, our GSM, that is, general meeting of shareholders.
There had been two new board members elected. Both of them are independent members. The payment of cash dividends of RON 0.12 had been approved, total RON 800 million. We have also decided about the capitalization of the remaining of the profit. We have informed our shareholders and investors about our strategy, businesses that we target in the months to come, and our also preoccupation in terms of the market volatility. We will be also growing faster in terms of our businesses to our subsidiaries, including asset management, leasing, micro-lending, consumer finance, and so on.
There has been a share buyback plan of 40 million shares approved, and we have also asked the approval of shareholders to consolidate the nominal value of the shares of TLV, as in TLV, to RON 10 by consolidating 10 shares. We think that it is not against the market practice of splitting because we had been a penny stock actually at half a euro value per share. The fact that now the value with the approval of shareholders will be close to EUR 5 will not block retail investors to continue investing Banca Transilvania shares, but it will also help, as you know, to our institutional investors to have an easier reporting and more investment opportunities. We are also pursuing now the closing of the transaction of Tiriac Leasing.
We are waiting any time as we speak. Closing, we are assuming, will be in June 2022, and then we will continue developing our leasing business with a stronger foothold in the segment of interest. Sustainability is an important subject that actually also Mihaela had been presenting to you very often. We have started analyzing our own existing portfolio, but also products and services that we offer continuously to our customers. Now the numbers you will see in the presentation in more detail. We are making efforts to decrease the carbon footprint of the banks on one side. On the other side, we want to help our customers to decrease their carbon footprint and to invest more in green.
Our green loans to companies reached RON 538 million and green certified real estate projects, RON 360 million. In the retail, we have granted RON 144 million lei of loans to private individuals in partnership with EBRD. We are also having this RON 959 million financing under the green mortgage loan product. The bank itself, through recycling, through efforts in environmental responsibility, has decreased usage of paper by 111 tons, 111,000 kg. With recycling of our cars of our customers, we had been also saving over 1.2 tons of plastics production. Our electricity consumption is coming 87% from renewable sources.
If you look at the business lines also of our subsidiary, electric cars, electric vehicles leasing reaches 25% of the total leasing that we grant to our customers. As a part of governance and sustainability, social responsibility of BT, we had been a social bank. Actually by nature, it's in our DNA. We had been in the areas disadvantaged by the markets, by the economy. We proved that we can grow businesses, communities together with us by being closer to them. Our group performance is also in the presentation. The 1st quarter was generous to BT Group, totally. All our subsidiaries delivering good results. I am happy to say that BT Asset Management is going on a sprint of assuming market leadership.
Now it's the 2nd company in terms of assets under management in Romania. Our bank subsidiaries like Victoriabank or Idea::Bank benefit from the efficiency projects that we have done and delivered good results. I would like to leave the floor to questions, trying to answer as much as we can. As usual, if we will not be able to answer on the spot, we will come back to you with our answers, or we will be adding the information requested to the presentation. Thank you very much.
Ladies and gentlemen, at this time, we will begin the question-and-answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the 1st question, please. The 1st question is from the line of Liv Wan Haitan with Concorde. Please go ahead.
Hi. Thanks for the presentation. Thank you for taking my questions in this very difficult times. My 1st question would be on fixed to variable loans. Could you tell us, like, what is the proportion of variable loans in the retail and also corporate? That will be my 1st question. My 2nd question would be on gains and losses from financial assets, because I saw some negative figures. Could you confirm whether it was due to bond trading or was there anything, like, unusual in the 1st quarter? My last question would be on Victoriabank, if you could share with us your view on the bank, maybe on the macro in Moldova. Do you see any worsening there? That would be my questions. Thank you.
Thank you. Related to the variable interest loans, I don't have exact numbers, but what I can say in the retail segment, except short-term loans, consumer or cards, which are already very at very high rates, mortgage loans or other longer term loans are almost 80% with variable interest rate. In the company loans, except for few, let's say, back-to-back or hedged portfolios, almost all our portfolio is with variable interest rates. We have been mentioning this also when the interest rates were going down, that this was the, let's say, strategic choice of the bank because we are financing ourselves with local deposits mainly. We are benefiting from the trust, confidence of our customers.
On the other hand, deposits tend to be short term, so we didn't have the courage to offer long-term loans with fixed interest rates. The market doesn't offer too much of hedging opportunities. That's why the increase in the net interest margin. Net interest income is coming definitely from this. The deposits, the liquidity being still high. Deposits are a bit more sticky. Interest rates didn't increase much, but loans interest are being repriced every three to six months. As reference rates are increasing, we are repricing them at new rates. The new repricing will be at the end of June. Second question you asked about the financial impact.
It is, as you know, the main impact is under equity because we don't pass it through our income statement. Still the transactions with it, be it repo or market transactions or in other assets, investment evaluation had an impact of RON 130 million in the 1st quarter, negative impact as compared to last year. But we see some of it, and hopefully that will be the trend, will all be reversed in April or stabilized in May. We are not. Unless there will be more bad surprises, unpleasant surprises to come in the market, we don't expect it to be a trend on a quarterly basis.
In terms of Moldova, definitely it's an investment that we learn a lot of lessons that we didn't want to necessarily learn. Now, after a strong 2021, a profitable 2021, where our, let's say, deposits, number of customers had been growing in Moldova. The 1st quarter, especially in the days after the recent threat, business is a bit, definitely stressed. However, we continue our business plan. The impact of Victoriabank to the bottom line of BT Group is less than 2%. This is the, let's say, good part of it.
On the other hand, we think that with the efforts of joining European Union, pro-European government and structures, and we see from local colleagues and local media that pro-European opinion of the public with the decreasing threat, we are also, let's say, loyal to our business plan that we want to grow in retail, we want to grow in small and medium sized enterprises, in agribusiness, without assuming big tickets and big risks, which in any case the market doesn't allow. The interest increase, the interest rate increase in the Moldovan market has helped Victoriabank to significantly increase its profitability. But we are following. I don't want to make a wrong geopolitical comment.
I would refrain from it, but as we have our teams and the banks functioning there, definitely our business making appetite remains.
Okay. Thank you very much.
I don't want to comment on the situation.
Yes. Yes. Thank you.
The next question is from the line of Nelly Saijan with Citibank. Please go ahead.
Oh, hi. Thanks very much for the opportunity, and let me forward my condolences. That's really shocking news. Yeah, thanks for the call. I guess I'd like to unpack a bit further the decline in equity. I think you said that you think most of the impact of higher yields has already played out, but I think yields continued to rise in the 2nd quarter. Why do you not think you'll still see a further increase in losses through equity in the 2nd quarter? If you could elaborate on that. Then just on the margin outlook, I'd be interested to know what kind of further rate hikes you think are coming, and what's your sensitivity to interest rates for the rate hikes?
Last, on capital, I see from your full financial statements that consolidated capital, the CAR was 19.87%. I think that's a different number than you have in your presentation, I guess, because that number probably excludes profit of the 1st quarter. If you could just confirm that. Could you let me know if the RON 800 million dividend is deducted from the 1st quarter reported capital position, or will that happen in the 2nd quarter? Thank you.
Sorry. Thank you for your thoughts. Hearing your voices, I again remembered, I wish that Mihaela would be together with us here. If I skip any question, please repeat. Basically.
Of course.
The RON 800 million is included in the financials that you're seeing, and the difference is coming from indeed the profit. Because we didn't audit 1st quarter, it's not included in the report. We are showing you as is. Actually we are planning to go through an audit process at the 1st half of the year, so which will help us to add this. With regard to interest rates, with the, let's say, we see also mixed messages from national banks. We also understand their concerns, they will not rush very aggressively. Yes, sure.
In the next monetary meeting, tomorrow we may see another 50 basis points increase in the reference rate and Lombard rate. Still it will be in the negative yields territory. I mean, it's still below inflation and ROBOR being transacted. On the other hand, they will take cautious approach. If they will increase another 50 basis points, I would go with the forecast of our chief economist, maybe another 50 basis points this year. It depends very much also on the inflation, which we see that in the market, energy prices stabilized or started slightly to decrease. Agricultural harvest looks to be good, which will help the food inflation to decrease in Romania.
If the inflation will give a more positive sign on, I guess, also National Bank of Romania will be more prudent. On the other hand, the market, due to its liquidity position and growth of loans and deposits, has its own reference rates, which is ROBOR. The real impact we have seen that. In terms of interest rate sensitivity, we will come back to that more details. Having most of the loan portfolio with variable interest rates, actually the more than what we are impacted maybe in the fixed treasury bills or bonds portfolio is actually coming as a positive impact on our balance sheet to the loan book from the repricing and the new production.
The impact is mainly that you have seen in the capital position is related definitely with the revaluation of the portfolio, mark-to-market. Only a very small part of it we have seen in the income statement. The transacted amount of other evaluated financial investment. Because we have a portfolio with a relatively short duration, we are also renewing our portfolio in rather shorter periods of time. That's why we are investing now in the fixed income instruments at higher yields, which help us to improve the, let's say, net yields, the real yields on our portfolio.
Do you think the impact of the further rate hikes or the market rates going up in the 2nd quarter should lead to a smaller negative revaluation in the 2nd quarter? Is that the message because of the-
Yes. Yes.
Reinvestment down?
Thank you. Thank you for clarifying. Yes, this is the message. Although you have seen what happened after Federal Reserve's, let's say, announcement. Initially, markets took one day, everybody was very optimistic, then pessimistic. How to say, here, I would say that the next rate hike is already priced in. And
Yeah.
Because it is not over the yields already in the market, I don't see a big reaction in the market. On the other hand, how to say, everybody is reading now international news, world news, energy prices. Volatility might be, but we don't expect the impact being every quarter as it was in the 1st quarter.
Okay. Maybe one last question from me, if I could, is just on Tiriac Leasing. Can you kind of tell us what's the benefit of that and what kind of financial impact do you expect that acquisition to have?
I mean, we had been also publicly announcing that we are looking to grow in the non-banking financial institutions leasing in terms of financial performance, security of lending and benefits to economy and our customers. It's always a good tool. It's mainly financial leasing and mostly car leasing, be it the car fleet or individual or company acquisitions. The Tiriac Leasing gives us access to the biggest car dealership network in Romania. Almost 10 brands, medium and high-end brands, will be having cooperation with us in the years to come.
Mm-hmm.
This gives us a quite a strong hand, kind of 1st right of refusal for the customers who will be buying cars. On the other hand, it's a profitable business itself. We think that it is a good placement for our liquidity. Leasing yields are really positive yields. With our funding costs, we think that it is a good way of also placing our euro excess, highly excessive euro liquidity, because car leasing is mainly in foreign currency in Romania. Although the leasing market itself and the leasing company, Tiriac, they are quite small, it is Tiriac Leasing has total assets of EUR 250 million. How to say, if it's quite arithmetic, if we increase the yields 1.5% to 2% on this amount through financing and grow the business further, it will definitely have a positive impact in our, let's say, bottom line. Plus, definitely for new customer acquisition, it's a good tool.
Super. Thanks, thanks very much.
Thank you.
Once again, to register for a question, please press star and one on your telephone.
If there are no questions, we can also continue taking your questions through our investor relations address. In case, we will be sending, circulating a short contact detail memo, hopefully tomorrow. Providing in case you don't have Diana contact details. You can always contact me as well. The email address is quite easy to estimate. It's omer.tetik@bancatransilvania.ro. We will try to, let's say, rearrange our agendas to accommodate all the meetings, all the scheduled or to be scheduled. Hopefully, we will continue our good communication and interaction from here as well. Thank you for good, for your kind thoughts and messages. I will deliver it to her kids. I'm sure they will appreciate that. How to say, light a candle for her whenever you have the occasion. Thank you.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.