Ladies and gentlemen, thank you for standing by. I am Kelly, your Chorus Call operator. Welcome, and thank you for joining the Banca Transilvania conference call to present and discuss the 2021 annual preliminary financial results. All participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a 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, Ms. Mihaela Nădășan, Deputy CEO, Head of Financial Institutions and Financial Markets and Investor Relations, and Mr. George Călinescu, Deputy CEO and CFO. Mr. Tetik, you may now proceed.
Hello. Good day, good afternoon or good morning. We are glad being with you, but we would have all preferred, most probably not to be discussing financial numbers and figures in such an environment, in such a humanitarian and geopolitical crisis. We are all concerned. It's actually second consecutive years, and we are—although we are proud and happy that we can announce such strong and solid numbers, we cannot be happy about it, looking around and reading the news. However, we will try to give you brief information about the 2021, most of you already know. Then we would like to leave more time for the Q&A session. I'm sure that that will be a lot of interesting questions to come.
In case we will not be able to answer your questions, we will come back to you. Also, the presentation is already being uploaded to the investor relations part of our website so that we can check even more comprehensive information there. 2021, with all its challenges and pandemic-related problems, was a year of growth for Romania when the economy advanced over 5.5%, almost 5.6%. We have been seeing a very strong and solid growth in consumption, in acquisition in housing. New investment decisions, the resilience and structuring program had been approved. Romania started receiving the first tranches of those funds, very important and sizable funds.
All the, let's say, market indicators, except maybe the pressure from the energy prices, thus the increasing inflation, market macroeconomic developments were in favor of Romania, Romanian economy and Romanian businesses. We have finished the year with 8.3% inflation. Our budget deficit started to be under control and decreasing, thanks to growth in GDP and better management of the fiscal side. All along the emerging markets, Romanian fixed interest rates started to slightly increase. Last year, National Bank of Romania has been much more cautious in terms of change of monetary policy. The changes they have been showing already in the last couple of months very strongly in terms of their view.
Definitely, we are following the geopolitical developments and its impact on macroeconomic indicators to understand how if the monetary policy decisions will be modified or implemented from now on, not only in Romania, but also in European Union, U.S., and in other emerging markets. Banking sector had been having a good year, I would say, after probably 2006, 2007. It was the first year when almost all banks were profitable. The loans growth was almost 15%. The strongest growth was on the corporate loans with 20%, which is a good indicator of confidence, economic growth, and future potential. Household loans continued to grow as well at a slower pace just below 10%.
Meanwhile, NPL ratio was going down below the 4% target, 3.8% target, finishing the year at 3.47%. Romanian public had been continuously saving, and it's actually, especially when it comes to this kind of data, we say it's a nice problem to have because the loans-to-deposit ratio of Romanian banking system, Romanian public finance institutions is below 70%. It's 68%, it's around 68%. This gives the confidence of liquidity, confidence in sector and also the necessary financing for further growth.
Coming back to BT, the second year of COVID-19 pandemic, we continued to be the main partner of government-led programs. These, in the main, are the Invest and other non-reimbursable grants and pro-funds. Actually, we have intermediated under the SME Invest program over 4,200 loans. The amounts granted were together with the Agro Invest close to RON 3 billion, RON 2.7 billion. We have been also an active partner in the HORECA hotels, restaurants and catering industry schemes, where more than 20% of the customers opted their grants to be intermediated through accounts in BT.
Throughout 2021, all the moratoria conditions had been fulfilled, so no loans were left in moratoria conditions. In retail, we had been growing both on the lending side and on the digitalization side. Our so-called BT One subscriptions had been exponentially growing. We see that 2.7 million of our customers are totally, both in retail and company segments, fully digitalized. They have at least one channel of digital banking from BT. We are also very proud of our wallet application, BT Pay, which became top of the mind among the customers, the most downloaded and utilized application as per the app stores of different operating systems.
We have continuing our efforts on onboarding, on different investments in automation and robotics. Our chatbots, our robots have been serving millions of customers and thousands of hundreds of thousands of different types of questions and needs during last years. We have seen, despite the pressure, especially in the first part of the year on the net interest margins, we have seen a growth in net interest income to RON 2.7 billion. We are again happy to see that all our efforts in terms of salary cards, digitalization, account services, cash collection, and so on, is paying itself back in terms of a high growth in fee and commission income.
Five, six years ago when we were discussing about this item, when we were saying that we would like to see continuous double-digit growth, but now actually we can say that we came at the level of best practices in the market in terms of fee and commission income, better than our peers regionally and locally. The growth of 23% in fee and commission income brought us to revenues of RON 800 million. Our net profit was RON 1.78 billion, much higher than the initially budgeted, because at the beginning of the year, be it on the vaccine side, on the variations of COVID or other governmental programs or the customer sentiment, we were not that optimistic maybe.
Our bottom line was helped also with lower than budgeted cost of risk. We managed to deliver a cost-to-income ratio below 50% at 48%. Our gross loans are now at RON 56 billion, with deposits from customers at RON 103 billion. We are one of the lowest loan-to-deposit ratios in the market. This is high liquidity, but for most of this liquidity is staying with us at 0% interest rates for its current accounts and bringing us the fee and commission income, transactional incomes that we had been mentioning. We have our capital adequacy ratio, if you include also our profitability, is over 24%, which is very comfortable level for further growth and further investments.
We have seen definitely also pressure from increase in operating expenses, especially inflation, impacting cost of materials we use, salaries, and other expenses that we use. Comparison to 2020 might not be very relevant, because in 2020, most of the operating expenses of the bank were close to zero, as we didn't make aggressive investments, renovations, travels, customer visits, events or other types of spending. Although the operating expenses increased 17%, we managed to deliver good growth of net profitability of the bottom line. We are continuously a bank naturally hedged in terms of foreign currency position, I would say. Our deposits and loans are very much in balance, and they are mainly in local currency.
We see together with the higher inflation and the volatility in the market, customers stopped at least converting their deposits in lei. Still, our deposits are mainly in lei, and we are continuously financing local companies, households, or institutions also in the local currency. Our NPL ratio, PAR90 is below 2%. It's 1.7%, and the coverage ratio is 125% if you include also the collaterals that we have. Without the collaterals we are close to 90% provision coverage. I guess we are also a good practice or because not all the banks are listed, we don't know all the numbers.
We are a good practice in terms of non-performing loans ratios and management of collection activities from customers. Our retail loan book reached RON 27 billion with 3.3 million active customers. Only in 2021, we have granted over 220,000 loans. We are already a trendsetter, a market leader in terms of digitalization. We have seen also last year our customers made over 1.2 billion transactions with the cards issued by BT. BT Pay, our wallet, has seen 250,000 payments per day, which is much beyond our initial targets when we were launching, investing in our BT Pay application.
It became also an encouraging factor. We are investing more and more now. We are learning with these volumes and number of transactions, number of customers, we are learning a lot. We have a lot of data, so this makes this helps us to invest more efficiently, more clever in the further digitalization of the bank. In the SME, as per our BT definition, our loan book is at around close to RON 7 billion with over 375,000 customers. The growth was over 8% of the lending, and we continue to be the main bank of small and medium sized enterprises in Romania.
Be it at their establishment or their first loan or different types of bank products or financial products they need. We are also happy to see our corporate loan portfolio increasing strongly and also very healthily to over RON 16 billion. With medium and large corporate segments, we are serving over 11,000 customers both on the private and public sector. Quite balanced, and we don't, as you know, that we prefer always diversify risk and smaller tickets. And we see that some transactions maybe last year we have missed are they were not part of our business strategy. The large corporate, mid-corporate departments are also having this very important responsibility starting from last year to be our pioneers in ESG actions.
Where we had a from time to time giving you more information in terms of our sustainability, sustainable banking efforts. If you include the profits of 2021, our total capital, total equity is RON 10.8 billion, well above the minimum capital adequacy ratio of 8%. We are around 23%. We are also, as you will see in the presentation that we have posted, we have good results and good allocation of different capital requirement items, as per local or international authorities, supervisory bodies requirements. As you know, last year we have finalized the acquisition and takeover of Idea Bank. Currently in Idea Bank we are doing two streams, important streams.
One part is kind of integrating the banks, taking customers and portfolios towards BT, a project which we will finish in the next six months. Another stream is that we are establishing the only local fully digital bank of Romania. We are aiming to launch our first product package early next year to customers. It will be not necessarily a big competitor to or not only a competitor to BT maybe, but competitor to fintech, to different banks. We are addressing a certain customer segment, certain age segment there. We will give you more information, but it will take some time for us, for Idea Bank, which is after we also rebrand it, to be a sizable, significant part of our portfolio.
We have also before the end of the year, we have finalized and then signed early 2022 the acquisition of Țiriac Leasing. This is a segment we have been mentioning a lot during our last years of conversations with you, with analysts and investors, that we see a big potential in leasing, consumer finance and factoring. It is a good complementary product. It has a very good distribution channel with their own car dealership network. We are now expecting the approval of the competition council for the transaction. It will be both in terms of new asset generation, placement of our existing liquidity and developing our business in a specific segment which is a very good fit as we consider.
I would leave to Mihaela about sustainability because she's our champion and leader of sustainability in the bank. They have been doing a lot. We will be coming more, with more and more news. I also kindly ask you, if and when you have time, please check our website where we are trying to explain our activities, our standing, our approach. If you have any comments or requests, we will be very happy to accommodate.
Yeah. While we have just a couple of information on this slide, including it in the presentation where we are mentioning what we have done in terms of green lending during 2021 and also what kind of major directions have been taken by the bank in terms of ESG. I would like just to underline once again that despite Banca Transilvania with its initial DNA of being a bank for local SMEs and entrepreneurs and for micro companies, we were from the very beginning a strong supporter of everything what inclusion is meaning when it comes to having access to financial services and trying to come with the right products which were that clearly benefiting clients and trying to be a very responsible banker in relationship to our clients.
In this respect, we were having all kinds of initiatives over time from organizing different kinds of clubs where we were trying to educate our clients to help them build business plans. We are going to continue doing this exercise, helping them to understand what ESG means.
This would be like a separate and very important stream with which comes along with our endeavor to have more and more green products or very clearly dedicated products in order to support winning for our investors and are having business endeavors and trying to be as present as possible with both education and banking services and products for what our clients are needing in terms of the ESG approach and what a responsible banking institution is meaning.
Having said that, definitely most, and now mainly our focus will be on social. We are also at BT and the Romanian business community, we are focusing a lot on the humanitarian support efforts, together with local and international partners, for the refugees. So far the big bulk of refugees didn't enter Romania, but we are expecting in the coming years, in the coming weeks the numbers to increase. I'm amazed, I'm happy to see that Romanian public, Romanian government and private sector institutions, they all mobilized, in a very good manner, exceptionally to kind of welcome to host the refugees. Going back to our businesses, the group, and with that I will be finalizing the presentation side.
BT, our financial group, has reached over RON 125 billion lei, total assets. If you look at the, how to say it, different segments from consumer finance, leasing, asset management, capital partners, micro financing and pensions, all our subsidiaries are delivering good profitability, good market share, increasing market share, and good potential. We will be investing further in different segments of financial sectors, from now on. Hopefully we'll be also coming back to you with more sizable interesting numbers from our Idea Bank journey. As I mentioned, we will be rebranding the bank soon. We are in the, how to say, period of preparing the new brand identity. We will be also informing you.
I would finish the presentation here and try to allocate the rest of our time to the questions that you will or you may have. 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 first question, please. The first question is from the line of Pulitika Đivo with InterCapital Asset Management. Please go ahead.
Hi. Hello. Thank you very much for this conference call. Well, I think the obvious first question should be about your exposure to Russia and Ukraine. It's not directly, do you have an idea on how many of your clients are mainly exposed to these countries? Yeah, and then we can go with the other questions.
I mean, the sanctions and I would say what we were considering two, three years ago, excessive attention of the local authorities for payment transactions with Russia and Ukraine had been actually making all the banks very prudent. I mean, there are a few of our customers whose businesses might be impacted by the changes by geopolitical changes, especially in maybe grain trading or technology. But it will not be any in terms of exposure, it's not even mentioned, it's not significant. We had been avoiding a lot, also not having banks in those geographies were limiting us in terms of compliance actions. That's why we standing aside.
I would like to add here that a confirmation of what Ömer is saying is also the fact that we hardly have any kind of banking relationships, meaning no correspondent banking institutions in those countries, which are usually coming hand in hand with the commercial need of our clients. This is clearly a sign that our clients are not engaged in commercial business or are not having significant volumes with the partners coming from that part of the world.
As you know, Republic of Moldova has closest business relations, economic relations with Russia. We own Victoriabank, which is in terms of total assets, equity and contribution to the bottom line is below 1.5% of our total group size. Here, because we have imposed all the know your customer regulations, compliance regulations of BT Group also to Victoriabank. I have to admit that our colleagues in the last two years they have been also losing market share. We are not the third largest bank there anymore. Although the market is very small, we are now the fourth bank because we had to let go certain businesses, certain customers.
As per our calculations and analysis, I can confirm that we don't have any significant exposure to those geographies.
Great. Thank you very much. Two more questions from my side, if I may. The first one is actually about your expectations in terms of central bank behavior and interest rates this year. I know this is a very hard question, given everything that's going on. I would just like to hear your opinion on the situation and how you think this might impact your interest margin. The second question, if I may pose it right away, is about your future provisions. Could you talk about your expected cost of risk this year? This, probably excluding any major disturbances around the war.
I just wanted to have an idea on whether everything related to COVID was over and if you think this year could be normal, so to say, in terms of cost of risk. Thank you.
Thank you. I will start with the interest rate. Indeed, it is very difficult, I mean, to estimate. Because if the war wasn't happening, we would be saying that most probably another 100 basis points increase was already priced in or very much expected in the market. The increases of benchmark rates, market rates help us because our lending portfolio is heavily variable interest rate. It's repriced every six months. So any interest rate increase would have had a positive impact on our net interest margin, considering that we are financing ourselves with current accounts at zero interest rate, so that any market rate variable rate increase would be adding up. We have made some calculations also on the kind of payment capacity of customers.
It's around these levels. Interest rates being increased another 100 basis points doesn't put any significant pressure on the NPL generation, on our portfolio or other banks in the Romanian market. Now, I guess, due to the concerns related to economic growth, supply chain issues, cost, investment and consumer sentiment, my personal opinion, I cannot even say that, I guess if you sit 10 persons in the same table, each will have a different opinion. My personal opinion is that the increases of benchmark rates or reference rates will be a bit slowed down. There will only be discussions on this aspect also internationally as you see. Otherwise, as I said
Thank you.
Okay, thank you. The next question is from the line of Nellis Simon with Citibank. Please go ahead.
Oh, hi. Thanks very much for the opportunity. Yeah, my first question would be, actually back on risk cost. What was behind the large jump in risk cost in the Q4 ? I'm always surprised by the sharp swings in risk cost, if you could elaborate a bit there. I have a few other questions as well. Should I just list them out, and then we can go through them or do you wanna go one by one?
I will try to answer the question related to the Q4 . Actually, our Q3 was quite low. Also during our September's results teleconference, we had mentioned that we are readjusting our models and calculations so that we will be coming back to, I don't know if the word reasonable is correct, but more rational, pragmatic level of cost of risk, which happened. Actually, the Q4 should be taken into consideration as an average of the third and Q4s.
Okay. Yeah, the next question would be on your equity. I saw the decline quarter-on-quarter. Is that just security marks going through OCI? I was surprised that the equity didn't rise over the quarter.
It depends on the quarter, but maybe it's related also to dividend payment. As you mentioned, it is our fixed income portfolio going to OCI.
When was your dividend paid? Was that in Q4 ? Okay.
No, it happened Q4 .
Um.
That's. Yes.
Yeah. Just what is the, I guess you haven't announced the dividend out of 2021, but what's your thinking on dividend for this out of last year's earnings?
Again, from, how say, Financial Times to Bloomberg, there's a talk of prudential approach from the supervisory body. Unless there will be, there won't be any changes, we will maintain. As you have seen, we are having quite comfortable equity position. We'll be more or less in line with what we have done in the last couple of years. I have to refrain from giving you a percentage or an amount from working the
Okay.
This is something that we consider as part of our usual course of business.
Okay. Could you give us a little indication of how you're thinking about fee growth, cost growth, and volume growth going into this year? I guess you'll publish your full budget at some point, but if you can give us some idea of what you're thinking, that would be helpful.
Exactly. I mean, less than a month time, during last week of March, actually, we will be presenting the budget proposal to be approved at the shareholders' assembly. I would say that it will be very difficult to deliver 20%+ growth in fee and commission income. On the other hand, we see that our number of customers are increasing. Our product range, bank insurance revenues are increasing. This definitely a double-digit growth will be in the budget in terms of fee and commission income. Our net interest margin, I mentioned, is very much positively affected by interest rate increases. You can almost arithmetically calculate how much it will be increasing this year, even if you don't grow the loan book.
We are seeing that we will continue our lending growth above the GDP growth of the country, above the average market growth. Patrick, I think that it will not be wrong to say that we will come with bottom line very close at around numbers that we have already delivered, despite maybe some other challenges coming from expense side, as you mentioned. Because we are already increasing our the salaries of our personnel. We see that everything we do costs us more and as a big bank our duty is not and we are very efficiently controlling our costs. That's why we delivered less than 50% cost income ratio, and I can tell you that it will be the same.
We will not in no case budget any cost-to-income ratio above 50%, probably closer to what we delivered in 2021. Patrick, also, we don't want to, but well, we don't see the necessity of cost cutting now as we have business growth and potential to grow our business.
That's very helpful. Then just on the risk costs, you were saying around 100 basis points ± is what comes back to normalized levels, yeah?
Yes.
Yeah. Very clear. Thank you. Thank you very much.
Thank you very much.
As a reminder, if you would like to ask a question, please press star and one on your telephone. The next question is from the line of Boulougouris Alex with Wood & Company. Please go ahead.
Yes. Hello. A quick question on the costs on the wage growth. I see the staff costs on a consolidated basis were up around 20% in 2021. How much of this was related to wage growth? I assume there was an increase in employee headcount as well or not, and maybe if we can have any color on 2022 wage growth, if possible. A second question regarding net interest margin. I get the trend we saw, as you said. Mathematically, we can more or less work it out as the portfolio reprices every six months.
I get the trend we saw in Q4 is the start of this repricing with NII increasing on a quarter-on-quarter basis by double-digit levels, correct? I mean, could we assume NIM going to 3% and above in 2022?
Okay. In the Q4 , there was also a combination of both the repricing impact, lending growth and also type of products the customers had been choosing in Q3 or Q4 , shorter term and higher interest rate products. Our credit card revenues increased a lot, so it's a combination. I will come back to your first question and answer it more or less in the same manner because the 20% growth, I don't have the exact percentages in my mind now, but partially it's coming from delayed, postponed bonus and incentive payments from 2020. As you may remember that we were not allowed to, and we kept them on the results.
Partially, it was related to headcount growth, which was around 3.5%-4% increase in terms of headcount. We had been also adjusting salaries both with the performance and inflation. It's a combination of many items, I would say. We don't expect it to repeat. If that's a further question, we don't expect it to repeat in 2022.
We'll start with new queries.
Okay, thanks.
Oh, thank you.
Yes. Thank you. Just a follow-up question regarding loan growth. I've seen your presentation regarding public sector financing, that there was an increase of 50% year-on-year as you want to support the development of municipalities. Could you clarify how much is public sector finance as a total at the moment, more or less?
You mean like a total amount?
Yes.
It's like RON 1-something billion. Yeah, it depends. Usually it's short term, so these kind of outstanding balances are going to have a high variation throughout a one-year period or a 1.5-year period. We haven't changed too much our profile in terms of getting into too many long-term kind of investment projects when it comes to public finance. We are more and more active in short-term or medium-term kind of plans. Clearly being involved also in all kind of bridge financing schemes, which are related also to projects where the EU funds are going to be involved at later moment in time.
Okay, great. Maybe one final question from me. I mean, I know it's too early to say, to mention anything, but the high inflation and high under pressure that this has on your clients, do you see any, I mean, preliminary, probably too early, but if there is any preliminary indication that this could lead to some NPLs or it's too soon to suggest something like that or?
Indeed, too soon to mention a number. Definitely, wage inflation is putting pressure. On the other hand, also, we have seen that across the sectors, there is an adjustment. I mean, actually, salaries are increasing, production costs are increasing, sales prices are increasing. Somehow it kind of matching environment. I guess, at one point, which we don't think that it will be very soon, energy prices will be stabilized even if they will not decrease, but they will be reaching a certain limit of increase, then the inflation will be positively and downward affected. It will also relax the pricing or cost strategies of our customers.
Here I'm going to add a little bit what we were mentioning also in previous calls, that the fact that the wealth position, the savings position of Romanian both population and company sector is looking much more better compared to what we were seeing before the previous crisis. It's going to help them weather better and have, let's say, a better cash flow during this initial period when inflation was hiking that much and until it's going to get to a more normalized level. The same kind of an approach was valid also with regard to the COVID crisis, where again, the fact that people were having some savings, were having some reserves, was helping them to have a much better repayment behavior.
We were hardly generating new NPLs during that period, even though we were clearly cautious and we continued to monitor the portfolio very closely. The same monitoring is going to continue also nowadays. It's important to mention that the savings and the resource structure our clients are having is going to help them be better off out of this potential new credit risk crisis related to the higher inflation rate.
Thank you.
The next question comes from the line of Unger Thomas with Erste Group. Please go ahead.
Yes, hello, good afternoon. Thank you very much for also taking my question. I would connect with the previous question. You were talking about inflation, and I would specifically ask about energy price inflation. You said that you'd expect energy prices to stabilize. But do you see any risk for this portfolio from energy prices from the gas crisis in Ukraine now spilling over and affecting your clients, corporate, but also the retail book? Has that changed your perception of risk or your outlook for costs in 2022? Although I understand that you can't specifically talk about your outlook right now.
On the Q4 results, the trading results was quite weak in the quarter. Do you expect that to recover in the coming quarters?
I'm sorry. Mr. Unger's line has been disconnected. He has dropped his line. I will move on. Hold on one second, please.
Let's take other questions because I will answer the question once, he will join us back.
Of course, Mr. Tetik. Once again, to register for a question, please press star and one on your telephone. As a reminder, if you would like to ask a question, please press star and one on your telephone. Mr. Unger, can you please register for a question once again? We will now proceed with Mr. Unger's question. Thank you.
Hi. I just dropped out of the call. I don't know if you heard my question before and if it's been answered or-
No, we didn't answer, so we wanted you to reconnect. Otherwise we would have been connecting you also directly. It was related to trading. I mean, one question was related to inflation and energy price expectations and how it will affect our credit performance, loan book performance. The other one was related to trading results. I don't know if there was anything else.
That's it. Thank you very much. Thank you for waiting. Those were the questions that I had exactly, yeah.
Okay. I will take the first one. I mean, itself, energy sector. Well, it was a sector that we were not active, so we don't have direct exposure. This is something that we always refrain. Now, with the Green Deal, green economy, we are looking at trying to gain confidence and develop this portfolio. We didn't start yet. But on the other hand, we see that in many cases, the packages, the eight packages of Romanian government so far active until end of April. They prolong it until end of April, helps so that the real bill, the real cost is not immediately on the public or small companies. It will be through the budget deficits, kind of diluted in time.
If it will be prolonged, it may put pressures. On the other hand, we think that also customers will be starting to adjust their pricing. They will try to be more efficient, maybe. They will look to different alternatives. We don't see a huge jump, significant jump, at least immediately or in the H1 of this year due to the energy prices. If definitely prices will continue increasing and then there won't be any other measures to be taken, we have to reanalyze all the situation. As I said, in most of the cases, except agriculture, where the fertilizers depend very much on the gas prices.
On the other sectors, the cost/income, energy cost increase is important, but it's not necessarily the main item in our customers' cost base. Related to trading income, we have Mihaela Nădășan here, head of financial markets, better to answer.
What can be mentioned is that for sure, when it comes to the FX trading side, that's an item where we are going to see very nice growth also during 2022. With all the volatility we are having now on the market, there is no doubt that things are going to continue in the same way. Clearly, when it comes to trading related to the fixed income instruments, things are very much related to how market conditions are. BT is going to be very careful always not to, let's say, jeopardize future spending and the quality of the bonds portfolio, looking on the midterm or for the entire lifetime of the bonds portfolio, just for obtaining short-term trading income.
This was a strategy and a policy we were applying forever in our treasury activity, and we are going to continue with this approach.
Mr. Ungur, are you finished with your question? Thank you.
The next question is from the line of Mandru Daniela with Swiss Capital. Please go ahead.
Hi. Hello. Thank you for the presentation. I have one question and a follow-up question. The first one regarding the increase in the net loans portfolio for this year, should we expect another double-digit growth for this year? The second one regards the cost to income, which reached 40%. If I remember well, your target was around 45%, and I'm not sure if I understood well that your target has been adjusted up to 50% now.
I will start with cost income ratio. No, we didn't adjust our target to 50%. As I said, I'm refraining to give certain numbers before we announce our budget. But I'm saying that cost income ratio in the worst case should be at around 2021 level. We are not targeting an increase.
In the base case scenario, this is the worst case?
Daniela, we haven't published yet, we have the budget.
Yeah. Exactly. Too many scenarios this day. Also in terms of overshoots, I may be recalling wrong, but our target was slightly above 47%. Yes, we overshot it. We have our own targets, but it's not an argument, but doesn't matter now. Still, I'll see. If I look at the announcements by international regulatory bodies, it's quite a decent, if not one of the best cost-income ratios in the European banking sector. Definitely, we are not entering into complacency, and we want to improve it. On the other hand, we do acquisitions, we do investments, we do, how do you say, we are a high growth company.
We are focusing more on the revenues than growth, not just on the cost base. This is one thing. The other question was? Sorry, now discussion about the-
The increase in net loans.
The increase in net loans, I again, not like a real budget indication, but I don't think that we will be having a similar growth, but it will be very close to double-digit growth.
Very close. Yes. Thank you. No, I'm asking about the cost-to-income because I struggle to see what would be your profit in this year. Are increasing a lot the salaries, a lot the other operating expenses, and the best I can get is a 43% cost-to-income. That's why, probably your worst-case scenario. I don't know from where it comes. Just, that's why I insisted on this.
No, I understand. You will see all these very clear when et cetera. Actually, it's a bit more than three weeks once we announce our budget. I don't think that there will be disappointment or bad surprise.
Yes, I'm sure of this. Yes, yes. Okay. Do you have-? I don't know, I'm not aware of the fact that you have reversed all the excess provision for COVID-19 this year. If you have something left to reverse next year, did you? Sorry.
No. Daniela, we never said something like this. We said that there are no longer loans under moratoria. That, let's say, the NPL ratio was not coming to the levels we were initially anticipating or we were preparing for. In terms of releasing provisions, no. There were some releases last year, but we haven't released the bunch of provisions which were set aside according to, let's say, the adjustments which we have brought to our provisioning policy starting with 2020.
I mean, it's up to. We didn't change our provisions, provisioning policy, nor we didn't drastically change our models. I wanted to say if it was misunderstood, that there are no loans under moratoria.
Mm-hmm.
Provisions of the loan books model, they are there.
Oh, okay. You provisioned well. Because I give you the example of BRD, they reversed EUR 25 million from this provision. That's why I'm asking if you have something to reverse.
I wouldn't like to discuss about competition, but even in, for them, in their size, it's not a big amount.
Okay. Okay, thank you very much.
It looks like there are no other questions now in the queue from the information I'm having here.
Yes, indeed. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Thank you very much for being with us, listening to us. I hope that this craziness will stop soon and we will come back to a peaceful, healthy spring that we've been missing for a long time. We'll be discussing under decent, normal, peaceful conditions with you. Looking forward to hear from you also. If you have any other questions, please do not hesitate to contact us, our investor relations team. Stay safe. 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.