Ladies and gentlemen, thank you for standing by. I'm Constantino, your Chorus Call operator. Welcome and thank you for joining the Banca Transylvania conference call to present and discuss the First Investor 2021 Financial Results. All participants will be in a listen only mode and the conference is being recorded. The presentation will be followed by a question and answer session.
Today. At this time, I would like to turn the conference over to Mr. Omer Tetik, CEO Ms. Mihaela Nadasan, Deputy CEO, Head of of Financial Institutions, Markets and Investor Relations and Mr. George Kalinescu, Deputy CEO and CFO.
Mr. Tetyeck, you may now proceed.
Hello. Thank you for joining us. Hope that you had Your summer vacations managed to travel a bit and enjoy the summer of 2021. We will try to give you some brief insight about Romania, Romanian banking system and then we will go deeper in Banca Transylvania has numbers. And definitely, we'll try to answer your questions or listen to your observations.
In case we will not be able to answer for any reason at this very moment, We'll come back to you. Mihaela and her team will take over and come back to you. We are trying a new platform. I hope that our sound Our voices are being heard well and also the Q and A will be on an online platform, so that we will be trying something new. And let's see how it goes.
With regards to non recurring situation, You might be following actually, Romania is very much in line with European and global trends, but Actually, in some numbers positively passing the global trends of averages, especially in the second quarter. If you look at the numbers, the GDP of the country grew 13%. This is definitely coming from the fact that Lockdowns heavily affected last year in the Q2, roaming and economy. So quarter to quarter Comparison might not be very correct, but still we are expecting the economy to grow 6% to 7%, between 6 to 7% this year throughout the year despite all the discussions, debates On the delta variant and what might follow with the 4th wave. The macroeconomic and monetary situation is quite stable so far in the Romanian Bank of Romania maintain the policy, right?
They want to see more healthy, profound changes in the GDP structure, bigger pressures in on the inflation on the prices. Because So far, especially in the Q2 of the year, main growth came from consumption, which grew almost 25%. And this didn't create that much of inflationary pressures on the prices, plus Romania Also having its best year in terms of agricultural production. This is a year with record production. When the prices are also relatively high in global markets, so the economy will be benefiting, but also the fact that we are not Importing heavily in the capsule products will help us to grow local economy.
The budget deficits have been growing. Now it's around 4.3% at the end of the first half of the year. And this is Yes, it's positive, partially from the growth programs, partially due to the tax Granted, but with the new funds with the rebound of real economy, we will be recovering this budget deficit Hopefully, we see quite good effects on the fiscal discipline from the government side. On the money markets and fixed income markets, we have seen that the yield curve is getting steeper. In 10 years, This is what I believe that the growth will be also quite stable in the next 3 to 6 months, we will be expecting a sign from the nation of banks in terms of the monetary policy change.
This helps, definitely, the economic growth, lending, savings despite the fact that Sales are increasing the CO2 active in the capital markets in Romania, where the domestic stock market is at record lows as Banking system has been quite robust During the fundings last year and also this year, the banking system lending had been growing quite fast. And only in June, we see month to month 1.4% growth of to non governmental loan book and 11% more than 11% growth year on year. The growth is coming definitely mostly from main lending and also supported by the government Programs like SME Invest, Agro Invest and so on. But contrary to the Expectations or the initial forecast early last year, the APR ratio so far is below 4%. Banking system is active to life and wealth provision.
And the biggest challenge remains Still the financial inclusion and to increase the bankability of SMEs, smaller companies, to our households and thus to increase mostly GDP ratio, hopefully to Similar levels of European Union. Deposits have been also increasing. It's a good time that we had been nice Also last year, Romania until last year, until each financial crisis or any, what's the With a very high loan to deposit ratio, it's low liquidity and dependency on liquidity from external partners and markets. In the last couple of years, non deposit ratio went below 5%. Now it's actually around 68%.
Although the lending activity has increased the loan to deposit ratio by 0.6%, which is still in Mexican, We are at very comfortable level and this also shows the possibility of both the households and through the companies to meet their debt obligations to banking system or to other parties. Coming back to BT, we have been quite active last year in the We have implemented programs, but this year we have built our strategy that we come back to normal lending, normal banking activity. So we have seen a very strong growth in retail lending in terms of number of operations in the core On the company side, from micro lending up to the large corporate, actually, 60% of the Loan active is being supported by growing programs, but 40% is our own initiative And we are getting more and more active and we see also a real value have a real sense of the markets and see our customers, How they reacted, how they stay after almost 1.5 years of pandemic and financial crisis. So we have been over 6,200 companies this year have been Okay. Grants or loans to the grants of government programs this year.
The most Active ones being SME Invest and Agro Invest. When you see in our presentation IMM, in MA, we just abbreviate it as SME. This is our main segment, but also with the pandemic digitization efforts that we have been spending has Accelerated. Now we can comfortably say that almost 70% of our retail customers are digitized. So they use It's one of our digital solutions.
We keep paying our wallet application has tripled its number of transactions. We have been launching several different options and opportunities. I don't want to bore you with all what we do there, but I guess we are Kind of leading digital transformation, digital adaptation in the Romanian Market, this number of contactless payments reaching 27,000,000 in the first 6 months with BT Pay are valid Having almost 1,500,000 users and our customers using heavily our visual help and omni channel support activities, support channels to interact with the bank. This is also valid for to the company site where we are more and more interacting or offering them alternatives to our network. On the other hand, we are also happy to see that BT's network is 100% capacity back to work and we are Almost at the point that we will see again crowds or customers with different transactions or different requests.
This is our strong point. We trust our network and also we need their presence because they have been a driving force And they are fully packed in the front line of Our financial and commercial growth. In terms of financial performance, I don't want to just With the numbers that you already have seen or Mike has seen, but we have very good quite a strong profitability With, I will say, very prudent provisioning policy for the loan book. Although the decrease in interest Right. So, Anthropologie, in general, is putting pressure on our net interest margin.
What we are Maybe losing that we have been mostly compensated from net fee and commission income, which grew today. Very strongly and this almost every 3 months when we are discussing with analysts and investors, this is what we say that this was our Maybe weak point now we have a very reasonable and comfortable level and we see further opportunities. So customers are doing more and more of their transactions with us. Our interactions with them became profitable. So this has definitely at the end, the bank could deliver Almost 19% return on equity with a cost income ratio below 46%, which is quite a good practice even if it's not best practice in this part of the region, in Romania, we have the best practice.
So with $46,000,000,000 loans And 94,000,000,000 deposit our loan deposit ratio is at 49%. We are enjoying the trust of the customers. We are enjoying the transactional volumes and fee income generated by them. But Definitely, our focus from now on will be accelerated growth of landline book, so that we can provide more to take interest income for the liquidity that we have. Our check to the ratio, If we include also our profits for the 1st 6 months, it's 3.6%.
And this is beyond regulatory minimum levels, beyond even our budgetary levels. It is quite a good positioning for organic growth and if there will be further acquisition of different NII activities In the our net interest income had been If you compare half year's half first half of twenty twenty to the first half of twenty twenty one, Our interest income grew by 5%. Fee and commission income, as we were mentioning, grew 27% and trading income Due to down management of our fixed income portfolio grew over 45%. But we also see The pressure is on operating expenses, especially from the human resource side. Romania, both domestically and also economically becoming a more expensive market.
But I think Some adjustments we have been doing, we are offering good commissions, good benefits to our employees and they issued good Results of the bank that we are presenting to you, there has been some impact from postponed Benefit that we were supposed to grant a full 25th year celebration of the bank early last year Due to pandemic, we decided to postpone for potential reasons. But this year, we are allocating those benefits, some Special loyalty premiums to our employees who are working €5,000,000, €10,000,000, €15,000,000 and so on with the bank. This is mostly a one off of which the impact will face in the next years to come. Our loan structure is mainly in local currency. We have kind of naturally hedged in terms of our foreign exchanges.
Also this improves customers' payment, payment performance, payment LOE as well. And we don't see any change, under that will be clear and precise plan to Our NPL, per 90, is at 1.96, it's below 2%. And NPL coverage ratio, it includes also the Collateral, it's the real I think Collateral is close to 130%, which Right. So these are conflicts that we have doubt provisioned and that prepared for the growth to come. In terms of liquidity, I have already explained.
By the way, our presentation that We are using the guidance now. It's already in our website. If you didn't access it, you can definitely access it now. Our strong points have been always JPL Banking and Small Business Banking In Romania, our return on portfolio reached €25,700,000,000 at the end of June 2021, with 3,100,000 active customers. And only in the 1st 6 months of this year, we have granted over 100,000 retail loans.
This comes also from the fact that both with our network of branches, POEs, ATMs, We are quite an available bank, accessible bank for them, not only to just through digital channels. And If we look at the digital customers, actually, we have 2,000,000 This is the main reason we're using at least one of our channels as I have mentioned earlier. In SME Banking, it's small business banking. We have a loan book of R6.5 billion dollars late with over 350,000 customers. Last year, the boost from SME Invest in the Netherlands program has been crucial to reintegrate and to keep to be alliance segment.
This year, we see that all customers are already coming for their own investment of working capital needs and the payment platform is very good. There are almost no customers left from monetary line. If you look at the payment guidelines, we don't see any, Let's take alarming guidance. In corporate 2019, we had 11,000 customers. We have been growing also in the slightly larger secret this year, especially in the utilities of MCG, manufacturing, to help you with the financial results.
I mentioned already that our check to the ratio, even if it does include the profit of the first 6 months, it's over 20%. It's a positive increase of 23.6%. And we will be continuing our growth organically. We are prepared and trained for that. But on the other hand, we are also thinking that the consolidation In Romanian, financial sector will continue.
So we'll be looking to maybe smaller banks, maybe to leading companies in order to extend our reach and to use our capital vessels. When it comes to sustainability, I have to admit that We have one of the best leaders of support of Tata Energy and his team in Romania, Emmanuel. So I would like to leave It's more important to Hialeah to tell us a few reasons of Alta's payment PFS.
Yes. So maybe we are going to repeat Part of the information which you already have seen on our website or we were publishing in previous press release. What we have started this year is definitely to be much more vocal and much more transparent with regard to all the initiatives we were having in that respect. And the fact that we were having already since 2,008 all kinds of programs, which were designed in order to increase energy efficiency when it Investment projects of our clients, of our SME clients. Then we continued with different partnerships with other investment And also for energy efficiency, mainly when it comes to municipality projects that was started in 2012.
Again, we entered also the retail side of green loans back in 2015. And what we can say now is that We expanded everything what is meaning sustainable kind of approach within the analysis of all the loan Contracts, we and the loan arrangement we are having now with our clients. Besides this, we are going to We are transforming slowly everything what is plastic in our interaction with clients into green kind of banking. So virtual cards are going to be, let's say, the drivers when it comes to the new portfolio The part which the Banco Transylvania is offering to its clients. That's, let's say, maybe A couple of these are a couple of details when it comes to the green, the environmental part of the sustainability topic.
When it comes to the social part, only the very nice words which Omar was saying with regards to the managers of the bank are To complete the scene here, so looking at the structure of the human resources in Banco Transylvania, you are going to see That diversity and equal chances is, let's say, a practice for us for already a significant for a number of years. And so we are going to pass this practice and these good Thank you, Sampras. Also when it comes to the relationship we are having with our clients and in this respect through different programs, we are supporting everything what is related to women in business and entrepreneurial approaches coming from different layers of the society and trying to Bring, let's say, the financial inclusion at the table each and every time when we have the chance. While for corporate governance, you have maybe seen the scorings, the ratings we were obtaining with regard to the transparency today. Of our report, definitely, we are doing our best to improve everything what we are having there, not only with regard For the financial reports we are presenting, but also with regards to the entire activity of the bank and in terms of the way in which we are organizing our to shareholders meetings and we are interacting with all the stakeholders of the bank.
Thank you.
Thank you, Mihaela. Before we close our presentation and thanks to Kjellin, we are also very happy to see the growth of our subsidiaries. Before Closing the 1st 6 months actually, the asset management was just slightly under €5,000,000,000 main assets under management. And if you look at the consolidated numbers presented also to you, our subsidiaries are Having significant contribution, they are adding almost €350,000,000 rate to our operating income And over €1,000,000,000 to our total balance sheet, our total asset. And we see continued potential in terms of the third pillar of the pension In terms of asset management, leading but also our micro lending company, Netel, Microfinancare Having a tremendous platform despite all the challenges that they have, they are not only growing, but they are growing profitably.
These days, you might see also a couple of photos if you look at the presentation throughout the corners of the pages. Actually, these are some pictures from our new head office. We are since June 20 21, we are in our new offices. And from a couple of different buildings, we have gathered all our staff It's good to see that over 80% of our personnel is coming to office. So we are working from work.
And also our personnel is enjoying the much better conditions of the new currency. Hopefully, when everything is closed, we will be organizing maybe and investors in the meantime, we would like to host you Thank you very much. Now I would like to switch to Q and A, we will be there is an online platform, I understand, that we will be taking questions. Me, Ihala and Georgi will try to answer as much as many today. It's possible during the time delay.
Ladies and gentlemen, at this time, we'll begin the question and answer session. Please use your handset when asking your question for better quality. The first question is from the line of Nifong Hai to Pican with Concorde. Please go ahead.
Hi, can you hear me?
Yes, we do.
Okay. Thank you for your presentation. I just joined the call. So sorry if you mentioned or you already answered my questions. So just a couple of questions from my side.
The first one would be on the Stage 2, because I observed That they increased quite a bit in the Q2. And I was wondering if there was any special cases Or if SSCOR is really deteriorating to that level? And then my second question would be on cost. So it seems like even on a quarterly basis, our tariffs increased as well. And I was wondering if you Can you elaborate on your outlook, what should we expect in the coming quarters?
And then third one would
Hi. Could you repeat your third question? Because unfortunately, we were not able to get it properly, The third one, the last one.
Yes. It was on interest margins, like how is your outlook for the rest of the year? Thank you.
Okay. So I'm going to start with your first question. So maybe you remember that we were mentioning that we remain conservative in terms of to be And this is the reason why we were shifting some exposures looking at potential risks arriving in the future, but without any kind of signs when it comes to repayment deterioration. So this reflection is in fact also in the way in which the weight of Stage 2 loans was growing. Otherwise, It would have been quite impossible to set aside provisions for performing the loan book.
So this is for number 1. For number 2, the operational cost owner was mentioning some details in his presentation. So definitely, we Keeping them as much as possible under control. And as you know, we were always looking at the cost not like a single item, but In correspondence with the income, so what we are controlling is the cost income ratio and we intend to keep it At regional level, definitely comparing it or if we compare the figures for operational Also with last year, last year, we were not having that much of, let's say, activities. There were a lot of savings happening because of the lockdown.
So part of this growth is coming due to the savings from or the base impact from last year. It's part of this quite high growth phase you are seeing this year. Plus, we were having that loyalty program for people working with the bank for a large number of years, which should have happened and Those fees amount should have been paid last year, but we postponed it for this year. So plus the fact that, Yes, we are continuing with all the investments when it comes to the digitalization of the bank, improving all the systems we are having, trying to to improve not only the interaction with clients, but also internal kind of processes and flows. So This is something what is going to continue, but definitely we are going to keep it well under control, so that we are keeping the cost income ratio at levels Which we committed in front of our shareholders.
To the level at least, we are we will say that we are comfortable For the bank of fast growing banks. But on the other hand, we've been hell of a thing. Last year, suddenly after February, especially, We stopped training, we stopped advertising, we stopped marketing activities, projects with consultants. Several different things have disappeared from our day to day activity. Indeed, suddenly, we had to spend It's unboxed on masks and gloves and plexiglass, but they were not that significant.
So it's not very, Let's say, maybe fair to compare semester to semester. On that bank, in Romania, this is a general Issued, especially on the human resources side, the cost of employment is increasing. And technology is not just itself a solution because it's also a costly investment, although we are early investing there. I guess your last question was related with the NIM. Yes, and while we are enjoying our liquidity To grow from deposits, we are also very committed.
We have said this
a couple of times.
We are not going to Please answer things will get so drastic. We don't want to quote negative interest rates to our customers' deposits. We don't want to penalize Romanians coming to a bank, trusting a bank and making deposits there. This is something that we have to develop further. This is part of the financial education.
So we almost see it as our marketing costs. And we actually cover part of the today. The increase in the net fees and commission income that we have been always mentioning. What we think is that both The global and monetary policy rate most of all in the next 3 months at least will be stable, Maybe towards the end of the year or early next year, National Bank may give the first time of change in the direction in the This will have impact on the interest rate in general. Although it will impact the fixed income market on the other end for banks like us having heavily Main loan portfolio is derived in interest rate, which also help us to increase our net interest margin.
We didn't grow our assets globally very aggressively in the last one year. Although Yes, the market leader in terms of growth as well. We didn't want to be over aggressive. Every day when we have the comfort of economic data, financial data from our customers, we will be accelerating our lending growth, which will also have
Thank you.
The next question is from the line of Bulu Boris Alexandros with Wood and Co. Please go ahead. Hello. Thanks for taking my question. I would like to ask regarding cost of risk, maybe regarding a bit to the question from my colleague previously on stage 2 as well.
Do you still I think in your budget and your guidance, you We're assuming around 120 bps, 150 bps cost of risk. In the first half, it has been about 50 bps and quite volatile from 1 quarter to another. Should we still assume this level that you have in your budget as a full year guidance is still reasonable? A second question, recurring fees. In your budget as well, you had a small decline year on year, but it seems that first half The trends are moving well above these expectations.
It may be a reason behind the strong Performance compared to your initial assumptions have to be useful. And that's all on my end. Thank you.
I will start with the second one. Filipe question, last year, if you may remember during this period, we had been also We have opened certain channels, which were fee based, commission earning, Free of charge to our customers. We have postponed payments. We have I mean, there was no activity. So definitely, part of the increase is Coming from the revival of the economic activity of our customers, part of it is coming from increased Volumes, but we are very attentive.
I mean, this year, actually, we are also accelerating what we in terms of Volumes and number of products what we do on bank issuance or what type of other needs Our customers, that's why although we cannot we will not promise, we will not commit to 25% growth every 6 months, We think that still there is room for double digit growth couple of more years to come for BT in terms of Despite the challenges that we had from in regard to the decrease of interchange fees of different regulations, As we grow our number of customers, as we grow in terms of account volumes and deposits, this helps us So that's why I mean, we see the customer's profitability itself not just from the net interest income point of view, we see it as a bonus itself And we try to take the best part of this model for each customer who is customer. In terms of the Cost of income sorry, cost of risk, sorry, cost of risk, indeed, I mean, maybe we had made a Tradition of being more prudent each year in terms of expectations, last year and this year, all the talk was about Increased NPLs and need for provisioning, so we tried to adjust this.
There are not really too many one offs. We have been also changing our rating models, which impacted On the upper side because of this, but now we are comfortable with it. I'm not sure if you will be able to If you will be going towards 120 basis, but closing of the year will be slightly higher than Yes, between 80 to 100 basis points, I guess.
Yes. And here, just to add something, what we were also mentioning earlier this year is that all those clients who benefited of the public moratorium are still monitored by us. Steel repayment behavior is very fine, but yes, we are waiting for the Q3 and Q4 Prior to confirming that indeed, yes, we have passed without negative surprises, The crisis generated by COVID. So this is also one of the reasons why we are not changing, let's say, the Expectations when it comes to a more conservative level of provisioning, but we yes, we are going to We'll be able to come with more details and to have a clearer picture once we are closer to the year end and we have a confirmation of the economic performance of our clients.
Thank you. The next question is from the line of Petr Christian with NN Penci. Please go ahead.
Hello. Just to make sure Regarding Costa Vista, you are paying around 80 to 100 basis points for the whole year? And the right question please.
This will be something what we could anticipate now looking at How the portfolios are performing. But we are not coming with any, let's say, kind of to budget rectification or any changes on the budget. So it's an assumption based on the current spending of the situation.
Okay. So just to make sure what was the estimation in the budget, 100 and Thank you. And regarding the dividend, I mean, is there any plan to distribute any dividends this year, I mean, taking into account Good position on the NBR and other announcements made by other banks?
Yes, maybe you have also seen that we have convened our shareholders meeting in order to approve A dividend topic, definitely we were checking with authorities and we are coming with a Balance, let's say, proposal in terms of how much cash dividends we are proposing to be distributed. The shareholders meeting should take place in September. And yes, we are assuming that it is going to approve the dividend of order prepared by the bank's management.
Okay, I got it. I see it now. Okay, thank you.
Thank you, Tobias.
The next question is from the line of Nellis Simon with Citibank. Please go ahead.
Hi. Thanks very much for the call. I'm going to ask, I think, a question I usually ask, which is how can you have such high Thank you. Exceeds your income this quarter. Is that sustainable?
That will be my first question. And second question will be on M and A. Sorry, can you repeat
the first question because we're not denying. I mean, how can we have What? We didn't get that. Sorry. Such high
trading and other income. I think your trading and other income is In excess of your fee income this quarter.
Hey, Sid, you have one more question.
My other question was on M and A. I think there were some press reports that you're finalizing a transaction by Getin's to the business in Romania. Can you just share us the logic of that transaction and what it can bring to be brief. Any other potential transactions that might be there?
Sure. I will try to answer the First question, no, I mean, definitely, we are due to our liquidity, an important part of our balance sheet is in fixed income. We are Not trading too much or significantly out of Romania exposures, Matsumina has been trending well. Our treasury has been managing well, and that we Managed to catch based on our know how, experience, our connect, I'll say, connect teams to the local market. When we will close moving, we did the right move.
So that's the asset. It helped us with the trading income. In the other income, it's mostly if you look at our balance sheet, actually loan portfolio, most of it is coming from recoveries Usually, we get asset sales or other types of recovery. But partly, This is not something we can predict. We are not trying to make our budget, but it will be quite stable.
I hope This asset, the first part of your question
Yes, there are also some revaluations of Some investments which are going through the P and L. The majority of our T bills is being reevaluated in But there are also some positions which are going to the P and L, and they also positively contributed to the Other income position.
And then as With regard to the Ideavance, actually, it is a different type of acquisition that we did Until now what we have done with even portfolio buying or going towards bigger market share. On the other hand, we have liked both the team in IGA Bank and what they managed because in a quite A couple of problematic years, they had been quite good survivors, creative. They did establish a good flow, Good know how in leading and creating some receivers from leading, which the bank their bank was financing. So we would like to obtain this structure, people and know how from them. But also we are now assessing very carefully to only to Follow maybe the footsteps of several other bigger banks who did it in the Western Europe having a separate digital bank, In several digital banking entity, we are trying to see who did what kind of mistakes and what worked, what function.
Our digital banking The transformation strategy had been always the best early adopter. I mean, we as a local group, We don't think that in banking you can really easily innovate new products or services. We can innovate procedures, loans, the type of return to your customers. And we are looking from Singapore to Canada to all the best practices. We have kind of an idea about what to do, but If you will get the necessary approval, at the end, we will be addressing also roaming and the forest.
Running is giving a growth, which is We are speaking about couple of remaining deliveries. But this is not the only target. It will be a fully digital bank Without physical presence, because we don't need a smaller BT, we have already the Banco Transylvania. But we think that it's simpler, easier to deal with. Bank might address A part of the customer segment who might have a relaxed working liquidity.
And just in terms of phase, we have submitted all the requests for approval for the The regulatory bodies in Romania, so we are now just waiting to receive their approvals and then closing can have We
are expecting the closing to take place towards the end of mid to end of last part of this year. I mean, in October, November, actually early.
Sounds interesting. Okay. Well, thanks a lot. Actually, one more for me, if I could. Could you just update us on the Moldovan situation?
How the business is going? And any steps forward in terms of your It's a court issue
there.
Your legal issue.
There has been some, I guess, good political news maybe from Mondovo, although we are not In this segment of the country, we think that there will be some transformation adapting to Western European Standard norms of business making. There has we haven't been in the court yet. Our funds have been there for quite a long time. We are trying to, hopefully, get more information about what and when will be happening on that event. The bank itself is fully operational, decently profitable.
Our colleagues are doing a very good job there launching new products. Actually, Victoria Bank has been pioneers in launching new housing loans, credit card wallets, Credit card structures contactless payments just during last 18 months. We have been doing With the help of Better Capital Partners, our investment banking boutique and together with Victoria Bank, We have been doing bond issuances for small municipalities. So actually, there is kind of a Parallel here was that the bank gained the business in accordance with the client strategy with quite Encouraging numbers. On the other hand, there is this litigation, which doesn't progress.
We are expecting now things to settle down to see the changes and then we will try to contact authorities to move to a certain to any direction to a more selective because as you are asking maybe every quarter than we have these calls, We are asking almost daily, we are also reporting to our regulatory bodies in Romania that's something that's The bank is doing
The next question is from the line of Brzosa Robert with PKO BP Securities. Please go ahead.
Hello, everyone, and thank you very much for the presentation. Obviously, by now, most of my questions have been answered. So a quick few follow ups, if I may. First, on the Internet Bank, I couldn't hear clearly. Did you say that you're going to apply for a separate Banking license and to open a separate, so to say, web based bank.
So that's first question. 2nd question on OpEx and employee remuneration. Could you say how much of the quarterly increase in costs was related to those one off the bonuses being paid out and whether the remainder is sort of Expected run rate for the remainder of the year? Or do you still expect to further raise wages in the second half of the year in Romania? On dividends, the third question, would you be willing as you said, there are M and A opportunities rather in the Middle sized banks available.
So compared to the historic payout, would you say it's possible that you would raise The dividend payout ratio, say, next year and going forward? And finally, my last question on the cross cycle Expected cost of risk, I believe you stated recently it's around 100 bps in the medium term. Did it change somehow? Did it perhaps It's improved as was the case in other regional banks. So that's from me.
Thank you.
I guess I remember, I tried to note all the questions, but in case we don't keep anything, please ask again. In regards to the digital, the online banks, I mean, it will be Okay. The bank will definitely we don't need to apply for new banking license because we are waiting for the approvals of A commission of Ideabank. So once we have approval that we have that banking license, but definitely we have to convince the regulatory body And all the controlling that is that we will be able to manage 2 banking licenses for different initiatives or for a new niche with the new banking license. And indeed, As I said earlier, if you do a digital bank, we want it to be really digital.
So we don't want to be a bank which is also offering digital services or channels. Otherwise, it doesn't make sense for us to have another traditional bank like ourselves. That's something. And we will be this is something that we can share more plans and clarity only after we close the transaction, hopefully in the last quarter of this year towards the end of the year, and then we will come back with regard plans. But there are several examples of it in the West, in Western Europe, in Canada and U.
S, The big banking group have a smaller entity, which is doing full banking to a separate entity. This is The road map that we have, if I can give you a hint, this is a hint actually.
So in a way, you're already to acquiring an existing online infrastructure and a new banking line.
No, we are acquiring a bank On which we would like to embed I mean, if our plans will function, if everything will be okay, It will be after the closing, again, I have to make a lot of disclaimers here. Once we have the accruals and we have the closing, we will be moving The traditional bank, the traditional IDA bank with its personnel, with its people and portfolios to BT and the empty shell, the banking license that we will Keep that. We will build up on it.
Okay. The next question was with regards To employee remuneration and what would be, let's say, the expected run rate in terms of growth. So on a yearly basis, you might have seen that we were definitely increasing the salaries of our staff at least with the inflation. And then we were having a couple of years in which we were having shift, let's say, when it comes to the Structure of the staff, employing more people, more specialized people, IT specialists Or data mining kind of specialist. So that kind of trend is going to definitely continue.
So what we are seeing or what We are foreseeing like normal growth rate for our staff cost is somewhere around 6%, 7% As the run rate for the staff related costs.
And what was the impact of the bonus, please, if you can share it?
Segment wise, There were like $42,000,000
It's less than $10,000,000
Yes, exactly.
Yes. Okay.
Okay. Then with regards to the dividend, I'm not sure we were Capturing webcast.
This loyalty bonus is related to the 25th year of the bank Granted to people having 5, 10, 15, 20, 25 years with the banks. So it's not a recurrent event, just another disclaimer for me.
Okay. Then with regard to the dividend, somehow we were not really Getting your point in that respect. So we were always mentioning that dividends are going to be paid out depending on the growth Expectations of the bank definitely looking also at M and A possibilities and making sure that we are not having the bank inefficient by keeping too much capital in the bank. So a combination of Unexpected return on equity and a minimum acceptable from the management perspective of the Capital and equity ratio.
On top of which, we have also EBA, European Banking Authority and National Banking of Romania Financial guidance regulations which may come as they did in the last 12 months. There are my restrictions or strong recommendations that we have to comply with. So it's not a good time to give a dividend Cash dividend guidance, but if we will also manage to, what's it, meet our expectations to grow In the next area, we still have enough capital, more than enough capital. If things will go south and There was a pressure on the loan portfolio policy. We are having a lot of excess capital that we don't need to tap to Shareholders, on that one, which is our very key scenario and that we believe in that Things go back to market to normalcy.
We grow still our loan book close to double digit levels on a yearly basis. Still there will be quite good room because we are creating enough internal capital to pay cash dividends. But for 2021, 2022, we should be discussing when we have more credit enough to give a weak guidance to anyone. And
then your last question was with regards to the cost of risk. And yes, for the time being, we are keeping that expectation that across the cycle, Cost of risk is somewhere between 100 and 120 basis points. Okay.
Thank you very much.
Thank you, as well.
We would like to take the last question, if possible. And then further questions, Please do not hesitate to address our Investor Relations addresses or ask directly. Let's take the last question, please.
The next question is from the line of Patrick Christian with NN Tempe. Please go ahead.
Hello. Can you comment a little bit on the net interest margin outlook and how do you see,
So we were trying to address This topic also earlier, definitely looking at high liquidity we are having, but also at the growth potential in the We can say that this level of the net interest margin is more or less a minimum floor and that to the extent The reference rate is going to potentially grow closer to the year end or beginning of next year. And definitely, we are not Foreseeing any kind of additional rate cuts, this is a minimum from which we can see just, let's say, a growth related to the net interest margin. This is also connected to the way in which we trust that The loan to deposit ratio is going to improve, becoming a little bit more efficient. Right now, we are below 50. And this means that, yes, we do have a lot of liquidity, which we have to manage.
But clearly, as the economic Expectations for Romania are improving, and we are forecasting GDP growth of 7%, six On a couple of years basis, also the level of new lending should be on a growing path And this will trigger a more efficient balance sheet and that's what we also improved net interest margin.
Thank you.
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 bearing with us, listening to us. I hope that we managed to clarify some of the questions. But as I said, If you have any other observations or remarks or questions, please do not hesitate to contact us. We are looking forward to We'll come back to you once we have the Q3 results available. There will be more maybe news also in regard to Ideabank's to please.
The year end number guidance And we will be at beginning of September, we have our general shareholders assembly, upon which we will be providing some more news to you. And Nivy, you can also organize the call. I hope that all of you will stay safe and take care of yourselves. I'm looking forward to meet Most of you, every one of you at investor conferences that we used to have in different weird parts of the world, We hope that in 2022, we will have the chance. Thank you very much.
Ladies and gentlemen, the conference is now concluded and you may