Ladies and gentlemen, thank you for standing by. I'm Konstantinos, your Chorus Cal l operator. Welcome and thank you for joining the Banca Transilvania Conference Call to present and discuss the first half 2025 financial results. Please note that the conference is being recorded. The presentation will be followed by a question- and- answer session. You may submit your written questions using the ask question window. At this time I would like to turn the conference over to Mr. Ömer Tetik, CEO, Mr. George Călinescu, Deputy CEO, CFO, Mr. Cătălin Caragea, Deputy CEO, Chief Risk Officer, and Mr. Aurel Bernat, Executive Director of Financial Institutions and Investor Relations. Mr. Tetik, you may now proceed.
Thank you for joining our call, our earnings call. I hope that you managed to get a good summer vacation and now back to business or at least soon you will have the chance to enjoy some couple of days off and join the business recharge. Romania had not only meteorologically but also economically had a hot summer after the establishment of the government. There was also announcements about the changes to the fiscal code, new taxes had been introduced. Aurel will be giving you more insight on that. Indeed these were necessary and we have already seen that two out of three rating agencies reacted, I would say positively, accepting both the needs and the direction of the changes. Definitely the changes announced will create an environment where the burden will be shared by everyone and it will not be an easy and quick fix.
We will not start seeing positive results immediately at the end of this quarter or next quarter. On the other hand the momentum is good also as we always say, banking system, especially Banca Transilvania is the leader of banking sector in Romania. We are ready to support the continuous growth as we have done it in the last years and support with both liquidity lending and different products, the investments much needed. We have also news about brief news about the EU wide stress test led by EBA where we had very good results, strong results. It was the first experience for us. The outcome is confirming that in terms of capital planning and in terms of liquidity, BT is on the right track and this encourages us also for our further plans for growth. Cătălin will provide more details on this as well.
We think that the first semester results of BT are quite robust above banking sector average. Although we had a slower first quarter January to March where our focus was on the integration of OTP and also our base bottom line had been hit by some one off events which impacted cost of risk and provisioning. The second quarter we have seen very strong growth. We have seen accelerated growth of loans both on retail and company side. Deposits started picking up and we are happy to deliver the return on equity still at the 25% with capital adequacy ratio well above the regulatory limits, but also at our, let's say traditional standards. Our asset size has grown close to 16%.
Loans, especially with the support from OTP loans after the integration, but also higher growth in the second quarter, we have seen almost 28% growth in our net loans. Our loan-to-deposit ratio is slightly, let's say, positively impacted as OTP didn't have high liquidity as we had. This is also bringing us to more normalized levels. We are also happy to see that in a very competitive environment, in a very, let's say, well-regulated environment. On the fees and commissions, our net fee and commission income is still growing at high pace at double-digit 12%. The packages that we create for our customers or the subscription packages that we had been explaining, bringing back the returns that we had been aiming to and I will let you.
I would like to give some insight about Romanian economy, about the fiscal changes that we know that they're already applicable. There are also more to discuss maybe with the second and third packages soon to be announced and then we will come back to the business growth as well. Thank you.
Thank you very much, Ömer, and welcome everybody. I must start with a disclaimer because on that highlighted blue side of our presentation we are always detailing some evergreen information because these are the information on which we develop our future perspective of growth and so on as a bank. First of all, we remain and we are the second largest economy in Central Eastern Europe after Poland and having this 19 million investor base or customer base in Romania. On the other hand, we have the fastest growing economy, one of the fastest growing economies throughout Europe, despite the fact that in the short- term we had a slowdown during the last couple of months from 2024 and also during 2025. In the first half of 2025, we have an increase in our GDP of 0.3% unadjusted series and with the seasonality adjustments we have a 1.4%.
The third relevant information, as I mentioned, evergreen one, is the lower debt-to-GDP level compared to the European average. Despite the fact that it had quite an increase during the last couple of years, it still remains well below 60% in the short run. In terms of deficits and what we are seeing in the economy, we are still facing twin deficits, government deficit and also the trade one. In terms of government deficit for the first half of the year, we had a similar result as in 2024, which might be considered as a good sign because for the remaining of this year there will also be the impact of fiscal measure implementation starting with August onward. It's not only about the fiscal measures. We can also talk about foreign direct investments, which had an increase compared to the previous period of 17%.
Also, until December 2025, this year we'll have approximately €3 billion extra revenues from the resilience fund. Going back to trade deficit, it also shows some improvements, still on the deficit side, but with a slower pace. It's 10.7% this year compared with last year's 16%. Inflation was more volatile during this year due to some obvious reasons which I will detail. Nevertheless, at the end of April we had 4.9% and it increased to 6.6% year-over-year in July 2025, being impacted by the cancellation of the price capping in energy. Most probably during this year we'll see a spike in September and later on this year of higher single-digits also due to some fiscal measures, among which there is also the VAT impact in terms of wealth in the CE region. This is also something that we presented you in previous meetings.
We are closing the gap. For GDP per capita we are at 78% from the European average. The dynamics of the GDP for the last nine or 10 years put us also in pole position alongside with Poland and other countries which have, let's say, a more positive impact from the financial investment side. Relatively lower d ebt to GDP ratios and inflation. As I already mentioned, these are something that will also shape the future in a more positive manner for the banking sector. As an evolution, what we are seeing is that on both lending side and the deposit side, the evolution was good. Usually the growth is higher than the European average.
On the corporate loan side, we saw more than 8% increase in lending. On the households, we talk even about lower double-digits reaching 10%. On the deposit side, the pace of increase slowed. Nevertheless, for the corporate rate, it's good that we are seeing a return in terms of increases after 2024, when it was a year of more standing by-ish mood from their side. Most probably, corporates were using their own cash at hand in order to make investments.
Now we are seeing a more bullish market from this point of view. Household deposits as well, 10.2%, which is a strong, strong figure. We might add that during the last year we had good impact on overall investment fund usage in Romania and also for the capital market. All three of them contribute to quite a strong willingness to increase deposits from both corporate and households as well as the strong asset quality and robust capital. You can see it as well. The NPL ratio at the system level is 2.8% and the Tier 1 is 21.4%, which are relevant, reasonable, and positive details of the sector. In terms of competition, as you already saw in our earlier presentations as well, the top five players have approximately 70% market share. Banca Transilvania is at 22% market share, which includes also OTP.
It still remains a very vivid market with a large number of banks, approximately 30 banks in the sector. Key highlights, I won't be going through them, just touching them as details in terms of resilience, asset quality buffers, and also profitability at the banking sector. You can as well see the final details. An extra information that is extremely relevant, especially during these periods of time, is the sovereign rating, which was reaffirmed or affirmed by S&P and Fitch as well. Romania has an investment grade with negative outlook. On the other hand, it's good to know that the fiscal package was well received by investors and also by the rating agencies. The first fiscal package which was enforced or approved refers to the VAT which was increased from 19% to 21% and also it impacted the reduced rates of VAT from 5%- 9% which went to 11%.
The turnover tax in addition to the corporate income tax, dividend tax which had an increase to 16%. Social and health insurance. This impacts especially the pension side which will be paying these contributions for every pension which reaches the level of approximately €600, RON 3,000. Late broad tax as well, public expenditure for 2026 which will come as a second package. They are all in debate, so we won't be making official statements regarding any future future package. This estimated impact nevertheless for is a little bit less because it is applied only for half of this year. It means between 0.6% and 1.1% to GDP. It will have a much larger impact during next year.
First of all, we will be talking about 12 months and also we'll be talking about some fiscal packages, extra fiscal packages that are on the table right now and somehow covered by the media. Going towards the business performance. George, you have the floor and thank you very much. I will be returning soon.
Thank you very much, Aurel. We go into the performance of the first half of the year where both the bank and group present very good pre-provision operating profits for the first time. Since we present this type of information, we put in annex more information in terms of quarterly results because, as we mentioned in the first quarter, we think that the first quarter had some one-offs and related primarily to the integration with OTP . Therefore, we wanted to separate the evolution in the first quarter, which you have seen before, versus the evolution in the second quarter, which presents a more normalized view on the evolution of the bank and what we expect to happen in the next quarters.
This is especially related to the fact that we see more revenues coming in and then less cost because we don't have in the P&L costs related to the integration. Coming back to the evolution overall at the level of the first half of the year, as I mentioned, pre-provision operating profits increased year-on-year by 15.8% at the level of the consolidated results and by 14% at the level of the individual results. This is driven primarily by very nice growth in terms of net interest income, net fee and commission income, and by a very tight control over operating expenses, as you will see in the pages of the presentation and here.
From the point of view of analysis, we can see that the growth in net interest income at the level of the first half of the year at consolidated level gets to 25.3%, which is higher than last year growth for the same period where we had 23% increase. This is at consolidated level, while at the level of individual results net interest income increased by 19.4%. From the point of view of net fee and commission income, we do have an increase of 14% at the level of consolidated results and 12% at the level of individual results. The 14% for this year is very similar to the one last year, whereas from the point of view of an increase in terms of individual results, we do have a slower increase this year, 12% versus 15% last year in terms of net fee and commission income.
From the point of view of operating expenses, we do have an increase at the level of the bank of 15.5%. Unconsolidated, we talk about 22.9% increase. We'll go into more detail in the next pages, but I want to mention that if you take a look at the information that we presented in Nanext, you will see that in the second quarter of the year, while revenues increase quite nicely both at consolidated and at an individual level, costs are decreasing quarter on quarter. We do see the synergies on the cost side being reflected and represented in the PNL, and that will follow on in the next quarters. In terms of cost income ratio, the bank presents cost income ratio overall including the turnover tax on turnover around 45% at the individual level and 47.9% at group level.
If we didn't have this turnover tax that would have been less than 42% at individual level for the bank. I mean you've seen the numbers presented above. This is significantly lower than the average for the banking system which is above 51% in terms of cost to income ratio overall. In terms of asset quality, cost of risk with 0.84% we do have an increase versus the same period of last year, but this is driven primarily, as we mentioned in the first quarter, by some one offs that were reflected in the first three months and I'm sure Cătălin will go a little bit more into details in his part of the presentation.
What I want to point out is that the bank continues to have an NPL ratio that is substantially below the risk for the system with 2.6% whereas you've seen in the previous pages presented by Aurel that the system has an average of 2.81% NPL ratio. From the point of view of profitability, as I mentioned some details, in terms of net profit with RON 1.77 billion. On an individual level we show a small decrease versus the same period of last year driven primarily by provisional expense which were higher in the first part of the year than in the same period of last year.
While at the level of the consolidated results with almost RON 2 billion, we're less than what we had for the same period of last year, but in the first half of the previous year we did have some one offs related to the fact that we closed the deal with Victoria Chisinau and that presented some bargaining gain that was booked in the first part of the year 2024. Overall, if you move to the balance sheet evolution, assets increased at an individual level by 6.2% to almost RON 196 billion and by 0.5% at consolidated level. Loans increased when you compare with the amounts at the end of December at the individual level by 18%, driven at the individual level primarily by the inclusion of the OTP exposures. However, we do have increases, organic increases at the individual level as well.
In the first half of the year, you see this at the level of the consolidated results. Consolidated results have grown by 5% in terms of gross loans, while in terms of deposit from customers we do have a 5% increase in terms of deposit at individual level and a decrease at the level of the consolidated results with RON 158.5 billion at the individual level and RON 164.4 billion at the level of the consolidated results. We do see an improvement in terms of gross loans to deposit ratio as we were mentioning in the previous discussions that we had. Individual level increased by 7 percentage points to 64% and at the level of the consolidated results the improvement is of 4.3 percentage points to 65.09% gross loans to deposits. This is primarily due to the acquisition of the OTP business.
In terms of capital, very good capital ratios above the minimum requirements. I will not go into details because Cătălin has dedicated pages on this topic in the next part of the presentation. Let me go a little bit more in details in terms of income and expenses both at individual and at group level and then start by net interest income where we are at consolidated level at almost RON 4 billion in terms of net interest income recorded in the first part of the year, a 25.3% increase versus the same period of last year. As I was mentioning a little bit earlier, if you look at the structure at the individual level with almost RON 3.2 billion in terms of net interest income, 19.4% increase versus the same period of last year, we do have a strong net interest income evolution.
If you look at the margins both at individual and also at group level with 3.45% and 3.95%, we are well above 300 basis points that we were mentioning as an absolute minimum for the next period. You see that the bank was able to maintain this level irrespective of the fluctuations of the base interest rate, being it ECB or NBR policy rate. Net interest income is also the largest contributor to overall income in the bank with 70.4% contribution at the level of the bank and 21.8% in terms of group. If you look to the next element that has grown nicely, it is the net fee and commission, and as I mentioned before, these two are the main contributors to revenues in the period. We do have increase both at individual and at group level.
This is different primarily on the one hand by the increase of the number of transactions that we have from the current customers, but on the other hand also by the fact that we do have an increase in the number of new customers in the bank, and in the first half of the year this was an increase of 40,000 clients at the level of the bank, both retail and companies. They increase in double-digits, as I mentioned, 12% at the level of individual results and 14% at the level of consolidated results. In terms of the other components of income, namely trading income, both individual and consolidated is growing nicely, driven primarily by FX results. The good evolution was driven by the, let's say, volatility in terms of FX rate, foreign exchange rate.
Volatility allowed us to take advantage and to have very good revenues in the first half of the year. In terms of net gains or losses from financial assets, this is primarily driven by the evaluation related to fair valuation through OCI. Here we do have lower results than last year. Again, on the background of the volatility related to interest rates in the first part of the year, we have RON 100 million at the level of the bank and RON 96 million at the level of the consolidated results. In terms of rents in operating expenses, the biggest contributor to operating expenses both at the bank and also at group level is personnel expenses.
Here I would like to mention that in terms of personnel expenses, we do see some increases in the first part of the year, with 13.9% at the level of the bank and 16.4% at the level of the group. Part of it is related to the new people coming in from OTP. Later on you will see a little bit more details on this OTP integration in terms of its contribution to the overall, let's say, balance sheet and P&L KPIs on the bank level. What I want to point out is that from the point of view of increases in expenses, we do have, if you take a look at the appendix where we presented quarter on quarter analysis, you will see that staff expenses in the second quarter of the year versus the first quarter of the year are presenting a decreasing evolution.
Meaning that we did have some one-offs related to staff expenses in the first quarter of the year. We have nearly 10% at the BT level and 12% at the level of group. Other operating expenses is the second main contributor in terms of operating expenses. Here we include also the tax on turnover, which is the biggest single item that we have there, presented with the 163 million at the level of the bank. Here again we have an increase of 20% in the year 2025 versus the same period of last year and 35% in the first half of the year versus last year at the level of the group.
The main type of costs that we have here, with the exception of the tax on turnover, are related to the fact that we did have some maintenance and preparation of the network related to the OTP transfer of the unity in the branches and also some of the marketing and sponsorship expenses related to the activity in the first half of the year. Overall, if you take a look on a quarter-on-quarter basis, these expenses decreased by almost 5% in the second quarter versus the first quarter both at group and individual level, reflecting the fact that we did have one-offs in the first part of the year. As I was mentioning, if you take a look at the individual level, overall quarter-on-quarter increasing revenues is of 13% whereas increase on expenses is actually a decrease of 0.8%.
At group level, the income increases by 5% whereas expenses decrease by 5%. If you take a look at the efficiency of the staff, we've put here an analysis comparing the number of staff increase in the last almost five years, five years and a half, which is almost 24%, and the total assets per number of active employees. You see that whereas the number of staff increases by 24%, the increase in the efficiency of the staff is 52.4%, reflecting an increased efficiency of the staff that we use at the level of the organization in terms of cost income ratio. As I was mentioning a little bit earlier, if you take away the turnover tax, this is 41.7% at the level of the bank. Including this turnover tax, we do have comfortable levels below the market average with 45% and 48% at the individual and group level respectively.
As I mentioned, I will go a little bit more in details on OTP when we talk about the group. For now I will let Ömer Tetik continue with the business evolution.
Thank you. As I said, the first quarter as you mentioned was more focused on the OTP integration, which was a, let's say, a record time even for us, where we do like a factory work. Our integrations that impacted also a bit of our business growth. In the second quarter we have well recovered. Our total loan growth for the first semester is at around 18%. If we exclude actually OTP integration, still with 7.4% growth in retail banking and also 5.2% growth in corporate banking, we are well above the banking sector average on both segments. Also definitely much higher than the GDP growth. We are always mentioning this. Also the fact that in Romania financial inclusion, the banking sector's weight in the total GDP is low. We see good potential of growth even at the slow growth environment.
In total, growth of loans had been around RON 16 billion, RON 15.5 billion year- to- date. If you take OTP integration out, it's around RON 5.2 billion, which means around €1 billion. We have seen an increase in retail loans from our customers, especially in the second quarter. This, let's say, increased interest is also continuing, I could say, without being able to give you numbers before September call, also in the third quarter. We are also comfortable seeing that our portfolio growth also offers a quite, let's say, balanced approach and kind of a hedged environment, as 65% of our retail loans are floating rate and 93% of our corporate loans are floating rate. With the currency distribution between loans and deposits also quite well distributed, our deposit base is continuously growing.
In the first semester we knew the amount of deposits which will come from OTP, so we weren't aggressive in terms of pricing. With our very comfortable liquidity ratios, we do not see, let's say, high pressure on ourselves to increase interest rates. Without OTP, our deposits had been almost flat in the first semester, which as we mentioned helped us to improve our loan-to-deposit ratio towards 64%. One thing that we also enjoy seeing is that as prior to pandemics and wartime economy, I would say our current accounts and savings accounts have reached also. In retail banking, 43% these are, I'll say, this is funding we consider as our core funding, actually part of our core funding at zero or very low interest rates regardless of the interest environment or monetary policy. This gives us also very cheap funding possibility.
In retail banking we had RON 7.1 billion lei new production. This is organic growth. Out of the new loans granted, around 47% were mortgage loans, 53% were consumer loans, short term maturities, and just during the first six months of 2025, 11,000 households have purchased a new house, a new home with loans from Banca Transilvania. We are also saying that the trend, the demand, is quite visible. Also, in the third quarter we see growth of our active customers. Growth of cards, cards and payments is a business segment that we are by far market leader. We are investing a lot and we see also customers prefer more and more using our products, be it on cards or online applications. On this segment, in corporate banking, our focus on healthcare, agriculture, infrastructure investments continues.
We had RON 9.7 billion lei organic growth, diverse also government led programs like Creditul Fermierului , the Farmers Credit, Women Entrepreneurs which will start soon. While we are taking active role in all these programs, our midco, our large corporate business, our mid corporate business is also being an active creditor of the investments in infrastructure and investments in Romania. I will switch to Cătălin for the rest. We have seen some questions already in the platform with regard to the business growth or potential of business growth. I will come back to that on the Q& A. Thank you.
Thank you, Ömer. Going on the risk slides, we will start with the capital position of the group. We can observe the same situation that we are also targeting. The fact that we are able to happily maintain the capital adequacy ratio above the targeted level of 20%, which is also including more than comfortable buffer on top of the minimum regulatory requirement, which for the group is the level of 17.84%. We can also highlight the very high loss absorbing composition of the own funds. If you are looking to the bottom left slide, you will also observe that as of June 25th, we increased the share of Tier 1 own funds through the inclusion of the profit for half year. This is also concluded in an increase in the available capital or available own funds up to 19.5% at the group level.
If we are looking at BT individual or standalone level, up to 17.8%. What we also like to highlight is the RWA density, which on credit risk slightly increased in 2025. We would like to mention here that this is due to the fading out of the regulatory transitional provisions here. Namely, we are talking about the euro denominated sovereign exposures, which in 2024 benefited from a zero risk weight, and starting with 2025 and successfully sequentially for the upcoming years, it will fade out this transition provisions up to the regulated level of the Romanian state RWAs or risk weights. This being said, we can move forward to the asset quality. We can see in 2025 indeed a slight increase in the NPL ratio.
However, on the positive side, we can also see that because for this time in these slides we are showing also the market average, we can see that BT c ontinuously stays below the market average. For June, the market average is at 2.8% in terms of NPL according to the EBA definition, whereas the market system is at 2.8% and the bank is at 2.65%. The increase from 2.07% at the year-end up to 2.65% can be sliced, I would say, in three levels. The first one, the first impact, which is around half of the impact, is coming from the OTP integration. OTP, as I explained also in Q1, came with a slightly worse portfolio quality than BT, and this basically brought around between 20 and 30 basis points up drift in the NPL ratio.
Another significant share from this is due to the one-off effects from the first quarter, these corporate exposures, a few corporate exposures where we observed, where we encountered a default, and the rest is the normal evolution that we have seen also in 2024 in the second part of the first half. Basically, in Q2, we observed a normalized NPL inflow. This was visible also in terms of risk cost. The risk cost went down from the 1% level, which we have seen at Q1 2024, to 84 basis points standalone and 80-89 level. In the second part of the first half of the year, we saw a normalized evolution of the portfolio quality. I would say that this is also in line with the economic environment. Nothing unexpected in this second part of the first half of the year.
What is also to be noted is the share of, I observed also a question, hopefully I will answer the question about the share of stage two provisions. Here we can observe that we are keeping the same share of stage two provisions and stage two exposures. Of course, if you look in absolute terms, because the portfolio is growing, you might see in absolute terms an increase in the stage two exposures. I wouldn't say that this is outside of a normal level. Going to liquidity and the MREL strategy, liquidity position proves to still be high. This you'll see also on the next slide. As always, we are much above the market average with both ratios, LCR and NSFR. If we are looking to the loan-to-deposit ratio, here we are also seeing an improvement.
We are seeing an improvement, also, as George said, about an improvement because we considered that we were too low up until now, and now we are basically going slightly up. This is also due to the OTP integration in the bank, so currently witnessing a 65% LTD on the MREL strategy. Yes, comparing December 2024 with June soon and looking to the minimum requirement, here we see that the minimum requirement for the group—just to mention one more time that the MREL strategy is always done at the group level—increased from 30.1%- 31.7%. This is due to updates of the minimum levels imposed by the national bank, mainly driven by increase of the size of the bank because the buffers that the bank has to hold are strongly correlated with the size of the bank.
Basically, through a mechanical calculation, the bank has to hold more eligible liabilities, so more minimum requirement. However, what we are managing here, we are managing to keep our targeted buffer on top of the regulatory requirement. As mentioned, we have a targeted buffer of 50 basis points to be kept on a continuous basis as a capital management strategy. Looking to the composition of the balance sheet and filtering this through the liquidity profile, this is the explanation for high liquidity levels of BT given by both assets and liabilities. On the asset side, given by the high liquid assets through the sovereign bonds, and on the liability side, due to our very good customer base. Here we are talking, of course, about the deposits. As also Ömer mentioned at the beginning, BT went through a journey this year.
In fact, we started at the end of last year being the first Romanian bank which is engaged in EBA stress tested EU exercise. Before going in the figures, I will give a bit of a few coordinates about this exercise. In general, this exercise is run at the European level every second year and it's covering the largest banks of Europe. The exercise has some very strict and plain vanilla methodological constraints, here to mention the most important one being the static balance sheet, basically assuming that there are no business developments over the balance sheet of the bank or of the group and there are no strategy considerations when running the exercise. The exercise is run for a three-year horizon and having as a starting point a fixed point.
In this exercise, the starting point was year end 2024 and the horizon was three years, basically stress testing the balance sheet and the P&L of the banks until year end 2027. Another particularity for this year was the fact that CRR3 was implemented and all the banks had to do a restatement of year-end figures, bringing them to a common denominator of CRR3. This being said, I would like to guide you a bit through the main figures, especially because Romania is a specific case. Specific case being the first, as I said at the beginning, the first BT being the first Romanian bank. Romania is for the first time engaged in the exercise.
If you look, for example, to the EBA's website when the countries are presented, you'll see that the result per the country equals the result of BT because it's just BT from Romania, and of course, not being a euro, sorry, a euro country, then we have some particularities corroborated with the fact that we have a particular balance sheet with our sovereign bonds sharing in our assets. If you'll look to the figures and starting from the beginning, we are seeing that the starting point when coming about CET1 ratio. Just to mention that the exercise is judged in terms of CET1 ratio from a capital perspective. We are starting with 19.5% capital ratio, which is, when compared with all the banks that have been participating in this exercise, we are part of the first quartile.
Having such a high starting point in the capital ratio is attributed to two factors. One is the specificity of the Romanian sector, and another one is the fact that we are keeping high levels because we have to also create buffers for the transitional effects that are explained immediately. Basically, if we are looking forward in the slides from left to right, we will see that we have a depletion, which is also one of, if when you're looking, comparing with other banks, you'll see you will not see this very commonly in other banks. We have the transitional effect that we are showing here as a starting point with around up to 6% in the capital ratio.
This is given by the next years where we will have to fade out the transitional effects that the bank benefited from in 2024, and these are attributed to the sovereign exposures on two sides. One is the euro-denominated exposures, which will gradually increase the risk weight until 2027. Another effect is given by the reserves triggered by the fair valuation through other comprehensive income, which are going as an impact in the capital. If we'll exclude the transitional effect, then the starting point of BT becomes 13.6%. Now looking solely to the and purely to the stress test impact the bank will encounter in this scenario. In this adverse scenario, which is quite a strict scenario, if I will give you a few coordinates, minus 4% in GDP depletion, the strongest impact or 12% unemployment rate.
There are also other effects, of course, assets, real estate assets, pricing increase, and so on and so forth. We will. See that BT registers in this adverse scenario 139 basis points shock in the capital ratio. If we compare with the market, with the EU average which was more than 300 basis points, we can see that BT balance sheet is showing a very strong resilience facing a severe economic downturn. This being said, this was an experience for BT. Yes, we are looking forward for the next exercise which will come in two years where we are confident that we will still keep our resilience in front of such severe macroeconomic shocks, which we hope do not happen. Of course, last but not least on the risk presentation are the credit ratings. There are no changes.
However, we should mention that the rating agencies kept their view over BT standing, with Moody's keeping the positive outcome and not changing or not adjusting or maintaining the rating that was granted or reconfirmed in 2024, and Fitch still maintaining our investment grade, of course with the adjustment on the outlook to negative, which was of course linked with the sovereign. Thank you. Next is sustainability for Aurel.
Thank you, Cătălin. Just scratching the surface in respect of sustainability. I will go through very briefly. We had our second impact and allocation report, which was published in June. 40%- 60% went between green and social eligible projects, and what is most important is that 100% of the proceeds out of that €1.2 billion were allocated to loans for eligible projects. You have the breakdown in case you are interested between green and social categories. On the other hand, we also made some computations regarding the impact for €1 million lending, also based on the green and the social one, impact in numbers. We will let you read them and make computations if necessary, both for the green and also for the social one. In terms of reporting, on March 25th we had our first sustainability statement, and on June 25th we had our fifth sustainability report.
Our main ESG targets can be seen in the lower left-hand side. What I would highlight is our sectorial focus between agriculture and healthcare. We talk for both of them, with more than 30,000 customers and market shares between 27% and 41%, which makes us leading banking in both areas. In terms of ESG ratings, just some mentionings about them. Refinitiv places us in the top 6% companies worldwide, while FTSE Russell gives us scores above the average from the Romanian market and also from worldwide sector. Going further to digital, Ömer, you have the floor and thank you for watching and having me.
Thank you. This year we are indeed in a very transformational period because BT Pay and BT Go are two main applications that will become soon also our only applications. We are very happy. Based on the experience of BT Pay for our retail customers, we can develop also BT Go. These are also our systems developed by us for the needs of Romanian customers. Our customers, BT Pay already reached 4.2 million active users and we have more than 150 million transactions performed in the first six months of this year. BT Go, which is aiming at companies, which is the mobile banking application, the wallet application for companies, small sized or big ones, has already more than 380,000 active users with more than 11 million transactions. The numbers are growing exponentially as we are switching from other applications to BT Go.
I would say that as we mentioned many times, even today in cards payments, mobile banking, we maintain our ambition to remain the leader and also the pioneer of Romanian markets. As we did with a couple of new products in the cards, be it special cards for festivals or a joint, let's say, a cooperation with McLaren launching McLaren cards in Romania. Also, BT Go is becoming from a payments and account management application, it's going towards a partner for businesses of our customers, offering also accounting services, invoice management services, new features being added as we speak on the PowerSafe. If we give a very, let's say, brief snapshot about recent developments, definitely we are happy that INNO Investments, former OTP Asset Management, is now fully functional. We have plans to develop through INNO Investments different alternative funds and develop our contribution to financial markets.
More, BT Asset Management reached already over RON 7 billion assets under management. BT Capital Partners is the leader in brokerage services and intermediation in Romania. Our small boutique of investment banking became actually the investment bank of Romania already. BT Microlending has surpassed 35,000 customers and we are continuously offering not only lending products but also consultancy to our micro customers, to the startups who want to start their journey through BT Mic. BT Broker is also one of the active segments that we are looking to develop because we think that besides our bancassurance activity, which contributes a lot to our bottom line, brokerage is with our customer base and subsidiary network. It's a huge opportunity, and BT Pensii, we have finished the first phase of our integration with BT Pensii.
Now for the pillar two, we will continue our project, and assets under management is already close to RON 700 million. Betalium Leasing this year reached a performance that, if I can make a comparison, BT Leasing now every month is having new production equal to total production of 2008, 2009, and we see still a great growth opportunity in their business line, signing new partnerships with both customers and also dealers or intermediaries. Victoria Bank, in a small, challenged economy, continues its growth. It is already part of SEPA. It offers different digital banking, mobile banking alternatives, also inspired and supported by us. We have finalized the contractual part of the Micro Invest acquisition, now expecting the authorities' final answer on that. We don't see much challenges, but definitely it's a lot of bureaucracy going on there. I would let George say a few words about synergies.
As I said, also there are some questions, and we will switch to quick Q&A. Thank you.
Thank you, Ömer. As I mentioned, we have put together this individual slide where we break down some synergies that we see from the integration with OTP. The main point that we want to put together is the fact that this portfolio that we transfer from OTP reflects a more optimized balance sheet for the bank. We see that the loan-to-deposit ratio contribution improvement from the portfolio for OTP is of 4% in addition to what organically BT sold in terms of loans in the first half of the year.
If you see the ratio of loans and deposit between the BT and the OTP contribution, you see that actually even though we transferred the same amount, approximately, in terms of loans and deposit at the level of the merger, while on the loan side OTP contribution is 10% out of the 100%, on the deposit side the OTP contribution remains at 5% at the end of June, reflecting the fact, as Ömer mentioned at the beginning of our discussion, that we didn't chase pricing on the OTP deposits and whatever was not priced according to our price strategy, we didn't chase it in terms of deposits, resulting in a small decrease in terms of the amounts that were taken at the level of the merger, improve weight in terms of loans into total assets by 5%.
Also, if you take a look on the other side on the revenues, you see that we have a positive contribution in terms of interest income by almost 6%. The OTP business improved the cost income ratio by almost 1% when you take a look at what the cost income ratio for the combined entities is versus what would have been without this entity. The bargaining gain added 1% to capital adequacy ratio because we could use it following the merger in terms of retained earnings available to include in the capital of the bank. Also, we have added 600 new colleagues that bring enhanced competencies at the level of the staff in the bank in the year 2025. I will not go into more details.
We have the details of the annexes where we present the bank and the group broken by quarters as I mentioned and also individual and consolidated balance sheet and P& L. I think we can move to Q& A.
Yes.
Ladies and gentlemen, at this time we'll begin the question- and- answer session. You may submit your written questions using the Ask a Question window in the webcast. One moment for the first question please.
Hello everyone. First set of questions comes from Andreea Playoust for Mirova. Can you provide a view on the expected impact on the performance of retail loans and on the residential house market following the loss of purchasing power from higher taxes, lower income and public sector? The second question, please explain the evolution of the stage 2 gross loans which are growing both quarter on quarter and on a year to date basis.
Thank you, Diana. Thank you, Andrea. Definitely the impact, I mean, is to be seen and calculated, but as compared to 2008, 2009, we see loan-to-deposit ratio at a different level. All the conversations about how, say, crisis or fiscal code changes, new taxes, potential restructurings had been quite active in the public space for the last couple of years. We don't see a huge impact when we speak about decreasing the power of consumption of the retail customers or households. I guess there are more ways and we will probably see that soon. Romanians had been the largest spender as per their disposable income, had been the largest spender proportionally of their incomes to travel abroad, to vacations, to luxury items. I guess that will be the first case, especially in the mortgage loans. We don't expect a big change coming.
There might be some pressure on the cost of risk, on the non-performing loan formation, but we don't see this in terms of jumps as Cătălin had been presenting. Also, our capital and liquidity ratios are quite comfortable to sustain that coming back. Also, seeing some of the questions here, plus what we have presented despite one-offs in the first quarter and what may happen in the months ahead, we are still considering that the budget which had been presented and approved by the shareholders in April is our target and we are comfortable delivering it. When we look at the business growth numbers and revenue numbers, we are comfortable that we will be delivering the figures with hard work but still comfortably. Coming back to the residential house market, the market had been quite impacted by several things.
First, it was the higher interest rates when mortgage loans were not very accessible. High salary inflation, inflation not only in Banca Transilvania or in banking, but all around Romania and all sectors, had been a supporting factor that the loans become accessible again. The interest rates had been decreasing. With the new fiscal code changes, there is also pressure on the VAT side, a couple of percentages, but still important. We have seen transactions had been accelerated at the beginning of the summer. Now, when you look at the third quarter numbers, when we will be presenting them, numbers will be still solid but actually mostly delivered in the first quarter. We think that both the households and the market will adapt to the new conditions, to the new reality.
On the other hand, in the last couple of years, because of the salary inflation and because of the higher demand, prices and margins have been increasing a lot for developers' side. I guess there will be more competition, although we might not see the same numbers as the last couple of years. We see the housing market quite active going forward, and we don't see, with all the measures taken by also regulatory bodies including the National Bank of Romania, indebtedness ratios are quite low. We don't see the risk of a big housing stock to hit the markets through recoveries.
Second set of questions comes from Christian Petre for NN Pensii. Can you make some comments on OPEX increase and what are your expectations for the next quarters? What actions do you plan to take to control the increase? Why net fee and commission income are growing much slower than interest income, and lastly, cost of risk, what is the reasonable level going forward?
Thank you very much for the question. In terms of operating expenses increases, we do see a little bit of pressure in the second part of the year coming from the fiscal changes. Even though we can quantify the effect of these fiscal changes quite well and the biggest one is related to the increase in terms of turnover tax, which doubles in the second part of the year starting with July, we do see the fact that we managed to keep tight some of the other expenses which were in the first part of the year.
A lot of them related to the integration OTP, as we mentioned, and even something that may seem, let's say, unrelated, and I've seen a question that may come a little bit later related to on staff side, the provision for untaken holiday is also related to the integration OTP because we didn't take holidays last year because we had the project of integrating OTP and we had to put provisions up for the untaken holidays. This year we don't have the situation anymore, which creates less pressure on the expense side at the level of the bank. Will we be able to recover fully the increases related to the fiscal changes? Almost most probably due to cost control, but we expect also to have a little bit more revenues than we budgeted.
Overall, the net result should be the same as we have budgeted and approved in the shareholders meeting. The question why net fees and commissions are going much slower than interest income. Here it's about synergies and related to OTP. OTP had a quick and very well seen impact in terms of net interest income because we took on these exposures that brought in interest income. As I mentioned a little bit earlier, we managed to optimize the liability side so we had less expenses in terms of interest with the portfolio that we took on. However, in terms of commissions, here the work starts from this period on because we need to increase cross sell on the clients that we have taken from OTP.
This is something that will be ongoing in the next periods where we will sell more products and have more transactions with the clients that we took over from the business. In terms of cost of risk, I think just.
I may take over here. I mean on the net fee and commission income there is one fact related also to the EU-wide or Romanian regulations where certain fees and commissions had been either limited or canceled. On the other hand, as George was saying, there is also a bit of overlap. We are the main salary and pension paying bank of Romania. This brings us zero cost funding or almost zero cost funding in terms of current accounts and savings accounts. This is part of our value proposition to the customers that you bring your salary and you get certain number of payments, certain services free of charge. Actually, looking item by item is not doing justice to the increase of our net fee and commission income.
We see that especially as compared to our competitors, our net fee and commission income is still growing double-digit where we see either policy-limited or no growth in our competition, big or small banks. Although coming back to the way of us, I mean, although it doesn't grow at the same pace or percentage as the net interest income, still we are very comfortable and also proud of the growth and we are also committed to maintaining it further on. For cost of risk, we had been discussing many times, I mean what is the reasonable level of cost of risk for a bank in an emerging market doing retail banking and SME banking, micro lending as well. Normally it should be well justified even over 100 basis points. Now we see a bit of increase to 80, 85 basis points for our group.
Per se, even this level, if you look at our return on equity profitability, is quite reasonable. I will ask Cătălin to add up.
Just to add up a bit on the risk cost and also on the stage two, because it was a question for stage two. Starting with stage two, if we are looking to, because here we are talking about continuously growing portfolio, looking solely to the absolute levels of stage two might be a bit misleading. That's why we are looking to the share of loans which are staying in stage two. If we are looking to the evolution of the stage two share, we don't see any, let's say, abnormal evolution. On the contrary, if we are comparing the share of stage two for the bank two years ago, we are still below that level because stage two is usually seen as an early warning signal. What we can say is that we don't see anything worrying at this point in time when looking to the stage two.
About risk cost, as Ömer Tetik said, yes, around 1% should be, let's say, a guidance in a market like ours. However, if you are looking, because most probably you are also looking to our budget, we will say that we are targeting for this year the range between 70 basis points and 1%. Of course, trying to look to the lower end of this range.
Next set of questions comes from Daniela Mundro for Swiss Capital. Considering both the doubling of the turnover tax in the second half of 2025 and the higher than budgeted provisioning costs, where do you see the net profit at the individual level for 2025, and another one, what are your full year expectations for provisions in absolute terms?
Thank you, Daniela. As I mentioned already, we are both committed and comfortable saying that the budgeted profit will be delivered because although we had some one-offs maybe in the first quarter, we have also potential recoveries or adjustments in our provisions as well. We don't expect our provisioning or provisioning expenses to grow exponentially. On the other hand, business growth in the second quarter and so far for the third quarter is encouraging us to say that we are going to deliver our budget as committed in front of our shareholders. As regard to. The level of provisions, as we said, Ömer said, we are targeting to keep the budget which is around RON 600 million.
Next question comes from Dan Angelake. For that, would you be able to provide the timeline for your plans around the potential issuance? Do you expect something throughout 2025?
Thank you, Dan. A U.S. dollar bond issuance is an idea that we are internally discussing quite often. It's not a, how say, we don't have an established plan because, as you know, Romanian economy is very much also, I mean, leu. I mean, definitely we have Romanian leu, but also for us the denomination is in euro, and it might be either expensive or difficult to use U.S. dollar proceeds. That's why we are looking for any bond issuance for us, especially now at a more comfortable level. We are looking at the cost of converting, hedging, cost of even doing the transaction with the partners. We had been doing with different very solid partners and investment banks. We will be very careful, mindful of the costs that we can incur, also there, and also the yield, the real cost, interest cost, coupon cost of the issuance.
I cannot confirm because we don't have any date established. I don't deny that obviously in the years ahead, not months ahead, but in the years ahead, we are also planning or looking at U.S. dollar issuance.
Okay, last set of questions comes from Marianne Michalka for Emergent Investments. What was OTP 's contribution to the quarterly net profit, and how is the third quarter shaping up so far?
I will take this one as well. I guess you will see both in the presentation, but also George had been giving some insight, so OTP's net contribution was at around 3%, but also if you look at net interest income, it's around 6% contribution net interest income. There are also synergies that we hope to create. We definitely want to create with the customers that we acquired with the other products that we can sell. I mean if the question would be did it turn out transaction as you planned? Yes. I mean the outcome is so far the same. Not any bad surprises or surprises on the downside, and hopefully we'll create good surprises on the upside as well.
How is the third q uarter shaping up so far?
I already said a couple of things. Definitely our governance team is not very happy. We will see the third quarter shaping up in how it shaped up when we announced our end of September results in November. I mean we are very comfortable, and the numbers are encouraging for us.
No other questions. Thank you for connecting and I will hand over to the team.
Ladies and gentlemen, following the conference call, we would like to announce to you that the investor relations team in Banca Transilvania will send you a short survey about the content and format of the conference call. Thank you for your input. The conference is now concluded and you may disconnect your telephone. Thank you for calling and have a good afternoon.