Hello, everyone. Thank you for your patience, and welcome to the Management Board of NLB webcast, where they will present key highlights and business performance of NLB Group for 2021. Today's presenters are Blaž Brodnjak, CEO, Archibald Kremser, CFO, Andreas Burkhardt, CRO. This presentation will be followed by the Q&A session. If you would like to ask a question, you can do it at any time during the event. If you're joined via the webcast, please use the Question tab located above the slides. If you've joined via the conference call, please press star followed by one on your telephone keypad. Before we go on, we would like to draw your attention to the disclaimer on slide two of the presentation. By this time, I pass the word to Mr. Brodnjak. Please go ahead.
Thank you very much. It is difficult to hold a call in such circumstances, obviously, and talk about performance of the banking last year, where your hearts are with suffering people somewhere else, but, so be it, right? We are pretty much very happy, actually, with last year's performance, and the trends have been continuing this year as well. This has been, in many, many dimensions, a breakthrough year for the banking group, turning, you know, positive in client perception, winning awards such as, you know, the Advertiser of the Year, such as, the Stock of the Year in last year, and so on. Continuing strong digitization agenda and, the ESG agenda as one of the pioneers, definitely in the region. Above all, delivering very robust recurring result, in practically all client dimensions.
For example, just the growth of the market share in housing loans in Slovenia has been at the level of 1.9 percentage points in a single year, which is enormous achievement. We have been growing market shares also in consumer lending, despite the total book has been decreasing given the macroprudential restrictions from the Bank of Slovenia. Generally, NLB has been improving its market position. It's been similar in corporate lending in Slovenia and other markets also in the region. Very, very strong organic evolution. Very good progress also in delivering the integration of the banks in Serbia. In the meantime, selling obviously one bank in Republika Srpska and successfully integrating already banks in Montenegro. Delivering practically in all dimensions also the revenue and being still rational when it comes to cost.
Clearly, couple of one-offs in the last quarter, which we announced, related to the integration and restructuring efforts in Serbia on one side. On the other hand, certain legal challenges coming from the region, but all within managed more or less dimensions. There have been obviously some surprises coming beyond the balance sheet dates, such as, for example, the introduction of the Swiss franc law in Slovenia, which will be challenged as of Monday in front of the Constitutional Court of Slovenia. We would have high hopes that this law would at least get suspended, if not then fully annulled, but clearly, we need to wait, sit and wait how this plays out.
Otherwise, NLB has been very solidly positioned from recurring, as mentioned, organic evolution and more or less analyzing eventual opportunities, depending on the outcome of Swiss franc law, actually, of course, defining the potential capacity for inorganic growth. From the recurring and organic evolution, very strong opportunities ahead of us, we believe. Of course, not simply ignoring what's happening today and in the last days. Of course, certain instabilities are lying in front of us, but any such instability and crisis, on the other hand, can also, of course, introduce certain opportunities which the bank might, of course, actively address. Just as a short summary, very strong year, especially in recurring results in both client segments, in practically all geographies, and significant breakthroughs in public recognition.
The bank has again become the most reputable bank in Slovenia, which is one of the really important milestones, given the fact that we have been, you know, more or less an anchor point for negative publicity for a decade. Now, actually, there has been very limited negative publicity around NLB Group, and furthermore, being recognized as I said before, a pioneer in ESG efforts and digitization efforts again. From this point of view, very solid performance, and as I mentioned at the beginning of the year, it's pretty strong as well.
Of course, we now have high hopes that we will see stability in Europe when it comes to the Ukrainian situation on one side, and of course, with that related impacts on the energy pricing and availability of energy sources and so on. On the other hand, again, for the region of Southeastern Europe, we would hope there would be no material implications, rather even more opportunities to position itself within the global reshift of supply chains. By that, I would pass the word to Archibald to guide you through the key numbers. Andreas will speak about the asset quality, and then I would wrap up at the end. Of course, we will be available for any questions. Thank you.
Thank you, Blaž. Well, in a nutshell, financially speaking, NLB Group had a great year in all dimensions. Not just that we fundamentally strengthened the underlying business performance with visible improvements on all key business lines from retail, corporate, and importantly, growing revenues in these areas, both interest and non-interest income. On top of that, we also very successfully progressed in the integration of KB Group. Actually even absorbed the restructuring charges, a large part of the restructuring charges with extraordinary income, both from Serbia, but.
Very much still from NPL resolution results throughout the year. In this sense, Q4 was extraordinary both in positive terms. Also in booking finally the announced restructuring charges in relation to KB. In this sense, Q4 was of course affected and burdened with these restructuring charges, both the straight restructuring charges and as well the effect from the divestment of the KB subsidiary in Bosnia. By and large, it was really a great financial performance. We are really particularly proud that the underlying business performance is robustly strong and giving really rise to hope for more to come, as we are absolutely programmed for growth.
Of course, important pillar in revenues, interest income, and clearly all eyes on the rates environment, also of course, from our side. In this sense, we are just lightly optimistic that finally the long-term low environment to some extent is over. We are starting to reprice assets, also on the regular business side, retail and corporate, of course. You see a relatively stable margin and operational business margin evolution throughout the year. Slight uptick in Q4 with realization of a small contribution from TLTRO repayments, but nothing material. Robust performance on the main business lines, and that's something we are really very, very proud of. You see this in the absolute numbers, both interest income and non-interest income.
Very solid growth. If you look 10% even without Serbia growth in fee and commission income is, I think, really an impressive result. Congratulations to the colleagues in business achieving this impressive performance. Fee commission income 15% actually year-on-year without KB. Overall, of course, non-interest income is affected here and there by divestment of certain assets. In Q4 in particular, of course, you see the effects of the sale of KB Banja Luka in this number. Very robust fundamental business performance. On the cost side, again, if you take out seasonal effects and one-off charges, we are very solidly performing with keeping costs, cost containment, as we call it.
That means we financed the necessary investments in scale and technology from rationalization efforts that are continuing as we speak. You see in front of yourself a quite visible reduction already from both staff and branch count. This is of course something that will continue. Q4 in itself, we have of course some seasonal effects. Q4 is traditionally a bit more cost-heavy with cost recognitions. On the other side, bonus payments are being recognized in this quarter. Of course, they are subject to performance, but this year was a great performance. You see a bit of an uptick in this sense of a variable HR cost element. By and large, the underlying cost discipline remains very strong.
Of course, that's continued focus going forward. Not to repeat, the essence of very solid business growth. You see it here pretty much in all dimensions. Especially I think noteworthy the very strong growth of retail books in excess of double digits. What makes us particularly happy also visibly in Slovenia, of course, with main contributions coming from the mortgage market or housing market and still a relatively benign development in consumer finance given restrictions in Slovenia. Also I think noteworthy is now visible growth also already in Serbia. You see also quite a healthy development both on retail and corporate. Corporates even in the double digits, retail in the higher single digits. Here, of course, we expect acceleration going forward.
All other markets, from our point of view, really very, very nicely performing, both retail and corporate. In this sense, we actually visibly exceeded our guidance of group level growth on the loan side. Capital unchanged, very strong position, well in excess, of course, of regulatory and risk appetite needs. Obviously, there is no immediate need to engage in capital measures. We are indeed considering to even stock up on our current strong position to be simply ready for both, for all growth options, be it organic or not organic. By that, I would pass the word to Andreas on asset quality.
Yeah. Archibald, thank you. As mentioned already by Blaž at the beginning, I mean, this was a good year. It was also a good year for asset quality. The distribution between the countries, you know, a little bit of uptick last year here for Slovenia. Blaž mentioned the strong development here. On the segmentation, obviously here also clearly visible is the good performance for retail mortgage loans. If we come to staging, if we talk about staging, actually it continued what we saw actually throughout the entire period now. The impact of COVID in reality is very, very limited. First of all, the stage development is very moderate.
On the other side, also, what we had before COVID in the rating system proved to be really a robust and reliable indicator because, if you map it to ratings, the portfolio behaved also very in line what you would have predicted. When we talk NPLs, last year was again, I have to say, pretty successful in a sense that we were solving a lot of old cases actually to a surprising extent almost. We ended up with non-performing loans of EUR 367 million. That's 2.4%. Whereas we have to say that, some 40% of that are without zero delays. As you know already, cash coverage and general collateral coverage is strong.
This obviously also didn't change last year. In last year, we have been releasing provisions on a net base, so credit risk provisions. It's minus 41 basis points. That's quite a change to the previous year. In 2020 we saw some COVID impact obviously. You remember we had there 62 basis points cost of risk, so positive. By the way, that's wrong in the chart. Our investor relations will correct that. That's missing in the comparison. Again, 2021 was very good. On the other side, we had some restructuring charges, some legal provisions. Archibald already mentioned it before, but overall, obviously still a very good result from here.
With this, I'm closing the risk part for now and would hand actually back over once again to Archibald for some more details on KB integration.
Thank you, Andreas. Speaking of KB, the preparation for our big milestone in April are in full swing these days. Clearly it's now very much focused on the technical pieces, because many other elements are in place. So the legal merger is pretty much prepared. The HR integration is to a good extent not implemented obviously, but prepared. We have a robust setup here, and all key appointments are in essence identified. Of course we have been running already quite visible headcount reductions. That is to some extent continuing, and we continue also after the merger.
We are already in deep preparation for the post-merger phase with a substantial improvement of the process environment, in particular which focus on branches. That's a project we just launched. Obviously we'll immediately after the merger start heavily investing in digital enhancements of the business. Plenty of things have happened, plenty of things still to happen. Of course at the moment, fully focused on the technical integration and making sure this process runs smoothly. You know, we had one successful merger already effectuated in Montenegro on the same or similar technical platforms. In this sense we are quite confident that we are in charge of the process. Still, it's a complex exercise and of course there is no margin for error.
We are really putting a lot of emphasis and efforts both from colleagues on the ground as well as external support. The equation on the financial side hasn't changed much, so in this sense I'm not gonna dwell too much. You know this slide. We are pretty much at 50% of the charge rate in terms of integration costs. We don't expect bigger surprises. Actually, if anything, we have been positively surprised, especially also from NPL resolution coming actually better than expected, in particular from the Serbian book. In this sense, still not every box ticked off, but a lot of confidence in the process and of course all eyes on realizing the potential in this for us, very important market.
With that, I'll hand off to Blaž on the outlook.
Thank you, Archibald. In these uncertain times, it is of course now difficult to fully stick to what you're saying since no one knows how this Ukrainian situation is going to play out. Our hopes lie with, you know, Southeastern Europe not really being affected besides eventual shortages of gas supply or some other, you know, commodity shocks. Generally, we have been actually the beneficiaries of the insourcing of global supply chains back to Europe.
There has been significant demand for our production capacities throughout the entire region of ex-Yugoslavia. Of course, we are very well positioned to simply be part of this shift. What we are showing here, obviously, is assuming normalization, and is assuming clearly, you know, a normal recurring evolution, finalized integration in Serbia, and this is clearly all a purely organic scenario. There has been another uncertainty when it comes to the results, which is directly linked to the Swiss franc law just adopted in Slovenia and coming into force tomorrow. There will be filings for the suspension of the law and constitutional assessments from the banks, following on Monday already. As mentioned, there will be high hopes that there would be at least a suspension, which would potentially, of course, not require provisioning.
By that of course, no impact to P&L capital and of course, capacity for, you know, growth and dividend and/or dividend payouts. This scenario assumes pretty normal evolution. Swiss franc issue will not jeopardize by any means capital adequacy of the bank. Of course, the bank can still afford to pay out dividends. On the other hand, clearly, we have by that subdued potential for the growth through M&A and more aggressively eventually than, you know, as was so far somehow perceived as the plan scenario. In this respect, I believe this is the solid enough indication of what we plan for in sense of pretty much normal environment. By that, we believe this is still a very strong performance.
We are talking about normalized ROE of 12%. Clearly, you know, we have to understand that there is significant dividend stock potential and that there is a significant stock of capital available for growth, which we do see and feel. Practically double-digit growth of retail books across the board and corporate demand picking up, and especially in Serbia, beyond the integration, we really already are seeing the growth. We would, you know, see even significantly higher chance for growth. Then allowing obviously for better results in terms of bottom line and of course dividend payout capacity on one side, but of course further leverage to the growth.
Our agenda of efficiencies and digitization and of course the entire shift towards the digital not only channels but hopefully also higher usage of our services through these channels. The ESG component is becoming more and more dominant. In this respect, the bank will be focusing on this territory and will be, you know, communicating pretty ambitious roadmap with committed deliverables from this roadmap. By that, we believe we will be really improving quality of lives in the region and of course, also conditions for conducting business in the same part of the world which we call home.
By that, I would wrap up the presentation and would kindly invite everyone to the Investor Day, the first ever in history, consciously organized in Belgrade on 12 of May. This should cater for easier logistics, given of course the connections of Belgrade with the world on one side, but we believe it is worthwhile showing everyone the, you know, the most promising market, Belgrade itself being the largest city in the region on one side, but very propulsive growth indicators and prospects. Then, of course, the Serbian market as such after the acquisition of KB becoming, besides Slovenia, actually the second most important with very solid growth per opportunities. We are welcoming you all, frankly, we are inviting you.
Hopefully you will be able to take time and see us live in Belgrade. By that, we are coming to the Q&A session. In the meantime, obviously, our PR team and IR team is available to any of your subsequent questions, or clarifications. Of course, we will gladly be responding to ones, also to the eventual ones right now. Thank you.
Thank you. If anyone would like to register a question, please press star followed by one on your telephone keypad if you have joined the conference call. If you would like to withdraw your question, it's star followed by two. When preparing to ask a question, please ensure you are unmuted locally, and we will come to the webcast questions after. Our first question is from Simon Nellis from Citibank. Simon, your line is open. Please go ahead.
Oh, hi. Thanks. Thanks very much for the call, and well done on the results. I guess my first question is really on your dividend payment outlook. I think you've given pretty specific guidance for EUR 100 million out of last year's earnings and EUR 110 million. Given that your SREP ratio has come down and you have quite a bit of headroom, you know, do you think you could pay out higher dividends than that if I don't know, maybe in the future, if things pan out better than expected? If you could comment on that would be very helpful. Thank you.
Yeah. This depends a bit on the growth opportunities.
We believe that the payout of dividends as signaled has been pretty high, especially if the correction of the price is happening. On the other hand, this crisis, as I mentioned at the beginning, might introduce certain opportunities that we have not been thinking of before, right? There might be some other strategic or non-strategic investors in the region reconsidering their position, which might introduce certain opportunities for M&A or, you know, also for the NLB Group. There is nothing concrete as we speak, but in the upcoming months, situation might unfold a bit. The dividend payout is in direct relation with the assessed growth opportunities, for, you know, value accretive improvement of the market position. By that, of course, also midterm and long-term benefit of stakeholders. This would be, you know, the general principle of answer.
It's too early to talk about dividend, and of course, we are committing to what we communicate here, and more would only be more or less, you know, considered in case we wouldn't see any, you know, more relevant opportunities for value accretive growth. Yet, we do believe that we have significant opportunity to grow both organically and eventually through M&A. That is, could be my view. Archibald, you might add some thoughts.
Nothing to add other than it's consistent, if you remember with our original announcement for the 2023 period, with cumulative dividend flow at EUR 300 million. In this sense, we didn't change anything. As Blaž said already at that time, it was clear that both positive and negative events could happen. I mean, Swiss franc is of course a burden if you look at it, if it comes to effect. Also, we strongly believe it shouldn't come to effect. It could become a burden on one side. On the other side as Blaž said, there could be a good use of capital still. In this sense, I think we are consistent and leaving room for maneuver.
Longer term, you used to have a payout ratio target of 70%. Is that kind of off the table for now? I mean, I guess after 2023, what are you? Yeah. I mean, listen, we have a target capitalization ratio and then that guides our thinking to a large extent. It's just short of 16%. Of course, if you know, we were sustainably above target, we would increase also payout ratio. If what Blaž said, there is no other use for capital, of course, there is no need to retain it.
It's a bit of a balancing act, which is why quite early on we said we put out a cumulative cash target, and this is what for the time being we still believe we can stick to. But of course, we will not be slave to numbers. We always act rational and in the interest of shareholders. At the moment, there is no news if you want, and so we simply stick to current outlook. We are by the way working of course on a maybe more elaborate view on that for the Investor Day, which for sure will be a forum to discuss this also lively with our investors, hopefully.
Okay. That's my main question. Thanks very much.
Thank you very much. Our next question is from Mehmet Sevim from JP Morgan. Mehmet, your line is open. Please go ahead.
Hi. Thanks very much for the presentation and thanks for taking my question as well. I just have one question on your interest rate sensitivity, which you have very helpfully provided on slide 27. Can I please ask what you have assumed in your guidance for 2022 and 2023 in terms of the ECB interest rates, first of all? And secondly, is this sensitivity relating to the whole group, so also parallel shift in the countries such as Serbia, et cetera, or is this just the Eurozone? Thanks very much.
In essence, this is always of course, a group view. On ECB, there is no specific move of ECB envisaged here. What we typically do is look at the Euribor positions and Euribor sensitivities, and this is pretty much what you see reflected in these numbers. No specific ECB moves.
Okay. Would you have any color on what percent, I mean, what the sensitivity would be just from the ECB?
Well, I mean, if you look at our cash position, it becomes very much straightforward. I mean, there is roughly, let's say short of EUR 2 billion position that is sensitive directly to ECB, and so you run the numbers.
Great. Thank you. Just to confirm, in your guidance, there is no interest rate moves assumed for now by the ECB?
No ECB move, no.
Okay, great. Thanks very much.
One additional information, there is an approximately EUR 3 billion long Euribor position as well, right? You can make your math as well here.
Yeah, absolutely. Thank you.
In short, as all other banks, and that's why I was mentioning on the rates environment. I mean, so far we have survived and actually been growing rates revenues even in this extremely challenging rates environment. Now, rate environments might recover somehow, and for us of course, predominantly that's an opportunity. The risk we are watching is, you know, no sudden moves. We wouldn't like to see sudden moves, might even, you know, rates, inflation or any of the other indicators, because, you know, turmoil and volatility is nothing that none of us would like or appreciate. If there were a gradual increase of rate environments, of course, for all banks, that's great news, including us. That's for sure. We're upside in a range of 100 pips easily.
All clear. Thank you very much.
Thank you. As a reminder, if anyone would like to register a question via the telephone line, please press star followed by one on your telephone keypad now. We have no further questions on the telephone line, so I'll move over to the webcast questions. Our first question is from Miha from Slovenia. It reads: To what extent is NLB Group exposed to Ukraine and Russia? How are you planning to protect NLB Group against economic and geopolitical consequences of the war in Ukraine?
Andreas, will you?
Sure. Obviously we are not directly working in these countries, so that's one major point. Secondly, our client base is relatively mildly exposed directly to these countries. Of course, you have the one client who has some Russian ownership partially. You have the next client who is doing some business there. We are following that, of course, very, very closely, also related to potential sanctions, which we now don't see a direct impact at all. We are following that very closely. At the moment, it looks like the direct impact will be very, very mild. Of course, what is the next sensitivity is now what will go on with energy prices with other commodities and so on.
We saw already in the last period here some turmoil, or you could almost say, or some changes already for that reason and of course still also for COVID and all the supply chain interruptions which you see here. We are following that very closely. For the time being, I can just say it looks all very, very controlled and very, very controllable. Of course, you know, not everything which might evolve we can predict today, but for our group, I would say if the situation doesn't further evolve than we see it right now, so on top of that, then the impact on our group should be from that perspective rather mild.
Thank you. Our next question is from Antun from Allianz, Croatia, and it reads: Could you please provide more details for the following three topics, Swiss francs exposure, Tier 2 bond issue, and the potential exposure to Russian-owned businesses and high-net-worth individuals.
Well, indirectly, we responded to majority of these issues, right? Swiss franc has been dimensioned to EUR 70 million-EUR 75 million provisioning threat in brackets. We and this would be one-off, obviously, operational burden, but at the same time, also P&L implication. This by no means shakes up the capital adequacy nor liquidity position of the banking group. There might be some other banks that are more affected in relative terms, but NLB of course can sustain that. It does reduce midterm development potential. This is clearly something that I mentioned a bit before as well. Ukrainian situation was explained a bit by Andreas, and I cannot add much more. We have to sit and wait, what this really means in indirect terms. What will be food pricing, commodity pricing, energy pricing and so on, right?
That is then of course having indirect implications to the businesses. Yet, this is partly offset by the fact that the order books of the businesses from the region, as I mentioned, have been full given the insourcing shift of supply chains. Turmoil in some other countries in Europe can even provide more opportunities, unfortunately. As much as it's painful for someone on the other side, it might bring more opportunities to this region as well. It has to be seen from this balanced perspective. The Tier 2 instrument we basically have been considering for a while. The markets have been extremely volatile as we speak, so you know, we have consciously not decided to continue because we are not in distress. We are not in immediate need of capital. This will be raised you know, in principle to actually address the three topics.
One is, you know, front loading the expiring lines in a couple of years, so there is no immediate need. This is actually expiring in a couple of years. The MREL I mentioned clearly is something that of course comes on top, and if we are issuing an instrument that also ticks the MREL box, it's, you know, killing two flies. And of course the third is to provide additional boost to capital. There is no immediate pressure, but we have been more or less ready. As soon as we see the markets allow something like that, we might consider opening the books. This is not something that has been forgotten. It might come.
We might even think of in case of further improvement of tax environment, because in Slovenia we have seen, actually, you know, not an arm's length or a level playing field taxation of AT1 instruments. There have been some progress in potentially withdrawing or removing the hurdle of taxation. We might then of course start thinking of potentially adding the AT1, which would serve, again, you know, the purpose of on one side optimizing capital, on the other side clearly boosting the capital for growth, you know, and then if ticking as well, you know, the MREL boxes and so on helps additionally. We have the plans, but we are in no desperate need, so we will simply here be rational.
You know, as long as the situation doesn't stabilize, you wouldn't see us there, but you know, if it stabilizes a bit and there is a favorable wind of opportunity, we might go for it.
No business with Russian.
Thank you.
No business with Russian high net worth individuals.
Ukrainian.
Thank you. Thank you very much. Our next question from the webcast comes from Jovan from Richardson. The question reads, Update on retroactive CHF law. EUR 70 million-EUR 75 million has not been included in the 10% ROE guidance. Is that right?
That's right. I mentioned at the outlook that this is a one-off we still believe we can avoid. If this hits the books, of course, this will be one-off very likely Q2 hit, but you know, that's something that is premature at this point of time. We have high hopes this will not crystallize.
Thank you. Our next question is also from Jovan, and it reads: Do you still stick to EUR 100 million plus net profits from Serbia from 2024?
We believe so.
Thank you. Our next question is from Gaspar from Slovenia. It reads, "Good job on the results. Can you tell us how Q1 is looking so far?
I mentioned what I could have mentioned. I said we see strong recurring trends and we cannot say more than that. We are happy about the first two months.
Thank you. Our next question is from Jovan, and it reads: Have you been stress tested by BS last year or recently? If yes, can you please share the impact on capital? Thank you.
Andreas, would you or Archie?
Yeah, sure. The stress test results in the recent years have continuously be improving in a sense of impact. Impact is getting milder and milder. Here, of course, a key parameter is also the continuously reducing NPL numbers. What obviously this year will be a very interesting exercise and I'm sure you know that is the Europe-wide ESG stress testing. I think here the point is simply that European Central Bank was jumping pretty quick then finally on that boat. Obviously that gives us at the moment a lot of work and we will see what we get from that.
That's now less a question which will directly influence us this year, but it's going actually well, on the one side in the direction we anyhow want to go, so we give a lot of emphasis from our side to ESG topics. But on the other side, it's of course still a new and a little bit unusual exercise. So that will be an interesting one. I'm obviously not expecting here any dramas, especially since this will be interesting exercise actually for the whole banking industry in Europe, but that's something which is imminent obviously this year.
Thank you. We have another question on the telephone line. This is from Mateusz, from Erste. I will open your line, Mateusz. Please go ahead.
Yes, thank you. Gentlemen, thank you for the call, for information, and congratulations on the results. I was wondering if you can just remind us on the timeline for this Swiss franc law. You said on Friday it becomes active on Monday. Banks will file injunction motion. What's the timeline next? Should everything be over, as I understood previously, in two months or maybe earlier or maybe later?
Yes. The law is pretty ambitious in terms of your obligation to deliver the new contracts or annexes and then the payment, right? This is more or less a matter of three months altogether, more or less, give or take. In this respect, we are filing immediately once the law comes into force, which is Monday. There will be two injunctions coming from various pools of banks. We will be hoping that also the ECB and the Bank of Slovenia clearly opine on something that is eating into the mandate of the European Central Bank and is against the legal order of the European legal order, besides being retroactive and so on. There are many, many boxes this law is breaching.
My hope is that the Constitutional Court would act immediately, with at least opining on whether to suspend or not to suspend the law. This we will hope to be happening in a matter of days or latest weeks and not months. Once suspended, this might then mean years before clarity because, you know, Constitutional Court might take enough time, even consult with European institutions and so on, to really properly understand all the dimensions, and this might really take time. We would hope for suspension. In case of no suspension, we would more or less, within three months, have a clear view, and a clear position whether we need to pay, and we will simply need to pay in Q2. Of course, provisioning, you know, would be happening in Q2, very likely.
This would be practically even impossible to avoid, you know. In case of suspension of the law, of course, provisioning would not necessarily happen. This is something we need to still, you know, talk about with auditors. You know, at the end of the day, we believe it should not.
Okay. There is no kind of a legal deadline for the Constitutional Court to give the final verdict on the thing?
There is no formal deadline, especially not for.
Mm-hmm
The final verdict. Given such unclarity and, you know, practically even regarding the implementations, there are no conflicting regulations of the law. The banks on one side should be pulling off, you know, the contract and annexes. Then there's the GDPR legislation, which actually prevents and prohibits banks from holding any of this information for more than 10 years ago. The law is actually affecting loans originated 18-12 years ago, right? It is really so ridiculously written that that is very difficult to even perform and execute. We would hope that the Constitutional Court with, from the difficulty of execution point of view, solely from this. Besides this being, in our opinion, unconstitutional and against the European legal order, at least immediately suspend the law.
Of course, they could take time. There is no deadline. This could be years. Of course, theoretically, they could rule very fast. It is in the hands of Constitutional Court of Slovenia. The banks, of course, will not stop there. Even if Constitutional Court of Slovenia validated the law, we would go for the European Court of Justice. You know, we simply believe this is against the legal order of European Union and the spirit of European monetary union, and it's eating into the mandate of European Central Bank and so on. Besides of course, socializing the cost from the budgetary perspective.
Because if in case the banks won, then in European institutions, which I would believe would be the final case eventually, you know, this would then eat directly into the taxpayers' interest. This is really ridiculous law, but it is what it is. We have to live with it. We will deliver operationally and also monetary if needed, but we will not stop fighting. Even if we had to pay and provision this year, we would continue to fight in European courts, you know, and potentially be reimbursed in years from now with hopefully penalty interest. Unfortunately, again.
Okay, great. Thank you very much. Maybe just, are there any updates, news from potential entries into Croatian market?
Unfortunately, I had high hopes. It was also pretty public because the prime ministers and other, you know, high state officials have been, you know, publicly mentioning our meetings. I had high hopes that, you know, Slovenia and Croatia have matured enough in the meantime to be able to put legacy issues aside. Unfortunately, we have not simply come to this point. I'm not sure whether there is anything until the elections or beyond the elections. We at this point of time cannot count on being able to enter into Croatian market, unfortunately.
Okay. Thank you very much. All the best. Thank you.
Thank you.
Thank you. We have our final question via the webcast, which reads: Can you comment on macroeconomic impact from possible energy shortage in light of possible Russia-Ukraine issues? This is from Pabi from Raiffeisen Group.
Well, that's a real question, right? What the shortage in gas supply and pricing of, you know, this energy and other energies will mean for the potentially disruption or continuation of the production. Luckily, heating season will gradually fade out. You know, I'm going to hope for some warmer weather soon, so that the total quantities of gas coming into Slovenia would not be compromised. There is clearly solid dependency on Russian supplies, but there are also other streams than Ukrainian-related streams. We would hope that Russia would not discontinue with the shortage with this supply.
Of course, it remains to be seen how European Commission and generally within the sanctioning eventual reactions, you know, would address this issue and how this could impact eventually the predictability and reliability of the supplies and especially the pricing. So far there have been gas terminals, even also closer. There have been, of course, African capacities and so on. It's a mix of it. It is difficult to really not properly give the full information on that and to properly understand the whole thing. But, you know, there have been certain doubts on supplies in the past, and it didn't crystallize in a radical form. We would hope it wouldn't this time around as well.
Thank you very much. This is all the questions we have today. I'll hand back over for any closing remarks.
Thank you very much to everyone for hanging in there with us today on such a specific day. Our hearts and minds are with the people suffering at this time. We hate to see that in 2022. We hoped it would not be possible anymore. It is obviously. Generally, when it comes to our business, we are happy about how it has been evolving. NLB has been positioning itself as a regional champion. You know, we do have the potential, we do have the ambition and the capacity actually to get there. We are closely monitoring all the growth opportunities to actually pursue and address them in a value-accretive way. If there were not sufficient ones, we would consider, of course, awarding our shareholders via dividends.
In parallel, we pursue both, and we believe we have still been an attractive investment opportunity. Let's stay healthy, let's stay alive, all of us, and all the best.