Ladies and gentlemen, the management board of NLB welcomes you to the webcast, where they will present 1Q 2021 results. Today's presenters are Blas Vorniak, C. E. Urshan. If you would like to ask a question, you can do this anytime during this event.
If you have joined via the webcast, please use the questions tab located above the slides. Before we go on, we would like you to draw your attention to the disclaimer on slide 2 of the presentation. By this, I pass the word to Mr. Bronjak.
This time around, despite of course all the uncertainties related to the COVID situation still, we see solid improvements both in health terms in Slovenia and also in the region, but above all also in business terms. So it is really something that is giving us Now really a confidence that this year is going to be quite a strong year. And in Q1, basically, we exceeded some of the expectations. There is a very solid ongoing result, recurring result and what I'm specifically happy about is that the integration process of Comercio Ambanca has been well underway. We are really working hard now to of course accelerate further this process and to be able to within 12 months fully integrate the business in Serbia.
We have published as you noticed I'm sure the takeover bit. We reached 88% ownership so far. We keep of course offering to minority shareholders, but this doesn't impact Anyway, our ambition to actually perform the integration. We have been really continuously seamlessly providing services, a significant focus on deep further digitization, But above all, given the situation also obviously a significant support of the businesses in the region, we have pre launched the health frame Initiative which is the very, very relevant EAG measure. On the other hand, as we announced, we have introduced the high balance fees for retail deposits In combination obviously to relatively shallow pool of alternative investment opportunities for retail clients as well, We saw some progress in moving assets, actually rerouting assets from deposits into bank Assurance and especially asset management products.
So we see a very strong production there and it continues within Q2. We announced publicly we are reducing the threshold from 250,000 €100,000 as of July 1st, so we expect further strong actually development in this direction. We have really been able to further improve the penetration in digital usage. So I'm really happy to see on a monthly basis strong progress here. Our contact center has been equipped also with closing capacity.
So within a month they will be able to close any transaction apart from the mortgage related housing loan And that's really an ongoing favor of the client experience. And we have just reemphasized and gave additional boost and push The entire ESG territory with quite an ambitious roadmap actually to implement the whole universe of it. I'm actually sad that our colleague in the Board, Peter Bunzig decided from personal reasons to actually leave the Board, but I assure you the situation is fully kind of controlled. So other Board members Have been used to such situations in last years and have assumed full control and we continue with the undisturbed business operations. Furthermore, The teams on V1 and V2 level have been very solidly equipped and fully motivated to deliver on the ambitious digitalization on one side, but of course efficiency improvement program As a whole, we have published the upcoming general assembly, Annual General Meeting to take place on 14th June.
We have also published the dividend suggestion. On the other hand, coming back to the results a bit more concrete and Archibald will give you of course more flash to it. We have really been already seeing a contribution of the Commerciano Banca, just reaffirming that this was a really transformational decision. This was Really a very meaningful one. We are very, very confident that in the coming years there is going to be a strong delivery through the, of course, activation, commercialization of the bank.
So really coming back to clients, we see really a significant potential for double digit growth especially of retail books. And we have shown in the Q1 that we have been able to grow actually retail book also in Slovenia and the corporate is also showing significant progress in cross border lending and leasing Just started showing really first results. So the things we have been talking about are actually delivering on the expectation. We have kept obviously very strong capital position and liquidity has been of course further strengthened given that there is still net influx of deposits in Q1. We saw in March a bit more stable mode of this development given the fact that the Slovenian economy finally started reopening And as of today, practically, we are almost close to the full opening, reopening of the society.
So hotels and restaurants have reopened also inside, Of course, following certain restrictions in terms of distancing, in terms of, of course, being either vaccinated, infected or having a test in place, but generally there is life you see it in the streets, there is again lively, so there is hope returning. We're talking about, of course, the general state of the economy, especially the production part and the export related part. We have very strong quarter behind us. There is growth of exports, there is even higher growth of exports and imports obviously. So there is some surplus in trade balance on one side, but this is really at the levels that are above Significantly above SG of 2019 levels, even pre COVID levels.
So we are very confident that Slovenia economy is in a good shape and ready for a significant rebound. We have even experienced in Q1 negative cost of risk. So we see solid development of couple of assets And collections coming from these assets from various corners in terms of P and L recognition and some of these trends have been continuing also as we speak. So we are quite confident that this year's cost of risk is going to be and Andreas is going to give you more fresh at a reasonable level. On the other hand, clearly, as I was mentioning, integration has been improving also not only physically through the opening up, but also mentally.
So people really feel Now much more empowered on one side, on the other hand, are much more positive. So we are hoping for the normal summer It is going to really give significant boost to the sentiment and then hopefully private consumption to follow otherwise strong robust trends coming from the corporate sector. The macroeconomic outlook has been stable throughout the whole region and we are happy specifically about development in Serbia, very robust picture coming out of Serbia And that's of course our future growth market. So obviously well positioned to be a beneficiary of this growth. I mentioned just shortly the dividends.
Of course, we have published as said the general assembly convocation and we have suggested what has so far been possible given the regulatory restrictions. We keep the ambition still within this year hopefully be able to pay €92,000,000 I. E. In last quarter then Adding the incremental decisions, so another general assembly called. There is a discrepancy in views Coming from the European Central Bank and Bank of Slovenia, Bank of Slovenia somehow following the standalone parent bank logic, Which we believe is professional and not consistent, but generally is the case so far.
So the proposed resolution for the general assembly is Actually dual payment as soon as the residual so far not been allowed with the Banco's denials would be allowed and then we would hope obviously for the residual For the entire €92,000,000 to be paid out this year. The Q1 result is supporting this. Furthermore, it is giving us hope that the whole year is going It's very, very solid. And of course, we are even more convinced that the mid term ambition in terms of dividend payout of in excess of 300,000,000 Actually now within 2 good years until July 23, it will be possible. By that, I would hand over to Archibald to guide you through More details and Andreas will follow on the asset quality.
Thank you, Plasz. Welcome from my side. I'll step you through a A range of key financials as usual. And of course, Dan look very much forward to your questions. So as Pladj said, very Robust Q1 performance actually in all dimensions, revenues, costs and of course, especially cost of risk.
You see also here the Q1 with Commerzbanker contributing and meaningful contributions Actually in the range as we have expected, clearly with a lot of upside still to come. So this is early days. Blush set integration It's getting going. But more importantly, business activation and then cost measures are being said As we speak, but of course, we will take some time to trigger through results. And I can assure you, we are online with developments in Serbia and the team almost on a daily basis.
So Blas and myself are in the board as you know, so keep a very, very close eye On all of these dynamics, on the various P and L positions, you see that really recurring income is So stable, slightly up even without Commercenabanker and of course, Commercenabanker adding very meaningfully already. Same on cost, very strict cost discipline. We'll come to more details on that. And very reassuringly, Even, let's say, at the end of COVID and comparing to a pre COVID quarter last year, we have a pretty stable Pre provision result and of course, also on this the visible contribution already Breaking it a bit down, see that we have A little bit of a pressure on interest income, of course, offset with contributions From Kave, we offset that and Blas indicated the way we do it. Decommission income, very strong focus and very good and nice positive developments, especially in Slovenia with the Asset Management franchise.
And of course, We expect here more to come given what is already announced as further measures on the deposit side, Which are, of course, in these days, a continuous pressure on NIM in particular. Costs, as I said, we are really, really, really focused keeping costs Under control and of course heavily working on the whole, let's say, rework of the operating model. There is plenty of projects underway that keep direct check on costs, but also make sure that structurally we set the right Measures to, in essence, help transition the bank to a more and more digital operating model. And of course that over time will put all physical cost base, physical footprints, branch network, headcounts So in front and back, of course, on the continuous review. So that's a never ending story.
In KB, we are, of course, accelerating Some of these aspects, in particular, headcount, to some extent branch networks are already under review. We have Run or started 1st voluntary relief offers in KB, which we see very Positively accepted by the bank. So we expect contributions here to kick in relatively fast. Andreas will give you more details on the very positive impairment provision dynamic. And that overall, as was said, So a very, very strong Q1 and more importantly, very solid basis and good outlook for the whole year.
So we are really Proud of this quarter and are very optimistic looking into the rest of the year. You see also NIM for the first time Since quite a while, I can report that we have an uptick in NIM. That's really good to see. And we are Again, confident that there is more to come. We have really all operations now very much focused on loan growth, In particular, of course, KB, which as predicted and discussed Is, of course, having its expected positive impact.
We also, for the first time, show you here the quarterly dynamics on the so called Operating margin overall and similar dynamics. This includes, of course, the fee and commission income. And so overall, broadly speaking, stable and positive dynamics on many different elements In a continued challenging environment. So of course, this is all against the backdrop of a hugely challenging environment overall Given the rates dynamic. Cost I mentioned is continuous focus.
And We see here the various components, including breakdowns of KB in particular, what KB added to the cost base. And as said before, apart from KB, which is a special Which is running a special cost reduction program as we speak. Of course, the rest of the group is in a continued effort To keep an eye on all dimensions of cost, Plas mentioned digitalization is more or less in full swing. And of course, we expect over time this to substantially change our whole setup and appearance, not that we will And being a bank with many physical outlets, but the design and cost base Of that out, let's will be changing significantly over time. You see this basically happening gradually Because these are structural costs, not that easy to touch.
But we are in a very good way And we'll continue to on that path. As I said, in an accelerated way also for KB. LoanDynamics, we are very happy to report that we see growth in all segments. Corporate, retail in basically all parts of the group. KB is, as indicated, a bit Flattish on individuals, but that is soon to change.
And We hear that monthly production volumes are actually developing very, very nice. So we are confident that for the full year, we will be able to show Also very positive dynamics here. So overall, we see loan demand very healthy, picking up in all markets, So especially housing is always a bright spot. There is really big demand across all geographies for that product. And of course, NLD Will and continues to establish itself here as a leading player in that key product segment for us.
On capital, very important topic for us, of course, given Post KB acquisition, we show a very solid capital adequacy in the range of 16.1 So nicely above target. And that fully accommodates for the temporary, I should say, The decrease in capital on the minority interests of KB, which we fully took out Temporarily until this so core takeover bid is concluded. And then we expect actually a part of that minorities To be added back, as Plasz said, we are at below 90%. So for the time being, we assume these minorities will at least partially Assumed to be part of our group capital base. And of course, very importantly, negative goodwill Is yet to come.
You're seeing a range of 110 bps. We expect this to be included upon recognition of result and results. By the upcoming general assembly, this is already aligned with the regulators, so More or less a done deal. And also speaking of capital risk weighted asset dynamics, that's something, of course, we keep watching very, very closely. And there is a continuous stream of activities trying to control and optimize our risk weighted asset Position and risk weighted asset drivers, importantly also for the so called MREL requirement.
So for us, really a key And on the positive note, there is still good news to come. We look forward and anticipate that equivalence treatments are kick in somewhere in this year for Bosnia Herzegovina and Macedonia, Northern Macedonia. And that's, as you know, subject to equivalence regimes being enacted. That's a process run through EBIT and EC eventually. And you've seen that kicking in for Serbia End of last year and we expect similar developments for these two markets.
So that's coming up. In other words, on the capital side, actually quite some solid buffers still to come, which, of course, is very important to Underpin our dividend ambitions and of course, our ability to deploy capital in efficient ways. By that, I would pass on to Andreas to give you more flash on cost of risk and asset quality.
Yes, Achibald, thank you. I guess one main point was mentioned already by both colleagues. So first quarter, We saw a release in a sense that we saw both very positive effects from NPL resolution, both on balance and off balance. And so far, we are now on the moratoriums. By end of March, 78% of the moratorium have expired, which were banker banks, Whereas the big, big part of that has expired by end of December, so we have already some grip on that.
And from the a lot of it has expired. What you can see is From the expired moratorium, 82% They have 0 day delays, so they are repaying fully regular. Then you have a certain chunk, which is actually having Delays, but slight delays. And then obviously, you see the more problematic ones with up to 90 days past due and Default category, which is altogether some 4% of that portfolio. I have to say on staging, it looks a little bit different because these last two categories, which tells you that here we are also Conservative.
And so far, I have to say this portfolio actually behaves That's all critical. So we staged them, have certain problems, but not all of them. But overall, also here on that No negative surprises whatsoever for the time being. And then we have remaining Moratoria, the end of March here, obviously. So companies are 70% of that and the rest is households.
And I mean, this is obviously now the long end of the moratorium. So many of these moratoriums 12 months' moratoriums, which primarily were given here in Slovenia. And this long end Of the moratoriums, we see simply more critical. So if you see here the staging, then we are between 30% 35% already on stage 2 And from 6% to 12% on Stage 3. So I would say here we are even more conservative.
Obviously now, whether it's conservative enough or too conservative, we will see in the next coming months. We obviously Keep watching these clients especially closely, but let's see. So far, also here we have a good feeling that we did the right thing. More we will see in the next couple of months, but our view on these clients anyhow became already quite conservative, I would say. Overall, in the bank, I mean, one point was mentioned.
So the release of provisions of €15,500,000 net for the reasons I explained already. And overall, a very Stable stock of NPL with €480,000,000 End of March. But you have to see here that quite high portion, so SEK196 1,000,000 actually have 0 days delays. These for a big portion are, of course, still clients which are in the past restructured and which we didn't hear yet, But we're just simply paying. And of course, these days, to a certain extent, also clients, which We foresaw that they would have problems after the moratoriums, but so far they are simply also keep paying.
Yes. I would say that's maybe big picture view. Overall, this tells us also, of course, considering what I said before that we saw these positive surprises, but so We don't see negative ones that certain one offs still expected to come, really coming, That it's very realistic that we may outperform our cost of risk guidance, which we have originally given Of 70 to 90 bps. So we might be better than that. And I guess for such times and such circumstances, As mentioned by the colleagues before, that's actually a very good news and that proves that the bank advisory also in the last years was, well, Conservative enough and doing some things right.
And of course, as a CRO, 1, 2 years after COVID has passed, I will say this with additional confidence, but so far, whatever we can see, honestly speaking, we should be very, very happy. With this, I will conclude my part for now and hand back to Blas Gortner. Thank you.
Thank you, Andreas. There are some slides that are anyhow publicly available, so I would not stick to them necessarily. What I just mentioned at the beginning, we are full fledged on the agenda of digitalization all over. So within the EIG, of course, Paperless initiatives, but generally also when it comes to client experience, we plan to introduce a new brand new front end platform more or less as an Mbank And e bank for the retail clients here this year and we are well advanced in the friends and family version already. And we are actually the only bank in the market offering 20 Availability for practically almost all services.
I mentioned before, very soon in a month, any client of NLB will be able to close Any business actually online 20 fourseven without having to talk to the to come to the branch, you can already now raise any And submit any request for any service and sign any contract with NLB through the mobile app more or less with biometrics. So that's Revolution of client experience and we of course plan to replicate this and roll this out throughout the entire group. Obviously, as soon as integration is done in Serbia, Serbia would be Focus Market since also digitalization there is the most advanced legislation is ready. So of course, we want to show them immediately after Slovenia very strong Progress in Serbia as well. It's happening practically all over the place.
So we are actually moving clients to mobile usage. We are moving clients also to usage And more or less 20 fourseven chat and video chat functionality and we are really happy with this trend. The contact center has really been having now already closing capacity as I mentioned. So they actually can at 2 o'clock at night close more or less almost all services. Even if you're not using mobile as an end to end digitalized solution, you can actually reach us for a personal interaction Not being dependent on the branch opening hours and that's really a facilitating feature for mid term optimization of the channels And that's really something that is enabling this now.
Of course, we are planning for higher migrations there from clients. So many clients do prefer physical meetings in branches, but we furthermore position the branches and advisory hub and less and less as a transaction service And to our clients, Archibald mentioned, I'll just reiterate that we are further of course working on efficiencies. Clearly in Slovenia and mid term, we are looking at further reductions, but this is true also of course for the But this is true also of course for the whole region. Archibald also mentioned already successful first wave in Serbia of envisaged rationalization In terms of, of course, number of employees and the voluntary regime actually has shown really success already in the first place and will So also concrete results in the upcoming months once we actually deploy it. The KPIs here are improving as So digital penetration is moving really and of course we have higher ambition, significantly higher ambition and we really are pushing towards This migration in a more accelerated way even.
So when it comes to the outlook and the numbers, we have changed Our way of positioning the results as our last appearance recently when we're talking about the annual results and more or less we're guiding the direction still. So Andreas gave you a picture that given the developments in Q1 and Q2 and positive effects coming from various Corners in terms of accounting recognition, not necessarily all booked as a cost of risk, but coming from various corners upon successful collection, As Paul and successful resolution of some legal disputes and so on, he is actually catering for a likelihood of course to outperform the cost of risk, But more relevant, I would say guidance is on the return. So mid single digit return, that's sorry, a high single digit return for this year. And that's something that we believe is a very solid performance. Q1 is definitely showing strong path towards that.
And of course, what we keep to is the dividend suggestions and we believe it is justified. We believe it is possible To pay this amount actually hopefully already this year for the 2021 portion, but for sure we believe that it Should be possible then until 2023, so in actually good 2 years to pay out this excess of SEK300 1,000,000. By that, I would wrap up to allow for questions And we are now fully available for them obviously. So, so far very solid outcomes, very, very confident Sure. We believe that the macro picture is solid and is improving even.
So the HoReCa and some other industries Have been fully locked down for quite some time, have been reopening gradually and it has a positive trend. So it's I apologize. It seems that towards the end of June, we might have full opening in their normal summer. And this would be really mentally a significant boost to Private sentiment and consumption that is then going to assist obviously already so far robust trends in production. Thank you very much and gladly responding to your questions.
Thank you.
Of questions tab located above the slides. We have had 2 questions come through via the webcast from Jasper from Sylvania. Question 1, good afternoon and congratulations on excellent results. My question is regarding outstanding shares of KB. Is there any plan for KB to do buybacks or something else to get over 90?
Archibald, will you do the KB part and I do the Albanian?
So Blush has said quite specifically we have still an order out Spending and so we are happy to buy to whoever is willing to sell. But obviously, that requires willing sellers. And from our point of view, if it happens, fine. If it doesn't happen, also okay. So that was for us just an extended to minorities.
And so we are now progressing, of course, with the merger plans. And once the current order By us, we will simply proceed. So on M and A plans, I pass back to Blas.
Thank you, Archibald. So when it comes to further M and A plans, I would really now reiterate what we've been saying. Once we feel really confident about integration in Serbia, we're not jumping now to another opportunity just overnight. We see a significant chance for us. Collection is feeling very, very well at the end of the year and confident to be able Onboard another project, once we have full visibility on expected closing of integration in Serbia, so far we are feeling well.
So far we feel confident we are going to Meet these targets and this might mean that towards the end of the year and beginning of next year, we might start exploring further opportunities. And we mentioned on a couple of occasions that Albania might be the next market we might consider. And we definitely hope that there would be a stage when there would be a political agreement between Slovenia and Croatian Governments that we might be then thinking of entering these or other recreation markets, though not through the large acquisition field.
Thank you. We've had a question come through on the telephone lines from Johan Sikkemik from RBI. Jovan, please go ahead. Your line is open.
Hello. Thanks for the call. I have just one, two questions. First of all, on KB on your Excel spreadsheet, there is a it's Showed that KB NPL ratio is very low, 1.5%, 6% and very low coverage. I mean, the question is, How recurring is this already?
There are some accounting issues here that I actually, I do not understand why it's so low. And the next one would be on cost of risk. I mean, I'm not sure whether you can explain a bit What was really the amount of releases and whether you booked some additional risk costs for your underlying portfolio,
So maybe first On the first question, I mean, obviously, Commerciano Banker in the group accounting, their NPL portfolio was initially So here you see fair value amounts and that's of course which is blurring a little bit the whole picture. I mean if you See the whole group, then this was reducing our coverage ratios as a group. And this is then supposed to normalize over time. So this is to a well, Good extent on accounting questions you already mentioned. But at the same time, of course, Comenciano Banker, if you see them retroactively, they have in the last years actually done also a lot on NPL resolution.
So they are not seeing any negative surprises, which honestly speaking from my point of view is a big, Big recognition also to the due diligence work of our internal team, especially in late 2019, Because it looks like that we got what we expected to get, and that's actually a very good news. On cost of risk, so the second question in quarter 1, there were quite some items from off balance sheet, which Release provision. So basically, we solved it while it was already booked off balance. On the other side, we had on balance items, NPLs, Which were resolved. In here, we also saw a positive contribution.
So in other words, They were usually resolved to better value than what was still in our books. And thirdly, cost of risk From regular activities in the Q1 were very low. Honestly speaking, that's Generally not really unexpected. So quarter 1, the cost of risk from such regular items usually is the Lowest in the year. This is I mean, we are trying to get it as steady as possible during the year, But that's a fact of life.
So here usually figures are low, but they were also low in this last Quarter, which given circumstances is, of course, also a positive news.
Okay. Thanks. If I may add just one follow-up on that. You also specified some one off, which should materialize in the second quarter, like 14 point, I don't know, something million. Is it also related to further risk cost release in the 2nd quarter?
And is it do you expect I mean, as you said that you plan to outperform the guidance or can we expect even something on top of that?
So on top of what I said already that we might outperform the guidance, that's too early days, I would say. I mean, we are In the COVID year, we are relatively early, so let's be also a little bit prudent. I also didn't say specifically that it would be quarter 2. But 2 is, yes, we are expecting certain one off items. Not all of this, you will probably I mean, if the one off items are the ones we are You will not all of that see by a cost of risk release because we also have one We got fair value exposure, which we expect to resolve.
So this you would see in the P and L and you would also see in the NPL reduction, but not In cost of risk change. And we also see 1, 2 items otherwise, which might contribute. And And as Mr. Brodnergr also mentioned, also on the litigation side, we have now won 2 cases where we still may see some outcome, which is Better than expected. So it's coming from a couple of sites actually.
At the moment, I would say, Again, I think the message I gave was already quite optimistic. More than that is simply too early days because what you also have to realize is that all of these things Only 2 when you have the money on the account. So there are, for sure, still uncertainties.
Okay, okay. Thank you. Thank you.
Thank you. We've had a question come through on the webcast from Matesh. What is the purpose of 2 dividends instead of 1? MLB GDR Holders will have to pay unnecessary costs of up to $0.03 for each $0.12 of dividend they receive.
Well, we tried I apologize, Sam. We tried to Portugal, go ahead. So We try to pace it in a way that it's possible. So we don't want to, of course, keep shareholders waiting. It's really clear that we can pay the entire €25,000,000 but €25,000,000 has been more or less green lighted by the European Central Bank Given their approach to the dividend payout logic, assuming capital adequacy on the group level, whereby Bank of Slovenia applied the standalone parent bank level, which we believe is Professionally inconsistent.
And this was actually the only possible way to actually within one general assembly decision or regulate it in a way that it's paid also to payments, But nevertheless, upon one decision, Archibald, you might want to add something on projects?
I mean, to the cost, we are obviously very conscious of cost and efficiency Of such transactions to our best knowledge, there is no incremental cost to shareholders for such a payment. So we actually assume this is cost neutral. And In this sense, I don't see an immediate disadvantage for shareholders. But we are very much, Let's say looking at all dimensions of such decisions in our perception, the dividend split as suggested is the best solution for
And we would hope Of course repeated then general assembly in Q4 for the residual up to CHF 92,000,000.
Thank you. We've had another question through on the webcast from Victor. When should we expect the bulk of 1 off integration costs to be taken during 2021. Q1 cost performance looks strong. Do you see any chances of outperformance to combined cost guidance for 2021 2022.
So on the cost, I mean, we've put out a quite specific cost ambition for this year. That includes that would include pretty much all of the restructuring charges. Now accounting of these charges follows an accounting logic. So I can't assure you that indeed all of these restructuring charges can be booked. Our ambition is to book whatever we can.
That's in the magnitude of €30,000,000 And I think we've indicated that the HR part of the restructuring process goes pretty much so far as planned. Actually, we are Almost exceeding our ambitions here. And so in this sense, outperforming the cost guidance To some extent is possibly underperforming on our ambition to book restructuring charges to the largest extent In terms of timing, in terms of spending the money, we think we have sized this restructuring process sensibly. So we believe the numbers are what they are. And on the rest of the group, we've indicated that we are very, very, Let's say prudent in spending decisions, we are getting really focused on each and every penny overall And more importantly on setting the stage for a structural optimizing of the cost And that has mostly to do with getting our digital agenda out.
We are really excited that we have now pretty much all the building blocks In place in the bank, in terms of digital agenda, we have the data, we have the analytical capabilities, we increasingly have the Headcount working on these analytical capabilities. We built the digital channels. Blas mentioned the contact center. So all the building blocks are gradually coming to play. So in this sense, we are now also progressing very well with Preparation for real estate rationalization.
Clearly, COVID has taught us all a lesson of what works, what works Not so well in terms of remote work. So we will also have a hybrid model in place for us and That's gradually the office space of course then Being addressed as a dimension. So all this in the next 1 to 2 years. So there's plenty of cost agenda we work on structurally. We are very conscious and cautious on the run rate spend.
And KB is a matter of Whether we can book everything this year or next year, we believe the guidance, euros 430,000,000 for now still holds.
Thank you. We had another question from Victor. Having been in control of KomaShana for a number of months, what has been surprising to you? Anything that has been better or worse than expectations? How should we think about KB's loan book growth in 2021 2022?
I thought this, I guess, during the previous addresses, Right. So we are feeling very confident. No significant negative surprises. We have actually introduced first common joint campaigns Communication wise and of course also product wise, we have become price competitive and we see already very significant production. In March actually this was a record production of all times in Cobbe when it comes to the consumer loans for example.
And we have introduced the welcome packages And we have really reactivated the sales with the beginning of Q2 introduced clear KPIs and performance related variable Remuneration to the sales stuff. So we are really feeling confident and I mentioned actually double digit growth. So that's something that we really believe in and should come and this is True for retail loan book and corporate loan book and by that offset partly liquidity resource placements. So we are enthusiastic and excited about the whole thing. And we really give big hopes and that's on this to deliver what we were talking about once specifically introducing the case, right.
Serbia should bring €100,000,000 contribution to the group. And that's something we are counting on. Arty, you might add something.
Nothing to that really.
Thank you. We've had another question come through from Henry. Page 24 of the presentation says loan growth of a high single digit through 2023. What is normalized growth Once you remove the noise and acquisitions and COVID, what do you think the long term growth of the business is?
We cannot really be concrete and specific here. What we have some hopes for is that the Bank of Slovenia would remove certain hurdle here, which is restriction of retail lending, obviously, with very strict criterion, creditworthiness of households. So this could facilitate significantly quicker growth in retail in Slovenia. But generally, high single digit is something that is solid. And if you look at Q1 this year of close to 2%, practically we are reaching this already.
And if we keep the momentum, this is something that we are talking about. If there were a release of these restrictions for Bank of Slovenia, there might be possibility to grow quicker. Otherwise, this is simply something that we count on. And given the sentiment, given that is significantly improving as we speak And then really depending on the usage, especially of overdrafts and credit cards once private consumption resumes And these are all booked obviously after on the cash lending, the consumer lending. We might see some nevertheless bigger boost in consumer lending.
Otherwise, we have Had now already a conscious focus to be a market leader in retail lending and housing and consumer, we are top 3 bank in 6 countries and that counts. And we have the size, we have now we are putting actually all the pieces of the puzzle together in Slovenia. And I must say them specifically proud that in the last 6 months on average, We have been practically on without exception originating higher portion of the entire new production in the market than our market So we have been continuously growing market shares in housing and consumer loans since the beginning and that's our strategy also in other markets. So assuming the market allows more, We will be benefiting from it, I'm sure. But so far, we believe that high single digit is reasonable and achievable.
Thank you. We've had a question come from Laden. Thank you for the call and congratulations on 1Q 2021 results. Where do you want to see loan portfolio structure of KB in terms of retail versus corporate and when? Do you plan to reintroduce dividend policy
for KB. Maybe I do the balance sheet split and then I'll give you the dividend. So in principle, what I believe in is that there is a huge potential in both. So and corporate is more or less a bigger number of business. So KKR is completely underrepresented in corporate businesses for beer.
If you look at the market share in deposits, we are talking about 17% market share in retail deposits, But you know, lending market shares of below 10% both in housing and consumer. So just making bringing to the natural position is giving you enormous potential. But when You're talking about top 700 corporates in Serbia. We are barely present and this is something that is on the other side of course offering significant opportunities to grow. So And if you do both things right, you could have a balanced picture as we're looking at in Slovenia and some other markets as well.
So of course, primary focus is retail SME, But there is significant opportunity also, especially given the very, very strong and robust liquidity of Comercenba Bank and access to, of course, obviously, very sticky deposit base. We could be a company in corporate sector in Serbia as well and also public infrastructure projects, municipal level projects and so on, Especially focusing on energy efficiency improvements and renewables. So we have the potential, we have the firepower. It is a must actually Do the relationship stuff right and actually then address the need and the demand and we are there. So we are ready to take this opportunity.
Maybe on the dividend Maybe on the dividend Sorry.
Yes, there was a question on dividend. KB. I mean, we I'll comment on dividend policies of a listed entity that is not NLP itself. But by and large, You know that, of course, rationally speaking, you would expect that KB once the whole integration process Concludes and that is somewhere next year in our perception. Of course, we would expect that a regular Profit is going to be generated at some point and plus mentioned ambition levels and of course As with any other operation, part of the profit is returned to the shareholder.
But it's not on us and it's too early to be More specific.
Okay. Thank you very much. We've had a follow-up question on the telephone lines from Joanne Szickevic from RBI. Devan, please go ahead. Your line is open.
Yes. Hi, once again, this is my last on KB as well. And it seems that there was a kind of sharp margin drop in the Q1 compared to the 2020. I mean, the question is where do you see the bottom? And then what would be your guidance, let's say, for this year on KB level?
Thank you.
Maybe a quick question from a quick answer from my side. KB was originally positioned as A market leader in FX deposit taking, so that is euro deposits in retail and they actually run deliberate campaigns in the COVID months Towards the end of the COVID period to keep up market share in euro deposits and they actually did that at quite some expense. So that was Leading into the margin, we immediately stopped that upon resuming control on the asset. And so, of course, we expect now with Picking up of retail production to for the margins to recover. And you know that KB Runs a quite low LTV ratio in the 50s low 50s.
So On normalization of that ratio, we would see margins closer to where we see it in the other bank. But I will and cannot be more specific than that. You know that Serbia operates at substantially higher margin than, of course, Rest of the group and so we are hopeful that we can benefit to the fullest extent with a combination of the measures I mentioned.
Okay. Appreciate it. Thank you.
We currently have no further questions. So I hand back over to Mr. Bonjak.
Thank you very much. I would just reiterate what I said. We are feeling very well. We are feeling confident. The sentiment is improving throughout the region.
Micro prospects seem really robust. I just saw that The prospects for Slovenia growth this year have improved to 4.9% coming from 1 corner. So it seems that 2022 would already be a recovery level year. And this means that we are well equipped and well positioned to take benefits out of it. So the unemployment rate has decreased now to more or less Already almost pre COVID level.
And once we reopen Horeca entirely, I would see it actually back to full employment situation here in the country, Seeking for talent all over the place and really learn significant confidence and boost the sentiment of private consumption and that's something that we really believe is going to then Bringing another value to us. Overall, we believe it's a very well positioned story to harvest to yield in the coming years. We stick to dividend guidance. We stick to high single digit ROE guidance. And so far so good this year.
And talking to you soon after Presenting the H1 results, which we believe are going to be very robust as well. Thank you very much and take care and see you.
Thank you. Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect your lines.