What a start from the musical machine The Stroj! Thank you. I think after an opening like that, no coffee is needed to begin the day, and I hope you feel as energized as I do right now. Ladies and gentlemen, dear investors, financial experts, and analysts, dear clients of NLB, and representatives of regional media, all of you who are joining us in the room today, and all of you who are following us online, good morning, and welcome to the second NLB Investor Day. Besides feeling energized, I also feel very privileged, and there are several reasons for that. Number one, I get to spend the day in a good company, yours.
I get to talk to some knowledgeable and inspiring speakers that will soon start joining me on stage, and I get to facilitate the full day of content, focusing on growth, talking about the future, exploring new horizons. Not so common topic in a world so heavily marked today by polarization and anxiousness. Let's start with the welcome address from our host today, Blaž Brodnjak, CEO of NLB Group. Please join me on stage for a welcome address.
I wrote this one because it's a really important occasion. Esteemed Minister of Finance of the Republic of Slovenia, Mr. Boštjančič, dear clients and journalists from all markets in our home region, analysts and portfolio managers from East to West Coast, from São Paulo to Singapore, existing and prospect shareholders, dear members of the Supervisory Board of NLB and my NLB team, other honorable guests in historical Union Hall, and wherever from you're joining us online, it is my utmost privilege to welcome all of you to Ljubljana, the capital of my homeland, the Republic of Slovenia, the only country in the world with love in its name. Today's Ljubljana is positioned on top of the remains of Roman Emona, and was in 2016 awarded the Green Capital of Europe.
I claim that Slovenia, positioned in the heart of the continent, has belonged to the countries with sustainability inscribed in the genes of its people. Two-thirds of the country are covered by the forest, and 10-minute drive from here, you can meet almost overwhelming populations of brown bears and jackals, growing one of the gray wolves, and again, stable one of the reintroduced lynxes. On the other hand, social state is inscribed in our Constitution, with accessible public schooling and freedom of speech being the norm.
The first three medals at last Olympics, all golden, by the way, were won in cycling, climbing, and canoeing on wild waters, which demonstrates close ties of our people with a diverse nature and climate, as in less than half an hour drive from here, one can experience alpine, Mediterranean, or continental climate type, and in less than one hour drive, one can swim in the Adriatic Sea, alpine lake, ski on the slopes 2,000 meters above the sea level, or enjoy walks in fantastic vineyards of three wine-producing regions, or fields of gold of melancholic Pannonian Plain. Slovenia has continuously belonged to top five countries in the world in terms of number of Olympic medals per capita, which demonstrates the level of our ambition and determination.
These days, we have been celebrating 20 years of full membership in the European Union, and as the early adopter, 7 years of Euro as a legal tender, while enjoying life at 90% of the EU's average in terms of GDP per capita, based on purchasing power parity. We have been a very attractive, non-permanent member of the United Nations Security Council, and as a nation that in the last 1,000 years have neither attacked nor tried to conquer any other one, we have been building on our pacifistic posture, as we firmly believe that there cannot be any legitimate and credible push of the ESG agenda without lasting peace and safety of people's lives. What is the end-to-end carbon footprint of a bomb, rocket, tank, jet fighter?
How can we at all still be talking about social aspects of inclusion, equal opportunities, and so on, when family members of many people in the world are getting killed by these same bombs and rockets? How dare we preach about governance with our firm views that the revival of the European economy should be boosted by the defense industry and war economy-based measures? For crying out loud, in 2024, we are witnessing an obvious clash of hegemons on who will prevail instead of a systemic thinking-based multilateral agenda of a sustainable development. Policy making has been driven by short-sighted populism and particular interest, squeezing common sense out of the public discourse. If any place in the world is aware of the pains of wars, it is our home region.
As only one hour drive from here, 30 years ago, people were sticking eyeballs from the skulls of their neighbors while still being alive, just because they were of different nationality or religion. This must not happen ever again. One can always assume a position that there is value in imperfection and that every crisis is an opportunity, but we refuse one where one's gain is at the same time someone else's existential pain or even something worse. Saying that, NLB, as a systemically important bank in six markets, just entering the last missing one, the Republic of Croatia, has been the greatest promoter of significantly accelerated reform of the European Union and full accession of all countries from the so-called Western Balkans into the European Union.
They are surrounded by the EU members, and they deserve the prospect and their future as the part of our European family. Systemic businesses have the responsibility and obligation to raise these expectations to politicians very clearly and very loudly. So in the bank-centric economy environment, we from NLB cast our appeal. I firmly believe that it is a very credible and relevant one, since NLB has been a carrier of more than 2 centuries of Central European banking tradition. As already in 1820, Ljubljana got the first savings bank, at that time, Laibacher Sparkasse, as the second in the entire Habsburg monarchy, to follow only the Erste in Vienna, established just a year before. Since then, we lived in 5 countries.
We were using seven currencies, whereby former Ljubljanska Banka was the second largest bank in Yugoslavia and was a vital link of the backbone of the international trade of the country, with correspondent relationships and representation offices in all global financial centers. After the unfortunate and disruptive split of the country, accompanied by a full discontinuation of Slovenian banking operations in other Southeastern European countries, in early 2000s, NLB returned to these markets to finally become one of the three most relevant banking players in all of them, apart from Croatia, which, as said, we have been entering as we speak, and for tomorrow, we have organized a joint conference, joint investor conference, to give this renewed relationship a concrete shape and taste.
By the adoption of euro and entry of Croatia into the Schengen regime, Slovenia has become an expanded home market for Croatia and the other way around. NLB has, and with the new strategy, even more prominently will, become a cohesive tissue of the entire region and a natural choice provider of universal financial services to businesses and households of the region. We share a common past. We were cheering for the same teams, watching the same movies, and reading the same comics. On the other hand, we have learned the hard way from the ups and downs, and I firmly believe that with the new generations, we will find a way to move the entire region into the European integration soon, by which political stability and insurable prosperity will be ensured.
Economies of the region have been growing at a solid pace for the last decade, whereby with more concrete EU accession steps, the growth is expected to be further accelerated, allowing for higher household income, expanding the bankable population for the universal portfolio of saving, insurance, and lending services, as well as providing significant boost for investments into national and municipal productive infrastructure. We look at a tremendous potential for energy efficiency improvements, renewable production of energy, catch-up highway and railway connections, communication lines, waste and wastewater treatment, and so on, which can and will for sure be addressed by the solid capital and liquidity base of the banking system, NLB included.
By joining Net-Zero Banking Alliance, UN Principles for Responsible Banking, and many other similar initiatives and activities, NLB belongs to regional pioneers committed to the ambitious ESG program, including a very relevant CSR framework, truly caring about the propulsive business environment and quality of life in the region. By holding leading positions in six regional markets and by banking with a large number of regional businesses and households, NLB represents an entry hub into the region and the window out from the region. Investment in NLB shares, consequently, represents an investment, investment into the whole region as it is very close proxy to regional macro developments. We are unique and truly representative as we have been headquartered here in the region and have had an exclusive strategic focus on the region.
As one of our reputable analysts just wrote in his refreshed research, "We have become a regional powerhouse," and we accept this attribute humbly and responsibly. We have been doing well. We just published very strong Q1 results, and today, we will reveal our new strategy, with which we believe we will not only positively impact the banking industry, but also shape of the regional economy and welfare of our citizens, which truly believe that. Please allow me to wrap up by thanking you from the bottom of all NLB's hearts for being with us today and for your trust and support throughout the last years.
At the same time, I feel truly privileged to be able to thank you in advance already for eventually freshly joining us and/or staying with us also on the thrilling journey ahead of us, as only together and closely connected, we have the answers for whatever may come. Warm welcome to Ljubljana, Slovenia, and our entire home region, a region of enormous opportunities.
Thank you, Blaž. No less energetic than the musical machine before, and definitely reminding us about the impact this institution has in the region. Speaking about impact, today, we are going to talk about the future from different perspectives, and the one that we should start from is really that of our decision-making environment, which is impacting us all. We are honored today to have our first keynote speech delivered by the Minister of Finance of the Republic of Slovenia, Mr. Klemen Boštjančič. Mr. Boštjančič, welcome to join me on stage. Let's give a round of applause. Mr. Boštjančič, I know how busy you are, so thanks for taking the time. The floor is yours. Take us to the new perspectives of capital markets in Slovenia.
Ladies and ladies and gentlemen, dear participants, good morning, and warm welcome from my side. That was the most energetic start of any conference I've ever been, not just this trial, also the Blaž's speech. I hope I'll be short enough and not too boring that you won't need coffee after my speech. So, I would like to use this opportunity to thank you for your interest, efforts, and commitment to the development of the Slovenian capital market, which is also of big interest of Ministry of Finance.
We can all agree that a developed capital market is important in terms of a country's visibility on the international financial markets, but it also gives companies access to the necessary sources of financing for their growth and development, and it offers investors the opportunity to enrich their savings. To achieve this goal, we must all work together to ensure that the Slovenian capital market has the support for further development in the years to come, both from the government, which is committed to giving this part of the financial system the weight and active support it deserves, from the regulator, which ensures that the market operates lawfully and transparently, and from the financial industry, which is adapting its services to the needs of the market, so that we can achieve a more significant breakthrough in this area.
As a small market, we need to work to raise its profile and increase investor understanding of how it works, both the benefits it brings and the risks that need to be taken into account when making investment decision. I have to admit, this is an area that is particularly close to my heart, and I'm aware of the importance of a developed capital market. That is why over the last year, we have made significant progress towards achieving our shared vision. Last year, we adopted the government's first capital market development strategy for Slovenia, which sets out the key challenges and areas where action is needed. Based on this strategy, the ministry has started to implement it, and among other things, has set up working groups, which are already intensively working on concrete solutions.
The overall objective of all these measures is that the Slovenian capital market will become an emerging market, and will also contribute to sustainable economic growth in Slovenia, the green transition, and digitalization. First important step based on the strategy was the issuance of government bonds for citizens. With that, we followed several objectives. The important one was also to stimulate the interest of retail investor in capital market and to activate a part of households' deposits with banks, which still amount to around EUR 26 billion. The issuance was successful, and we believe that we encouraged the people to engage with such financial instruments permanently. Gaining experience with bonds can improve financial knowledge of retail investors, which makes them better equipped to manage their finances also on capital markets. We are one of the few EU countries where municipalities cannot finance themselves by issuing bonds.
A legislative change is in the process of being adopted to allow them to do so, if the legislative proposal is adopted, so our ministry will provide technical assistance, and at the start, support at least one of the interested municipalities with the pilot project for its first issuance. We will also issue a special bylaw to address the necessary steps for such a form of financing. Over the last year, significant progress has been also made towards the establishment of a trading platform for SMEs based on distributed ledger technology. In my opening remarks, I cannot omit financial education, which is particularly important foundation for the further development of the capital market and overall financial market.
An interministerial working group has been set up to prepare the revision of the National Financial Education Program, the aim of which is to raise the level of financial literacy in the society. In this context, the Ministry of Finance is working to make financial content part of the school curriculum, as early financial education is key to creating financial-aware citizens. The renewed National Financial Education Program will include the strengthening of financial literacy for all age groups, and the key segment of the economy, small and medium-sized enterprises, will also be targeted. Having said that, I should add that the challenge is great because the process of changing curriculum is extremely long-lasting, rigid, and outdated.
The ultimate goal of the adopted strategy is also to achieve, as I mentioned, emerging market status, which can bring several benefits, such as increased visibility of Slovenia on international financial markets, increased liquidity, attractiveness for foreign investors and issuers, and strengthening the competitiveness of the Slovenian capital markets. Thus, our joint activities must be focused on increasing the liquidity of the domestic market and attracting new investors and issuers, and strengthening the overall competitiveness of the market. Only with sufficient trading volumes can we assure efficient pricing and competitiveness with other markets. At the same time, we need to remove inefficient regulatory and, above all, administrative barriers that still burden market participants. We are confident that with all the measures we have set up, we will be able to achieve the goal by 2030.
At the EU level, the Capital Markets Union project is also intensively active. We are actually going to talk about this subject again on Monday in Brussels. We have a strong position already communicated at the EU level, that we support the efforts towards the effective Capital Markets Union and the strengthening of capital markets that will provide new sources of financing for the real economy in all member states. However, we stress that the development must be parallel and complementary between larger and smaller financial centers and capital markets. Regarding the issue of integrated supervision, we argue that the focus should be on strengthening supervisory convergence, ensuring that all member states are fully engaged in the process.
We noted that any concrete proposals from the commission aimed at expanding the powers of the European Supervisory Authorities should be accompanied by a clear demonstration of added value and a comprehensive cost-benefit analysis. Finally, I would like to thank once again all of you who are contributing to progress in this area through your daily work. I'm confident that together, we can build a competitive and transparent capital market that will effectively support the growth of Slovenian economy and provide diversified and safe investment for the investors. Thank you again for your efforts and cooperation. I wish you a successful continuation of the conference, and at the same time, I would like to apologize because I will have to leave soon. Thursday is the governmental session day, and it's somehow dangerous if the Minister of Finance is not there. Thank you very much.
Mr. Boštjančič, thank you. As a citizen and the owner of government bonds, as a customer of NLB, and also as an entrepreneur, I wish you good luck with your plans, and of course, we understand. Now, let's talk about the strategy of NLB until 2030. The business as usual would be for me now to invite the members of the management board on stage. They would show you some slides, they would talk you through some numbers, talk about the key financial performance indicators. But the business-as-usual mentality would not have allowed the NLB for some breakthrough achievements in the past, rising from the state-owned bank that was often frowned upon into, as Blaž said before, the only truly regional financial player who is also headquartered in the region. And this is exactly the reason why the presentation of the strategy cannot be business as usual.
I will invite all of the members of the management board to join me on stage as a team. Despite their diversity, they work excellently together as a team, and we will do it a little bit differently. So Blaž Brodnjak, please join me on stage. You will be active today handing the microphone several times. Archibald Kremser, welcome. Andreas Burkhardt, please take your seats. They are not the hot seats, they are comfortable seats. Hedvika Usenik, thanks for joining, and thanks for dealing with all of the challenges, and there are plenty in retail. Andrej Lasič. And last but not least, Antonio Argir. A big applause for the members of the management board. And this is the time when I can take a seat. What a privilege! Antonio, only you are missing here.
Before we start talking about the future, because the future is always informed by the past, let's reflect on the past a little bit. Blaž, first question for you: What were the highlights of the last five years?
I would extend it to maybe 11 years, because there were three stages, actually, of NLB's transition. It was a period of fundamental restructuring, you know, from financial crisis to 2015, where this was really full crisis, full crisis mode on. Then it was a period of transition through privatization, actually, that unleashed potentials of this banking group, and they were immediately tapped, basically. So we immediately, you know, acquired a significant bank in Serbia. We did, you know, up a couple of other acquisitions. And now, actually, we have grown the foundation that, you know, is coming from the position of strength to be talking about real growth strategy that is, you know, unhurdled and unlimited in this respect of, you know, we can imagine just about everything, as long as, of course, we can afford it with capital and liquidity.
This I see as a privilege. Three stages, now we're talking about growth. Now we are a normal business, and that's, you know, a joy, just pure joy.
Yeah. Thanks for laying the foundation. A little bit different question for you, Archibald. What's the biggest difference in this bank from the time you took over as a member of management board and now?
I'd say clarity of thinking and real strengths of team and capabilities in short.
Yeah. No other spoilers. There will be some recurring themes, but you will recognize them soon enough. Andreas, somebody said that risk in the bank is like a film music. If it's really good, you don't notice it at all. How are you managing to keep this bank a low-risk bank, despite all of the things that were happening in the past?
Well, I mean, first of all, risk management is not a miracle. I think what you need is two things. You need, A, professionalism, and then, B, be honest to yourself, don't bend. Obviously, professionalism needs a lot of knowledge, and we are building on that, and being honest to yourself also means that simply you follow a professional path and nothing else. As you see, it works well.
Yeah. And you make it sound so simple, and it's not, I know. Hedvika, you took over as a member of the management board just with the last investor there. You've been with the bank longer. You're working in the banking industry for a long time. What was the accomplishment of the past few years that you are most proud of?
Thank you, Martina. I think I'm most proud of the team, of the development of the team, and I mean the team at regional level, because we went through three difficult integrations. We went through a lot of transformation. A lot of branches were closed, optimized. Still, the team managed to deliver, month after month, quarter after quarter, year after year, excellent result, and I'm really proud of that, and I think the team is now stronger than ever and really ready for the next strategy coming in.
High alignment, the pure joy, as Blaž said, also because of the team. Antonio, what were the last few years exceptional by?
I would say that there were many lessons learned, also some surprises, but again, I will, I will contemplate, actually, on what Hedvika said, the team. I'm really proud of the team, the group steering team, the payments team across the group, but really proud on the whole NLB Group team, because actually we did really excellent results. We have record financial results last year, but also, also a record high level of engagement of our employees, which is really significant achievement to, to have it in parallel.
Yeah, sounds easy to have a happy team, happy people in times of puppies, unicorns, and rainbows, but transitions, difficult measures that you had to implement make it difficult, and therefore, even more gratifying. Andrej, last but not least, you've been in banking since ever, I know. What is a surprise to you in this business?
Yeah. Thank you, Martina, and thank you for that. I'm being forever here - because now I'm recognizing how old I am. Okay. The biggest surprise actually for me is the change of the habits of younger generation, the job perception, what they would like to work, and consequence, actually, how we, institutions like we are, will attract those young generation. This is, for me, the biggest surprise, how world, how younger generation is changing and what a challenge, and also how we will adapt to attract those young challenges, young professionals, especially to fulfill this ambition strategy.
And, just a heads up, we will dedicate some time to talking particularly about how HR will support this ambition, and also the challenges that you are already facing, and probably more to come. Thank you for the introduction. Blaž, to you now. Yes, we're talking about the strategy, and we will talk about some of the performance indicators that this strategy has an ambition to achieve. But, we also have heard, it's almost a cliché now, that the culture can eat strategy for breakfast. So tell me about how the culture of this bank will evolve until 2030 in this a little bit different circumstances that you mentioned before.
Two years ago, before actually getting engaged into preparation of this strategy, we were trying to redefine as a team, as a group, our value system. So we tried to define what are really the key pillars of our behaviors that would drive such a transformation and such a growth, you know? Basically changing the approach, because, you know, growth strategy is something else, the transition strategy or restructuring strategy. And we focus on three pillars. So our value system is based on three simple pillars: growing people, which says we are, you know, continuously learning, life-lasting learning. We grow as professionals and as individuals. This is key aspect of it, so we're, you know, we are eager to learn. The second is entrepreneurship, which is not necessarily intuitive for the bank, right?
But we did write in our value system as a second pillar, entrepreneurship, which means we really want to actively deal with client experience, you know, which is actually a key success factor in long term to challenge back actually the fintechs and the likes, right, that challenge us. And the third one is simply genuinely meaning sustainable development. We don't buy washing. We genuinely mean it.
Yeah. So it's the people, it's the entrepreneurship, and sustainable development. In the face of increasing volatility, and this region is no exception to that, what is the glue that is keeping a very complex entities that consist that this bank consists of, what is the glue that is keeping them together?
It's sticking to the value system and being consistent in behaviors. It's simply that.
Okay. Some things you make sound very simple. Let's talk about the financial performance. How will this bank look like in terms of numbers when we have our investor day? Imagine it's May 2030, what do we say?
It's going to be May 31.
Okay. I should learn the math.
We are basing this strategy on a position of strength. That's a clear message. We sit on a very sound bed of capital and very strong liquidity. We are already belonging to the leading players of the industry in the region. Obviously, they're in Slovenia, in distribution of universal financial services, obviously holding leading positions in other markets as well. So we base on that, and we believe that through the accelerated accession of the countries into the European Union, we will see a multiplication of growth, obviously, through the infrastructural projects, through energy projects, you know, communication projects. There's going to be a lot of room for organic growth, but at the same time, this capital base and liquidity base allows, of course, also for tactical acquisitions.
So what we aspire for is actually becoming one of the most reputable businesses and employers of the region, being agnostic to the industry, so not only in the banking or financial industry, but generally. We believe we have what it takes to get there. We are close already, but we will build on this foundation, and we are operating in this respect with couple of, of course, statements: be a leading retail franchise, be a leading, of course, corporate investment banking franchise. But we try to simplify it with three numbers which is 50, 2, and 1.
So we, we aspire to exceed EUR 50 billion of total assets by the end of 2030. We aspire to generate more than EUR 2 billion of annual revenues, and we aspire to deliver more than EUR 1 billion of annual profits on a recurring basis. We believe this is a very sound value proposition. We believe it's credible because it's based on high single-digit organic growth, which we believe the region growing with 2%-3% real GDP growth, would be accelerated once, of course, the EU becomes reality, to maybe 5%-6%.
And then this is more or less nominal 7-8, and then, of course, with some tactical positions, not even too sizable, EUR 5 billion-EUR 6 billion, we believe we can get there and achieve these goals.
Yeah. I know a lot of you might be taking notes. That's okay. The presentation is also going to be published, if it's not already. Hedvika, a large portion of this ambition, of this growth, relies on the retail segment that you are leading. Before we start talking about what are the enablers of this ambition, let's talk about the customer base. So tell me, how are the customers of the bank changing? And you have a diverse environment. Let's talk about a typical customer in 2018 when there was an IPO, and what will the typical customer in 2030 look like? And from that, we can talk how that affects the initiatives.
Well, in 2018, we were still very much traditional. Even in Slovenia, the share of mobile banking users was around one-third only. In the region, less than 10, 15%, it was at that time, quite a traditional banking, so a lot of payments in the branches, a lot of cash in the branches. It is still the case in some areas, even now. So, you know, in Slovenia, we managed to reach now over 62% of customers on mobile, active while in the region, we are still significantly lower. So, you know, for somebody coming from Scandinavia, U.S. or U.K., this might sound super traditional still, but in 2030, also this region will change.
So I expect by 2030, the banking will be really, you know, fully on mobile, so the customers will be able, also in this region, to do all or the most frequent services online, not just payments, but also, you know, loans, you know, top-upping investments, insurances. So all the simple services that now you might still need to get to the branch, would be done mobile, as it is already the case, you know, in many countries in the world, but not fully in this region. So this is what we see 6-7 years from now.
Yeah. Let me double-click on something that I heard from Blaž, and also you mentioned. This is the period where it's going to be a more stable growth than it was in the past. You were involved in the preparation of new strategy. What was your biggest surprise in the process?
You know, we typically look at 1 year in front or 2 years in front. Now we have to look 6-7 years in front, imagine how the future will look like. So what struck me the most is the potential of the region, so the potential we really have as a group in this region, because as Blaž said, the region will be growing, and expect the growth rates will be higher than Western world. And only that, that the region will be growing, and if, if we manage to outperform this growth of the region, which we did in the past, and I'm sure we can do it also in the future, this already unlocks a lot of potential for us.
If we become a real, you know, financial power, not just banking provider, but provider of full financial services, this really unlocks a lot of potential for our group.
Yeah. That was a great trailer. What are the key initiative from the strategies that will help you ride this wave?
Okay, so maybe if I can ask immediately for the slide, which shows the initiatives because, Martina, you're asking for the initiatives. So in terms of products, the main revenue pools that, you know, the largest revenue pools that we see in these countries or the region where we are operating going forward, are consumer finance and mortgages. So for sure, being the largest revenue pools, we want to take our active part in this. We currently estimate that our market share, if we look at the whole region, is around 22% of these revenue pools, and we aspire to get to some 25%-26%, so a higher share of these very profitable pools. The other things is customers. We want, of course, grow customers. We already have a strong customer base of roughly 2.7 million customers in retail.
A large share of these customers are primary relationships, which means that they are doing, you know, their daily business with us, that they keep salary with us, the, the payment transactions with us, and we want to keep growing such relationships, and we want to put specific focus on a couple of segments, and this is affluent and micro. Why? Because these segments typically drive, you know, as I said, primary relationship, a lot of deposit gathering, but also are super important for fee business, because, as I said before, we don't want to just be a bank. We want to offer comprehensive financial services, asset management. We are already super strong in Slovenia on asset management, growing organically to 40% market share, just selling via the NLB channel, and we want to do this across the region.
For this, we need to, you know, be strong in this affluent segment. These two segments, in particular, are also very important for fee generation, you know? So this is why we are specifically focusing on these two segments. There is a lot of potential in our, you know, customer base. So if we develop this customer base further, we can unlock a lot of potential. But on the other side, we need to really invest a lot into digital especially mobile.
So we need to make sure that we have very good digital channels across the region, that we make the customers enter these channels very often, ideally on a daily basis, that they can perform most of the services via this channel. And this will require some work from us, because we are not yet there. You know, we do offer quite some services already, but we have to do much more. And by this, we will enable the branches not to focus on transactions, cash, small, you know, services that they do still now, but to really focus on value-added services for customers, like housing, investments, you know, how to manage their personal finance, and this unlocks a lot of potential again for us.
Yeah. I heard 2 things. 1 is the portfolio, which is becoming more complex, it's expanding. On the other side, we hear more complexity on the customer base. Archibald? Let's come to the how. What's the part of the strategy that will enable complexity on one side and also the demand for simplicity on the other, especially from the customer?
Well, as I said initially, clarity in thinking really matters. And, I mean, what we developed in this whole process of putting this strategy together around the growth theme is not just a business agenda, but also a technology agenda. And, we are not there yet, so we are in the midst of a transformation process, technically speaking, going really top to bottom across the region, which is a complex undertaking, as you imagine. And, what makes me confident that we will be able to support this transformation is, as was mentioned before, not just clarity in thinking, but in the meantime, really, the ability to attract the best talents of this region, and to make them enthusiastic on this journey.
And, we have, I think, pulled several strings and implemented several tactical and strategic measures. One of them, for example, setting up an IT hub in Serbia, with 100 people in the meantime. Another one really having a much, I would say, better engaged dialogue, with business partners. So a lot of things are happening as we speak, and not to forget, we have, in the meantime, the financial means to support this journey. We spend in excess of EUR 100 million a year on the IT transformation. Actually, we have very interesting dialogue also with the board, encouraging us to accelerate on that. So we have many paths to explore still on how to get even faster and better.
So I'm really much more confident, looking ahead, given what I said. We have a foundation, we have a plan, we have the means, we have the team, and we know what to focus on.
The growth, Andreas, means different impact of risk. I asked you before, how are you managing to keep this bank a low-risk bank? But with the high rate growth rates before, and even the new strategy is accelerating that, how does that impact the risk?
Well, you were asking a couple of colleagues now already what surprised them in the development of this new strategy. What surprised me a little bit is that we didn't have more discussions than we had on risk management. But that tells you that in reality, also, our external support here, our consultant, felt that we are very much equipped for this growth. So I think risk management is ready. It's a lot more of the same, more of similar.
But of course, if you look in detail, it's not that simple, it's not that easy. So when we are talking about the more standardized business or retail, micro, SME, it's becoming more and more professional with a model-based logic, with a digital decision-making, and that's not a world of George Orwell. That's really being much better and faster and accurate in supporting clients with their needs.
Mm-hmm.
If you're talking especially about the SME business and the corporates, of course, you know, it's always about being knowledgeable, deepening your knowledge, having industry understanding, having a clear understanding how that will develop forward, so that on the one side, we can support customers correctly, and on the other side, of course, that from risk perspective, we don't do mistakes.
You start mentioning the corporate segment as well. So, Andrej, this is where I bring you in. It's really having the deep and strong relationships with the corporate segments, but it's also the macroeconomics that is affecting you strongly, because it's not just the relationship between the bank and the client, it's also what the client does, and that impacts the society. So tell me about the macroeconomic indicators that we should be, or you are especially aware of in this region, and we should all know.
Yeah. And thank you, Martina, really, for this question. Why I'm especially thrilled and confident that we will achieve this strategy, which is in front of us, it's actually two main messages from this macroeconomics: that region will grow faster than average EU country, at least 2x-3x faster, so penetration of the region towards Europe will be relatively quick, and that indebtedness of corporate segment in the region is 2 x slower. So there is a potential, especially what Blaž was speaking, really to boost the proper investments, which will increase the quality of life in this region.
I'm really happy that we can support, and with our equity and liquidity base, we are actually perfect, perfect match with all the businesses from government, municipality, corporate, as a matter of the size, really to boost the investment activity in the region, for improved quality of life in the region, but I believe that is our joint common goal.
What are the key initiatives in the strategy which will help you tap on this opportunity?
Yes. I would. There are several, of course, but I would mention exactly two where we will focus. Of course, we will keep on, I believe, very strong growth that we were showing also in the past. We're actually growing in the market share in all the markets. Example, in Slovenia, in last three years, from 80%- 26%, also with the help of some acquisition, but obviously, that the clients are trusting us and that we have proper products and service for the clients.
But we have two main key drivers that we will focus. So by growing the region, all the countries in the region, and acceleration towards Europe, the international business will grow. So it's one for sure, it's trade finance business, which is helping actually the economy to boost the international business. And second one is, as we are calling, transitional finance, off-balance sheet finance. It's in principle, CSA. This is capital structure advisory, to advise company, municipality to properly structure the larger deals, and then to syndicate the deals to the partnership equity, banks partner in the region or from outside the region.
Yes, you are, again, giving some of the heads-ups, so maybe this is a good time to tell you that a lot of those things that you heard being just mentioned now will be explored to much more detail when we have the deep dives after the coffee break. So this is just the big picture, but we will talk more into detail. And also in the afternoon, this is especially interesting for the clients, we are going to talk about one such project that is making a big difference. Antonio, last but not least, sorry to keep you waiting. Let's go back a little bit into the retail segment. I want to open the topic of payments, the cash transition.
As we heard a little bit of the big picture, what is going on in terms of macroeconomic indicators. What’s the pace of the cash transition in Europe, and how is that important for payments in this region?
Thank you, Martina. Yes, actually, the cash transition is happening. Drop of cash usage is happening, worldwide. If you see from this slide, we can see that actually in the last 10 years, there was a significant change on the European average, where actually the usage of cash dropped from 67.6 to below 49. If you see Scandinavian countries, especially Sweden, we can see that actually this trend was even, even with a bigger pace. So the cash usage dropped from above 50% to less than 10%, so almost 9.9%, 2020 and 2022, and this trend continues in 2023 and 2024. So, as I said, the cash transition is happening. We, as a region, are part of this cash transition, but still lagging behind.
So cash usage in our region is for 35%-40% higher than the European average, and here, including, Slovenia.
How are you going to bring those countries closer to the non-cash payment ratio of that of Scandinavian countries? What are the initiatives provided for in the strategy that will help us pay with the mobile phone wherever we go, whatever we need? In Slovenia, I have the feeling I can already do that, but in Serbia, obviously, this is not so easy.
True. You go with your phone or your watch, and you will manage. You will pay whatever you want almost in Slovenia, but I believe also in other countries. Actually, the thing that we will focus on will be tapping the differences in all these our countries, learning from each other, learning from best practices of our countries and also external best practices. And lead by payment center of excellence and innovation, tap on the payment strategy, delivery, the payment solutions, and bring these payment solutions to the clients. Here, I would say that actually we don't have that much of a challenge on payment side or on issuing side of the end customers.
We have much bigger challenge on acceptance side, where actually we as bank, we as banks, together with society, we have to work on this.
Because beside the technology, which enables the digital payments, beside the us as banks having a role in educating first ourself, educating our clients, there is also a role of a society, working on the legislation, working on the acceptance, working on the increasing the, the financial literacy. Here, we would like to tap this opportunity with different kind of solutions, which we will speak about later on in the deep dive.
But one of, one of it is, for example, merchant acquiring, next-generation merchant acquiring, where we will try to bring the, the merchant acquiring solution beyond the payment. So bringing some value-added services for our merchants.
Let's come to this topic a little bit later. One of the things that you mentioned, and it's also a little bit of a recurring theme, that tells us how important it is to have the local economy supported by a really strong bank that understands the problems and the issues of those local economies. How does the society benefit from having more larger ratio of non-cash payments? Why is that important for us?
It is important. It is important, first of all, with digital payment, digitization of payments in general, actually, the financial literacy of the people is increasing. This is important for every one of us to understand our financial better, to understand our financial better in order to have more stable financial future. It's important for the economies itself, because they can grow their revenues because of the avoiding the tax evasion, combat the gray economy, and combat the corruption, which is really, really highly present in our region. This is really important.
Yeah. It's an ecosystem that is needed for this. Good luck. I hope the government environment is not only speaking, but also hearing. As we are talking about the challenges, it was mentioned a couple of times, Blaž, that it's really important to have the team to be able to attract the new talents, even though it's not easy. One of the challenges that you definitely face are the fintech companies, the attackers, as in N26 or Revolut. What will you do to protect the bank against those companies trying to steal your market share?
We always welcomed competition, and they woke us up. And, of course, for the incumbents, it's a bit more difficult to move fast, but we have started moving much faster. And now, with this strategy, we are simply committing to be at par or better when it comes to client experience, and that's the only relevant response.
You simply have to offer the service they offer at least, you know, comparable level of client experience, which is tough, of course, if you're deriving from the incumbent environment, and you have a complexity of 300 systems. You know, they started from scratch. So we had to start thinking in a different way, and that's why a couple of years will be really spent on the processes t he key processes of onboarding and lending.
But, you know, the payments universe, we are practically almost already there, so we have to be adding, you know, certain services. Unfortunately, this region is not on the radar of the giants. You know? We brought Google Pay to some countries they were not interested before.
Apple Pay has still not been interested. We are working on Apple to actually open up the market because, you know, it doesn't exist. You know, Apple didn't offer the full functionality of iTunes in Slovenia ever for example.
There is no Slovenian language in, you know, in iOS, for example, right? This is a demonstration of the commitment of giants to the region. But when it comes to the fintechs, we are fintech as well. Through NLB in Slovenia, you today can 24/7 get all the services, either via via video chat or, you know, closed real time at 2:00 A.M. from anywhere on the planet, or, you know, with couple of new releases now until end of June, the entire consumer lending and deposit universe will be, you know, three taps away on your mobile phone. So 90% of transactions you will be able to do via mobile phone, you know, without having to talk to anyone, without having to sign anything a sheet of paper, and that's revolution for us, you know?
And it is happening for more universal product portfolio that fintechs are doing as of now, still because they usually focus on two, three services. We are a universal provider, and we want to offer the comparable client experience for the entire portfolio of our services. And this is the answer. This is the response. You know?
On one side, we are forced by them, on the other side, we are forced by the demographics.
This was just to finish my thought, because this is extremely important. Everyone's talking about green transition. Demographic transition is much, much tougher nut to crack, I tell you. Because, you know, there is 1.5 children, you know, born in Slovenian family, you know? And of course, by 2 years ago, you know, until 2 years ago, we were talking about a need for efficiency improvements through process optimization. Now, we are forced to optimize processes in order to retain operational capacity, because we will not find talent. You can't import people from Asia to speak Slovenian at a teller. You can't, immediately, at least not, no.
Interesting trend to watch. And Blaž was just starting to talk about the how. So, targets are ambitious. You have lots of growth initiatives. How, Hedvika, are you going to do it, and what gives you confidence that it will be done?
Well, first of all, what gives me confidence, the track record of performance so far. So if we did it so far, many years, I think we can do it also in the future. Secondly, the way we have designed the strategy is not some wild thinking of, you know, tapping the fully unknown. Basically, 80% of the upside that we are planning, aspiring to get to in retail, is coming from our core business that we are already doing, but we have to do it better. So as we said before, no, so the region will be growing. We will be growing, you know, with the growth rates of the region, then we will outperform, but still on our core business.
So just 20% of the upside is on the so-called strategic place, where we don't know exactly how we're gonna do that, where, you know, we might tap into the areas that are, you know, not yet known at the moment. The rest is the core business that we need to do much better, that we are doing now. So, on the how, I think we have, in Slovenia, in the past years, a bit perfected already the recipe, so we are by far not only a banking provider. As I mentioned before, we are strong in asset management. We provide the full range of insurance services through our partners. We provide now leasing, we are selling also, end-to-end in a very easy process in retail branches. And we aspire to export this model also to the region.
So we want to be a full financial provider also elsewhere. Now, what we need to do is really increase the digital penetration. We have done a good job in the past years, but still, we have a long way to go. Our target is 80% digital penetration or mobile usage in, in all the countries. And what Blaž also mentioned before, the end-to-end processes, we really need to make them much better than now. Digital proof, no? So, you know, like fintechs, this is our homework, and this is really the main point of this strategy if we talk about digitalization.
We will make the, you know, the customer experience of our customers much better, and we will relieve also the branches from these small tasks, so that they will be really able to focus on the value-added services, and we will be able to sell much more than we have capacity now, because we will do a large part of the sales also digitally.
Yep. A lot of work to do, but also some time. Yes, luckily. Andrej, similar question to you. You were, talking before about off-balance sheet financing, trade finance. What gives you confidence? What are some of the projects or experiences in the past that you can just transcribe into the new demands that you are facing on different markets?
KYC became last year very important topic from the regulatory point of view. But for me, and what actually gives me the confidence that we will achieve those figures, is actually really know the client, and this is the keyword, how to really be live with the client on a daily life, and really to understand each other. The both sides need that you can really do optimal solution for both sides as win-win solution, which is the only way for forward. So what I say, it's actually what we will boost, it's actually SME, SME strategy, which is in every country backbone of every economy. And here is really quality of the relationship.
What we show in many occasions, like floods recently in last year in Slovenia or COVID times, when we're really daily helping the clients' need. And then is, of course, really to boost the investment banking by growing the regional GDP. The investment banking needs will increase and with M& A activities, with syndicated loans and so on. So we are having all the means really to achieve those figures, which is actually what is our ambition. If you can put on next slides.
Let's talk about the outcomes. The numbers.
Which is from current EUR 300 million net interest and non-interest income, we'll almost double it to EUR 500 million, and this is mainly with the growth, with the excellent cooperation with the clients. What is our promise? Is that we will grow the market share, especially into most, the biggest country, the biggest economy, which is Slovenia, which is currently 25%, which will come to 30%. This is the ambition of next 6.5 years, so, 2030. And similar growth in Serbia from 15%, from 10%, roughly, which is current market share, to 15%. And we have to go about 10% in, in, Bosnia, especially, Sarajevo.
We are still relatively weak, where is really our focus to become one of the most important players also in Bosnia, to dramatically increase the activity from currently 5% to much more, about 10%. So these are main core drivers. Besides the two initiatives that I was speaking about, these are the strategic place which I was just speaking before.
You mentioned the SME segment, and you were mentioning, Antonio, the SME segment before. They touch on the side of the merchants in terms of payments, and you started talking about the merchant acquisitions. We will also, I think, touch here on the fintechs. How is this constellation working in terms of payments to speed up the cash transition in this region?
Yes, Martina, you're right, actually. Payments are somehow infrastructure, somehow stickiness with all the clients, including SMEs, as you mentioned. So when we come to the legal entities from the perspective of especially merchant acquiring, I would speak about the three major segments. Actually, the large key segment, we don't have much of an issue there, because they are already equipped with the POS, is the. You can pay digitally, physically on physical places, but also e-commerce. When we come to the SME, it's also true for the, let's say, bigger SMEs, larger SMEs, but we have much bigger challenge with the small SMEs, small businesses or micro merchant.
As I mentioned previously, we will try to tap this potential actually with this, one of the initiatives, next generation merchant acquiring, where we will try to develop something beyond the payments in order to make the payments attractive also for these merchants. What this does mean? How we envisage this? We will try to connect the payment services with their business model.
Connecting the payment services with their electronic cash register, for example, where they can benefit actually from the data capital that they will acquire through this. Meaning that they can be able to better manage their businesses through better inventory management, better sales or KPI management, better reservation management, et cetera, et cetera. On top of this, we would like to develop better reporting for them where they can understand how they perform, they can compare against the trends against the season, against the industry, et cetera, et cetera. And also, based on this data, again, we will try to develop, let's say, easy, accessible financial facility, like easy, accessible overdraft, based on overdraft, based on the POS turnover.
Yeah. In the region where everybody knows everyone, and we all have neighbors and friends and relatives who do little apps and help us with the small things we need. As a micro merchant, in what way will I benefit from working with the biggest bank on all of those small, particular details sometimes? Why are you a good partner in this process?
As I said, we will try to bring you something on top of payments. We will try to bring you a quality that you will—that will help to manage better your small, small businesses. And here, we actually start with some initiatives. Here, we will for sure leverage not only on ourselves, we will leverage on cooperation with partners, with the fintechs, with the independent sales or sales organization. And we started, as I said, we already have some three partnerships across the region, two in Slovenia, one in Montenegro, and actually, one in Macedonia. I forgot it, sorry. We developed-
As a Macedonian how did this happen?
Yes. You know. Then we developed the Smart POS, which actually turn your mobile phone into the payment solution. We developed PayByLink, which is really suitable for small hospitality services, which they can. They don't have capacity to develop their web pages and connect with the payments, et cetera, et cetera. So there are initiatives that we already started, there are partnership that we already started, and we believe that with this part, we would manage. So we want to increase the partnership, I don't know, from 5 today to 20+.
So when I take a taxi, and the taxi driver complains: "But I don't have a POS," I can say—tell them that NLB offers a Smart POS solution.
Absolutely.
Everybody is encouraged to do that. Andreas, we're talking about growth constantly. We're talking about this increased complexity. We're talking about also the volatility and all of the diversity that you are facing, in this region that is very particular. Sometimes, NLB was known as, or it still is known as, a low-risk bank, maybe even being a little bit too conservative on risk. How is the new strategy and all of the things that we are hearing about here, how is that affecting the risk, the risk in, in the respect of conservatively dealing with it?
So for this comment or this feeling, you're definitely right. So here you have to open up a little bit more. If you ask me, this is not primarily a question about the strategy. In the strategy, what the colleagues mentioned already, we are there to feed in, be a part of it, and being, if possible, not noticed much, right? So that's for me, less a question of a strategy. But what is right is, I mean, the system, NLB, had a big shock 10 years ago, and it's somehow normal, especially we also had to change a lot that you start then rather a little bit more conservative.
But of course, what we are realizing is that we have excellent results in terms of cost of risk, which are often below what we are predicting and modeling by ourself. And here, we have to become more sharp, so that the risk we are predicting is what we are getting, and not much less, because if you get much less, that means you leave money on the street. You have good business, which fits in your strategy, but you're not doing it because you are too conservative. What will help a lot with that is that we are getting more and more professional in modeling.
And on the other side, as I mentioned earlier, the more you deepen industry knowledge, the more you can, on the one side, also here, be sharp, not too conservative. On the other side, also really properly support front office, because the colleagues in corporate can not only do a good business for the bank, but they can, in reality, also help the clients with this knowledge to do a better business by themself.
And again, we're talking about the impact. You mentioned modeling, and Andrej was talking about how this bank was always very agile, even in times of distress, like COVID, the floods, to really be responsive to what the real client needs are. How are the technologies serving you in the topic of risk already now, and how will that evolve?
Well, here, we are working on many topics, and as Archibald said earlier, that's to an extent, still work in progress. You need all the data. You need to have it readily available. You need to be able to process it, swiftly, smoothly, in a way that, you know, it's a help, it's supporting your risk decision. But I give you just one small example. I mean, a couple of times now in the round already, we have mentioned the floods last year. We were developing over the last years, mostly in-house, solution, which is actually giving us flood risk areas. And what was amazing for me to see last year is that, when, unluckily, the floods really happened, our system was matching 99.5%.
So what we were predicting happened more or less like this. And, and as you realized, we had a minimum impact from the floods on our portfolio for our clients, and of course, this is one of the reasons. Let's be clear, that's not the only reason. First of all, you need a professional approach from front office, which we definitely have, and then these tools are adding on it. You know, they make it easier, they make it more predictable, they make it more precise, so that's always a work which we are doing together. And then, last but not least, honestly speaking, if you have an event like floods, it's nevertheless still a little bit also a question of a good luck.
Right? So, but that's just one of the examples where also, you know, technology and development of software can support.
Archibald, we heard about the front office, we heard about all of the initiatives in retail. Mm, but let's talk about what needs to happen in the back for this bank to be able to deliver on the ambitious promises that were presented so far. What are the changes?
I was alluding to that already earlier. And, I mean, the short answer to that, it's difficult, but doable, because it's not rocket science. And, as I said before, for me, what matters most sitting on the technology universe, is that the dialogue with business is educated, informed on both sides, and here, I've seen really significant improvements. Also with the broader management board that we have now for two years, which gives capacity also, in this dimension. Besides, of course, we really onboard now exceptional, good talents in technology across the region. And, so these days, in technology, what matters more is that you are smart buying and combining solutions rather than building everything in-house.
I think that will make a difference, especially in acceleration of deployment of all the things. AI, we don't have to invent. It's there, we have to use it.
Many data solutions are out there. Many business solutions are out there to be used and deployed. So in that sense, it's really a mutual, I think, continuous education process, both in technology and IT. It's a bit of a mentality mindset change. Don't build everything. Tech people like to build stuff, but a lot of things can be acquired and deployed. And I think we are on a good learning journey here. So I'm really very happy, much more confident than, let's say, two years ago, on where we are on this.
Based on the fact that you are working in a region that is a little bit specific. What are the capabilities in the region to answer some of those needs that you just mentioned? Working, not building everything from scratch, being able to find things on the market. How are we able, in these six countries, to maybe become a really good vendor to NLB Group?
I'd say by and large, this region is technically as developed and sophisticated as any other region because this, you know, you have in Montenegro, which is a tiny country, but you have digital nomads working there from there globally. And to some extent, that's true throughout the region. We have excellent tech talents in Serbia and Slovenia, also the other markets. Also here, admittedly, here and there, it's tough to attract and retain, which is why we increasingly, I mean, see the IT function, but actually all function, all business functions as group functions.
So we collaborate, we share, we don't develop 7 x. We develop once, deploy 7 x, and that makes it easier. It's a bit complex to navigate this because it's still 7 different regulated markets. It's not always that easy to seamlessly work cross-border, but having done this now for the last 10 years in this group, I think, again, we are here on a very different level already, and we have important group functions now distributed already, business and IT, across the group. So not everything is centralized. We really work with everything we have.
We have to be smart and a bit agile, which sometimes in a bank is not so easy. It works. The learning curve is steep.
Speaking about the learning, and maybe, Blaž, this is a good question for you. We, we said this several times, you are one truly regional player that is also headquartered in the region. Still Slovenia is very dominant in this. So I, I want to ask you, what is this flow? What is this learning curve? What have you learned from other countries that joined a little bit later, and what can they learn from you? How is this transfer of the knowledge taking place?
Here, I can just reiterate what Hedvika and Antonio said before: this has really become a team. So talking about NLB today is, you know, if you're talking about NLB, the guy sitting in Serbia or the lady sitting in, you know, North Macedonia, breathes the same philosophy and the value system. You know, we are organizing, on a quarterly basis, group CEO meetings, which are attended by all the subsidiary CEOs and the group board. I mean, this is as if we are running one business. It really is. We're talking about, of course, aggregate KPIs. We're talking about, you know, key initiatives. We always discuss best practices, share them, what is deployable immediately group-wide, what is maybe just specific market specific and, and deployable to specific markets. So this has really become a working atmosphere that is leveraging potential.
This is really the case now, I would say, for some three years. I, I started feeling it really some three years ago. And now from group CEO meeting, group CEO meeting, it is somehow more and more emphasized. The atmosphere is a team atmosphere.
Right? I'm really fully enthusiastic, because once we add the only missing bridge, which is Croatia, and I'm on purpose wearing Croatian cufflinks today in , as a message. We are not complete without Croatia. Croatia is the largest GDP of the region, obviously, you know? But once we connect this as well, we will become really the natural choice, regional value proposition. Because you can accompany trade finance, obviously, financial flows, goods flows of goods, flows of talents, group-wide. We are sourcing our talents already, you know, group-wide. So the DigIT company subsidiary in Serbia already, you know, is a place of 100 talents from Serbia developing solutions for the group. It's not happening in Ljubljana, it's happening in Belgrade, right? We have group competence center for cards in Skopje, in North Macedonia. You know, there is robotics competence developed in Sarajevo.
So, you know, we are working on this really as one team, eager to learn from each other. The bank is actually also in a systematic way, providing learning platform, so all of the employees have access to the platform, where you can actually share the know-how of this world, free of charge, whenever.
You know, and I see in my stream people, you know, actually learning, on purpose, learning, you know, 10 days or even more a year, off the working time. And that's, that's a luxury package, but they have, by now already identified what this brings to them. Because first, this keeps them competitive in the business, because we are transforming from traditional incumbent into, of course, digital first value proposition to the clients, but it's also keeping them competitive in the market. I'm more than happy when one of our people succeeds and gets appointed to the management board position elsewhere, because this means we are a talent hub.
This is what we want to really be even more pronounced in the future, a real talent production hub. You know? And that's why I'm so much talking about growing people and then, of course, this entrepreneurial component of client experience attached to it, because this is forcing us to learn more, more effectively and more quickly.
Before we move this discussion from high-level overviews of what is happening within the bank, how it exemplifies in the user experience, let's go into the retail segment again. Hedvika, you told us about what needs to happen for you to succeed delivering on the, on the targets. But I don't think we said much about what the numbers are, for retail. Maybe a couple of sentences on how does that display in terms of some of the typical indicators that you have to follow?
Okay. Maybe I would mention that we aspire to get to a higher revenue per customer on average, at group level. And this is quite an ambitious plan. On average, we have now roughly EUR 270 per retail client to EUR 400 per retail client. So this is one. Also, what we really want to measure more systematically is the customer satisfaction or, you know, customer experience that Blaž mentioned before, a lot, because quality really matters. We see it also in the, you know, hospitality business these days. You know, many years ago, you could go to a place which was, you know, on the street, and you would get really bad experience. This doesn't happen anymore because all of us check before, if you know, what is the rating of this restaurant.
There is no way around quality anymore in service industry. We have to work on quality. That's why we need to more systematically measure and improve also our customer experience. We typically do it by, you know, NPS or different measures. This is something that we want to put in the forefront and the digitalization targets that I mentioned already. Not only digital penetration, on which we were focusing a lot in the past years, so putting clients on mobile, because if you don't put them on mobile and enable some services, they cannot perform services in that channel. But now the focus moves more towards digital sales, and we have a lot of discussion also with our board, no? And we are putting now transparently ambitious targets for us also in this space.
What is gonna be the share of digital sales of main products? And, you know, these are mainly the KPIs that I would specifically mention, but I think we are touching them later on in the deep dive session.
Antonio, anything to add in terms of the outcomes, financial outcomes of all of the endeavors that you were talking about in the terms of payments?
Thank you, Martina. As I said previously, actually, the payments are embedded somehow in any client relation, and together with Hedvika and Andrej, we will really make sure that payments are, how to say? Safe, convenient, with the best user experience being there when you need it. And this should bring some additional revenues. Again, this is revenues bought from retail and corporate. Currently, we have a level of EUR 220 million + revenues connected with accounts, payments, and packages.
We want to deliver 100 million + on a yearly basis with all these initiatives. Part of it coming from the within growth, growth of the market, which actually we expect that the market will grow with 6%-8% on the yearly base, 6%-7% on the yearly basis. We want to grow 8%-9%, so above the market growth. But also we would like to tap some of the, let's say, new strategic initiatives, like as we discussed previously, cash transition, but also the loyalty, increasing stickiness of the with our clients. The payments are the really important part of digitization of what Hedvika mentioned. So, many of the KPIs we are sharing among us three, Hedvika, Andrej, and me.
Because if you develop good user experience in payments, then you move somehow into the direction that the clients will use the mobile app, the mobile wallet, at least on a daily basis once. This is our KPI that we want to achieve. More than 80% digital penetration and increase the stickiness of our client base.
Stickiness is the word that we heard so far, and you just reminded me that I have been a customer of NLB since ever, and we don't want to go into those details. But Blaž, how are you keeping me and maybe my daughter, who is now 18, fully mobile? She is a customer of NLB as well, almost by default, because she inherited the account from me. But how are you making sure that this loyalty is unquestioned? Anything to add in terms of how are you making sure that this loyalty is unquestioned?
By client experience. That's continuous effort, and that's why we measure it on a single transaction level, right? Not only on the client level, but single transaction level. And now, there is a significant shift in how we actually focus on it, but it's now really publishing digitization targets and client experience targets. Actually, they're becoming an official set of KPIs for the management board, also for remuneration.
This is now a real shift in the focus. So me talking about that continuously for 8 years is no longer just the sole measure. Right? Now, we really mean it. Now we mean it by, you know, really put it into the set of KPIs for the management board, measure it, you know, on a daily basis, on a single transaction level, and by that, hoping, you know, meeting expectations of your daughter, that is, of course, testing other solutions that are global, not necessarily deriving from Slovenia.
And it's so easy to collect the data and, analyze the data that is helping you .
We hope she gives us consent to use the data.
I'll make sure. That is one thing I can promise, not many others. Okay, we have provided a big picture of what are the ambitions of the new strategy of NLB until 2030. We gave you partial information of how that reflects in the outcomes, in the numbers, in some other indicators. But now, I think it's time, actually about the moment everyone, especially investors, analysts, are waiting for, to tell us about what are the numbers that we are going to see in the Investor Day 2031. And I know this is a little bit of a forward-looking statement. Sorry for the provocation here, and I will understand if you, if you refrain from it a little bit. But take us through the financial picture of the NLB Group by 2030.
All right. So first of all, a lot has been said, so I'm not gonna reiterate all the things that we mentioned already. Blaž set out the ambition. You heard the colleagues talk about a lot of growth opportunities in particular, and we'll have opportunities in the afternoon to talk them through even more thoroughly. But I think as an equity story, as young as we are, but we have, I think three teams that are, you know, emerging and more and more clear. For sure, clearer than two years ago when we had the last Investor Day in Belgrade. One theme is around growth, and it's now very clear and prominent, I would place it on number one. The other theme is around returns, in particular, the cash returns, of course. And the third theme is around optionality.
Optionality also in terms of thinking beyond to some extent seizing on opportunities. We've had quite some M&A opportunities in the past, which we seized on because we were prepared and to some extent funded. We want to maintain all this, build on these strengths and develop them further. So here you see the revenue ambitions again the exceeding EUR 2 billion, which as you've seen from the other colleagues is basically building mostly on organic opportunities that are present in the market, that are you know inherent in the macro environment, the growth dynamics. And yes here and there what we call strategic bets in the div- in the strategy deployment, and yes also M&A optionality, which we think by 2030 are pretty safe to assume that there will be something.
We can't say what and when, but, we are pretty sure there'll be something, and we have ambitions also. Blaž mentioned ambitions to enter new markets. And also, as we have shown in the past, also ambition to do ancillary investments. We just acquired a leasing business. We just acquired and enhanced our asset management platform in North Macedonia. So there's plenty of opportunity in terms of building on the core franchise and enhancing it with ancillary services.
So this, given current growth dynamics, given also our commitment to cost discipline, which you also have seen here, and that we didn't highlight it, but there is for sure a lot of inherent cost discipline in the strategy of retail because digitization means nothing else than moving things from very expensive physical channels to less expensive digital channels. So we believe cost discipline is something that we can maintain, and we set out a target of cost-income ratio to be maintained. We just published for 2025, around 45%; 2030 is gonna be below 45%. Returns continue to be strong. Of course, these days, in a high-rate environment, they are even exceptionally strong.
Here we set out an ambitious but achievable, also under more normalized rate environment, ROE ambition of exceeding 15% ROE on a normalized basis, so basically accounting for excess capital, even exceeding 20%. So these are very, very strong growth and return metrics. Now, in terms of returns, and specifically cash returns, which by the way, all of us are very directly also incentivized, both in terms of total shareholder return but also in terms of the actual stock price. All of us are incentivized with both long-term and short-term incentive schemes, so we have a pretty direct interest in how the stock develops, how the shareholder return plays out. So we're not talk about it. We don't just pitch it; we own it as well. We are invested in the story.
You see here, specifically payout ratio, we are now guiding more specifically into the towards 50%-60% range, which is a very, I think, substantial and visible cash return and improvement from current levels of 40%. And finally, in terms of maintaining what we call the fortress balance sheet, which is strong liquidity, strong capital ratios, we want to continue on that path, but don't exaggerate as well, because it obviously is in a tension between providing the shareholder return and maintaining the fortress balance sheet, which also then eventually provides the optionality to continue to invest if and when opportunities should occur.
So here you see us guiding for Tier 1 capital ratios around 15%, and CET1 ratio is now specifically guided of exceeding 13%, which is also, for us, increasingly important, as we are pretty active, in the meantime, in the fixed income market. So our footprint in fixed income is now, well, with the upcoming transaction, approaching EUR 2 billion. So that's, for us, a very material market in itself, and of course, fixed income investors are very focused on our CET1 ratio.
So here you see us, maintaining 200 basis points, roughly exceeding, Pillar Two guidance, as it's called, level. So, not just solid in terms of, fortress balance sheet strengths, but also providing optionality in M&A, also going forward into the future. Cost of risk, Andreas mentioned our risk appetite hasn't fundamentally changed, also not in this new strategy, so we don't see this, this mark, moving a lot. And colleagues have talked extensively of our, you know, continued focus, on both internal engagement and alignment and, and of course, most importantly, our collective focus every day on making our customers happy. So that'll be it.
I know it's a complex, crowded, slide, but I think the message of, we maintain focused on growth, we maintain focused on returns, including cash returns, and we maintain strategic optionality, all of which in combination are supported, of course, by this, basically existing growth environment. You heard colleagues not talking about rocket science.
You heard them talking about doing our job as bankers, servicing our customer base, and their evolving needs. That'll be it as a short introduction.
Yes, and the, the discussion is to follow. There will be a lot more on the key performance indicator side in the deep dives after the coffee break. Before I ask Blaž for closing remarks of this roundtable discussion, anything I forgot to ask, anything to add from your side? Hands up. Yes.
You invite now for the crowd, and then I do the wrap-up at the end.
Okay, that's an even better plan. Thank you. It is time for you to complement the perspective of the members of the management board of NLB with your own perspective. You are bringing your own context. You are bringing your own point of views, and it is the time to ask questions. Before we open the floor for questions, of course, we invite everyone in the room to just raise a hand, and there will be a microphone handed to you. If you have questions online, we will answer these as well. Be mindful of the fact that after the coffee break, there will be deep dives, when we will be a lot more specific, a lot more technical about how we present the key initiatives from strategy, and talk about the numbers as well. So maybe that influences how you frame the questions.
Now I'm inviting everyone to ask questions. This is the point where I usually lose eye contact. Any questions from the online audience? Let's give us-
Online is usually braver .
Yeah, it's anonymous. We can't see each other. Let's wait for a few moments. Blaž, before we get a question, now, listening to the strategy being presented so fully, really giving the umbrella perspective, initial thoughts, anything to say as a conclusion to the discussion that we had here?
Understand, anyhow, that the ones that are interested in more detailed questions w ould then join the team for the deep dive. So, first, thank you very much for listening to us. I know it's, you know, hard to hang in there, and, as the energy's volatile a bit and so on. But, it really means a lot to us that you actually took time and traveled all the way to talk to us in person for these two days. What we are trying to achieve with our Investor Days is actually opening up room also for others to be able to participate, which means that tomorrow's investor conference for us is, you know, an innovation of a kind for the businesses listed in this region, as we have been the only business from the region listed in London.
Inviting you, you coming, you being able to talk to 7 other, 8 other names, means a lot to these 7, 8 other names, but means also a lot to us, because we can prove to these 7 other names, right, that we have the leverage, that we have the access to you. And to me personally, having the ability to talk to you is the biggest privilege of my, my job, because by you simply raising the questions, you are showing the mirror to us, what to focus on. When it comes to the strategy, it is not a revolution. It is a bit more of what we are doing now, but much faster. So we will be focusing on the organic growth. We will be replicating what we do well, sharing best practices. It is 8%-9% organic growth.
If region growth, you know, grew faster, there would be maybe even more potential, because once the acceleration to the European Union suddenly started really happening, you know, then you would see multiplicator. No? If you build railways, highways, you know, big power plants, you know, and communication lines, this has enormous multiplication effect for the growth of the entire economy. We can be seeing 8% growth rates, 10% growth rates. Build a, you know, fast-track highway from Port of Bar to Serbian border, you know, I don't know, EUR 1.5 billion investment, but do you know what GDP, what does this mean in terms of GDP of Montenegro? This will be enormous boost, right?
So we really hope for Montenegro entering 2028 latest, others quickly, you know, joining after, and in this respect, really be able to count on even maybe potentially much more accelerated growth. What we are committing to is, as a team, being fully motivated to deliver what we have been communicating today. It is ambitious, but it's smart. It's doable. We firmly believe it's doable.
We have a question.
Ah, sorry, there is a question.
We have a question: Given the current share price, why has no share buyback program been implemented?
We, of course, always get these questions and, you know, of course, we can give you cash in form of dividend, or we can, of course, buy back these shares. Given, of course, the complexity of the latter, you know, so far, we have simply been doing, you know, the first, which is simply giving you more cash. Here, promising 50%-60% payout, and by that, having even more flexibility. That's why we, on purpose, also introduced dual payment in a year, because there might be, of course, value accretive opportunities on the go, when you might want to us doing something that, of course, is much more difficult if you had to talk about having to fund it through the capital.
So once you remove capital and then have to release capital again, or, you know, issue capital again, it's much more complex. So it's giving us much more flexibility. We do understand that, you know, valuation at 4x earnings is not something, you know, everyone likes. But, you know, there are a couple of elements that are very important to stress out at this point. First one is, liquidity has significantly improved. I'm talking about liquidity of the stock. After us publishing the results of 2023, of course, lifting the guidance of the dividend, talking now about this value proposition, we see much more interest. In last six months, the flow of retail investors in Slovenia has basically doubled, right?
You see now, daily liquidity is well above EUR 1 million, which was a kind of a threshold we have been, you know, listening about from emerging market investors, especially, you know, since we are a bit of a hostage of being put into the frontier bucket, frontier market bucket. We live 40 minutes away from Austria and 50 from Italy. We are by no means a frontier. Slovenia is a developed market. It is just the fact that the capital market is not developed. Our part of the world is, you know, pretty well developed, especially, of course, the key of our balance sheet, which is, you know, 60% of our balance sheet is sitting in Slovenia and in Croatia, which is your country again, you know, is eventually further elaborating on that.
The question, I'm interested in whether you are preparing bank acquisition in Republic of Croatia?
Yeah, somebody noticed the cufflinks, Blaž.
We were working on improving our position in Serbia for five years.
Yeah, and Blaž, there is a longer question, maybe I should give you the full text before you start answering. I'm interested in whether you are preparing bank acquisition in the Republic of Croatia in the near future, and how do you see the obstacles to such an acquisition? Do you think that the realization of such an acquisition would be more likely today than five years ago?
Yes, and now I continue. We've been working on entering Croatia for 10 years. It's been 30 years of pain. The unresolved legacy issues from Yugoslavia's split, I think that there has been a generation running both countries, that there has been a generation in the business society that's been fed up with this. That finally, we need to remove these hurdles. NLB has signed an SPA to enter Croatian market through the leasing business in November last year. The application has been submitted to regulatory bodies in Croatia, and we are expecting the final, of course, decisions in a matter of couple of weeks. So we believe the entry into Croatia will be allowed for the leasing business first, and second, then, of course, for the indirect entry into the bank also. This could then potentially be possibility.
What will be happening in terms of what assets might be actionable, what would be actually, you know, possible to do, I can't be more concrete on that, but NLB has been, as we said, many, many times, actively analyzing all single material assets of the region for ten years. So we know more or less the scene inside out. We would be able to move very fast, right, on such assets, if applicable, right? If actionable. Then the final piece is, that is missing is, of course, resolution of the unresolved issue of foreign currency deposits of Croatian citizens in Ljubljanska Banka , Zagreb branch. If ever, I believe now there has been a sentiment to address this on a inter-country level. Whether we will see the resolution this year, I don't know. I sincerely hope.
I see the sentiment there, but, you know, regardless of that, we would be entering Croatia potentially this year through leasing and then maybe, you know, indirectly into the bank, you know, in upcoming years. Direct entry, not possible yet. Working on it for 10 years. If it takes 5 more, fine. We will be in Croatia.
Yeah. Let's stay tuned. Let's stay tuned, and watch the cufflinks, always. New question that we have, maybe not a normal question in Slovenia about stock price, but is there a possibility to have a stock split in the future, 1 to 5 or 1 to 10, so the price will be more accessible to small and young investors in Slovenia?
It's EUR 111, right?
GDR is fifth.
GDR is a fifth. They can buy it, GDR in London, which is, you know, even less than that, which is 22 EUR, basically. So this is a price of a risotto in Ljubljana Center, and after 3 hours, you're hungry, right? So I don't see this really as a challenge, frankly.
Okay, new question, interesting one. Again, clicking on all of the developments in the tech part of the business. Does NLB plan to accept Bitcoin payments in near future?
NLB has been pretty clear on the crypto universe, right? We don't believe that these are currencies. We don't believe that these are assets. These might be crypto records. You know, so we in principle have very reserved view on offering this in any active way.
Another question: Would you possibly expect the last state-controlled bank to be privatized?
Which one? The Development Bank of Slovenia or what? I'm not sure I understand this question.
Maybe something to explore during the deep dives and, if-
I'm not sure whether this was meant for Slovenia or any other market, because Slovenia is only one state-
I'm getting the information, Blaž, that this is about Croatia.
Aha! So this is then the question to the Croatian government: Would they ever be willing to consider? Aha! To privatize the Hrvatska Poštanska Banka . This is not a question to us. If we, you know, were interested in exploring such an opportunity, if it was available and we had, you know, an ability to be directly owning in Croatia, of course, we would look at that.
And we have a question from the audience. Yes, we are listening.
You are listening?
Mic is working, I think.
Dejan, Dejan Azeski, North Macedonia, journalist. This is positive case scenario strategy. Does this mean managing board of NLB doesn't believe in new political or military crisis in Bosnia, Kosovo, North Macedonia?
Y ou're asking.
This is the assumption we operate with, and I tried to address in my speech. I was, hopefully very clear.
This should not happen ever again. It's on the leaders of the region for this not to happen ever again. They are liable for that.
Another question that we have from our online community: Regarding sustainable dividend payouts, I understand that you are banking on the digitalization to accelerate the revenue growth still. The 60% payout strikes me as somewhat conservative, unless you envisage a sizable acquisition or a pretty fast revenue acceleration.
It's a combination of both, as we try to guide. We on purpose keep some capital for tactical M&A opportunities. Some assets might be actionable quickly, some may be a bit later on, but, you know, we want to be ready once they are actionable. We have stepped up the dividend ambition, so, so far we have been reserving more cash for eventual takeovers. Now, if you saw 15% year one, 13%, you know, quarter one, we are talking about optimizing this capital and sharing more of our success with you in form of dividend, maybe at a later stage, sometimes buybacks and so on. So it is actually a combination. We believe there would be acquisition opportunities. It's too early today, but maybe, you know, in a matter of weeks, months, years, things will change for sure.
We have many times expressed our interest for Croatian market, of course, there is Albanian market as well. There is further in-market consolidation opportunities, potentially as well in multiple markets of the region, and this, this game is not over. We are strong enough and, you know, willing to be a consolidator.
Another question: What will be the optimal number of employees in the bank in 2030?
Yeah, that's optimal.
What is optimal, right? Yeah, 600 people out of 2,600 in Slovenia are retiring in three years. Retiring in three years. Now, we will not be able even to replace them, even if we wanted to, right? But the working assumption is, let's say, 20% less than today, on the level of the banking group.
Okay, that's a straightforward one, and there will be more detail on the HR-related topic in the deep dive.
Someone has stood up.
Another question from the audience.
Yes. Good morning, it's Michael Machaj from JP Morgan.
Hi.
First of all, Blaž, Archibald, and Andreas team, thank you very much for having us, and congratulations on another fantastic event. You have provided a very interesting presentation for another six years, right? 2030. I recall that it's been six years exactly since we started the IPO project together in 2018. I just had a look at the presentations you were providing back then with the team, convincing some of the investors we're hosting today to invest in the company. First of all, e ven though we helped preparing this, it was much less exciting presentation. We focused on asset quality issues, litigations, possible risks, and I'm talking about the bank that at the time, you probably don't recall, had less than EUR 500 million of revenue.
Today, EUR 1.1 billion, you're talking about EUR 2 billion in 2030. So I think it's fair to say that you have delivered extremely well. You have delivered on all fronts, locally and internationally. And here, it's my question, you talk a little bit about the M&A. I want to focus a little bit less on that, but look at the bank holistically today, what portion of the growth and ambition that you have outlined for those 6-7 years you would expect to come from the domestic market, versus how much hope do you have for this growth and delivery to come from existing international markets and potentially new international markets? Thank you.
Domestic, meaning Slovenian, you mean?
Yes.
Okay, Slovenia will obviously remain, but in a deep dive, you will have the statistics. Slovenia will obviously remain the key driver because it is, of course, the most sizable already, and we still see a lot of potential to grow the business in Slovenia. Since if you look at the household debt to GDP, corporate debt to GDP, you know, number of clients we have been able to persuade to invest in investment funds, in 22 years, you know, there is a triple growth potential to triple this business, you know, so alone in Slovenia. But then again, in other countries, we are only starting with this value proposition. So, you know, Serbia is going to come quickly, you know. The average salary is growing to EUR 1,000 +.
I was talking to the Prime Minister of Montenegro, together with Archibald Kremser, two weeks ago, and, you know, and he believes that the average salary in Montenegro will hit the 1,000 EUR hurdle October this year. You know, the President of Serbia is talking about 1,000 EUR net salary in a matter of 2 years. You know, it was 350 five years ago, now it's 850. It's going to be 1,000 in 2 years. This is expanding the bankable population enormously. People that could never think of a housing loan will suddenly be able to think of a housing loan. They will suddenly be able to think of, you know, ancillary services landscape, such as a long-term savings scheme, which could be either investment funds, unit- linked insurance, pension schemes, whatever. 50 EUR a month, suddenly.
This is fee origination platform and of enormous potential, right? So we are basing Slovenia as key contributor still. Now, I can't give you now an exact percentage. You guys will be talking about this in a deep dive. Then you would have see Serbia stepping up significantly due to sheer size, you know, of the network, of the country, of the number of active clients that you just need to activate, right? We have the largest branch network and the largest count of active clients in Serbia, of all the banks. In terms of loan portfolio, we are number 4, but in terms of active clients, we are number 1. That's an enormous potential, right? Then we've got, of course, other markets that will also grow with wage inflation.
As much as wage inflation is a hurdle for us because it is introducing tension on the cost side, it is opening up the bankable population and, you know, it's much more than offset by that. So Serbia is moving up almost to the level of Slovenia in terms of revenue pool, right? The others would be the third pillar. Croatia is very difficult to judge because it really depends on when we would be allowed to enter in a meaningful way, right? 'Cause now, coming in with leasing EUR 100 million, becoming EUR 1 billion, this is not material, right? You know, could this be a bank at certain point, couple of billion becoming 5 billion? This is a different story, right? Ideally, in long term, we would have 4 pillars of our business: Slovenia, Croatia, Serbia, and the others, approximately representing a quarter each.
Now, this would be ideal distribution, but this, let's say, 20-year view.
No? And it is, it is doable, and it's logical. If you look at the GDPs of the region, right? Slovenia, Croatia, slightly bigger, Serbia, they're quite comparable, you know? And the others combined are also comparable, so it's simply following the flow of the GDP and economic growth of the region. You should naturally evolve in this direction, and the rest is really a function of tactical M&A, right?
By the acquisition of Commercial Bank in Serbia, there was a skew towards, obviously, Serbia and non-EU countries. I mentioned non-EU because this is a pain for us from regulatory perspective, because, of course, ECB treats Serbia unjustifiably, you know, the way it is, and the other countries as well. I claim unjustifiably. Serbia should be investment grade, you know? And some other countries should be also better graded, and by that also treated by the ECB differently, but they are as they are. And this is another room for improvement potential for us, because they will converge, they will be investment grade, it will reduce risk-weighted asset consumption rates, right? And so on, and so on. So generally, I think I managed to respond somehow holistically from big picture perspective. If you want more details, they're coming down in the deep dive.
Yeah, there will, there will be more opportunities for that. We have another question from online: Do you think the Republic of Slovenia will still be NLB shareholder in 2030?
As a Slovenian, I hope so. Because this is a jewel of Slovenia. NLB is a gem. Why would you want to sell it?
Any more questions from the audience here in the room? We will have one more. I don't see any hands up. If there are no questions, then I have to thank you, all of my speakers, for being kind to me, and being very informative to our audience. You obviously have work to do. We obviously have work to do, but before that, we deserve a break. So this is when I exempt you from sitting on the hot chairs. They were not hot, and you can take your seats back in the audience. A round of applause for our speakers. And there will be, of course, lots of opportunities to speak with them in the breaks. They will be back during the deep dive.
So the seats are still here, the microphones will be open, working, but you can take a little bit of a rest. Before I let you go to the coffee break, just a second, I know you might be anxious to get a little bit of the refreshment. It's there. You are going to get it. A couple of really important announcements before I let you go enjoy your coffee. After the coffee break, exactly at 11:30, this event will split into two parallel streams. The stream intended primarily for investors, analysts, financial experts, continues right here at 11:30. So come back here, and to maximize your user experience, even if now you're sitting in the back, take the front seats. There will be deep dives into the strategy, more specific, more detailed, and also lots more opportunities to ask questions.
Clients, you are kindly invited to come to one floor above White Hall, exactly at 11:30 A.M., where we have some exciting topics coming up. They were announced a little bit. We are in the sustainability area. We're talking about technology as well, and there will be a fun component to it as well. I mustn't forget to mention, those of you who haven't registered at the event yet, it's really, really important that you do it now during the coffee break, the registration desk is there, to really make it seamless in terms of your user experience for other activities that we have in plan for the day. Other than that, enjoy the coffee break, meet new people, chat with old friends, and refresh yourselves. See you back at 11:30 A.M.
Dear ladies and gentlemen, it is my privilege to welcome you to the second part of today's event, the Business Deep Dives. We'll take a look at individual business areas, goals, plans, KPIs, all sorts of big words. Also, you will be able to ask questions at the end of the panel. Also, you that are following us from online, the streaming service, you'll be also able to ask questions. But now, without any further ado, I'd like to invite our board members to join me on stage. Hedvika Usenik. Andrej Lasič. Antonio Argir. And Archibald Kremser. There's no hot seat, no seating arrangements. You can sit as you please. No worries there. So as we begin diving, deep diving, retail's up first. Hedvika, the current retail operations will grow as they have so far within the core business.
However, you are adding two so-called strategic plays, one being housing ecosystem and the other one being bank insurance. Now, could you tell us a bit more about the housing ecosystem?
Well, housing ecosystem is obviously connected with housing mortgage lending. We are very passionate about this product in general. Why? Because it drives customer relationship, primary customer relationship, as I was explaining before, because typically, the customer who takes mortgage with us also, you know, stays with us with other services. They have accounts, typically premium accounts. They, you know, do all the payments. It's a real primary relationship, and typically, we see the cross-sell rates of these customers to be, you know, very high.
Among the highest in our, in our portfolio. So this is why we are excited about this space. We think, as Blaž was explaining before, that with the rising salary levels in the region, combined with our rather low penetration in the portfolio of mortgage business, we might have, still a lot of opportunities to grow. So mortgage, in general, is our important revenue pool. So this is why we have, you know, entered into this one. But it's a bit here we wanted to see it a bit wider. We believe we might have opportunities also along the whole funnel of, you know, the, the journey when the customer is buying a house. It's not just taking a loan, but it starts with, you know, searching for buying the home, and then, you know, buying it.
Then when you buy it, you also need to put the furniture in, maybe you would have to do some retrofitting later on, and so on. So we were thinking whether we could move a bit more left and right into a bit more, beyond banking, I would say. I don't have all the answers right now, but we think that for sure, one area that we would like to play is the green retrofitting. We believe this will be a great opportunity in the years to come for households. You know, we might be willing to move into also some other areas in on the whole journey of customers buying a home. So this is, you know, the general idea.
As I said, it's a few years' time to develop it, so we don't have all the answers necessarily at this point, but this is the space that we would like to play.
We're talking about full range of services, sort of a one-stop shop for every client, right? Okay.
Right.
Thank you.
Aleš, if you just allow me .
Sure.
To continue, and really to show really the synergies that are within the bank. Actually, starting the housing story is with, with real estate developers. And here, what we will enhance, we'll speak on a corporate, is actually project finance that we will develop in each and every country of our presence, that we will really support and boost, building the new housing, the new flats, that there will be a material. Because I strongly claim that as per today, there is lack of new houses. That's why the prices are so high, that we will really enable us, a bank, as the complete end-to-end story to the new youngsters to come to new their own flats.
Thank you. Let me piggyback off what you just said. On the corporate side, you've devised six initiatives, two of them being, CSA, you call capital structure advisory or off balance, or balance sheet financing. Could you explain what is this all about, please?
Yeah. We speak a lot about growth of this region, the infrastructure that has to be renewed, increased, rebuilt, the GDP growth of economy, the integration of the region towards Europe, increase of international international business in the region. All this, and sadly to say, but we all know, unfortunately, some of our home cities or capitals like Belgrade, Skopje, Sarajevo, Tuzla, are one of the most polluted cities in Europe, and this will have to bring a huge investment inside the region to improve the, at the end, quality of life and increase the GDP. And these are actually, in principle, the examples where we'll, we can bring the local knowledge, local presence. We are actually banking with each and every municipality from Slovenia, so from Triglav to Vardar to Macedonia.
We know each and every businesses, the governments, so we can bring this local knowledge, international knowledge or connections that we are having, either with international financial institution, bank funds, equity funds, and to bring in the region to really boost those investment and to organize this, such the investments that are needed, in the region. And also, because equity will always be, of course, a source, then we can somehow manage our balance sheet with off balance sheet, some or syndicated some of our exposures.
Thank you. Now, the question that presents itself is the following: Since you mentioned cross-border financing and regional financing, one of the initiatives in the strategy is also trade finance. Now, could you elaborate a little bit, what does that bring to the table?
Yes. I'm really proud that we are by far the first and the most reputable bank in trade finance in Slovenia, with a market share between 40% and 50%. Majority of the international business, in that sense, goes through NLB. And at least for me, will not be easy to execute this. We will actually copy-paste this experience to the region, especially when the region will grow, where the international business of all the countries will grow, and the need of trade finance business, which is guarantees, letters of credit and, at the end, factoring to managing daily liquidity will be increased.
Of course, because this is usable for actually each and every company in the region, we are thinking in the strategy, and we will deliver that a full end-to-end digital process that we would be really efficient and fast in helping the companies for this international business.
Thank you. Thank you, Andrej, for the insight. Now, none of this is possible without payments. No retail, no corporate, payments are at the corner, at the backbone, the cornerstone of the business. Now, Antonio, could you tell us? You talked about cash transition, and you also talked about client stickiness. Now, could you elaborate? What does cash transition bring to the customer and to the bank?
Yes, thank you. Thank you, Aleš. As I said, cash transition is really a core initiatives that we are working on together, as I said previously, with Hedvika, with Andrej, with the teams, actually, because we are simply representative of our teams, not just board members, we are. For the clients, it's always—I mean, first, digital payment for whoever tried are more convenient. The user experience is much, much, much, much better. You don't have to carry any cash with you, any different currencies when you are abroad, et cetera, et cetera. It also has an impact on the costs, especially for legal entities dealing with cash security aspects and et cetera, for this.
But what is really important is actually, as I mentioned previously, having influence on the financial literacy improvement of customers, understanding their financial situation, current financial situation better, and actually because of this, together with the bank, work on the future financial stability. It is important for them also in order to have better access to the financial facilities, to better record their businesses, to better develop their business plan, et cetera, et cetera. And I will use one example.
Let's take a small, a fitness for example. If they work only with cash, what is happening? They don't have a record of what they are doing. There are many mistakes, many possibility for mistakes. They are not tax compliant sometimes because they are not recording everything.
If they are doing it in digital, fully, actually, they are avoiding the mistakes. They have better reports. They can plan their businesses better, but it is really important that they will have access to the financial facilities. Why? Because they can easily prove to the banks, to us, how they are working, how they are performing, and support their investment plans for the future.
On the other side, for the bank, for sure, it's, you know, easy thing is decreasing the cost of the loan activities with cash and all aspects of cash. But again, the most important is the capital, the information capital that we are gaining through the payments, which helps us and will help us to better understand our clients on a segment base, better understand the segment needs, better develop the products for particular segment, and with the consent of the client, even for the particular client itself.
Thank you. My gym uses all the digital payment system, so well said there. Now, I'd say that we are in the loyalty business. Banking business is essentially a loyalty business also. What incentives will you offer to customers and clients who go fully digital or go digital, right? You mentioned before you wanted one digital transaction per day per client, if I remember correctly. Now, what are some of the incentives you want to offer?
Actually, we want one digital interaction with the client. Much more digital payments per day with the client. Everything, your coffee, your lunch your breakfast, your dinner, your, I don't know, electricity, travel, et cetera, et cetera.
I mean, the loyalty is one of the initiatives that we will, that we will try to, to really leverage on. It's one of the initiatives which is not within the core, but is really new for us.
And it's one of the things, as, as Hedvika said before, that we don't have really the answers right now. We don't know what we will do exactly. But what we know, we know that we will start with the internal loyalty program first, because there are many things that we are already offering to our clients today. If you're a client of, of our bank and you have a salary with us, you have, I don't know, lower interest rate on your housing loan, or you have better package or whatever. So there are many aspects of this loyalty program that we have currently, and we will try at the beginning to put it on one platform and try to have it on a group as a standardized base.
In the second phase, after, let's say, two years we will try also to expand on this and to invite partners, other retail businesses, in order to bring benefits for our clients on a daily basis for whatever they will pay, whatever they will do, whatever they will purchase. The benefits inside are, as I said, from the bank perspective, better services, better prices for some services, better offering, individualized one, because now we are not there, but we want to be there. If we attract right partners, they will have benefits also from the partner scheme. I don't know, if it is electricity or telecom or retail chain, all the aspects of their loyalty programs.
Thank you. So it makes sense to go due to digital. Now, we have corporate, we have retail, we have payments, and you mentioned platform. This sounds actually about a lot of like an IT word, right? Now, could you tell us, with all this is what's going on in the group and in the region, what are the challenges? How are you prepared to tackle all these challenges that the business side brings to the IT?
Great question. First of all, I think of platforms not as a technical term-
Okay.
But as a business term. I think of business platforms rather than technical platforms to start with, which, and the difference of which is, we solve solutions from a customer business process point of view, and then we solve them not just for one market, we solve them ideally for multiple markets. So that's for once. But, I mean, what you heard colleagues saying, in the various deep dives, the initiatives, the services they would like to add, everything is around going a little bit beyond the core banking. This is all about connecting to the business ecosystem as well. So I think the main challenge for banks these days is, first of all, clean up our backyard, and there's still some work to be done, but that's, let's say, hygienic.
And then, more importantly, open our systems, ecosystems, to you know reach out to our business partners, be it customers, be it merchants in payments, be it, you know, a green retrofitting in housing, be it product finance developers. So this is what I call smart money. So banks have to go beyond providing money on request or on application, but, you know, embedding themselves in the economy, and that's a mature way of looking at banking.
It'll be necessary to support all these great business initiatives that you heard the colleagues talking about.
Thank you. Doesn't sound too complicated. You said it's not rocket science, it's banking. We all do our jobs. We have full faith in you. Now, let's move back to the retail side. We spoke briefly about bancassurance in the previous session. What does that bring to the customer? What does that bring to the bank, and how are you preparing to tackle this issue or this ambition?
This is one of my favorite topics, so stop me if I talk too much. Bancassurance , it's among the strategic plays, but it's not really a new playing field for us, because we have been doing Bancassuranc e for quite some time, more in Slovenia than elsewhere. In Slovenia, actually, we are quite strong because we cooperate with Vita Insurance Company on an exclusive basis. This used to be partly owned by us in the past. We are actually achieving quite good market shares already now just by selling, you know, life insurance from Vita. It's in the range of 15%-20%, the total market share of life business in Slovenia, not meaning Bancassurance life business, but full insurance business.
In the last months, even beyond that, we are going even towards 23%-24%. So I think this is already quite sizable. We are selling a range of different products, so life, but also non-life with our partners. But the thing is, the whole business is now very heavily concentrated still in Slovenia. So if I look at the total fees that we are earning, it's still 75% Slovenia, 25% the region. So we have started in the region, but we are a bit early stage still. Still, we managed to double the bancassurance business in 3 years, which I think is also a good achievement.
But what gives me confidence is that we have just this year in February started selling CPI, credit protection insurance in Serbia, and already in two months, three months, so in April, we already managed to reach 50% penetration on new sales of cash loans. So 50% of the new cash loans were already sold with insurance, which I think is remarkable because, you know, you need to train the workforce, you need to, you know, put it in the KPIs. You need to make sure that the customer, the sales force, which was just used to selling loans, is now also selling insurances, which is not so easy, you know, to start.
I understand. So better safe than sorry.
Sorry?
Better safe than sorry.
Yeah.
Yeah. So, for sure, this gives me confidence that there is a lot of opportunities in the region, also in this bancassurance space. Coupled with the fact that, you know, GDP will grow, the gross written premium per GDP in the region is significantly lower than EU, so there is space to grow. We actually believe that this business will double during this strategic period, so during until 2030. So we for sure want to grab part of the opportunity in this space. We want to either strengthen the current relationships that we have, you know, strategic partnership and alliances with insurance partners. But what this strategic play means also potentially for us, that we might consider again, moving at least partly or at least in some of the businesses or some of the countries also towards captive plays.
You know, be owning also maybe some of these insurance companies, more in the life than non-life, I would claim b ut this really depends on the opportunity. So like we are owning asset management, you know, and we are distributing as well, we are thinking this might also be a space for us in the future, because simply we will be profiting also from the, from the income that is in the insurance companies, not only, you know, what we earn as commissions. That's the idea, but how it will play out, we will see in 2030.
Thank you. So business, banking business and insurance business go hand in hand. Now, in corporate side, the SME business and large corporates go hand in hand. Now, the SMEs are the cornerstone of every economy in the region, small businesses. Your team has prepared a strategy in that sense also. Could you please elaborate on that a little bit?
Yes. I will start actually where Archibald and all the colleagues finished, that the IT, it's not IT platform, but that's a business platform. So in SME, actually, everything what's going on is with client user, client experience. And what is really enhancing the SME strategy is, for sure, to have the best people who are working with the people, and what we can bring as the, we said many times as the biggest financial institution with the, regional headquarter, with the headquarter in the region, is this really the local, knowledge, and especially that we are sharing with all of the businesses, same vision, which is that jointly improve the quality of life of the region.
So this is firstly, we are speaking about the relationship, motivate people, which is one of the KPIs that you will hear in HR, session. And thirdly, it's really end-to-end digitalized process. And what does it mean? It's there are actually in principle, two things, and what I would also point out that average SME company is banking with us for 15 years. So this is the average SME company.
We know about this company, everything, almost everything from the past, and to utilize all this information, and really, that we are already having, really to improve this process. One is approval process. I strongly believe that for SME micro and SME business, we can approve regular things. I'm not speaking about investment loan, I'm not speaking about M&A activities and so on, but regular deals in less than one day. So this is one of the ambition, and we are also putting KPIs. And the other is to onboard, so all the KYC process, because all the region is relatively very much, very much transparent regarding debt, debt also in less than one days. So these two thing, so, internal processes to be as much as possible, digitalized.
It's easiest to say, it's not easy to do because it's so many different processes of many different units. But as you see, we are really thinking as one body, and I'm very much confident that we will bring to that, so with best people that we are having, we are sharing with the clients the same vision, the same mission for the region, and with the best process that we could be really the leader in that segment. This is the ambition.
Thank you. Now, I'll ask you a provocative question. We're moving to corporate a little bit. Could you tell us if our group, our bank, can compete with J.P. Morgan, Citibank, all these huge banking systems of the world on the corporate side?
I believe that I already answered this question. Yes, we are having a huge bank, which are also present in the region, but okay, also, some of the very large European or world bank left the region, like Société Générale, because I know I used to work for 17 years in Société Générale. So also some huge bank left the region, but we are regional bank, which the only focus is the region. And if we will focus on the things that we are knowing the best, so our, our core or our strategy, how to build the relationship with all the clients, with the region, how to improve the quality of the life, I believe we can compete. We have, I believe, the same knowledge. We have better knowledge, heart, actually, with the region. So yes, I believe we can compete.
Thank you. After all, this is our home. Now, moving on to the KPIs, and we'll start with payments. There's a target in surpassing 80% by 2030 in retail digital penetration. How do we plan to achieve that? Right now, we are between 40 and 60. We're shooting for 80 in about 6 years' time. How?
Actually, we are basing our strategy on three main things.
First thing is that the digitization of the region will continue with the even significant much, much, much bigger pace than today. So leveraging on the digitization of the societies in general. The second thing is working on delivery of standardized group function, group apps with standardized functionalities across the group, so bring the functionalities to the clients. And here, we are not speaking about the payments only. As Hedvika said previously on the first panel, we are speaking about everyday easy products, services that our clients are using, like overdraft limit on the card, saving product, even some top-up on the investment fund, et cetera, et cetera. And the third thing is actually, again, I'm referring to, I think all of us mentioned track record of what we what we did.
So if you compare what we did in last two years, especially, you will see that there was a huge improvement in digital penetration figures on a group level. And here, I would take an example of Montenegro, for example. Our bank in Montenegro, at the beginning of 2022, they were with the digital penetration of around 10%, and even without any significant improvement of the mobile app, but through the focus, through the education of our employees and our clients, through the right KPIs, we managed to triple them. Today, we have 28% of digital penetration. So if you simply extrapolate this trend, we will come to 80+% digital penetration, and we are all committed to it, from platform, from client perspective, from payments also.
I guess we are reaping synergies all over the place. Okay, now, as I looked at the KPIs for retail, I couldn't help but notice that we are trying to improve from EUR 270 to EUR 400 per active customer yearly revenue. How are we planning to achieve that?
Well, you know, if I look at the results of Slovenia retail only in 2023, we are already close to or somewhere in the space of EUR 500 euro per retail customer. And if I look at the first quarter results, we are even going above that.
Now, okay, in the interest rate environment, which is high, so we have to also count that the interest rate will not be probably so high anymore in the next years. But still, as I mentioned before, we have a lot of possibility in our existing customer base. We have been doing now lately, especially for the bigger markets, the benchmarking studies, so to understand how we are, you know, compared to some competitors in our regional markets, but mainly because we want to see where the markets are developing. So we—It's not so much to compare ourselves locally, but to see where the world is going, where CE is going, where the Western Europe is going. So what are the digital leaders doing? Just to, you know, imagine where we should be going towards.
We noticed that, you know, we have a good sales productivity in the branches, typically. We are selling a lot of products. In general, very good performance. But the thing is that if we don't clean out from the branches, you know, the cash, the transactions, the small sales, we will not be able to improve for the productivity. But the database that we have is enabling more sales.
So we have the potential to sell more, given, you know, what our CE peers, for instance, are selling on the same database. But we cannot at the moment if we don't activate this digital space, no? So if we don't also move in terms of digital core product sales penetration from this very low to 6% to much higher levels. So it's simply, you know, by doing all the things that I mentioned already in the morning, so focusing on the strong revenue pools that the region is offering, mortgage, consumer, daily banking, insurance, asset management, you know, being a real financial services provider, not only banking provider, by doing all of this well, plus significantly improve on digitalization, and by that, I mean not only penetration, but of course, penetration is prerequisite, but also product sales.
By that, I think we can move, you know, to the space from 270 - 400, plus the countries will be converging, no?
We expect so this should, by definition, help us. It will not be an easy journey, but we have to have an ambition otherwise.
True. So it seems that the digitization of the process and the payments and all that is the common denominator across the board. Now, here's another ambitious goal. It's called straight-through processing. Could you tell the audience and the people watching at home, and what does that mean? And there is a number, a strict KPI. It says, +90% of all transactions.
Okay, so t his one is on consumer finance. So what it means that at the moment, not everywhere, but in many of our countries and also to a quite an extent, still in Slovenia, also consumer lending, and I mean, also microlending, for instance, small, small lending that either, households or, or, small companies need, is happening in a way that somebody's manually confirming, you know, or approving, or that there might be even more levels or, you know, branch head risk. And this means for the customer is not such a good experience because the customers have to wait.
It's also more work for us than we would need, no?
And with all the data that we have and with all the, all the models that we are developing, we should be able to instantly approve 90% of the small consumer loans or microloans. And this is actually our target, to get as soon as possible to these levels, because also, you know, in the digital world, the clients will not be waiting a few hours or one day to get the loan approved. They want it now, they want it instantly, and we need to prepare for this. So, you know, it's we are not so far. For instance, in Slovenia, we are not so far from that target, to be fair, even in micro segments, not.
But we have to get there everywhere, in all the markets, and we have some homework to do, especially related to the processes, the risk modeling that Andreas was mentioning before. So yeah, that, that's it.
Thank you. Andrej, you were talking briefly about the KPIs, just a minute ago. Your team has issued a EUR 5 million green bond. Your colleagues are active in structuring green bond issuances for corporate customers. Where is the future there? So you, you interact regularly with people. What's the demand for this kind of services?
The future in green bonds. It's our must, actually. It's regional must. As I said before, we are having the most polluted cities in Europe, and without a huge investment, and this is actually what we are speaking about, with green investments. So green, which will bring a sustainable production, either of electricity, transportation, production of pharmaceutical products, production of car industry, agricultural. We will not achieve the figures that we are aiming for, but it's not because of the figures that we sign some, some nice net zero, alliances and so on. It's mainly to improve, really, the quality of life in this region, because I believe that the Blaž said at the beginning, the biggest risk and the biggest challenges, I would say, of this region, is that people are living.
For sure, one of the reason is also, also, the quality of life and air pollution, pollution of the nature of the region. This is actually our joint responsibility to improve this, and there I see really a huge potential.
Thank you. Again, coming back to IT. You said before, "We develop once, deploy 7x ," and you mentioned NLB Digit, which is located. This is an IT hub in Belgrade. Could you tell us a bit more, what's the mission, what's the purpose of the people working at NLB Digit?
Well, first of all, NLB Digit was created mostly to be an attractive hiring platform, a little bit, you know, detached from the banking space, which tends to be very regulated a bit bureaucratic here and there. And IT talent, generally tends to be a bit less patient a nd, a bit more mobile. So in that sense, we wanted to ease this, you know, onboarding of IT talent.
But frankly, Digit is one outfit we have. We operate, we're very happy with it, but we have, you know, 100 people in Digit. The whole group has 600 talents in IT. So, 205 IT colleagues sit here in Slovenia, so that's by far the largest talent pool still for us to have. So in terms of platformizing developments, it doesn't matter necessarily if somebody sits in Slovenia or in Digit.
These people cooperate very closely in developing such solutions. We, as we speak, develop solutions for CRM and loan origination in Serbia with colleagues from Digit, but also heavy involvement of colleagues from Slovenia. So as I said in the earlier segment, we have to learn how to collaborate across borders. These are relatively small countries, short distances.
We know each other very well. Senior management in this group knows each other by first name, and so colleagues tend to have very close contacts. Both in business and IT, and there is no other way than to work together because we have no time and no capacity for other than developing once, deploy 7x . It's as simple as that.
Break into silo and collaborate. Now, here's a question, a bit of a provocative question for you also: If I asked you, what keeps you—Because when something goes wrong in the IT, there's a huge price to pay, and that's not just my assumption. So what keeps you awake at night, if you don't mind me, if you don't mind me asking? Is it cybersecurity? Could it be some regulatory requirements? Is it operational risks? What could you elaborate on that one? So some of the things.
So indeed, all of it. What keeps me awake, really, at night is, you know, the need to be 100% resilient, in terms of operational stability and safety for our customers. This is the, you know, primary objective for us operating as a bank. We have to keep customer data and money safe. First and foremost obligation as a bank.
So to ensure that really is a discussion we have in the bank with business colleagues and of course with colleagues in IT almost every week, just to ensure that we keep this high level of safety, security, stability, and keep further enhancing it, because frankly speaking, the threat and the threat universe is emerging very dynamically. We all hear about phishing attacks, we all hear about DDoS attacks hitting specifically even Slovenia for political reasons. And all these events that while they will not end, they will not stop, and unfortunately malicious actors are getting ever more sophisticated, ever more prepared, ever more aggressive. So there is a continuous need in education, investment, and education also of our customers how to cope with these challenges. We also discuss here and there, to keep customers safer, sometimes reduce a little bit this, full straight-through processing.
Because if your money is fully straight-through processed with your hijacked phone to Lithuania or, wherever else, then also not such a great thing. This is an evolving theme. It keeps us all awake every day.
Not every night, luckily, but something that that's our core mission. We can't fail on our core mission, and that's clear and understood by all of us. And we are willing to do whatever it takes to fulfill and deliver on this core mission, no question asked.
Thank you. Now, time flies when you're having fun. We are nearing the end of today's panel right now. If there are any questions, now would be the time for you guys to ask questions. Yes. Okay, here's a question right there.
Hello. Antun Horvatić, AZ Pension Funds. I have a question about the loyalty or stickiness of older customers, because as we all know, they usually don't use apps, and they like physical contact with bankers, and you are reducing your physical presence in the regions. So how can you increase your stickiness with them?
Both of you can answer.
Yeah. Actually, older customers, if we think about today's pensioner, 65-70 years, just 10 years ago, they were using already cards, checks or whatever. Just 5 years ago, they started to use wallets and mobile apps. So there is no big challenge in digitization older customers. Yes, maybe 80+, et cetera, et cetera, but we have value proposition also for, for them. So I don't believe that actually older customers, as we are seeing, cannot be digitized and cannot benefit from the loyalty and stickiness of our offering.
Yeah, and now with that, we still have a strong presence. So we have quite a number of branches in Slovenia, 68. Region-wide, more than 400. We will be, for sure, still a bit reducing, but I think we will still have a strong presence. And, you know, we cannot pretend that the older customers don't exist. They exist, and we need to help them if they are willing to digitalize. If not, we will serve them, you know. So we will probably not be fully cashless, but what we are trying to do is reducing cash payments in the branches as much as possible. But I don't expect in this region we will be becoming fully cashless anytime soon.
And we are very active, also together with some organizations that are supporting, you know, elderly people in helping them. So we organize numerous events for clients, where we are trying to help them activate to digital channels, where, you know, we are also teaching them about all these security issues, how they need to take care that they don't give their passwords or, you know, these kind of things. So we are active in this space, and we will not stop serving them. We will keep them, for sure.
I would add just one example. We are now thinking about introducing the charges, charging of the cash withdrawal in the branches, but elder people, again, not pensioners, elder people will be excluded from this. So we are thinking about, absolutely.
That's a good measure. Thank you. We have another question from the audience.
Yeah.
The gentleman, yeah.
This is Robert from IPOPEMA. You spoke about targets, about vision. In 2030, how will your average customer look like? How old will he be? How much cross-selling will be there? Can you elaborate on that, perhaps? Thank you.
Well, because the customer base is getting old, for sure. That's why we need to acquire all the time. So if we, you know, keep our existing customer base and don't do a lot of acquisition, by definition, the customer base is getting older. This is why we have to run all the time in order to rejuvenate the customer base, because, you know, every year, so and so many customers die, and if we don't acquire new. Even that, even without churn. So if we don't acquire new customers and rejuvenate all the time, we are, by definition, going down in the customer base, which we are not, no? We are trying to keep at least stable, and with the new strategy, we want to grow much more.
Cross-sell rates, for sure, will improve significantly because of several reasons: because of the potential that we have in the customer base, because we will be adding other products, as I mentioned, asset management insurances, and, also, we will be focusing on the priority segments, which by definition bring more cross-sell, like, like affluent, like customers with mortgage. I hope I answered the question. Maybe some of the colleagues might add.
Thank you. We have time for one more question from the audience. Do I see any? There's a hand right here.
Yeah.
Thank you. Hi, Svetlomir Manolov from EBRD. I guess my question has two parts. In your prior strategy, you had the leasing as a key priority. Now that you have or you're in the process of acquiring SLS, where do you see leasing evolving in the future, in the medium to short term? My second part, my second question is, you spoke about Bancassurance , which is another key priority right now. Can you give us some parameters? You mentioned that you will try organic and possibly inorganic, but where do you see that business growing in with, in terms of numbers?
So in leasing, I mean, the business we acquired is fairly traditional. It's a used car leasing, more or less. But by having acquired this platform, we for sure consolidate our position in Slovenia and accelerate on our ambition to build a leasing book in, you know, in excess of EUR 2 billion, which we set out as a strategic vision some time ago. So in that sense, it was a bit of a shortcut, and as we talked in the earlier segment, M&A is and will remain to be, you know, a tactical and opportunistic way to accelerate on deployment of this strategy. Leasing will evolve to something we think of a mobility service, but that's a journey, and the journey will be bumpy.
We will talk about ESG and transition from combustion engine to EVs and evolving models about subscription type of mobility services, but that's a long journey. I don't think Slovenia is there yet. But we see it evolving in this direction, and having this platform for us is the way to go. So we now own the assets. In future, as was mentioned in many other contexts, we will also add the services on top of these assets. Sorry, the second question was?
Bancassurance.
Bancassurance.
Hedvika, real quick.
Cover.
Yes, sorry.
So we are currently at group level, earning last year, roughly EUR 13 million from bancassurance. As I said, we doubled in 3 years. Our aspiration is to almost triple by 2030, in a similar way as we are doing now. So add basically, roughly EUR 24 million to the current 13 on the normal place, you know, cooperating with with partners. If we add captive play, we might get higher than that. So, you know, it, it's, it's based on that, but with the normal business, with pushing cross sell, with activating employees in the branches, having license to sell insurance product and really actively cross-selling, we can activate. We can triple the business by 2030 and potentially add more if we get into the captive play.
Thank you.
Maybe just on the o n the leasing.
They're forcing us to conclude.
Because it was not mentioned from the last Investor Day till today, actually, we entered into new markets, Serbia and Macedonia, in leasing. And actually, what we will try to also do, like Hedvika spoke now in bancassurance and in Skladi, to repeat the success that we had, especially in distribution of asset under management and life insurance, the same thing in leasing. Here, we are really working hard here in Slovenia first, but we would like to repeat the same thing in Macedonia and Serbia, because the distribution power of our branch networks in all our countries is enormous.
Thank you. There's nothing much more to say than thank you for the informative insights. Now, we've concluded this part of the panel. Please put your hands together for our board members as they, as they have to join the other steering, the other group up on the first floor. Thank you very much. But now I'd like to invite Peter from investor relations to the stage.
Thank you, Aleš. Warm welcome also from our, from my side. Our management board members have, of course, set the stage with the, if I paraphrase, Martina, set the stage with a movie, and now we need to, of course, decide what kind of music we will play with this movie. With this, to help me is Igor Zalar, our Director of Global Risk at the NLB, so I would kindly invite him to join me on the stage. This would be your seat. Thank you. So, Igor, for someone that is surrounded with risk every day and all day, I would start by asking you, how well do you sleep at night?
Risk management is like never-ending marathon, so new risks, new crisis, new regulation, so you have to find some balance. And on your question, I'm sleeping well, so I find some balance, yeah.
Yeah, I would say that sleeping well is a cornerstone to a healthy life, so good to hear that. But I can imagine your daily routine is not a routine at all. Can you explain a bit to the audience how risk department within the NLB is set up? Who do you manage? What do you do? What are the tasks which you and your team is responsible for?
So our team is covering very broad area of risk. So we are the first one responsible for harmonization of risk framework across the whole, our region and whole group, which means from the risk strategy, risk appetite, limits, monitoring, managing also all this, risk, ICAAP, ILAAP, recovery, and so on and so on. So, it's a very broad area, which there is basically not really a routine job. Maybe routine for some of my members, for me, it's dynamic approach, priorities, solving issues.
So if I understand correctly, you, in essence, manage global risk for the whole NLB banking group. So, as the bank is now operating on seven markets within six countries, how do you keep track of what happens in when it comes to risk, of course, in Kosovo, in North Macedonia, in Montenegro, and so forth?
I think here, the most important is our idea of monitoring the whole group, and this is not relying on the reports from the banks, but on the data flow. That means we are getting data flow from our entities, and we can see all the corners, all the positions, and we can see all the trends, comparison to expectations, to the limits, which means that we can react very swiftly, if necessary. We are very proactive, so we are not dependent on information from the subsidiary but we can see it by ourself. Of course, we are in close contact with whole team, doing similar work in our subsidiaries, but we have non-biased insight into the group, into the entities, which I think is the most important in my job.
I would completely agree. I think this look-through is extremely important, but when we speak to the investors and the analysts, one thing that constantly comes to the agenda is, of course, diversification of the NLB Group across countries and across sectors. Can you elaborate a bit on why that is important for anyone listening this today?
Yeah. So our aim of strategy or our pillar is, first, cash flow lending, and second, diversification. This, we mean, is the most important thing, for our, for our portfolio, and we try to, to, to diversify across, first, geographies, sectors. You are following our portfolio, you know how we are spread out across, retail, corporate, 50/50. Then within the retail, again, housing, consumer, and SME corporate. So this is with intention. Of course, there is also geographical. Also is following, the size and capabilities of these countries. You can see that Slovenia is, most present in the corporate and housing, while in, in retail, consumer, and SMEs, it's spread out across the group, which it should be.
So, my firm thinking is, the risk of the portfolio is always lower compared to the risk of the high concentration in portfolio. High concentration can bring you in fast troubles. Portfolio usually is much more resilient, and so far it has proven it.
Do you have some numbers that can support what you just explained? I mean, we see here, of course, this quite busy slide with so many, so many details on it, but maybe some highlights of the portfolio.
So maybe our general standard products, which was half of the portfolio, so retail consumer is roughly EUR 6,000, 5 years. So it's quite, I would say, normal thing. On the housing, it's EUR 38,000, 17 years. But I have to say, under retail housing, we have also loans which are for refurbishment, which are a little bit shorter and a little with smaller amounts, which means for the purchase are a little bit higher than this, but in average, this is the amount. So I think this is a very healthy diversification. So in housing, the average maturity is 70 years. For the purchase is, I would say up to 8-20, and that's it, yeah.
So obviously, quite diversified portfolio book. But before we went to this diversification, you mentioned also one quite important aspect of the managing risk, and you mentioned cash flow lending. This is something most likely paired with high collateral ratios, is one of the strong arguments of the good or stable asset quality for the NLB.
Yeah, so basis is cash flow lending. For us, collateral is secondary mitigation measure, and to understand our logic is, most of our collateral, of course, are on, housing loans, that means on the purchase of real estate, which of course, makes sense. Cash flows are so long maturity to estimate that you take normally the collateral. On the consumer, we don't take any collateral.
On SME, we take the collateral mainly where we are talking about mid- and long-term lending, where also cash flow can be less predictable, while on corporate, it's quite normal. So usually, this is pari passu negative pledge, so means everybody has it and nobody has it. So this is the logic. I think this is the normal structure of how you operate. But if you based from the beginning on the cash flow, I think very rarely you come to the realization of collateral, so, and this is the main point. So what are your projections of cash flows for the future? How firm they are, and if the realization is there or not?
Thank you. I would say that's somewhat reassuring, if you ask me, but we'll ask the audience later. One thing which, of course, is not just on your, on your agenda or on your focus, is, of course, as we re-read through the first quarter, earnings announcement, that protection of the profitability is one of the, one of the NLB group's priorities. The part where it is your, your focus or your attention point is the, is the locking in higher margins through the fixed, fixed interest rate production. Is there something that you can share with us about, about how this is evolving, and why it's important in an environment where, where the central banks globally are indicating that most likely the next move is downwards?
Yeah, so I think every bank in Europe is questioning itself, are we higher for longer? Are we gradual down? Are we fast down in interest rates? And of course, you have observed then, that in the past we were positioned for the growth in interest rates, which also benefited us. And now we are on the position that we have to make some protections also against the reduction of interest rates. What we are doing is mainly, we have increased production in the fixed loans, especially in retail, so in housing and consumer. You can see, let's say, in last year in Slovenia, whole production in retail was fixed. And this is also the customers wanted.
Second, we are doing also some actions to mitigate possible decrease in interest rates, which means we are hedging some positions on liabilities. We are buying some government bonds of high quality with fixed interest rates, and so on and so on. So, we are taking the measures to protect the interest income regardless of the scenario. So this is the aim of our operations, and I think we are on the right track.
Great. As I can see, the time flies, we are having fun. I'm having fun. Hope you are. One thing which is often asked by investors and the analysts recently is the so-called Basel III endgame and its impact on the NLB. I know it's early days, and you're still running your calculations and scenarios and impacts and all sorts, but what can you share with the audience with regards to endgame? So fancy title.
Yeah, Basel is a little bit of mixed game, so there are positives and there are negatives. So what I can say is, my expectation is that on corporate, let's say, on balance, I expect reduction. On the housing, Slovenia, on balance, I expect reduction. On the operational risk, I expect reduction. On the other side, we have those which goes up. So one new feature is so-called FX loans in retail, and this, for our members, means euro loans. So that means in Serbia, Bosnia, and Macedonia, euro loans. So here, I expect the increase of risk-weighted assets. Second is also the off balance. Generally, in the off balance, there will be some upside also on this front. And these are the main effects.
There could be also some not connecting directly to the Basel, also some relation to our equity positions, which we have in subsidiaries, that some ways will change. But overall, I think the effects as it looks, it's quite moderate, so nothing that we would be surprised of, yeah.
Yeah. I would really like to learn more about the ethics risk for us with regards to Basel, but also on a general term. But now, I would really invite everyone to ask questions, maybe on ethics or something else. I see one hand being raised there. Just one more second.
Hi, good morning. Arthur Caye from Capital. I have a question about your rate sensitivity. I was looking at the most recent results, where I think the sensitivity has reduced from about EUR 100 million to EUR 80 million for 100 basis point shift.
Can you talk about how much more you can do to protect yourself against the turn in the rate cycle? Thank you.
So, we are still taking the measures. So, as I said, the main measures behind were basically three, so some hedges on the liabilities, some purchase of government bonds on the asset side, and new production in the fixed interest rate. So this is combined. What you saw so far, it's not the final figure yet, yeah? So we are still taking some measures, but the aim is not to come to zero, yeah. So, we are still have to be open also to the other scenario, because if not, we are losing money. So, we will position where we think we are the most comfortable, yeah.
We have another one? Yes.
Steve Gorelik, Firebird. You guys talk quite a bit about the asset side of the balance sheet and the interest rates there, but from the liabilities perspective, and specifically on deposits, what do you think could drive those interest rates to go up, the ones that you're paying to the customers?
Currently, there is no significant pressure on that. So you know our position, liquidity position, so we had the strategy that every entity is self-funded, and of course, NLB anyhow has huge surpluses and liquidity. So we think we can still be on similar levels as now till the decreases start, and then also, if there is a pressure, it will go away, so. Currently, I don't see a pressure on liability, so.
Thank you very much. I think, our time is up, but Igor will be around the whole day today, so any one-on-one deep dives with Igor and the team is more than welcome. I would thank you for the questions and the time. Igor, thank you very much. With this, I would invite Alenka Recelj Mercina, head of sustainability within our banking group, to the stage, to explain to us how we are preparing ourselves and what we are doing to thrive in this fast-paced environment, also when it comes to the environmental, social, and governance issues. Welcome, Alenka.
Thank you. Thank you very much. Thank you for having me.
The first question for you is, everyone that knows you would say that you are extremely passionate about what you do. Can you just explain shortly what drives you? What's your goal in everything that you do?
You know what? I have to comment this.
Yes, please.
I'm not used to this easy questions from your side, you know. I usually get really complicated questions in everyday life. But, yeah, look, presumably, Henry Ford once said that, you know, "The business that makes nothing but money is a really poor business." And this saying, this thought, actually captures the whole essence of sustainability. And, since we were, you know, entrusted with this mission, with this fantastic project of implementing ESG factors, I must say that the drive and motivation is really not a problem, especially because this topic, it embeds so much of a purpose. And, you know, everybody wants to add his or her two cents to a better world.
So it's super exciting journey, and we're just happy that we have the opportunity.
Can you let us know, how do you then pass this excitement on to your colleagues and across the banking group? Because sustainability, although an important topic, it's still a young topic for a bank operating in this environment. How is sustainability, how does it trickle down to every clerk within the group?
Yeah, well, I really don't have a feeling that we have to convince anybody about sustainability. It's quite the other way. It's more about that we are able to explain to people why sustainability is important, and why sustainability should be an integral part of each and every financial institution. And when, you know, different parts of a bank and colleagues in different parts of a bank, when they understand what their mission in this is, then nothing is a problem. So, we didn't really come across any problem in motivating other colleagues in the bank. And yeah, we actually live by the rule that we wanna make our team, sustainability team, at NLB, wants to make sustainability everyone's job and this is what we do.
Yep, wonderful. I can say that it is part of the investor relations job already. So it is-
Happy to hear it.
Yeah. I just learned that you, when we were preparing for this Investor Day, you came from Montenegro, where you attended the ESG Adria Summit. One really important event. What were your impressions? Can you tell us how well is the region, so speaking on top-down level, how well is the region prepared to tackle this buzzword, which is called, green transition, and what were the key takeaways?
First of all, I would like to say that this is not a buzzword at all anymore, you know. But what we observe is that in Europe, we are observing actually several different speeds of convergence towards low carbon and carbon neutral and sustainable economies. And what is the really interesting thing, as far as I'm concerned, is that Slovenia is actually on the border between two worlds. We have this opportunity to see the western part of Europe and the northern part of Europe, where ESG factors and sustainability is deeply embedded in the structures of financial institutions. And then on the other side, we have this Adriatic region, where the situation is really, really different.
But as we had the opportunity to see and to hear in Montenegro 10 years ago, things are really changing. What I would like to say is that Adriatic region is extremely dependent on fossil fuels. The share of fossil fuels in the region energy mix is around 80%. Albania is a notable exception with, let's say, the share below 60%. But at the same time, Balkans is so rich in natural resources, in rivers, sunlight, wind, and their use for electricity production was not successful. But there is not everything so gloomy, you know? I would like to point out that there is a really high public interest in the topic related to environment and climate change.
And with stronger leadership, with public investments, with regional cooperation, I believe that this can become an important opportunity. Maybe just to add, there is still quite a lot of political reluctance to pursue the green transition in Adriatic region, but it's driven by very well-known factors, I would say, such as project duration, which is always a problem in sustainability world, then fear of socially related consequences, of course, and simply ideological barriers which are very strong.
Can we pause here for a second? Because what you're saying is really, really important. What is the opportunity set for the NLB? Because we know, we know we just, to be completely honest, we scratch the surface when it comes to, when it comes to green lending, green financing, and so on. What's the opportunity set? What are the products which we already can offer to the clients, and which we are developing to, to make it, to make this, even a more important story?
So as our audience can see on the presentation, we estimate the potential for average annual corporate green investments in the region by 2026 to around EUR 5.5 billion. We expect that companies will invest around 1/5 of their investments for the green transition, which will amount to around 2.5%-3% of national GDPs. Highest expected green investments will be made in Serbia and in Slovenia, in sectors such as renewable energy, low energy buildings, clean transportation, and of course, decarbonization of extremely high carbon-intensive sectors. But of course, dynamics is expected to fluctuate extremely, so even analysis, the numbers can be very different if we look, if we take into consideration other time frame. So let's see what's gonna happen, but prospects are really interesting.
You asked me also about the products.
NLB, of course, is a universal bank. So we, of course, in the last couple of years, we developed quite a diversified range, I would say, of products that are helping our clients, customers, in retail and in corporate, to pursue actually their endeavor in green transition. So let's say we have specialized loans supporting key energy efficiency. We have two investment funds that are investing in green. Then we have leasing products that are supporting electrification of the fleet and so on and so forth. You know, we are well aware that there is really a lot of room for improvement here.
Definitely. I would really be interested to learn more about the national program. So how each country in the market where we operate is planning to develop in this field, but also how these investments will be funded. But let's leave it that maybe for the Q&A. So if we go a step further, at our last Investor Day in Belgrade, so in 2022, we had a really ceremonial event with signing of UN Net-Zero Banking Alliance. Can you walk us through what was the progress since the signing?
So it's now two years Let me also mention that, before we signed the NZBA, so Net Zero Banking Alliance, we also signed Principles for Responsible Banking. These are two most prominent and most important international initiatives aiming to introduce ESG factors in the financial sector. We became a signatory to UNEP FI, United Nations Environment Programme Finance Initiative, in 2020 by committing to principles for responsible banking. In hence, we started developing, I would say, the responsible banking in concept in this region, and we also added quite a lot to development of sustainable finance in this region. But then we realized that this is not enough for us, that we are even more ambitious, and we signed NZBA, and it's given us a hard time.
Of course. I guess that quite a lot of people in the audience know that NZBA is not an easy initiative. It means that you have to prepare a very very meticulous strategy about how to decarbonize your portfolio, where the biggest levels of emissions are. So, we prepared the first version of this strategy, but we also started with the second version.
So the second version of this strategy will be out in May 2025. This is another deadline that we are pursuing, and I hope that we will be on time. We were on time for the first time, w e're gonna make it for the second time as well.
Looking forward to deliveries, the delivery on this front. I would now open the stage for questions from public, but also from participants here live, but also online, if there are any questions. I see one hand. Wonderful.
Hi, I'm Đivo Pulitika from InterCapital Asset Management. I have a question that would try to somehow put this ESG into the perspective of what was being said earlier on about your KPI, financial KPIs.
How actually does ESG impact that? For example, if a company comes to you and says, "I want to finance something that's green," do they get kind of a lower fee, lower interest rate, and then on the other side, how does that impact your profitability in total?
Thank you.
Good question.
Yeah, thank you very much for the question. So, yeah, I will split this question into two parts. The first part would be, there are very clear targets related to sustainability. I mean, if you're a bank that's joined PRB or NZBA, you are basically you have to follow the agreement, meaning that you have to publicly announce the targets related to financing of green transition. So in December 2023, we actually committed to mobilize EUR 1.9 billion for sustainable projects by the year 2030. And this target is, of course, embedded in all business lines. We also set a net zero journey targets for four sectors to decarbonize these sectors, which is massively impacting our business as well.
What I have to emphasize here is also the commitment to finance at least 30% of NLB d.d.'s new production in most energy-efficient commercial buildings by 2030, and another commitment to finance at least 15% of NLB d.d.'s new production in top-rated mortgages in Slovenia by 2030. So, these are publicly announced targets and of course, we will stick to it.
Alenka, Alenka, maybe just one follow-up question, which I think that Đivo wanted to ask, is: Is client getting a better deal .
Peter, wait, this was the second part.
Ah, okay, that's the second part. Sorry. I was impatient.
My answer. Yeah, of course, we prepared a whole range of loans that are developed especially for these kind of reasons. And what all these products have in common is that they have a more favorable interest rates than the bank's regular offer. Customers are also not charged with, let's say, a loan approval fee. So, yeah, of course, if you look at the regulatory framework is really not supportive in case of profitability related to this products. But yeah, we are trying hard to help our clients in this transition.
I hope this answer was sufficient. Otherwise, I would invite everyone to reach out to Alenka at lunch or at later point to discuss further, because our time is up. I would thank Alenka. Thank you for your interest.
Thank you.
What is quite obvious is that sustainability agenda, it's not only important for us to improve the quality of the lives in the region, but it's also providing the tangible opportunity for us to, for us to grow as the bank. And what resources, of course, necessary for the bank to grow will be explained by Aleš and his final deep dive for today. So thank you very much.
At the end of the day, it's all about people. Nothing works without people, no strategy, no services, no nothing, for now. So it's all about people. Without any further ado, I'd like to invite Vesna Vodopivec to join me on stage. She is the Executive Assistant to the Management Board responsible for the HR and process development and organization development. She's also responsible for relations with the trade union and workers' council. Among other things, member of a few supervisory boards, and a biker, and a beekeeper. Vesna, hi.
Thank you, Aleš.
Now, could you tell us in a few words your history with NLB? You've been here for over a decade, since 2011, right?
Correct.
I joined the bank in 2011 in the middle of a very interesting period of time.
Hard period of time. So this decade, I can divide into three stages. Blaž already mentioned these three stages. The first stage was dedicated to transformation and downsizing and massive head count reduction. That took us a couple of years to close it, mainly because we wanted to be really responsible to our employees. In second stage, my HR team was devoted to strategic projects, development, and also to transformation of, HR function into a strategic one. And the third stage, well, we are living it right now.
From something not as pleasant to the age of-- the stage of expansion.
Yep.
Now, when we're talking about the growth and the strategy, all the board members mentioned that nothing works if we don't attract and retain the right talent and the right people. As I said, it's all about people, still. Now, could you elaborate, could you tell us what the initiatives is the NLB Group taking to attract and retain the right talent?
How much time do we have?
Well take time.
We will time? Okay.
We'll make time.
All right. So let's be honest, HR has evolved last couple of years. The landscape of talent attraction and retention has also changed significantly. This is actually applicable all over the Europe and in all industries. We also face the challenge of retaining our key professionals. But yet but of course, if we are able to create the interesting working environment, if we can offer a decent rewards, if we can invite them into different types of projects, then the working environment is creative for them. So for sure, we do have a possibility to attract the right talents. The retention is also, I don't want to say a problem, because everything is just a challenge. But we do have different types of initiatives which do give us support to attract and retain people.
Thank you. Before we mention, there is a question from the audience about how do we serve the aging population with our products and services? Now, as aging population is slowly saying goodbye, now we have to attract so-called Gen Zs.
So these are the younger people that prefer the hybrid workplace, you know, chairs and beanbags. We're not Google, but still. So what are we doing to attract this very, so to say, spoiled, expecting success overnight, Gen Z people?
I like Gen Z people you know? Why? They make me feel younger. Well, yes. Let me give you one example.
We introduced the hybrid work arrangements with. It seems that they are quite appreciated by our employees. In last couple of hirings, it was even a deal breaker for the Gen Z. They do prefer to have a work-life balance, and they can recognize what we can offer to them while hiring.
Thank you. Another aspect, very important aspect of retaining people or attracting people is the training aspect.
Oh, yeah.
Training is very, very important. So what initiatives does the group have for people to advance their career, to upskill, to reskill, to find skills that will fit the ever-changing landscape of today's labor market?
Aleš, you know that better than I do because you are my colleague and you're working in our training center.
True.
We have in-house training center here in Ljubljana.
It's going to be 50 years old this year, you know?
We are going to celebrate this in October. So I can talk here again hours-
-because I'm still a little bit passionate about that. But anyway, we are offering, or let's say, each and every employee receives an individual development plan each and every year. Your team is helping them to go through all the tailor-made programs. We are investing a lot in comprehensive talent management program and leadership academy. Both programs were designed specifically to meet our future needs. And then, of course, emergence of new technologies are motivating us to really upskill or reskill, of course, connected with all the digital skill set. Well, artificial intelligence is already here and organizing our lives, whether we would like to or not.
Yeah, AI is very much present in our daily lives, and we want to leverage it as much as possible. Now, another aspect that I want to discuss briefly today is diversity and inclusion. What steps have we undertaken to make this a part of our processes?
Ah, Aleš, in our region, the diversity is already embedded in our lifestyle.
With numbers of cultures and languages and lifestyles and religions, we are embracing the diversity, and this comes naturally to us. Yes, we do face a significant brain drain in our region.
The population, as you mentioned, is aging, and we are going to work longer. However, this gives us also the opportunity to blend generations to exchange the knowledge and skills, even to introduce reverse mentorship, for example-
which is going to be quite interesting for Generation Z.
Exactly. You're never too young or too old to learn.
For sure not.
Now, another thing that I want to briefly touch upon is equal pay for equal work. What are we doing to close any kind of pay gap we have?
Well, the equal pay for equal work or equal job, it's our top priority, for sure, and we are committed in closing any potential gender pay gap through the group. It's our aim to do the activities already this year and to close it in mid-term.
Thank you. Now, moving on to a very interesting topic. We have recently published for the upcoming annual general meetings, one of the items on the agenda is the remuneration report that was published. A lot of shareholders are here today.
Yeah.
Now, would you say that the revised remuneration policy fits and serves their best interest, is in their best interest?
Absolutely. I'm, I don't want to say responsible, but I'm really working on, on the remuneration policy more than a decade.
I have been in contact with several shareholders in last couple of years. I can share the belief that the policy is in the best interest of them.
It is clear. It is transparent with the remuneration reports. It is also quite transparent, and we are disclosing a lot.
Now, it's been enhanced with long-term incentives and key performance, clear performance indicators. Now, would you say that shareholders can rest assured that any rewards will be allocated based on merit and performance?
Yes, for sure.
Thank you.
We introduced the long-term incentive, based on shareholders' recommendations, and they are connected with strict financial KPIs and of course, with the strategic topics.
Thank you. A lot of big words. Now, let's so-called dumb it down a little bit. Now, can you, in simple words, explain the goal setting, the performance evaluation process, and the award system? How does that work?
Well, it starts everything with our supervisory board, of course.
The supervisory board gives the KPIs or the goals to the management board, and then after that, they are cascaded top-down to the senior management through the group, consequently, to each and every employee, of course. The KPIs are made from financial part and individual, and even individual development plans for each and every board member.
Everybody, every single employee in the group, is included in the goal setting?
Yes, and they can see their own participation to overall success of the bank.
They can feel motivated. It is fair, it is clear, it is transparent as well.
Okay, so everybody feels included. Now, saving the best for last. The remuneration policy is specific for the members of the supervisory board and the management board. How about the employees in our subsidiaries? How does the remuneration work there?
Actually, Aleš, the remuneration policy is, first of all, aligned with the legislation at all level all regulatory requests, and other recommendations.
Each and every group member has its own, which is completely aligned with ours. Maybe some local specifics because of, because of the local legislation, but the general principles are there. That means it's applicable through the group, and it comes to each and every employee. So the KPI, KPIs, as I was explaining, are cascading top-down to each and every employee. Yes.
Okay, thank you. Now, if we have any questions from the audience, now will be the time to ask questions. We can share a mic with you. Any hands? I'm blinded.
You said that everything is about people, right?
True.
No.
If there's no questions there, I have a follow-up questions. Saying that everything's about people, right? We want to ensure that every single individual feels valued, feels heard, feels of being a part of the team, 'cause the board member's talking, yeah, we are a big team. Yes, we're a big team. What specifically, if you could list a couple examples, is the bank and the group doing that people. Except performance management, except all these initiatives, are we doing to make few people feel acknowledged, appreciated, and valued? As we all know, you know, people like that will be the most productive and the most engaged.
Well, performance management is only one part of the story. It is connected with the development possibilities within the group. We are offering lots of those kind of things. Our clear ambition is to be a top employer in the region. It's not just because of attracting or retaining, but also we are, how to say, organizing many programs connected with well-being and self-awareness, and those kind of things. And what was your questions?
Actually, I have another question. You, you've answered what I asked. However, I asked, Mr. Kremser, I asked Archie about what keeps him away at night, awake at night?
Numbers.
Numbers?
Numbers.
What numbers?
Well, in the strategy it is pretty ambitious, and that's why we need to really onboard the right talents and to retain our key, key, key employees. And that's why the employer brand, the employer value proposition is so important.
These two elements are, how to say, unique and the same in each and every group or member.
We do have an advantage on the market, for sure.
Yeah, this is our home, this is our region, and we have, across the board, the same, pretty much, conditions for everybody. Now-
We do have a question from the stream. I saw something on the TV.
Is there a question? Somebody watching online? Okay.
Okay.
No questions so far. Now, we are pretty much out of time, so, thank you again. Before we break for lunch, right, you're gonna go lunch, to lunch, to the, your right side, through those doors. I'd like to thank you for being here today with us, sharing your thoughts and your aspirations. Thank you again, and put your hands together for Vesna Vodopivec.
Welcome back! I hope the lunch was good. How were the cocktails? Thumbs up if they were good. Try them. Yeah? Okay. During lunch, you got, hopefully, some food for your body, but now we are gonna take care that you get a little bit of food for thought and probably a little bit of food for the soul. In the next section, we are definitely gonna explore the horizons, expanding from Slovenia to the world. Slovenia is one of the tiniest countries in the world. We have just 2 million people. Our language is spoken just by 2 million people, yet it has 40 different accents, not to mention the dual grammar form. Slovenia is the home of the southernmost glacier in Europe, and the oldest musical instrument in the world, the Neanderthal flute, was found in Slovenia.
In Slovenia, we also have the oldest grape wine in the world. So much of our love of wine, you can talk about that during dinner. And in Slovenia, we have a square not very far from here. If you have a chance to take a couple of steps in the afternoon, go see it. It's called Prešeren Square, and it is one of the very few major squares in Europe where you can see the statue, not of a noble man or a war hero, but of a poet. Slovenia has also produced some extraordinary people: astronomers, mathematicians, sportspeople, basketball players. You heard Blaž mention before all of the gold medals in cycling. Extraordinary people that are leaving their footprint in the world, one of them, let me not forget, is the former ex-First Lady of United States of America, Melania Trump.
We are very privileged to be able to meet two such extraordinary people today. They have a couple of things in common. They both design things, but very different things. They both have strong roots in Slovenia, but definitely spread their wings to the world, and they design the things that touch us on a very intimate and personal levels. My guests are Nika Zupanc. Nika is the CEO at Nika Zupanc Studio. Nika, welcome. Thanks for coming. Take your seat. Rok Žgalin Kobe. Rok is the senior designer at LEGO. Now you know what I'm talking about, the things that touch us on a very day, everyday, and very personal level. Thank you both for coming. If you were wondering what is this thing doing here in an Investor Day Banking Conference? Let's find out.
I'm gonna take a seat as well. Nika, tell us about yourself in connection to the object that we see here. Why it's yours? Why did you bring it?
So first of all, thank you for the invitation. It's a big pleasure to be here together with Rok and among all of us. And when you challenged us with bringing a certain object, it was really quite a challenge because it might sound unusual, but I'm not really a person of objects. Privately, I do care much more about the experiences.
and therefore, you know, I have this double life. I'm also a very passionate windsurfer, so the choosing the object was actually very easy. I brought my paddle board, my windsurfing board, which in some way, very nicely, tells the essence of my design philosophy, of which we will talk later on, but then again, also speaks about myself, and about the things that are important for me. In this sense, adrenaline, freedom, connection with nature.
And connection with beauty. It's simply beautiful. I assume you designed this by yourself.
Of course. This was actually a collaboration with a very well-known Slovenian brand, Flikka Boards.
It's a small boutique brand producing surfs, and we decided to do this collaboration, where I contributed one of the patterns that I really like to use in some of my works, usually in a way to break the rules a little bit.
A good example, for example, is my collaboration with Porsche where I dressed 911 with such a pattern, but this is another story.
Yeah. When we all grow up and we will be able to afford a Porsche, a t least, I want to have the one that is designed with Nika's design. By the way, we didn't say that Nika is designing the furniture. Later on, we will see some pictures that you will have representation in mind how special these objects are, and you can see them right now. Rok, similar question to you. Rok is a senior designer at LEGO, and what did you bring and why did you bring that?
Yeah. First, allow me to thank you for having me here. It's a pleasure to be recognized and being here with Nika and you, and speaking to you in my hometown. What I've brought here today is something that's really special to me on a personal level. That's been good 12 years ago, actually 13, I was in Rome with my girlfriend at the time, and we were pregnant with our first kid, and I just started working for LEGO. I was basically being in the process, but I was already thinking about all the cool things that I could do for the LEGO Architecture line. And actually, while being there, while being at the Trevi Fountain, I got inspired that, wow, this could really break the mold. Wouldn't be another building, but we could do a fountain in the LEGO form.
It symbolizes a confluence of things that really worked together. It was a special period in life where everything just seemed to be on an up, and everything just clicked together, if I borrow a term from what I do. So it's where I've decided how to name my kid, who's named Rem after Romulus and Remus.
It's the Roman foundation myth, you know. I threw the coin, like you're supposed to in Rome, over the shoulder, which guarantees that you will be coming back, right? Actually, some time passes, my idea has actually been made into a global product.
Then good 10 years later, I actually made it back to Rome. That time, again, it was three of us, but it was me and two of my boys.
It holds a special place of how good life can be and how smooth things can go, so.
Yeah. And sometimes there are big objects, sometimes there are small objects that are reminding us of that. Now, you mentioned, being, an employee or maybe that's not even the best of words. You are working with LEGO. How did this happen? Because for all of us, at least for me in Slovenia, I'm thinking, "Ooh, that's impossible. How can that ever happen, that I would be working with one of the most reputable brands out there that is probably at every home?" And let's check this with the audience. Hands up if you have a LEGO set at home. I think all of hands have gone up. Now, this is the impact. So how did you go from ten- at the time in Rome to working for LEGO, designing, very special objects for LEGO?
Well, i t was part of my aspirations, only I didn't know how at the time. For if you want to know, that's an interesting fact that I've never even knew that a job of designing LEGO existed.
It wasn't on my radar until I actually applied. My aspirations were in architecture. I'm, I'm a trained architect, and I had an architectural firm before, and like every young, aspiring architect, I wanted to design buildings. But not just any buildings, you know? Like, I wanted to design the tallest skyscraper the biggest monuments, whole cities, even, you know? The unbridled ambition of youth.
Yeah. Your ambition reminds me of all of the ambitions that we heard about today, and not just on this stage, but on various stages across the hall. Go on, sorry.
There's some truth to it. I really aspired to that, but then the universe answered, or God, if you may, just as a figure of speech, in a form of the least resistance.
'Cause I actually, 10 years later, I got, I got to do the Burj Khalifa. I got to design the Colosseum, the White House, the whole cities even in skyline form, only in a different scale.
So my aspirations towards the universe came true, but it was my fault that I wasn't as specific as I should have been, right? I never said in which scale I would like to design the things that I got to design. So I can't complain. My wishes did come true, only it has surprised me as well in the process.
And, let's go a little bit deeper. So you make it sound so easy. I had this idea, and then there was a little bit of a universe help that I got, but it probably wasn't so easy. What were the steps? Well, how does it work with LEGO? You just apply somewhere or how?
I mean, honestly, I found an application on an online fan site. 'Cause I was just, casually browsing them from time to time 'cause I was using LEGO as a hobby on the side, and I thought that it could be really great if I could actually expand it to my architectural company, that I would actually work for LEGO. That was, like, the thought that came to my mind when I saw the application.
In reality, like, I got lucky. LEGO, at that time, was looking for an architect, and I was both in academia. I was doing my PhD on the university, and I had my own architectural studio. So I was both in practice and in academia, so I was well-versed in that, and I was a bit of a LEGO fan at the side as well. So I ticked all the boxes. I got really passionate about trying to secure that one. I made quite an effort of applying, let's call it that. It was. I took it on as a proper architectural project. So I wanted to stick out among the hundreds of applications that I knew would come.
If I knew how many we really had.
How many?
I get that I have a very the dream job more of all of the time, so I got people asking me on LinkedIn and various. So basically, in short, "Hey, how could I get your job? I would love to design LEGO as well." Cause it touches so many people. You know, personal matter, there's a lot of fans, and they would love to be a part of this universe.
Why did they choose you?
I had all the ingredients. The pieces fit, and I really, and I really went the extra mile. I was replying with ideas the next day. I was talking like we're from the selection process, I've approached it like that I'm almost there, that I have the foot in the door, so to speak. I really gave my best in the first few instances, and actually, in the first few years, I was a freelancer for four and a half year 'cause architecture was developed in LEGO's new business group, so it was like a, what are those called?
The Slovenian one?
The startups.
Startups?
The theme was a LEGO startup. So after four and a half years, it did so well that they've invited me, as in, "Congratulations, you made yourself a full-time position.
For me, Rok, this is a story about meritocracy. So if you're really good, if you're really diligent, if it's not just talent, but you're willing to make an effort, architect your own career, then it doesn't matter whether you are coming from a Slovenia that has 2 million people or you're applying from U.S. or from Singapore. And if you can say yes to this question, I would be very grateful.
You're definitely right, yeah.
Nika, similar questions to you. You told me before that you are from Ljubljana. You still have roots in Ljubljana. How does it happen that somebody who is from Ljubljana is now touching the lives of people who really appreciate aesthetics? You are on eye level, CEO to CEO, of some of the biggest, most influential designing companies in the world. How does that path go? Is there a recipe for that?
I mean, actually it is, but when I started. Now, I think there is a recipe. Of course, when I started, I didn't know about this recipe, and actually there is a beautiful, at least for me, very significant story, which I remember. It's just a moment that I really remember quite clearly. So I graduated at the Academy for Arts, Department of Industrial Design, so I always knew very clearly during my studies what I wanted to do. So I wanted to design products on the highest level with these most, let's say, exciting, intriguing companies, because you also learn so much when you are working with such prominent companies.
Of course, being from Slovenia wasn't the, let's say, the best position to start from because we, as Slovenians, don't really have or don't appreciate the design history that we have, et cetera, et cetera, et cetera. So I remember one evening, we were testing, I think, a very big new Audi car with some of the friends, and this was 18 years ago, and the GPS wasn't really working like it is now, because I think you need to upload, download, you know, the maps and everything. And like a joke, I inserted, "Let's see if we can go from Ljubljana to Paris." And I inserted the destination, Paris, and this beautiful artificial voice answered: "From this location, there is no route guidance to your final destination.
Can't go from Ljubljana to Paris. Sorry.
F or me, it was like some sort of a poetry, and at that moment, I somehow realized that I need to find my own way, and this is how it started. I knew the design profession is an international profession, that, you know, having a first exhibition in Ljubljana cannot give you the, the right result. So I actually had my first exhibition at Salone Satellite in Milano, which is actually quite close, and then it starts rolling year- after- year. Of course, as a designer, you have to have something to tell.
You cannot succeed if there is nothing that you want to contribute, in the sense of society, but also in the sense of design profession as such.
And, while I will ask the production to show some of the pictures of the objects that you designed, Nika, what is your competitive edge, would you say? Because this is a highly competitive world, and I will ask the same question to you, Rok. What is your competitive edge? And I don't care whether you refer to yourself as a Slovenian or a person, really doesn't matter. But, where do you think you were stronger, better, more agile than many people who would love to have this kind of relationships with those big design studios that you have?
Maybe I said before, I always knew there is something I wanted to tell, and the thing that I wanted to tell through design, because design has a very loud voice, so you can address different themes through design, through sustainability to social or gender issues, et cetera. I was always a sort of a rebellion, and I felt that women are not really equally represented in the design profession.
Both in sense of working as women, but also in sense of visual elements that are considered let's say, extremely feminine. I always saw those elements as being in sort of a ghetto of design, something which is not appreciated, something, you know, which is not taken seriously, maybe taking as something very naive. And deliberately, I wanted from the beginning to work with these objects, themes.
But by working with these themes, I somehow managed to find an empty space in the design profession as such, which, of course, also later on, especially today, became something very interesting, also in sense of sales for these very big companies. And therefore, through the years, with some of more, let's say, rebellious projects, some less, I somehow managed to establish my design philosophy. And today, when companies call me, very big companies like Natuzzi, Alessi, they want a part of that philosophy.
They want to identify with that kind of a philosophy, and in a broader sense, it also gives you a satisfaction, because today I have very young designers, female designers from, let's say, Africa, writing to me, thanking me for making sort of a way.
For being, let's say, unusual. Because as in any profession, also design profession, it's very strict.
It has a certain rules.
I didn't want to play by those rules.
Rebellious. Okay, I like that. Tell me, do you know who the buyers of these objects are? They look very feminine. Do women buy them more than men? Do you know? Do you have the data on that?
I mean, I don't know. Not necessarily, because of course, there is a big difference. I didn't want to create things, of only for women. I, I think we, designers, that have a strong author poetics, just give different, possibilities for users to identify themselves with, but it's not necessarily, you know, conditioned by the gender. Of course not. So it really changes from company to company. Now, I'm simplifying everything, but of course, because you asked me what gave me the competitive edge, and I wanted to illustrate that. Also, maybe how it has a broader impact. There is a short story, for example, with Lolita lamp for Moooi. That was introduced one that we see here.
That was introduced by a very notorious Netherlands company, Moooi, in 2008. When in 2008 we decided to introduce it in pink this was like something you don't do if you want to be taken seriously. Also in the catalog, there was a head title: Who's Afraid of Pink? But then when you see, for example, in 2017, 2018, that pink became one of the most used colors in Salone del Mobile, which is the biggest fair for design, that this color is used, I don't know, for mountain bikes, that, you know, skateboarders are using this color, it's really rewarding because you see how you helped contribute to the change of the perception of pink.
Pink today, it's not what pink was in 2008 . So this is maybe just to illustrate how you can influence broader topics, not just an object.
So we can say that you started a trend of sorts?
You could phrase it like that for sure.
Okay. Not something to be humbled by. I think you should be proud by that. Rok, same question to you. What is your competitive edge? How many people are working for LEGO?
I don't know the exact number, 'cause we're growing so rapidly in the past years, but when I started, I think we were 12,000, and now we're well over 20,000.
Wow!
So we're really on a journey of growth. But, what gave me the competitive edge is that I brought another passion into the LEGO that wasn't necessarily there before in as present.
You can see LEGO as an artistic medium, right? Like, it's a very easy artistic medium for people to master.
It's like a pencil or clay, something that kids can sculpt with, but then it you have levels of progression there. And when I've started in Billund, I've been exposed to the real geniuses of design in this area, which are truly masters of this medium, right? And I, I know that I cannot compete on that level 'cause they have a 20-year head start on me by imbuing themselves into that from forever. But what I did have is the passion for architecture and buildings.
I was in love with the buildings themselves, and I knew everything I could about all the famous buildings, and it was my goal to visit them, to experience them. I wanted to imbue that into the LEGO form. That was basically like, I got the ability that in the LEGO Architecture line, which was just starting to flourish, which was having its first sets. So, as I was actually able to introduce things from the original buildings, the original part, the original idea of the building, the, what architects wanted to convey with the building, and that could be also done in a LEGO form.
And we've then explained that in the building instructions. You actually learn a little bit more of about the building itself, and you see that through the medium of the LEGO bricks. Which means that it has become a bit more elevated than just a kid's toy, and that reflected into more and more adults actually coming into the hobby and started buying it. And now it culminates that we have a whole line for adults.
Where we explore with many different, many different products from art, from design. For example, LEGO sets such as the Eiffel Tower, which are clearly not in the scope of a children's toy unless you're from a very rich family.
You got me thinking, Rok, about the importance of play. Now, obviously, these objects are for, not just for kids. Maybe if kids wants to play with them, that's great, but they are also for adults. Why is it important that adults play, and how do you play?
I mean, I'm lucky enough to have two kids in an age where they really wanna play, so I'm trying really hard to relive my own childhood, and I'm steering that in the directions that I want it. For example, I mean, that was all the LEGO I had right there on my living room table - a lot of years ago. Now they have their own private store at home 'cause we, we got a lot of stuff. So t hey're post-materialistic, I would like to say. They don't wish for things because it's, it's there for them.
So they could really just do what they really want. They wouldn't go for the biggest box. They would go for the one that they really like the most, for example. That's something I don't think that we could afford at our age, if somebody has told us what we want, right?
By the way, Nika, did you play with LEGOs when you were young.
Yes.
Yes, of course.
Of course. W e all grew up with it, and now our kids also, they are growing up with LEGO. So it's really an iconic company.
Yeah. Something that stays with you for a long time, and I think this is really the art of it, because not just to be the kid of 5-10 years old play with it, but the adults playing with it. Tell me more.
Exactly. It's because, I mean, after a certain while, we lose the imagination. You know, a car is just a car. It's no longer a whole story that you had in your head as a kid. You can, you can still remember how you felt about it when you were a kid, and that's why you have this emotional connection with it.
But now, as an adult, you're striving more towards what we call a guided meditation. That you actually, you know, after a tough week at work, Nika now goes onto the mountains, Slovenia, but some just like to sit down at home, turn off the mobile and just immerse themselves into building a LEGO set. It's a meditative task. It's like meditation, only that you are doing something. What you're allowing yourself to do is having focus on something, but which doesn't have a goal. You know, it's not stressful.
It's just relaxing.
And at the end, you'll be left with something nice as a design object that you will hopefully display in your home as well. So that's the, that's the goal of these sets that are aimed at adults.
Play seems to be inherent if you work for a company like LEGO. How much can you play when you are in the office or a design studio at LEGO, when you are in your professional mode?
Okay, we're special in that case, that we're the design organization, so everything with us revolves around bricks. I actually have unlimited amount of all bricks at my disposal when designing. And funny enough, I was able to, until they are twelve, I could actually bring my kids along into work. So imagine if somebody would have offered you that as a kid.
Just an idea.
So we really try to embrace the feeling of being a kid when designing for kids of course, but it is, it is a job. It's, you're not in the same mindset that you are when you were just playing at home or that you are getting something developed towards a deadline. But the company itself really fosters play in a lot of aspects and, 'cause there's many more of us in the LEGO Group than just designers, and they are also. They have all of my colleagues, even from the HR or from the from the financial department, have access and are encouraged to play.
So we've got yearly activities. We actually have a whole play day reserved, where we have different activities.
What do you do?
Oh, it's very different. From different sports activities to different, could be LEGO builds. We have concerts, we have, like it's really just trying to foster play and interaction among everybody. We have, in our department, we have Fab Labs. It's how we call them. So these are days, one Friday in a month, on which we can do whatever we wish.
We want.
So it's like a really playful way, but it can actually lead to some tremendous new things, you know?
From time to time, a real diamond gets made when you give somebody the option to give the idea. And in design organization, we go one step further, we have whole boosts. We have a week of time where we can do whatever we want. When we can explore new ideas and new projects and new products.
Okay.
It's really, really fostering the creativity l etting our imagination run.
Yeah. It's not just spontaneous, but it has to be a little bit of a, the part of the system, which is what I understand from your answer. It has to be.
Yeah, no, but it's just that it's safeguarded. I mean, we all have a lot of work, and we could spend working on it more, but we are encouraged to lay aside our regular work and to spend a week on something that we're passionate about.
Having the discipline to keep playing.
I mean, it could sound a bit. Yeah, it's a bit yin and yang. No, but truly, it is a privilege, but at the same time the company realizes that this is a great way to get the best of us.
Great! Nika, how do you play for a pink lamp to emerge?
Actually, I mean, it's hard to say to explain in order not to give it impression that design is a playful profession—which it isn't. It's, of course, a very serious profession, which may be behind all these, let's say, beautiful objects, there is always really serious research of technology, of finances, of, you know, this, really tense collaboration with any companies where you decide how a thing will be made from what, et cetera, et cetera. But in sense of broader view, I see it as a play as such. For me, I could say that. For me, I could say that the whole career of mine, it's a game, it's a play. In sense of that I see the play as something that has a sort of adrenaline rush attached to it, a sort of a positive stress, not knowing where will you end up.
So trying to play with the borders of technology, of meaning, of, you know, searching for a new idea. Because I believe that only when you are exploring the borders of one profession, you can come with very exciting results. And there are, you know, many stories where I could, you know, underline where the play is. Maybe again, for me, a very interesting project was this, Porsche with roses. Because I was asked to do an art car, an Art 911, which has a long history of art cars, starting with Janis Joplin. So it's a very serious task.
And then again, you have this beautiful car, which is perfection as it is. It really doesn't need anything. God forbid, not the roses. But then again, you are asked to give a new perception because, for example, Porsche now, it's really female driven.
They want to, you know, include more female to decide for the brand, et cetera, et cetera, et cetera. So you are working inside a certain brief, and for example, when I got this idea to put flowers on this car, my next reaction was: No way, that's too much. It's not the right thing to do. But then, of course, you do it anyway because there is something you want to illustrate with it. And then you get this great response from people who get, let's say, the emotional ergonomics, which is very important also in a product design, and it teaches us that we react in a first second on a certain idea . We decide in a first second, then we analyze. And in this way, it is this research of the edges.
As such, I see it very playful, but in a good way.
Personally, I think in this sense, we need to learn all the time things that we don't know, things that, you know, are out of our comfort zone. So this is how you keep being playful, by learning new horizons.
You are working with some big corporations. Natuzzi is like a mainstream player in the furniture design. Alessi also, widely accessible. Okay, they have the brand. Many times in the creative process, the creativity is there, but then when it comes from the idea to the production, it goes through different approval processes, and all of a sudden it devolves. Tell me about this. How do you keep these high standards when working with companies that have processes, systems, silos, things like that?
This is a very interesting question because maybe one of the biggest things that I learned along the way was this fact that, for example, in. Mainly, I work mainly in Italian furniture or product industry, so my experiences are from there. These very big companies like Alessi or Natuzzi are, of course, family-owned and, you know, run by owners, and in these companies, you always talk CEO to CEO. These people behind these companies, as directors, they are actually curators of contemporary design. So when, for example, you work with Alessi, who is owned by Alberto Alessi, now only partly, but he is, I don't know, 78, and he still runs the family, and one of his first collaborations was with Salvador Dalí when he was 25.
When you work with him, you know that you are working with a history of product design, and there are no ideas that are discussed in middle management or in marketing department. These ideas are always discussed directly because these people have a very strong vision what they want to do where they want to lead their company, and who they need in sense of design to help them with. And once they make a decision, once they choose a certain designer, there is no doubt in that designer. This is like really beautiful collaborations of two philosophies, of two DNAs, which they then work together in sense of creating a new product. And this is really, really wonderful experience.
Actually, let's say one of the benefits, because you also learn so much.
Do you ever feel threatened by the authority of someone who started developing projects with the likes of Salvador Dalí? Is it easy to explore the edges with Alberto Alessi?
First of all, it's, of course, a big compliment. If you are called by such a company, by such a person, it's a big compliment to your work, which of course, give you also sort of, let's say, confidence from where you can start working with this kind of company, because they don't call you in vain. They call you for a reason. So I, of course, I don't feel threatened. It's always a really big pleasure and also a great learning curve.
Because, I'm a different designer when I work for a different company. The way I think when I work for Alessi is different than the way I think when I work with Natuzzi, because I need to, first of all, have a very good talent to understand the philosophy of that company, where it comes from, in order to, you know, to help lead it somewhere else.
You mentioned before that it is a serious business, Nika, and I want to explore a little bit how the limitation of the production, the materials, how is that limiting you both? I will go with you, Rok, first, and then, Nika, the same question: Can you do anything with LEGO, or is there someone who really understands the production process, and, "Ha, ha, ha, Rok, you can't do that?" "We're never gonna be able to produce that," or, "It's gonna be too expensive to produce that." How does that work?
Actually, LEGO is a system in play, right? And, like, the bricks are already there. And for my design philosophy, it's because I'm working on the LEGO Architecture line, I make it a point that I always work with already what's available.
So I never have any new elements created for my products.
You wanted to show the kids and adults out there that the limiting factor is your imagination, that you could basically, you could have created that from the things you have at home.
You know, so it's working within a system and then maximizing what could be done in that respect. But of course, on a broader scale, there's a very lively dialogue between design, production, and everything that goes into it. And of course, we're striving to be more and more sustainable on all the fronts. We're working very hard, and a lot of people in various departments are working very hard on these things flowing together as smoothly as possible.
But what separates us is that, for example, my kids are playing with the LEGO that my mom had. It's 60 years old, and it fits together perfectly. It's the same product. It's made to the same tolerances, to the same standards. So that's the strength and beauty of the LEGO system in play.
Same question to you, Nika. Going from something that really looks nice on papers, because this is something that we experience with creativity. It looks really nice on paper, but then when you take it into the realization, it loses something. You have to make so many trade-offs. How does that work in your area of business?
I think maybe it's more of an outer observation, the things like that, you know, you do something beautiful on paper, and then it doesn't work. In reality, the essence of industrial design is to think about all these parameters at the same time. So already, when you are thinking about an idea, you are at the same time thinking about sustainability, about the technology, about the material, about the restraints, about the outlook, in my case, about this X factor, about the story, about the topic. So whenever this thing merge together, this is the moment in which you can get a very great product. And I also always joke, you need to be best friends with product development in any company.
These are the lively discussions that you mentioned before, right?
Because they, they are those who say, "Okay, we will make an effort, we will push it, we will make it happen," or they say, "No, no, no, it's not possible." But these are small things. And also, as an industrial designer, for me, the biggest challenge is not to do whatever I want with, you know, unlimited funds, but to be creative in a very small box where you are very limited. I don't know, with the size of the sofa that will fit from, you know, in the container transporting the metal construction from China to Europe. I don't know, things like that.
It's like making a LEGO or better, making a puzzle that it needs to fit all together. You cannot think only about how something will look, because this look is result of all these parameters.
If we have questions from the audience, we will be happy to make this even more interactive, bring this closer to you. Do I see any hands? Okay, if you have questions, just let us know. We will hand you the microphone, and we will answer those. Let's talk a little bit about the, should I say, disparity? I don't have the right word, but it looks like the world today is so focused on a quick return on investment, on being very functional, materialistic even. So tell me about the relationship between the aesthetic, the importance of the aesthetic, also the importance of the aesthetics for the sustainability you mentioned before. Nika, I'll start with you, and then Rok. Why is it important to have beautiful things around us, to make it simple?
Yeah, this is again a very, let's say, long question which would require many answers in order to be exact. But for sure, first of all, sustainability in product design is not something out there. Now, it has to be incorporated in any object. So it's not in front of the object, it's part of the object.
So today, when you design any object whatsoever with a, you know, responsible company, you need to know how this object not only will be born, but also how it will die. So how it will be recycled, and you need to adapt the design.
So this sustainability, it's not like some sort of a sticker on it, it's in the essence, and we, in some way, when we present that kind of an object, don't even talk about it anymore. On the other hand, I also see not so much aesthetics, but design as a key tool to really help change the perspective because, you know, this is a meta trend, and we are really in a very tough situation regarding our production processes, sustainability, et cetera. And I feel, you know, that we can by using design, really incorporate it in sense of that it's not always so visible. It needs to be part of it, and at the same time, i t shouldn't bother you.
I remember just hearing a CEO, just this short story, of a very good car brand introducing a new electric car, and he was saying, "This car has some not so beautiful details due to sustainable solutions." Which for me, was a very wrong thing to say, because I think we, as the designers, should be able to bring sustainability to audience. Not to say, "Now, because this is sustainable, you need to suffer a little bit, or you need to be
It should be something incorporated but not so evident.
Are beautiful things more sustainable by themselves?
Yeah, absolutely, 'cause you don't throw them away. You don't dare to get rid of them.
Like, if you establish an emotional connection with something, and for example, LEGO, if it's being used actively for 60 years and it still works, that's, that's where the beauty is t hat's the essence of sustainability.
Yeah, exactly and this is where you see the, the value of design, the original design and everything that has been built upon it. Oh, I'm just making LEGO puns all the time, but it's continuing and keeping it alive.
I think that's the ultimate sense of sustainability that something that gets to be used and it doesn't, it's not thrown away, and in the very worst case, is gifted to the next generation.
I completely agree. It needs to be made with an idea to be inherited. I think timeless elegance is also, you know, very, very important key.
Yep. Rok, you mentioned several times that LEGO is, above all, a design organization. Nika, so this is more a question to you: What can managers of non-design organization. I'm not talking the Natuzzis, the Alessis of this world. What can managers of banks, of, financial institutions, of production companies, what can they learn from designers? Or what should they learn from designers?
This is quite a hard question. Maybe, you know, I would just make an appeal for all of us that we should really never forget to contribute to building this cultural capital, which will help us, I think, with many challenges. Because once you are really educated, also in sense of culture, society, you are more able to choose between, let's say, sustainable or non, non-sustainable decisions. I don't know, you are able to make a selection between a work that was made with AI and the work which was, which wasn't. So, I think this cultural capital could be the key word in sense of what we all need to learn and try to build.
And have the ability to ask for the right things, expect the right things from the corporations that sell us things. A little bit different question to you, Rok. You are from Slovenia. You're working for a company that is very famous. It operates from Denmark. It's very special. It's obviously very successful. What can companies in this region, and I'm referring more about ex-Yugoslavia, what can companies in this region learn from a company like LEGO?
Okay, LEGO is a really reputable brand. I think it ranks first on the RepTr ak. But what I really love about my company, if I dare say so, because I feel like I belong to it, it's a family-run company but it's the company truly walks the walk, not just talks the talk.
I can give you an example. I mean, we have a People Promise , Partner Promise, Planet Promise, Play Promise. And these aren't just, like, letters on the paper. We really try to live and show the values. I can, I can give you an example through one of my favorite projects, one of that I'm most proud of that I've been working on. So, a colleague of mine in the company, from production, from other, had an idea that we could help children and hospitals with play. And he had a very, it was a specific idea. So, you know, when kids take an MRI scan, you know, you go there, and there's a ton of metal rotating around.
It has, you have to be still.
And a kid has to be still there for half an hour. It's psychologically terrifying, right? So that colleague of mine had that idea: What if you gave them a LEGO set to begin with? You know, and it would show how an MRI is constructed, where he will change clothes. "Listen, Mom and Dad, wait here on the other side. You will play with minifigures, then you lay, you get in, and this is just the machine making circles that's making the noise, and the lovely doctors are on the other side here of the glass, so everything's okay." So that created, that was a great idea, and I helped with the design, and they designed that product, and we've tested it. We sent it out to the hospitals.
The hospitals were, "Yes, this is perfect." Now, we're not throwing away an MRI scan that lasts half an hour, and then the kid moves, and it's useless. They're introduced to it by LEGO, so they can get familiar with it. And what my company then did is they took that, created thousands of thousands of sets for free, and distributed it to hospitals all over the world, thereby saving countless hours of professional time and on machine time a s a donation. Just one of many that I was personally involved with, that, you know, I'm then really proud that I could be involved with things like that.
It's easy to say, "This is my company," for a company like that. I wish I could continue this conversation for at least half more hour, maybe at a coffee. Thank you for all of your inspirational thoughts. Also, binding thoughts in a way that the world can be everyone's playground. There are no limits, and I hope that was the inspiration for all of you here today. Thanks for coming. Good luck with everything that you do in the future. I hope to see you again sometime, and, again, thank you. You are done. Thank you so much. A round of applause.
Thank you.
Thank you. A shake of hands. Nika, we will do it later. Ha! If there are questions from the audience, you will have to catch them on LinkedIn or somewhere else, but definitely some, some more things that we can all learn from experiences like that. We are almost at the end of our event today. And before we officially wrap up, I would like to, again, invite Blaž on stage. Blaž, now you have an obstacle, but a beautiful one. What are the final thoughts, final remarks, lessons learned, inspirations picked up?
First, let's give a round of applause to Martina b ecause she did a wonderful job.
Thank you. Thank you. Thank you, Blaž.
Top-notch professional, huh? Slovenian, typical Slovenian, top-notch professional. I was now doing my LEGOs, you know, where I was sitting there, I was surfing with beautiful surf, so great, great, great from both of you. I, I, envy you a bit, being a boring banker. My profession is by, by no means so exciting. Although, I believe that today we have been able to show some thrilling news to you as well. So how did we do? Can you give me a short feedback?
Maybe thumbs up, so-so, a round of applause.
So halfway okay. You have to sleep it over, right? We shocked you a bit with, with a level of ambition. We are firm believers in this region. We are firm believers in this region's prospects. We are firm believers in Europe's prospects. We just need to put our heads together and simply start bullshitting and start acting, and this is what we have been doing for the last 10 years, and this is what we will keep doing for the upcoming 7 years, acting upon opportunities this region offers to all of us, you as shareholders, stakeholders of various kinds, us as employees, being able to grow in such a beautiful institution that has come throughout these waves and has overcome all of these waves of ups and downs, and now I believe it is all good. So we have done well.
We will be doing even better, and thank you very much from the bottom of my heart for your trust on the journey. Hanging in there is going to be even more thrilling. I'm looking forward to be with you in the evening because there will be more Slovenian talent shown to you. More Slovenian talent shown to you, associated with music and dancing and so on. So there is more to come. Thank you from the bottom of our hearts. Thank you.
Oh, wow. Thanks, Blaž. I, I feel humbled. First of all, thank you for the compliments. It was really a pleasure and not simple, but easy to work on this event. It takes multiple heads to get this production of good ideas and learning curves being applied in the very next minute going. I also feel humbled because I had the opportunity to be here with you today, and you are really the challengers that are helping this bank perform better, think from a different perspectives, be stronger, be more agile. Just keep the pace, and it should be okay in the next Investor Day, in 2031, did we say? Before I let you leave today, a couple of remarks, really important remarks.
We have finished the panels, but the discussions have yet to start, and what better place to chat than at the dinner? Dinner is here at 7:30 P.M. More talent to come, some really interesting music being delivered in an unexpected way. Make sure you are coming. The representatives of the regional media, you are invited to the Garden Hall for a press statement right after we are done, with the representatives of NLB. Those of you who signed up for tours, the Bancarium tour or Ljubljana City tour, please make sure that you meet the guides in front of the hotel entrance exactly at 5:00 P.M. With that, I'm done. You're done for now. Thank you for being great guests today.
There is one really small reminder that I have: Somebody forgot the card, the hotel room card, and you can get it at the registration desk in the foyer. So whoever misses the card, it's safe, it's in the registration desk. So now I can only say thanks for coming. Good luck, and goodbye.