Earnings Call: H1 2021

Aug 17, 2021

Welcome everybody to Bancorp Georgia Group Plc Second Quarter and the First Half of twenty twenty one Financial Results Conference Call. My name is Natya Balenderashvili. I'm Head of Investor Relations at Bancorp Georgia. And today, I'll be moderating the call. Please be advised that today's call is being recorded. Our call today will be organized in 2 parts. During the first part, Archila Chichilada, Bancorp Georgia's CEO will be presenting financial results overview for the Q2. And during the second half, you'll be able to ask questions as part of Q and A session. With that, I'll hand over to Achill. Achill, please go ahead. Hello, and welcome to our second quarter call and half year results call as well. I will be going through a presentation this time, and we will go through a few slides on macro, then a few slides of our operating performance versus our strategy, and then we'll discuss some of the numbers. And after that, we'll go into Q and A. So we start, in fact, with the pandemic because that is something that is on our minds and the whole world is looking at it. And in fact, we are experiencing a significant wave similar to the wave that we experienced at the end of the year with one difference though that although the numbers are as high, the vaccine availability is good. And in fact, our citizens have a choice of getting vaccinated with Pfizer or different types of vaccines. And the vaccination pickup is significant. And if it continues this way, and this has been over the last couple of weeks, in fact, We should have about half of our population, adult population vaccinated by the end of September, 46%, in fact, at least one dose. And then by the end of the year, the government is targeting 60 plus percent vaccination rate, which should be achievable. So while we are going through this and there are some limitations in fact, so restaurants are closing at 11 p. M. Instead of midnight. There's 2 weeks of public transportation limitations. There are some limitations, but the government is committed not to close the economy down as the vaccines are widely available and there are some rules to work with it. In terms of the economic rebound, we have really been seeing a significant rebound versus the 2020. But given the fact that 2020 was a difficult year and a low base, we also are comparing the numbers to 2019. And as you can see on the slide here, the GDP growth was 12.7% in first half of the year, which was mostly, in fact, in the or all of it in the second half of that half, so the second quarter versus 2019 for the half year period, that was up by 5.7%. And that is reflected in many other things that will follow after that. So this is predominantly driven by good numbers in remittances as well as other things, but remittances have stayed strong throughout of 2020. And also 'twenty one has surprised as well. As you can see, the monthly numbers are very impressive, I mean, the current numbers versus last year, but also versus 20 19, the numbers are up by 30% to 40% in U. S. Dollar terms that is so it's a significant growth. Exports have also overcome the 2019 level and are growing strongly in July numbers that came in. Also, the exports were up by 20% and versus last year, it's up by 40% or so. Imports have have picked up from last year, but versus 2019, they are flattish with June number being slightly up. But overall, basically, the trade deficit is closer to 2019 levels and the tourists started to pick up significantly. And we measure it as a percentage in terms of the income that the country is getting versus the 2019 level, which was a peak. And it's a month by month trajectory, but July was a very encouraging number where 51% estimates by the stats bureau was that Geostat was that it's about 50% of the income that we got 2 years ago in July. That will be somewhat affected short term by COVID, but the trajectory is a pretty fast recovery, which is very encouraging, in fact. Georgia is experiencing a relatively high inflation similar to a lot of international peers and there's an inflation wave. Georgia has it slightly higher than some of the other countries in the region. But that to curb the inflation, the National Bank has raised the refinancing rate 3x now over the last few months, up to 10%, which is very high for Georgian reality. And but there was definitely a welcome news to curb the inflation, which is running at 11.9%. That has caused some strengthening of Georgian LARI, which and appreciation, which we were expecting, in fact, because Georgian LARI was oversold over the last few years consistently when you look at the real effective exchange rate. So that is also welcome news. The gross international reserves are at their peak levels over the last few quarters at close to $4,000,000,000 and National Bank has not really been selling the reserves because light has been strengthening and did not require any intervention. Alongside all the positives that I described, a lot of international players, including the IMF and World Bank and then locally, the National Bank of Georgia have all upgraded the forecasts for 2021 real economic growth that we are expecting. As a reminder, it used to be around 5%, so let's say 4% to 5.5% for most of the predictors. And the IMF have upgraded that to 7.7%, but the National Bank of Georgia is more positive with 8.5% and our Gulf and Taggart agrees with National Bank and has our prediction slightly higher at 8.6%. And let us remind you that our expectation was 7% earlier on, which was which seemed much more positive than most of the people expected. And that 8.6% takes into account the current risks, and we believe there's some upside there as well. And let's see how that unfolds. Now a few words on the operational performance of alongside our strategy. So we as a bank, we can in terms of the overview, we are 2 thirds retail bank, basically, 1 third corporate bank. And retail is comprising of our mass retail franchise as well as our premium retail, which is Solo and MSME. Our payment business is living on the market and we have more than 50% acquiring business in our POS terminals when you measure it by all the payments done in the POS terminals in Georgia. We have 8,500,000 transactions going per month through our mobile app. And through all of the transactions that we have, more than 96% are done digitally. And in terms of the strength of our retail banking franchise, we have good deposit market share, 40%, 38% market share in terms of the loans to individuals. And we are ranked as the most trusted and top of mind bank in Georgia with consistently consistent good growth in our NPS numbers and I'll dive into it later on. And we are doing it all by and at the same time focused on profitability with 20 plus percent guidance that we provide, and I'll cover that. This is just a reminder of what our strategy is focused on mobile app payments and loyalty, strengthened by customer satisfaction, employee empowerment, data drive and strong franchise. All of this is being done as we are delivering very good profitability. So a few words on some of the measures according to our strategy or at least some of the things that we are describing here are our focus. So how are we doing on our strategic initiatives? We have in the mobile bank and Ibank active users, we have grown by 19.3% during the year. And what's more important is that people are using our mobile bank more actively. So the current users are using it even more. So why the number of transactions have grown have gone up by 84% year over year. 40% of our active users are using our application on a daily basis, which gives you an idea of a very strong engagement that our customers have with our digital channel. So we had a 61% uptick in the overall number of excluding POS transactions that is from the last year, but that kind of overestimates the overall picture because last year we had a strong breakdown and the number of transactions was lower. But when you compare it to, let's say, 2 years ago, it's up by 20%. But what's more important is that during 2 years ago, our in terms of the split, how our number of transactions was, we had about 20% of our transactions being done via mobile phone. And currently, as the denominator has grown, but also disproportionate growth has been happening with our mobile transactions. So it's 46% now of the total transactions. And when you look at it, it went from €9,500,000 to 26,300,000 euros and this really highlights the strength of that of strength and dynamic development of that channel, which we believe and a lot of and the whole market believes is the channel of the future, in fact. So what happens next in our mobile channel is that we are expecting a significant uptick in offloading and there have been different types of initiatives happening there. Currently, the offloading rate is still around in low 20s, but the nominal number has been going up as the economy rebounded. And we expect that number to go up from the low 20s to mid-30s over the next 12 months as more and more people get comfortable using different banking products, not just transfers and bill splits and the likes through on our mobile. And one example here is our remittances. As you know, remittances are is a very important part of the Georgian economy. There are a lot of Georgians working outside of Georgia sending money to their families. And until recently, in fact, we all of the cashing in of that remittance was happening in the branches. So you had to go to the branch to deposit that money on your bank account or cash it out. And when we introduced the digital way of doing it and you may say why was it complicated because there are a lot of different intermediaries, Western Union and the likes that are involved in. So doing an integration was is what I'm referring to. So over the last one and a half years, it has gone from basically all physical to about 44% in the second quarter of 2021 being digital. And as we speak, end of July, numbers came in, it's more than 50% now. And that is happening while we are gaining market share in overall remittances from about 32% to 35% over the last, let's say, 1.5 years. And that, I think, shows some strengths on dynamic of development of the types of things that we are doing. Also important in terms of the payments, all the different types of payments is our POS and merchant payment franchise. There, we have about 50% market, 51% in numbers and 49% in terms of the volume of market share. And as you can see, the growth there is significant, and we expect those numbers to grow significantly going in the future as well. So year on year, we grew by around 72% and in terms of the volume by about 90%. And those numbers we believe will continue and our position there is very strong. In terms of the mobile bank, but now we're talking about the business, the business pickup is significant. The large corporates have been digital for a long period of time. SMEs have been mixed and micro has been more physical. And that trend is becoming more and more digital. And there also, I think our advancement is very good. And the Q1, we launched the mobile business bank has seen a lot of pickups, especially on the micro business users. So you can see that the number of users of our mobile and Internet bank in business side has grown by 28 0.9% and number of transactions growing by almost 4%. All of this is being done by us focusing on customer satisfaction rigorously on many different things, measuring on channel, product, what people are happy about, what they're not happy about. It's all summed up in one number, which is NPS, but there's a lot happening behind it. And as you can see over the last, let's say, few years, we have seen our NPS numbers growing on a very good trend, in fact, from 27% to a peak of last quarter, just 49%. We had a slight dip and that dip was when we asked our customers, predominantly coming from a growing interest rate coming from the refi increase because there was several time done in a short period of time, but that is temporary. What people are paying a lot of attention to is the comfort of that they are experiencing in each and every channel as well as the easiness of product usage. We have also started to use Salesforce that we announced last year, in fact, and the effects of that will be visible in the quarters to come. A lot of things are backed by our very strong data capability, which is getting stronger. In fact, we had all of our middle management go through an online training done by U. S. Schools in fact. And more and more models will be used in every day to save costs as well as sell better. So now a few words. I hope that was not too long. So a few words on our numbers that we have delivered. Our revenue numbers were very strong, almost 40% growth year on year and 10.3% growth quarter over quarter versus Q1. Something that was that made me very happy, in fact, was that our net fee and commission numbers year over year was up by 73.9 percent and our Q over Q was 17.6%. And when you look into it, what's driving it, one of the strongest driver was our retail net fee and commission income, which was up by 99%. Other parts of the business also performed very well. In fact, corporate has done very well. But that is something to note that our retail free and commission income has basically doubled year over year. In terms of cost of risk, we have benefited from very good macro environment with the economy rebounding very strongly from the low start. Obviously, that has resulted in a low cost of risk and we have benefited from some recoveries in Corporate Banking. Overall, those negative cost of risk that contributed to our very, very strong profitability. Our profitability, in fact, for the quarter was 29.4% return on equity, reaching BRL202 million, which was all time high. And just in this quarter, in fact, we delivered about GBP 1 of profit per share, which versus our stock price gives you an idea how significant the profitability was. Now obviously, that profitability, we have had some help from the strong economy and some recoveries. But when you look at the revenue and pre provision numbers, they are strong as well. So 29% is definitely our return on equity is not a norm, and we don't expect to produce that. But 20 plus percent is what we have been guiding, and we are looking at sustained levels of that profitability. Our capital ratios have gone up very strongly in first half of the year, reaching core Tier 1 of 12.5 percent with a minimum requirement without using any buffers that is of 11.1%. And liquidity is strong well above the 100% minimum requirement and 124.5 percent. So more specifically, last year, we had a significant charge in the Q1 of last year, upfront charge, which was slightly unusual versus some of the European peers, let's say, that have not done that. But in Georgia, we had an upfront charge of BRL400 1,000,000 expected loss for the full cycle. And since then, we have delivered 20 plus return on equity on each and every quarter. Our operating income, we described that, as I already mentioned, was up 40% and 10% quarter over the last quarter. And as I said, the non interest income had an even stronger performance, which is very good. Also something that was, I think, an achievement of our team was that we had a stronger net interest income going up by 50 basis points over the last year and 20 basis points over the last quarter. Our costincome ratio was 36.4%, just significantly down versus the last year, which was a bit of a one off at 43.9%, but 36.4% was in 2nd quarter and for the first half of the year was 35.9%. So we are guiding a midterm guidance of 35%, which will be achievable over the next few years. We had our costs growing at 15.8%, which is slightly high. But at the same time, when you have a significant uptick in the economic activity, you have much stronger revenue growth and that also has some effect on our costs. But overall, I think our net operating income has grown significantly. In terms of cost of credit, as you can see from 2017 onwards, our cost of credit was reducing consistently as we were coming out of the 2015 2016 crisis, oil crisis, as well as entering into a more conservative regulatory environment. 2020 obviously was reflective of the COVID charge. This year, 0.1 percent first half of the year cost of risk is not sustainable. We are guiding about 1% to 1.2% into the medium term. But obviously, this year, we are experiencing very good recoveries. Our NPL ratio improved slightly to 3.5% and coverage ratio is 73% with the collateral discount. We are looking at 122% coverage, which we believe is a good reflection of the strength of our coverage. In terms of low portfolio growth, in fact, we had a very healthy growth. As the economy rebounded, we saw good demand coming from the micro and SME as well as consumer that is reflected in the growth that we have seen here. On the nominal basis, that was 4.2%. And when you look at the constant currency basis, that was 7.2% from the start of the year. On an annual basis, that's 17.4% and constant currency, which is usually what we are focused on, is 13.7%. In terms of deposits, they've stayed largely flat with this year growing by in constant currency basis by almost 2%. And what we have seen is that in 2020, we had a significant very, very significant growth in deposits, growing from DKK10 1,000,000,000 to DKK14 1,000,000,000 in lari as you can see. And that has largely stayed flat this year because as the economy opened up, people started to spend all the money that they've saved. But we are still having a very strong coverage in terms of net loans to customer funds and loans to customer funds and the development financial institutions, which is very stable long term lending is all very healthy levels. Now a few words on capital. Last year, as the National Bank guided us to provision for the full cycle, those who released the buffers to whether the crisis, quote crisis or whether the economic crisis caused by it. Now those buffers are still available and some banks are using it, but we're no longer using it from the beginning of the first, second quarter. And as you can see, our ratios are at 12.5% 14.4% as well as 19.1%, well above the minimum requirements, which is 11.1%, 13.4% 17.7%. Those are without the buffers, as I said. So when we look at it, the Basel III capital requirements are fully loading by the end of December 'twenty three, and those are the numbers to expect given the current buffers required for our bank. Those numbers are annually reviewed, but our current expectation is this. And as you can see, we had in the first half of the year a very strong buildup of our capital starting with core Tier 1 of 10.4 and going to 12.5 while finding very, very healthy growth. So that was good and we believe that this is why we are going into a new environment where we will be focused on dividends quite a bit. In terms of something to keep in mind is also that our National Bank requirements are more strict than the IFRS. And as we are moving to IFRS, it's good to remember that there's a difference of around 2.5% on a Core Tier 1 level, which IFRS accounts would see. So if you looked through IFRS glasses, you would see not 12.5% in fact of core Tier 1, but 15%. So that is good to keep in mind and underlines the strength of our capital. So in terms of our strategic initiatives, we have been delivering more than 20% over the many, many years, but last year, which was 13% return on equity. And the growth numbers were also above our 15% guidance. Now that number will flow to 10% going forward. And medium term, we expect our loan growth to be around 10%. This year, as we said in the previous discussions, we may expect a slightly higher given the high economic growth and the inflation in the environment and the economic rebound, but medium term is 10% is what we expect. The current dividend payout ratio range is 25% to 40%, although that will be formally reviewed on the next Board meeting and we'll be communicating to you with dividends remaining is very important part of our return to shareholders. Some buybacks may be in the cards as well, but they will be formally reviewed and approved and communicated to the shareholders after the September Board meeting. So with this, we are announcing an interim dividend of BRL70 1,000,000 on the back of our first half very strong profitability numbers. And going forward, we will see what we do on a full year. So with that, thank you very much for listening, and I will open up for Q and A now, which is a very exciting part usually of every call that we have. Yes. And just a reminder, those who are connected via the webinar, you can use the raise hand function at the bottom of the screen to request asking the question. And those of you who are joined via the phone, you can press 10 9 to ask the question. And please introduce yourself and unmute yourself when asking the question. First question comes from the phone. Please unmute and introduce yourself. We cannot hear you. You are on mute. So there's something to press there. Natia, can you guide us what Yes. Okay. I think I'm unmuted now. Can you hear me? Great. It's Andrew Keeley from Sberbank CIBC. Hi, Achal. Thanks very much for the presentation. I have a few questions. First of all, just interested to get a bit more detail on why you've reduced your medium term loan growth target from 15% to 10%. It seems like the economy is growing pretty well and probably there's a reasonably good outlook for the next few years to come. Just kind of wondering, are you kind of concerned about I mean, is it a case of some segments of the credit market look relatively saturated? I mean, are there segments that you're, you've kind of turned less optimistic on perhaps than others? Would be good just to get a bit more color on that and I can ask another question afterwards. Yes. So we believe that Georgia's development, the Georgian Banking development is not at the 2,003, 2,004 levels. And we expect that growing and focusing on profitability, in fact, rather than pushing growth is the right thing to do. So 10% is more or less what we expect, slightly higher or at the levels of the nominal growth of the economy. And that, I think, longer term is sustainable. Now there will be moments where we can have higher, like this year, I believe. But medium term, the growth of 5%, 5.5% real is what we expect in Georgia and an inflation of, let's say, 3% to 5%. And that would deliver a nominal growth of around 10%. And that's what we believe is sustainable. Okay. But I mean, are there kind of parts of the segments where you feel that the growth is not going to be as strong as perhaps you'd previously thought? I mean, is that kind of corporate parts of the retail market, MSME or kind of nothing none of those in particular? None of those in particular. I mean it also depends on the environment. So last year what we saw is that there was a very weak demand given the lockdown etcetera in micro and consumer obviously and some slowdown in SME, but then helped by the government support the mortgages were very strong. And this year what we see is that whatever suffered last year is recovering stronger than the rest of the book, which is MaTeiko, where we have a leading position by far as well as consumer and SME. So those, I think, are benefiting us disproportionately versus the overall market, but there's no particular sub segment, which I would say is discouraging anyway. Okay. Okay. Fair enough. I saw that there was a, I think, a €4,000,000 or so, Larry, loss from associates in the Q2. Can you tell us what that was? And do you expect more of that or not? Yes. We don't expect I mean the biggest associate that we have really is a credit bureau in the country. And we reviewed their profitability and we do the assessment on on an annual basis and we saw that there was a reduction. So when we looked at it, the underlying reduction there is that as the payday loan business has largely died off or reduced by 90%, their revenue reduced and that is at a new base. So when you look at it, that's where the revaluation is coming from. Other than that, we don't expect anything else. I mean if we expected, it would be in the numbers. It's not like Okay. Fair enough. And obviously, your fee income growth was very strong in the Q2. Just wondering, I mean, do you think that in kind of nominal terms, you can actually see kind of further growth from here in the second half of the year? Or are we going to see a bit of a slowdown, particularly given the kind of resumption of some restrictions around the COVID pandemic in the Q3? Yes. My expectations are good, in fact. I mean, I cannot give a real guidance there. But the limitations or restrictions of COVID are very limited in fact. So unlike last year when we did not know what to expect from this virus, that's one. And the second thing is that the vaccination was not available. The government basically to protect the population enacted a very strict lockdown in the Q1 of last year and that lasted for a big part of Q2. Now this year, vaccination is widely available and Georgian population was a bit slow on picking that up. But with the virus numbers picking up now, it's a very encouraging signs that people are signing up and the number of vaccinations per day has been very strong, well above 20,000 per day, which for a case of countries, very good number. So that's so with that, we don't expect a significant slowdown in business. And numbers are good, yes. I mean, they are reflective of our very strong retail franchise retail and payments. I mean, we have very good You've spoken a lot about noninterest income, and this is clearly much less of a balance sheet encumbrance. I'm wondering, A, what sort of share of your income do you think can get to be noninterest income? And as it increases, will you be commensurately increasing your bottom end of your ROE target range? And if not, why not? So very good questions. I don't have the answers to that right now. I think what we are focused on is making it easier for our customers and focusing on it and market share as a result rather than a goal of what we do. And in terms of the pickup, I think these are good. So far, whatever we have focused on in terms of delivery is happening. More than the share, what is the biggest competitor in our payments business is not another bank, but it's really the cash economy. So we are basically fighting for to gain the non cash payments from the customers because we believe these payments are more comfortable. And that focus has resulted in the growth numbers that you are seeing. So what is there to grow in the future? There's a lot to still replace in terms of the cash economy. And we believe that it's a continuous development of our product and it's not focused on one particular thing. It's bill split, it's money request, it's POS terminals and the integrations there. It's all kinds of different improvements and there's a lot to go. It's not just how the economy is growing, but really replacing the cash and there's a lot of cash in the economy. I have a second on capital and your strategy. Assuming we stick with 20% plus ROE, clearly, a reduction of 10% loan growth even without risk weight density coming down, which it naturally does as mortgages become a greater share of your book. Clearly, the 25% to 45% payout ratio would see a permanent increase in capital every single year add in for an item. I'm assuming that isn't the case, but I'm also assuming like we also see that obviously your min cap requirement obviously goes up out to 2023 as you highlighted in the presentation. So the question is, you said you're reviewing the dividend distribution policy at the year end. In the context of the short term increase in MINCAP requirement, are we likely to see a much more significant review when that is out the other side? Or are we just going to get a review as far as you're aware this year? All very logical arguments, but you are asking me what we are going to do in 3 years' time. And it's difficult for me to comment. I would say your arguments are very logical. So knowing that I cannot say in 3 years' time how it's going to look. But absolutely, we are right now building out the capital to comply with the Basel III requirements. And if in fact what you're looking at in December numbers, the Basel III numbers, there's only one part that we are currently not meeting, which is the Tier 1. You look at the June number, it's slightly short. You look at the mid August number, we are looking at it on a daily basis. We are already meeting that number, the December capital requirement number in 2023 that is. So yes, there will be building up of buffers as well as financing the growth, which we have reduced slightly and focused on returning the capital. And obviously, that last part is very important because shareholders have been our focus on value growth always. Thank you. Natia, should we go through some of the questions that have been Yes, we can and then we also have Yes. Can you read them out and I'll try to respond? So we have a question from Andrei Mikhailov. Part of this has already been answered, but let me read it. Thank you very much for the call. Could you please comment on what drove the loss from associates? This we already talked about. And the second question is should we also expect further gains from realization of real estate and securities in second half as well as further legal fees related to provisions? Yes. In terms of associates, I think I mentioned it. And in fact, that's the only significant associate that we have and that was the significant revaluation. So we don't have many associates. So not much to expect there. But whatever will be, we will reflect in the numbers. In terms of real estate, to expect gains or not, that is a difficult question to answer. So we are valuing the real estate life we are valuing, which is the market. And then the market has been improving and we have been able to have some gains there. So as we are in an inflationary environment, we may have that going up but on a longer period of time. We don't have short term expectations of that are focused on that. And in terms of the further legal fee related provisions, we those over the last couple of years, we had significant legal fees related to one of the larger legal case, which has been ended with Bancorp, Georgia winning it in London. So those fees we do not expect. Otherwise, there's always some legal fees and they will be there, but they should not be significant. From, Shaheen Farwani, this was all talked to in part, but what does the competitive environment look like with regard to your payments business? Who are the number 2 and number 3 players? And what percent of Georgians would you estimate use a payment service? So there are 2 large banks in Georgia, as you know, and they are the ones also dominating in the payments business. Number 3 is largely insignificant compared to those 3, but there are other payment services providers, but those are the main ones. And so basically, it's we operate for Bancorp Georgia only. Our competitors operate for all the other banks as well. So they have host to host for the other banks. But our market share, I believe, is what it is, just for Bank of Georgia. So that represents the strength of our franchise. So those are the players. In terms of the what percentage of Georgians are using the payment service, there are 2 types of payment services. 1 is something to do with our application and the other one is something to do with the merchant pace, right? So the merchant our application is used by 800,000 people. So there's good upside there. And but I think the growth there is becoming more and more challenging because people that have not been using mobile bank, older generations and others are slower to adopt it, but they are adopting it. And there, I think our leading position is good. And the other one is the POS terminal, which the usage is higher. I don't have the number off the top of my head, but we will disclose it going forward. We have one more question. More people have cards, obviously. And we also are operating a national transport system not national, sorry, Tbilisi transport system and metro payment system. Thank you very much for the answers. Yes, Natia? We have one more question, and then we can move to the live dial ins. Could you please comment on the current state of dollarization in Georgia and how hard currency inflows and outflows are currently operating? State of totalization, you mean? Current state of totalization. Yes. The totalization is coming down. In fact, we are at the new lows. And I believe on the loan side, it's 52%, which is historic low. And on the deposit side, it's about 60%. And National Bank has recently, a few months ago, in fact, enacted a new regulation which encourages us to accept the lorry deposits. So more lari deposits we have, less dollar liquidity requirements we have on our dollar deposits. So it's a marginal attraction of our deposit is becoming more important and that has contributed to an environment where we have a very strong, very good difference between the dollar and lari deposit, which is 1% 9%, so 8% difference there for the retail customers, which is little by little starting to have an effect. And I think policies focused on de dollarizing the liability side is very healthy and is not, let's say, is not causing new lottery supply to the market and is not inflationary. So it's derisking the overall economy and encouraging people to save in lottery, which little by utility and with stability of lottery, longer it lasts, more and more people will switch to lottery saving. So it's 52% now on the lottery side and on the asset side. And on retail, it's even higher even lower in terms of dollarization. I believe it's below 40. We have Simon Nellis on. Simon, please go ahead. Hi. Thanks very much for the call. I'm intrigued by the very impressive revenue growth. I'm just wondering how confident are you that you can kind of sequentially see further increase in core net interest income and fees? What needs to happen to be able to see that? And what are the key downside risks? And then just on the dividend, I think it's pretty clear what the regulator wants to see. But can you just walk us through the potential regulatory hurdles to capital distribution? Yes. On the first side, I mean, it's in terms of net interest income, we had some widening of that, but we don't expect that to be sustainable, obviously. I mean, NIM guidance, we have stable. In terms of growth this year, we should have slightly higher than 10%, but going forward, it's around 10% that we are guiding in terms of the balance sheet line. Now net fee and commission income, yes, that was strong. But I think on the retail side there, we should have strong growth depending how successful we will be to push out cash in the economy and this is a long process and we'll be doing it. So we are by many different measures very fintech like bank in that in terms of our product development and the speed of rolling out different products in our mobile app and payments business. So difficult to comment on right now, but we are seeing some of the results of of our focus that has been there for the last 2 years. So it's not like we are super successful this quarter and we expect something different next quarter. So these are some of the results that we have been talking about over the last 2 years in terms of new product in the Agile infrastructure and so forth. In terms of the yes, I think that was the question, right? That was the first question. The second one, could you repeat it, sorry? Yes. Just on the dividends, what are the regulatory requirements, I guess, to pay out dividends? And do you see any tightening or loosening of those? Yes. I believe the regulator is very supportive of the market economy as well as respecting the shareholder rights. So we believe that regulators what we are seeing at least is the regulators are fine with the dividends and so far has been very supportive. So we don't see particular hurdles with that. Obviously, the regulator would like to see more capital and less risk in this structure, which is happening. So that is we have a map of capital increased capital requirements we need to comply with over the next 3 years and we'll be growing our capital ratios obviously to have a buffer and comply with the requirements as well as pay dividends. So there's no other, let's say, additional requirement of per year versus the dividends that we are aware of. Okay. And actually, maybe just one last question, if I could, on the risk cost. Could you just confirm that you didn't release any of the kind of macro related ECL forward looking overlay provisions, right? Correct. We have not. Okay. And how much do those how much are those? And under what conditions would you potentially release some of those? And how the regulator is quite involved in that, right, process? Yes, we are very careful with that. So basically, there's some related to this SEK400 1,000,000 that has been allocated. There's a little bit left and we may be reversing that. But that's not IFRS, that's local standards. So when you look at the capital buildup and in fact, the first half of the year, we on one of the slides, I presented 26% increase in the core Tier 1, that is abnormally high, right? And that is partly due to some of the MBG provision reversals that have happened in the first half of the year because I think we were slightly over provisioned on the MBG standard last year. So you are seeing some of the capital build up stronger than you would expect just from, let's say, 29% return on equity or 25% for the first half. In terms of the overall macro expectations and based on that, we expect the provisioning to be, we have not changed it, although we have upgraded the macro environment. So we'll be slow there and wait until the COVID environment stabilizes. Although we don't expect a significant macroeconomic impact, we still want to see it go and stabilize and then we'll review. Okay. Thanks very much. Thanks, Simon. Next question comes from Ronak Badia. Ronak, please. Good afternoon, Arshil. Thanks for the presentation taking the questions. My first question is just on your margin expectations for the second half of the year, given the recent rate hikes by the NPG. That's first one. And the second one, I guess you've answered it in bits and Bob's because a number of people have asked it. But just on your payments business, you mentioned that your significant competitor is cash transactions. Could you share some data in terms of what proportion of transactions are cash based in the Georgian economy? And related to that regarding your own payments business on the subscribers that you currently have, Could you share some data in terms of how many transactions they are doing in a per month or per week basis and how you expect that to evolve? There are very specific questions that I don't have answers to right now on top of my head. But I understand given the interest of investors, we'll be disclosing more information there. The growth that we are seeing, let's say, in the payments business has been significant, and we believe that should be sustainable. But in terms of the shares and what we are looking at, I think we will need to report back. Okay. And just in terms of your margin outlook for the second half? In terms of margin outlook, we are expecting constant not constant, but stable margin. So we don't expect that to move in any significant way. Okay. So the rate hikes shouldn't have any significant impact on your lorry funding? No. I mean there are other things happening as well. Lot of funding that we draw on in terms of at the refinancing rates margin is largely for our mortgage financing and mortgage financing has a variable rate linked to that. So by and large, other than the 1st year or so of introductory rate, which is stable at the same levels but stable, and then it becomes variable. So that is passed through to the customers. And in terms of our consumer financing, that's short term and that's basically pass through as well. So we don't expect a significant impact there. So there are other things at play here as well, but they more or less balance each other out. For me, it's more so largely stable and more difficult to comment on more specifics is the answer. We don't necessarily see a movement because of that. Okay. Thank you. Thanks, Ronak. We have Vandemir on the line. Jan, please. Yes. Thanks very much, Achal for the comprehensive presentation. I just want to ask you about the Board's decision to remove 200 bps management buffer on CET1. Because if you look at a lot of the banks in the region that are in investment grade countries, less dollarized balance sheet, they do maintain significant buffers in most of the times much more than 200 bps over the regulatory thresholds. So how do you see that as a management? That's the first question. 2nd question is on non interest income. And I guess a part of the growth year on year has to do with the real estate gains, but maybe you could break it down for us a little bit further, if that's okay. Yes. The first one, so basically, I think, last year, when we so in terms of the management buffer, not the management buffer, yes, the management buffer of 200 basis points, which the Board removed, The Board as well as we believe that we are very, very strongly capitalized. In fact, our regulator, I believe, is super conservative in terms of the capital requirements. And the numbers that you see do not fully reflect the full capital position. And one example is the difference between the MBG requirements and IFRS and there are others. There are different capital pockets, let's say, in many different areas like our dollar mandatory reserves that sit with national banks are weighted at 100% risk weightings. The dollars that are sitting with the national bank are weighted as if those were the loans, right, because that's by law and so forth. So there's plenty of capital there. Having a 200 basis point guidance, we thought and the Board thought was not needed, especially to provide more flexibility in terms of managing the capital position. Nevertheless, we will be looking at some buffer. Obviously, we will not be driving that close to the requirement. We don't we are not comfortable crossing the requirement at any point. So we will be having some buffer. But we believe that from the macroeconomic point of view, our regulators' requirements are very, very conservative. So in terms of having a management being more conservative there, we don't need to be. We will just comply with that and have a buffer that will be comfortable enough given the environment not to cross that requirement. That's one. On the other one, in terms of the real estate gains, obviously, there was a question there and do we think it's sustainable? No, it's not a recurring line. I mean, there will be real estate gains or real estate losses whenever there will be. And overall, I think the price environment on real estate has not been suffering at all. And longer term, we don't expect that to be the case either. So macroeconomy improves, we will have more of this. The real estate improves. Prices, we will have more of it, but we cannot provide any guidance for the recurring nature of such a line. And what's the breakdown of noninterest revenues in the quarter Q, everything in front of you? Nointerest breakdown. I mean you see the net fee and commission income and net foreign currency gain. And net other income is what you're asking. And there was income from operating lease of roughly CHF2 1,000,000, net gain loss, net gain from the sale of real estate properties of BRL10.5 million, net gain on sale of investment securities of around BRL13 million. Then there were some small ups and downs, roughly that. And loss on buyback of securities. So when we buy back our bonds, which is about SEK 1,500,000, which is traded at lower yields than our coupons, so we have losses there. Got it. Giannis, I take a total of pleasure Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques. Thank you, Jacques Thanks for the answers though. Thanks very much. Thanks, Jens. At this point, we don't have any more questions. Well, with that, thank you very much. I think second quarter was historically one of the strongest quarters. And as I said, we delivered the profitability of per share of about GBP 1 per share. Obviously, that is extraordinary given the cost recoveries and reversals in cost of risk. But even on a revenue line as well as pre provision lines, I think we had very strong growth And I think something that made us very optimistic also was the net fee and commission income on retail side doubling year on year and some of the operationally very good performance numbers on the payment side. So with that, thank you very much and I wish you to enjoy your vacation if you are on 1 or if you are planning to take 1. Thank you very much and bye bye.