A warm welcome from Komerční banka. It is the third of May, 2024 today, and we are going to share with you the information about the results of Komerční banka for the first quarter of 2024. Please note that this call is being recorded. Our speakers today will be Jan Juchelka, Chairman of the Board and CEO of Komerční banka, Jiří Šperl , Chief Financial Officer, and Didier Colin, Chief Risk Officer. Standing by in case if you have questions are also Jitka Haubová, Chief Operating Officer, Miroslav Hiršl, Head of Retail Banking, and David Formánek, Head of Corporate and Investment Banking.
Essentially same as three months ago, we will begin with the presentation of results, which will then be followed by a questions and answer session. During the presentation part, all participants will be on listen-only mode. We would appreciate if you could keep your microphones muted during that time. So now let me hand over to the CEO, Jan Juchelka. Thank you.
Hello, everyone. Thank you for sharing your time with us. It's my pleasure to present to you together with Jiří Šperl and Didier Colin, and potentially other members of the management team here the quarterly results for the first quarter of 2024. Let's see the first slide showing us the highlights. Komerční banka remained very strong on both sides of the balance sheet. The client's loans grew by 4.6% on year-over-year basis. Deposits grew by 7.2% and the other assets under management grew by 15.3%.
What is still remarkable is that inside this, assets under management, outside the banking, balance sheet, there is 30.2% year-over-year growth on, mutual funds, which in our case, is mainly production of Amundi and, private banking. Despite this very strong, dynamic environment, we kept our loan to deposit ratio at, almost 80%, liquidity coverage ratio at 154%. Cost of risk grew to, 22 basis points, and I'm sure that, this is one of the points which will, which will, create, space for your questions. As a result of what I have just mentioned, the group net income, totals to CZK 2.8 billion, which is down by 21.3%, mainly as a, function of, the creation of, of provisions.
ROE, close to 9%, would be double digit if, if IFRIC 21 was linearized. Total capital remained at very high levels of 18.8%, core tier one, 17.7%. Cost to income, 54.5%, and below 50% should IFRIC 21 remain linearized. Let me remind that recently, the general shareholders' meeting decided to distribute the entire net profit of 2023 to shareholders. In our case, it was CZK 82.66 per share. And today, it's the first day when we are traded ex-dividend. Speaking about other important events, we have Delphine Garcin-Meunier as a new member and chairwoman of our supervisory board.
Delphine is SG strategic manager in charge of the pillar, which we, which we name mobility and international retail banking and financial services, which consists from Ayvens, International Retail Banking, mainly, Komerční and BRD and African banks, plus consumer lending. We are working with the new statutory auditor, which is KPMG Audit. Other highlights, we continue crafting the new digital bank, and I will come back to it in more details. At the end of March this year, we had already 250,000 users in our new application, KB Plus, and today we are growing to the levels of 350,000. The number of KB Bank's clients is up to 22,000 to 1,678,000.
What is important here that the new clients, which we are registering in the KB Plus, in the new digital bank, is a mixture of successfully migrated clients plus newly onboarded clients. We were also recognized by Visa as the number one sustainable bank and by Mastercard as a responsible innovator in the card business. We can move to next point, please, which is the new digital bank. Traditionally, after the first quarter, we are showing you the progress achieved in putting together completely new digital solution for a universal bank. And I need to say, we are continuing as planned, with the migration of retail clients.
You can see on the lower part, on the left-hand side, the graph, which is showing that from scratch, we are growing very fast to the current levels, which are already above 300,000, as I mentioned. And our plan is to be at 1 million users of KB Plus at the end of this year. Again, it will be a mixture of successfully migrated clients, plus newly onboarded clients. Speaking about retail, we are putting new and new functionalities and products in the application, and based on that, we take another cohort and another cohort of clients and migrating them accordingly to the portfolio of businesses, or not businesses, but products, which they are currently buying from KB.
It goes without saying that we do it in the continuously improving environment of Agile at scale, which we implemented back in 2018 and 2019, and using the DevOps working methods in working on the new software and applications. I need to say that this exercise is being pretty large. I would start with the core banking system. We are implementing fully the Temenos T24 core banking. We have already replaced TSYS and implemented TSYS Prime card system, and we have already replaced Valantic payment hub. We are building, as we speak, the final stage of mortgage center. We are putting both the building savings products and mortgages in one place when gaining new efficiency, and we are implementing also Data Mesh concept and in-house developer analytical layer.
This is from the, let's say, technological perspective. We strongly believe that this investment, which is fully supported by Société Générale Group, will give us a strong commercial and competitive advantage vis-à-vis the other players in our region. We are putting together a simpler proposition for clients using multi-currency accounts, selling subscriptions instead of individual products. We have instant payments already as a standard, and pay to phone, pay to phone number as a new functionality, which is already used by hundreds of thousands of our clients. Investments, insurance, and what we have in preparation, is a proposition for children, top affluent clients, and we started working on the solution for e-brokerage.
As far as the distribution channels part of this exercise is concerned, it's fully omni-channel model with single CRM in place. It's built as a mobile-first digital channel, which in human language says that wherever you use our solution, on your mobile phone, on your iPad, or as a banker on our branch, we are always working with the same design of screens and with the same logic of the application. With one exception, that the banker in the branch has deeper view of what the client is doing with us, what is the history, and how the best putting in place a proposition for her or for him.
We have reduced by 90% all processes and products from the old world when putting together the new solution. The simplification is the underlying word which is accompanying this part of the development. We are working in-house when speaking about the new KB Plus application. Next page, please. Macro eco. KB worked in a situation or in a country which was not growing last year. We do believe that it will grow this year. M- It will be a mediocre growth, around 1%, but coming back to positive trajectory. We see that both the households and the companies have better belief stronger in the better tomorrow.
We also think that household consumptions and investments by private and public sector will be the main engines of the economy in 2024. Unfortunately, we are still witnessing very tight labor market situation. The unemployment rate in February achieved 2.6%, which is technical zero, and in combination with the fact that wages in Q4 went up by 6.3%, Q4, 2023, means that the relative wages are in positive territory again, when you compare that with very low consumer price inflation. The inflation fell from the cliff to the percent of two, to the level of 2%, which exactly the target of the central bank.
You know that central bank has decided yesterday about another cut of 50 basis points, and lowered the short-term price of money to 5.75%. Which we believe will pay back to banks in the higher demand on mortgage loans, consumer loans, and corporate and business loans. Czech koruna, as a reaction of all what was mentioned, weakened by 2.4% on quarter-over-quarter basis, and 7.7% on year-over-year basis, vis-à-vis euro. We can go to next page, please. Business performance of KB. The gross loans to clients went up by 4.6%, driven by both the households, here we are speaking about housing loans and mortgages, and also businesses. Everything was in positive territory.
When speaking about businesses, it's more the larger corporations which are buying our loans or which are buying solutions from SG Equipment Finance Leasing. We can go to next page. Client deposits went up by 7.2%. Inside the deposits, there was a continuous shift from current accounts to term and savings accounts, which is very logical in the current environment of rates. What we praise is the fact that the overall deposits remained stable or were growing. As I mentioned at the beginning already, we are very happy with the evolution of new inflows into mutual funds, which grew by 30.2%. Our insurance, like, life insurance reserves went up by 2.7%, and clients' assets in pension company grew by mediocre 1.1%. In total, 15.3% more on year-over-year basis. Next page. Next page is the financial performance, so here I'm handing over to Jiří. Thank you.
Thank you, Jan. Good afternoon, everyone. Let me lead you through the key messages of the financial performance and capital. As already mentioned, the net profit after tax was CZK 2.8 billion in Q1 this year, i.e., less roughly by CZK 760 million versus the last year, influenced mainly by the cost of risk that was higher last quarter by roughly CZK 900 million. The core revenues, i.e., NII and fees and commissions, were almost exactly at the level of 2023, while income from the financial operations was slightly lower. In terms of OpEx, there are basically two components. The first one, improving the cost base. It is related to the regulatory charges.
What I mean is, resolution and deposit insurance fund, that are significantly lower, by the way, as expected, and indicated to you last time. While the underlying cost, OpEx, are growing slightly, influenced mainly by the depreciation FX costs. I will touch it in deeper detail later on. In terms of profitability, Jan was mentioning some indicators. Let me comment also, IFRIC 21 adjusted, so maybe to dimension only return on a regulatory capital, where the ROE is at a level of 13.1.
This is bringing me to the balance sheet, and its dynamic growth continues even in Q1 this year, adding quarter-over-quarter almost 7%, driven mainly by the deposits, the second quarter in a row, and more specifically, corporate deposits, as also commented by Jan. Otherwise, I cannot see any further big changes here. On the asset side, the new funds have been primarily invested into the client loans, and the rest, I mean, the liquidity surplus, into the repo operations with the central bank, while the investments into govies went a bit down.
Next slide is focusing on the net interest income, which stayed steady quarter-over-quarter, and a bit down year-on-year, minus 1.1%. The most material elements are following. Let me start with the year-on-year perspective. On positive side, it's mainly the dynamically growing client deposit, as already commented by by Jan. On negative side here, it's mainly the increase of the regulatory cost or so-called regulatory cost. And what I mean is a significant increase of the volumes of an MREL instruments, i.e., the senior non-preferred loans, needed for the fulfillment of the regulatory requirements. That's first. And second is the increase of the volume of the sub-debt.
And also, maybe two figures to sub-debt, one year ago, in our balance sheet was EUR 100 million of sub-debt. For the time being, it's already EUR 200 million . And also, the canceling of the minimal obligatory reserves remuneration, starting, as you might remember, from or since October last year. From quarter-over-quarter perspective, so now I'm referring to the bottom right chart. Again, on a negative side, it's a continuing of the shifts from the current accounts to the term deposits. We were expecting that, but that's true that it was in first quarter of this year growing more than expected.
And on positive side, it's partially offset by NII from loans that recovered quarter-over-quarter by almost 6%. Which by the way means naturally that the erosions on loans margins stopped. And here maybe also let me add that in line with our expectations. Simply the bank delayed there are reductions on the down pricing trying at least partially offset the gaps on the margins on deposits where the competition is still high. All in all, and now referring to the upper left chart, this led to further drop of NIM. Quarter-over-quarter, it's by seven basis points. Fees and commissions.
The group here delivered a very slight result, growing year-on-year by roughly 5%, supported by the usual suspects, i.e., cross-sell fees, in line with our strategy. Again, Jan was commenting the dynamic growth of these investments. And this quarter also somehow by better specialized fees from the financial services, like income from bond issuance for our clients, custody, depository services, et cetera, et cetera. One comment to the bottom chart, which is on quarterly basis, there is a seasonal decline that was again expected, as it is the case every year. The last chapter of the top line is about financial operations. Well, they are down year-on-year by 16%, roughly.
From my perspective, another evidence that the volatility in this category is higher than in the others. It is not the case for the blue part of the chart, i.e., FX income from the structural book, which is typically currency conversions, FX from cards, transactions, clean payments, et cetera, et cetera. That brought a very solid result at the level of 6%. But it's the case of capital markets activities, basically our investment banking, that were last quarter negatively influenced by the subdued hedging activities of the clients. And this quarter, also by the negative impact of the DVA, as visualized at the bottom of the page, left-hand side, where it's roughly CZK 125 million.
OpEx traditionally is under control year-on-year, even down by 4.5%, in line with our expectation. What I mean is that the booked regulatory costs declined significantly, i.e., roughly by 35%. At the same time, it's probably worth to and fair to mention that we finally received two weeks ago the final invoice from the resolution authority. And at the end of the day, the invoice or charge will be very slightly higher, roughly by CZK 330 million, still year-on-year significantly down. And of course, this adjustment is gonna be posted into the Q2 books. Otherwise, depreciation still growing by low-teens pace, reflecting mainly the activation of the new digital stack. What I mean is our NDB.
Personnel costs are growing by relatively high 10%. And there are basically two effects, reasons behind. The first one is naturally the increase of the base salaries for our employees, and the other one is kind of accelerated success in our insourcing activities in agile part of the bank, where we are progressively replacing externals that are much more expensive than the employees. The positive effect could be seen in the gray part, that's red color, declining by 8%, on top of the mentioned effects, I mean, insourcing also influenced by lower marketing and real estate costs. So that's all for the GOI, and I'm passing work to Didier. Didier, please, the floor is yours.
Thank you, Jiří. Good afternoon, everyone. So, turning now to the evolution of the credit risk profile of our loan book, I will start with sharing with you a brief overview on the evolution of our default rate, not disclosed on the slide, but definitely worth sharing with you. Starting with the mortgage loan portfolio, we are here in the first quarter, we've continued to see a very good level of resilience with default rate at the historically low points, so confirming what we've seen in the recent quarters. So, good situation here.
The consumer loan and the small business loan portfolio, which we commented in the recent quarters last year, due to the deteriorating trend that was recorded in 2023. In the first quarter of 2024, we've seen stabilization of this trend, which is also a good news. And the stabilization, in fact, is at a level that is slightly higher than the levels reached in the pre-COVID period, so we are not talking here about a situation that is worth of some concern. What I could add also is that this 2023 deteriorating trend was analyzed and reviewed in detail relating to very specific situations and the appropriate measures were taken for example in terms of the adjustment of our credit policies. So this was done and again in the first quarter we've seen a stabilization of this trend.
Now turning to the corporate segment. In the first quarter, we have recorded a bit of an increase of our 12-month default rate for the SME portfolio, and we assessed it, assessed it, and in fact this evolution is concentrated on a small number of trend situation, to be precise, less than 10, but having a visible impact on our default rate and with levels which are, again, not a source of concern. And if looking or when looking at the overall default rate level, we are ... for the corporate segment, we are still below the COVID peak, which we reached in 2022.
And again, the situation in the SME segment is really one-off type of situation, and is not assessed as the beginning of a portfolio deteriorating, deteriorating trend for this for this segment. I will finish this default rate overview with the last corporate segment, where we continue in the first quarter to see near zero default rate levels. So again, confirming the resilience of our loan book for that particular, but very important sub-segment. Now, this translated in terms of our risk classification with the few indicators that are in front of you. I will start with the exposures classified S2.
So we've seen a very moderate increase by CZK 2 billion from CZK 122 billion to CZK 124 billion. So in fact, this is almost a flat evolution. And on top of it, this two billion, in fact, was driven by a few IFRS 9 adjustments, which are related to some methodology upgrade or model recalibrations, which we had to implement for our retail segments. The intensity of the loan migration dynamics, which is a point that I mention every quarter, continue to be very low in the first quarter, which again confirms the stability of the credit profile of our loan book.
If we now look at the exposure classified S3 or defaulted, we have a small increase of again CZK 2 billion, taking this exposure category from CZK 12 billion to CZK 15 billion. In fact, this is the direct reflection of this few SME client situation that were transferred from performing to non-performing. So far, contained an isolated evolution. If we look at the evolution of our S2 and S3 ratio, so S2 was almost stable, increased moderately from 14.7% to 15%, again generated by this IFRS 9 technical adjustment, which I just mentioned. The NPL ratio, or S3 ratio, increased a bit from 1.8% to 2.1%.
In fact, this is solely due to this isolated evolution of our SME portfolio, the NPL ratio for the retail part of our loan book being stable quarter-on-quarter. And finally, here, for this asset quality overview, our S3 or NPL provision coverage ratio went slightly down from 47% to 44%, and this is simply the mathematical reflection of the lower provision level applied to newly defaulted corporate exposure. Again, this being related to what I mentioned regarding this residual pocket in our portfolio of SME exposures. So turning to the next slide, which gives you the overview of cost of risk.
So we recorded almost CZK 500 million, which is an equivalent of 22 basis points. The composition, in fact, is relatively simple. You have a little bit over CZK 150 million of provisions booked on those new SME corporate default in number less than ten situations. Then we booked CZK 150 million, so another one on our performing corporate exposure, and here it's to be precise, it's concentrated on three client situations. So again definitely not a sign of deterioration and a cause for concern. The last element is CZK 170 million booked on our retail portfolio.
And here you have the breakdown. CZK 80 million is related to the small business exposures, CZK 50 million related to the consumer finance exposure, and the delta to the total of CZK 170 million is related to this technical IFRS 9 adjustments. One important point to mention, which is the last point on the slide, is that in the first quarter we have decided not to use our inflation overlay or inflation reserve, for the very simple reason which I just mentioned being that the evolution that we recorded for the SME portfolio is of a one-off and isolated nature.
So, for that reason, we decided not to use this reserve that was kept at the level of CZK 2.3 billion, unchanged or almost unchanged compared to the previous quarter. So taking into account this stable risk profile of our loan portfolio, we've decided to renew our guidance, our service guidance for the full year at the same level as what we communicated to you at the beginning of February, which is a range anywhere between 15 - 20 basis point, which is below or through the cycle cost of risk level, assessed or estimated in the range of 20 - 30 basis points . And this guidance is taking into account three main elements.
The first one is that, as we have seen it a bit, our 12-month default rate across all portfolio will be, higher, slightly higher than the low level reached in 2023. So that's the first element. The second element is, as it was communicated to you in the previous quarters, we expect a lower level of, net recovery potential from our defaulted corporate portfolio compared to the, high point reached in 2023. And the third element, which is an element of comfort supporting this, guidance, is that if, there would be a need to, start using the, inflation overlay reserve, we would do so, having this, CZK 2.3 billion, that was booked in 2022, for this, type of situation. So this overlay, inflation overlay, is definitely here a point of support to this renewed guidance at the level of, again, 15-20 basis point for the year end of 2024. And on this, I will hand over to Jiří, who will continue with the guidance and outlook section. Jiří, the floor is yours.
Thank you, Didier. So it's for last two slides, the first one focusing on capital and then outlook. So, let's start with the capital. Capital adequacy is still super strong, and that despite the fact that we are accruing, as you know, dividend worth 100% of the 2024 profit. Having said that, the capital adequacy is exactly at the same level as three months ago, i.e., roughly 190 basis points above the minimum requirements. Which, by the way, also means that it is in the very upper part of our management buffer. Just to remind, there is 50-200 basis points.
In terms of MREL, the message number two at this slide, MREL requirements are fulfilled, so we do not expect that this year we are gonna to conclude further ones. So that's capital in a nutshell. And let me also very briefly comment on the outlook for this year. So very briefly, because we are basically confirming what we are telling to the markets three months ago, there is only one slight positive exception, which is related to the growth, as was mentioned by Jan at the very beginning. So three months ago, we were guiding 0.8% of the GDP growth in 2024.
Newly, we are a bit positive, up to 1.4%. Otherwise, no changes in the banking market outlook, i.e., both loans and deposits are growing, mid-single digits. The same for KB business outlook, but with the addendum that, that we would like to, to gain a bit, in both categories, loans and, and deposits, in loans mainly in, in retail. And in terms of the financial outlook, again, the same. So it means, revenues low- to mid-single-digit compared to 2023, while OpEx should grow slower, and thus to generate, generate a positive, positive growth. Risk also commented, by Didier, so, only to add, potential risk as usual. So they are listed there, so that's a potential further escalation, the war in Ukraine, shocks in external demand, supply chains, and more generally, unexpected monetary and fiscal changes. So that's, I think, the end of the presentation, and I'm passing word back to probably Jakub. Jakub.
Yes, thank you very much. So this has concluded the presentation part of our meeting today, and in the next part, we will be happy to answer your questions. So let me remind you that this call is being recorded. If you have a question, please click on the icon with raised hands at the upper part of your screen, and then please wait to be called. If you are connected through a telephone, then I will call you or invite you to ask your question later. So, now please the button. Thank you. So our first question comes from Mehmet Sevim from JP Morgan. Mehmet, please go on.
Good afternoon, thanks very much for your time, and thank you for the presentation. I'd like to hear your comments on the margin developments from here. So NIMS come down a little bit, and you're still mentioning the elevated deposit costs. With the CNB now having cut rates quite visibly, have you reflected any of the lower rates to your deposit pricing so far? And do you expect to do that in the coming quarters? And how would you see overall the margin developments from here going forward? Thank you very much.
Okay, so that's probably a question for me. Well, I was mentioning during the introduction of the net interest income slide that yes, the banks, let's say, went with the rates down, but not as quickly as was originally expected, which of course led to the decline of the margins, or better said, stabilization slash decline. Maybe a very important point also is that in these declined margins on deposits, you already see the impact of minimal obligatory reserves. Because in Q4 last year, this, l et's say, extra cost was not, let's say, part of the pricing. But in Q1, starting from January 1st, we fully implemented it, and it's clear that the business lines were not able, due to the market competition, to down price accordingly. So this is not a negligible impact, off the top of my head. I think the impact here is around 10-12 basis points. Of course, further through the years, the target is, I would say, clear, once the competition allows that. And it's very much about other smaller challenges. We go down with the pricing, and having said that, that's why we believe that the NIM should improve throughout the year. Yes.
Very helpful. Thanks very much, Jiří.
Pleasure.
Thank you, and the next question will be asked by Mate Nemes from UBS. Mate, please.
Yes, good afternoon, and thank you for taking my questions. I have two of them. The first one would be on volume developments, particularly loan growth. It seems like that in retail you have seen some slow growth in the first quarter, sequentially offset by some decline from a high base in corporates. I was just wondering if you could provide some further color, what you're seeing in the market, both in terms of retail and also on the corporate side. How does the pipeline look like in corporates? How much confidence do you have in a continued gradual pickup from here onwards? And also, on the retail side, what do you see among your clients in terms of demand for mortgage products?
Are we going to see perhaps a further pickup in new volumes or new originations? Any color on that would be quite helpful. That's the first question. The second one would be on capital. Appreciate there hasn't been much of a movement in terms of hard dividends, given the loan book hasn't moved much. But the reality is you're accruing dividends at 100%. You have a strong capital base. You're, like earlier you said, you're close to the upper end of the buffer. Can you perhaps provide any update on capital allocation, most specifically, whether you see any concrete opportunities for inorganic growth, and if so, which area, which space would be of interest? Thank you.
I will probably ask with the answer for the first question, but then probably my colleagues, Mirek and David, will add some sentences going directly from the market. In terms of the growth, as I was mentioning, we are confirming our guidance, i.e., to grow a bit above mid-single digit. So, let's say 6 to 7, 7%. And the drivers will be a bit different than was the case in the past, because as we are completing or almost completed the retail transformation, we would like to start to monetize the heavy investments there.
So, the main driver of the growth in 2024 will come from the retail, i.e., both mortgage loans and the consumer loans. In terms of our expectation for the market growth in for mortgages, it's expected, whatever, between 5%-6%. The KB would like to grow by 6%-7%. In terms of consumer loans, our ambition is even higher. So, the expected growth of the market is around 6%-7%. We would like to grow at either high single digit or maybe even low teens.
We do have already good tools for that, and probably Mirek will comment on that. In terms of business loans, here we were gaining significantly. The market shares, like last, I don't know, five years, something like five years. Starting from 2023, and also due to the fact that corporate part of the transformation is starting right now, or started three or four months ago, full steam. The objective or target for CIB is basically to follow the market first, i.e., to grow really mid single digit, and at the same time, focus a bit more on kind of originate to distribute activities. So that's a kind of general introduction, and now I'm passing over to my colleagues. Please.
If I may start, and thank you, Jiří, I would add a few words on top of what was mentioned by you. Speaking mainly about mortgages, the market has been recovering over the last four months. The year-over-year growth is above 70% and we are not that fast. We are growing as well, significantly, but at the pace of approximately 50%. To put it bluntly, I would say that the growth of the market hit us in the most vulnerable moment, in the middle of change management, as we are just rolling out all our solutions based on one mortgage factory. So we are in the middle of massive change management. It has happened already on primary production of branches. Now we are launching the solution toward the third parties, but it always takes some of your energy and effort, and it is happening at that moment.
On the other hand, it's temporary, I would like to see us coming back to our natural 22% market share on the new production in units of months, and we are still confirming our ambition to reach 25 after we finish the rollout and have the full capacity to focus on business again. So I'm rather on the optimistic side.
Just a few comments from my side regarding the business financing or corporate lending. So generally speaking, there is a question of the, let's say, trust in the economic growth. I would say that the sentiment on the side of the corporate sector is rather or is getting more and more positive. So that we can expect also a better investment appetite, and also the appetite for further acquisitions. So some of the important players, local players, are very very active in the area of potential acquisitions.
We can also see increasing, and this is also just to complement what Mirek has been saying, we see more and more residential developers to be able to discuss with us potential residential financings, which also could give us better confidence in the appetite on the side of the buyers. So generally speaking, very much depends on the further macroeconomic development, and on the confidence, and also on the decreasing rates. Because the decreasing rates, even though the corporate lenders are also strongly depending on the euro rates. So but generally, when we see that the trend is the decreasing rates, that the confidence will grow.
If I may add just few sentences on the corporate investment banking. One should not forget that there is also expected higher activity on the side of municipalities and public sector. So, we do expect that the state, through its agencies and funds, or through the National Development Bank, and the municipalities, will smartly use the available European funds in order to support the prosperity of the country. The banks are ready, obviously, to stay at service of this type of investment, so we do believe that this activity might be beneficial for everyone.
If I may, because, yes, if I may, to sort of touch also the question number 2, which was about the risk-weighted assets evolution and, and capital allocations, et cetera, et cetera. You are perfectly right that, in Q1, the growth or consumption of the equity was limited. But at the same time, it's necessary to take into account that the growth of corporate loans was, in Q1, negative, very slightly, very slightly negative. And, as was indicated, by the way, by the way, 3 months ago, and, by the end of the year, of course, there will be a growth. As I was mentioning, it is expected that year-on-year basis, it will be mid-to single digits. So this is gonna consume some capital in the quarters to come, and we will see how much. And based on that, we will, at the end of the year, decide how to allocate the equity. Yes.
Thank you for the detailed answers.
Thank you, all. Just reminding you can use the icon with raised hand if you wish to ask a question. Our next question comes from Jovan Sikimic from Raiffeisen.
Yeah, thanks, Jakub. Hi, everyone. Just a short one. Maybe it's too early to discuss this, but is there any chance, or do you consider at any time, releasing those stage two overlays of, I think, CZK 2.3 billion you mentioned, right? Because as you said, asset quality is fine more or less on all front. There are some couple of isolated cases on SME level, but how about the likelihood of, at some point in time, kind of considering maybe releasing this?
Thank you for the question. For the corporate part, we will probably work on it in 2024. For the retail part, we've decided, I think it was last year, to keep it until 2025 and 2026, just to stay on the safe side. You know, given the turbulence periods that we've crossed in the last two, three years, and this part of our portfolio being, more at the, you know, at the end of the economic chain, if you will. So, this is the plan today. Corporate part, on the agenda for, 2024. One way or the other, I will not disclose any details because they are not, even yet, defined. And retail, 2025, 2026. And the split between the two is something like, CZK 0.7 billion for, retail and, CZK 1.6 billion for corporate.
Okay, thank you. Maybe one on the dividend. There was no change in the comment as regard this year's dividend, 100% payout, right?
Not at all.
Not at all. Okay, super. Thank you very much.
Peter, please, if you would like to ask a question through your telephone, press star and six, and then you can ask your question. We will give you some time to do it. Alternatively, of course, you can still use the raise your hand button. So our next question comes from [audio distortion]. [audio distortion] , please go ahead.
Thank you. Can you hear me? Okay, okay, thank you. Recently, you have started the negotiation with the City of Prague regarding the sale of the property, the building you own in the city center. If I'm correct, the City of Prague is offering you CZK 3.6 billion. Can you give us a bit more details how the negotiation is going, and what extraordinary profit you assume you will hit? And, in what period from when do you assume the transaction will be finalized? And related to that question, as you mentioned, your plan is to pay out 100% of this year profit, so I assume here that this extraordinary profit from this transaction will be also paid in full to the shareholders. Am I correct here? Thank you.
Should I take it, Jan? Okay. Well, so, as you noticed, and it was public information, we are in the process of the sale of the first head office building. There was a kind of fully fledged process. In the last round, the highest price offered was by the City of Prague. And based on that, we informed the markets that the negotiation is starting on the contractual recommendation with the City of Prague. 8.6 is the offer for the SPV because the building is part of the SPV. As a matter of policy, we do not comment on further pricing considerations and also the impacts, what are the expectations. What I can indicate now is that if the transaction is completed, the impact into the PNL of the bank would be positive.
Okay. Thank you.
Thank you. So, let's wait a few more seconds if there is any question. Sorry, so your question was also when the negotiations should be completed? If everything goes well, it's mid of the year, i.e., end of June, end of July, something like that.
Okay, thank you.
Right. So we don't seem to have any further questions at the moment, so, I'd like to ask Jan for a concluding remark.
All right. Thank you very much again for your interesting questions, for your active participation here. Let me thank also my colleagues for preparing the presentation and for answering your questions here. It was our pleasure to provide you with, we believe, a very strong performance of KB. We expected your questions related to the increased cost of risk, obviously, and I do believe that Didier has satisfied your needs of more information and more explanation here. We do believe that down the road, for 2024, we will be back to the targets for our expected cost of risk. And in the meantime, you will check with us after the second and third quarter. We are looking forward for the next round of presentations, obviously, and in the meantime, if you wish, we stay at your disposal for any question you may have. Thank you again, and thank you for your confidence to KB.
Thank you all. This has concluded the meeting. You can now disconnect.
Thank you. Bye-bye. Have a good weekend.
Thank you. Bye. Bye.
Thank you. Bye-bye.