Good afternoon, ladies and gentlemen. Welcome to the presentation of the results of Komerční banka for fourth quarter and full year 2021. Let me start with the housekeeping stuff. This call is being recorded. It's 10th of February 2022, 2 P.M. CET. This session will consist of a presentation part, and then it will have possibility, opportunity to ask questions. Please wait with your questions until this later part. The presentation will be held by Chief Executive Officer, Mr. Jan Juchelka, followed by Chief Financial Officer, Jiří Š perl, and Chief Risk Officer, Mr. Didier Colin.
We have also with us, and you will have opportunity to ask questions also to Miroslav Hiršl for retail banking, David Formánek for corporate investment banking, Jitka Haubová for operations and ESG topics, and Margus Simson for digitalization. Thanks again. I'm handing over to Jan Juchelka. Jan, could you please start?
All right. Good afternoon, ladies and gentlemen. Thank you for giving us time. I will ask you kindly who doesn't speak to mute your microphone. We are here to share with you the results for 2021 for Komerční banka. Let me start with the strong conviction that we believe that the presentation will make you happy or even happier than you are today. Komerční banka was rowing against the sentiment of certain level of skepticism or negativism framed still in 2021 by the COVID restrictions here and there, and was creating very positive story.
We were able to unify our employees around the purpose of the bank and implementation of the strategic plan, alongside their strong and enthusiastic service for clients. Employees are satisfied and happy to work for Komerční. We see that at the people's engagement index, which is at the level of 77 positive points. We were able to unify our clients around the bank's proposition and around the constant, responsible, reliable, tireless service in both the physical and the digital world. The clients are showing us their feedback through Net Promoter Score, which also landed at high levels, and I will come back to it in a minute.
We were, last but not least, able to unify also investors around the strong responsible and predictable and credible business and financial performance of the bank and strict management of our risks. This is being visible also at the current level of the share price, which is currently oscillating around CZK 1,000 which was last time the reality in 2017, and we are very much thankful for the attention and the sympathies you are paying to the share of KB. The highlights as of 31 December 2021 are framed by full speed implementation of our strategic plan. We have launched the new digital bank in the form of new mobile banking application.
I am one of the proud testers of this new solution, and we are convinced that we will bring to the clients, to our clients, a revolutionary digital proposition, for their financial and banking needs. The Net Promoter Score displayed by our clients is landing around 40 positive points in individual and small businesses, and is higher at 45 positive points in corporate segments. In Slovakia, we are still above 60 and we are far ahead of any other competitor there.
The people engagement level is at 77% of satisfaction, which is giving us a good hope that there is a purpose why people are working for Komerční banka, and Komerční banka is satisfying them with delivering enough space for fulfilling their dreams. When we turn to business, our loan portfolio expanded by almost 7% and landed at the level of CZK 740 billion, mainly driven by very dynamic development of a very dynamic performance of housing loans provided by both Komerční banka and Modrá pyramida, a building savings company. Housing loans grew by almost 10% and are representing CZK 340 billion in the loan book.
Client deposits and we didn't do much to attract new deposits in 2021. Were growing by 6.2% on year-over-year basis and landed at CZK 950 billion level. The volume of clients assets in mutual funds, in pension schemes and life insurance grew by 7%, so even faster than deposits themselves, and are representing today CZK 203 billion under the management of KB and KB Group. The fourth quarter of last year was very strong for Komerční banka. There were mainly two reasons. The first one is revenues growing by almost 20% compared to fourth quarter 2020 and excellent asset quality.
Didier Colin, the Chief Risk Officer, will tell you more. We were down by almost 100% of creation of provisions for our cost of risk. Full year 2021 net profit, which is up by 56% year-over-year, was driven by improvement in revenues and disciplined cost management. Let me say that by growth of OpEx by 0.7%, including higher regulatory costs, are moving us to probably the most efficient banks in this region. I have already mentioned the negligible creation of provisions for cost of risk. All of these positive trends are leading to a net profit, which reached to CZK 12.7 billion.
Out of CZK 12.7 billion, we will move to a state treasury CZK 3 billion on income tax alongside or together with the health and social charges, you know, for the employees. Our dividend proposal made by Board of Directors of Komerční banka is at the level of CZK 8.3 billion in total which represents CZK 43.8 per share. We are proposing that to the General Shareholders Meeting, which is the one condition of the payment. The other one is the Czech National Bank green light. The further excess of capital we intend to address in the second half of 2022.
Komerční banka was awarded various awards from external parties. The Banker selected us as the bank of the year for 2021. Finparáda.cz selected the consumer loan of Komerční banka as the best financial product for 2021. We were named the sustainable bank for 2021 and the corporate bank of the year 2020 by Fincentrum Banka roku Award. We can move to next. Macroeconomic environment. Last year, Czech Republic GDP grew by 3.3%. In 2022, our macroeconomists say it might be achieving 4.9%, which this prediction is putting them rather on the positive side of the spectrum of Czech macroeconomic teams.
This growth will be driven by exports where the disruptions on the supply chain should be resolved. And they are being resolved more or less as we speak already. And also by fixed investments on public and private side and household consumption. We see that in 2021, also due to this disruption already mentioned in the supply chain and lack of some spare parts, mainly the semiconductors, the Czech car production was down by 4.1%. The labor market remains very shallow.
Mathematically, there is no unemployment in the Czech Republic and we have very, I would say, poor immigration policy in place. So we are not helping ourselves as a country, unfortunately, to solve the problem of lack of labor resources quickly, which is translated in the demand for salary increase as one of the inflation factors. Speaking about inflation, this has already shown its teeth at the end of last year when there was 6.6% recorded in December. Average growth of CPI was at the level of 3.8%. As a result of everything, Czech koruna is strengthening. End of last year at the level of CZK 24.9 per euro.
This strengthening continues also this year. Here we see that there is a quite solid probability that we will see the koruna below 24 per euro during 2022. Czech National Bank, as it is very well known to all of you, is reacting to the inflation tendency very fast and very strong by increasing the base rate. Jiří Š perl will provide you with more, I would say, view on what does it mean for us. Currently, we are having the base rate, the two-week repo rate at the level of 4.5% after the triple hike made at the beginning of February of this year. We can move to the next one.
Maybe it's worth to mention here in the context of macroeconomic environment that we have new government in place. The government has just presented the state budget in recent days. The government is fully engaged and committed and acting upon improvements on state budget deficit and improvements on indebtedness, even though Czech Republic remains as one of the lowest indebted countries in the European context. The pandemic update for those who are not familiar, as everywhere in the world, we have Omicron in the town. The healthcare system is coping with the situation quite successfully as we speak.
We have 64% of the population fully vaccinated and 35% with the booster vaccine, with the third jab of the vaccine. Containment measures remain rather soft in the current context. This is mainly masks remain mandatory in public transport in closed spaces in buildings. There are some limits on cultural and sport events as far as the capacity is concerned. We still have in place obligatory testing of people at work or kids in schools which should evaporate, if I'm not mistaken, next week.
One of the drivers we expect will play a significant role starting in 2022 and continuing in following years is named NextGenerationEU. Czech Republic should receive equivalent of CZK 7 billion. Oh, sorry, EUR 7 billion, mainly in grants for projects protecting climate, for projects supporting digitization. We see that the pre-financing has already been visible in 2021. You will see that in our list of tombstones of important transactions, mainly coming from municipalities and regions. The COVID guaranteed lending under the name of COVID III was ended at the end of last year. There are debates whether in some form this program should continue or not.
We are well prepared as we were the majority distributor. We distributed more than 50% of the COVID III program towards the clients from small and medium-sized enterprises. We can move to next page, please. The business performance. Let's start with digital and innovation. I will start from the bottom right-hand side, if you allow me. We have more than one million active users of our mobile banking application. Even though the group is taking care of approximately 2.3 million-2.4 million clients, the banking clients on its own are 1.6 million.
In relative terms, one million active users makes our position quite unique among the peer banks. Close to one million clients are also using KB Klíč as an authentication tool for signing documents. Digital wallet use and tokenized cards through Apple Pay, Google Pay, Garmin Pay, or Fitbit Pay is also growing in a very dynamic way. Mobile banking is initiating payments for CZK 85.3 billion in fourth quarter 2021, which is very dynamic growth of more than 180%.
Speaking about channels, our ESSOX production of consumer lending and our consumer lending or consumer credit production from Komerční banka are probably the champions of digital sales. Mortgages, credit cards, and personal accounts are still waiting for updated and upgraded solutions, which will be either provided by new digital bank or will be provided by other parts of the new digital tech on which we are very intensively working. When we go to BankID. BankID is gaining positive traction. We are one of the founding partners or founding shareholders.
We are very proud that the company is extending the service for digital signature and is helping the overall country to digitize the clients' journey, not only in the private but also in the public services. Komerční banka, together with Visa, with Association of Social Responsibility and with e-shop comparator Heureka, are putting together the label for ESG responsible e-shops to put the ESG element into the minds and habits of Czech e-shops. ESSOX, as one of the very positive contributors to the innovative movement of Czech financial sector, has presented a deferred payment for the customers of Czech e-shops.
This is the digital and innovation. Can we move to the next one, please? Lending. It's up by 7%. Very dynamic growth. Let me compare it with the growth of GDP in Czech Republic. Very strong last quarter, more than 2% higher than Q3. The engines of how we're working on full steam. Modrá pyramida building savings company was growing its production by almost 19%. 7% were up in the production of mortgages by Komerční banka. There was a growth of 2% by consumer loans by KB and approximately 5% growth of business loans.
Business loans, the breakdown on the right-hand side is showing that the most dynamically evolving group of companies were Czech corporates, which were serviced by Komerční banka, ESSOX wholesale or factoring and other solutions. Speaking about small and medium-sized companies, growth were totaling of 4.3%, and there was rather moderate growth of leasing solutions by SGEF at the level of 1.1%.
You see at the right-hand side, the bottom part of the page that the production of mortgages by KB and by Modrá pyramida building saving company remained strong over the year, over the entire four quarters of 2021, even though at the end of the year, there was a little slowdown, which continues also this year as a combination of stricter regulatory measures taken by Czech National Bank and obviously the increased rates.
The battlefield or the competitive field is moving from production of new businesses in mortgages to risk management of the portfolio, where we believe, and will tell you more in a few minutes, that we are well-positioned also for the future. Despite this very dynamic growth of loans, the net loans to deposits ratio remained at very safe level of 76.4%, and the liquidity coverage ratio at a level of almost 150%. We can go to the next page, please. Those are the tombstones, so I will not describe one deal after the other.
Let me just declare on behalf of our teams of corporate bankers that they were busy with all classes of sectors in Czech economy. We played well the role of universal bank and traditionally one of the strongest corporate banks in the country. Supporting either new investments or working capital facilities for our clients, as well as increasing the business with municipalities and regions. I spoke about those regions who are preparing the investments in infrastructure also using the EU recovery fund money. Next page, please. Those are deposits. We didn't do much for attracting new deposits into the bank. Nonetheless, being recognized as a trusted partner of our clients, we detected a growth by more than 6% of the deposits.
What is interesting here is that after Czech households and Czech companies piling up their money on the current accounts now, they were more choosing the option of saving accounts and term deposits. What is for us very important and very, I would say, promising part of the fee business is the fact that the non-bank assets under management grew even faster. So there was like 7% growth on year-over-year basis. By far the best driver was mutual funds provided by Amundi or SG Private Banking or KB Private Banking Solutions. The growth was double-digit at around 13%.
Pension schemes were growing traditionally in a very stable way by 6.5% whereas the Komerční pojišťovna insurance product were staying at slightly below zero. We can move to the next page. With the next page, I'm handing over the word to Jiri Sperl, our CFO. Thank you.
Thank you very much, Jan. Good afternoon, everyone. Let's deep dive a bit into financials. The last chart is, I would say, traditionally showing contribution of individual P&L categories into the growth from year-on-year perspective. You can see here that everything is gray, which means positive contribution, naturally except taxes. From the higher profit, we pay higher taxes. The biggest contribution on a year-on-year basis is coming, as indicated by Jan, from cost of risk, driven by the great quality of our assets. Also, I would say other components are pretty strong, and I will comment on them a bit later. The right-hand chart is a new one, and it's showing quarterly evolution of our P&L in four key categories.
That's revenues, costs, cost of risk, and others. Behind others, you can see mainly taxes, and at the same time income from other assets and so on. It's very clearly visible that the trends are very promising and proving our resilience in the difficult environment. Probably not necessary to comment on cost evolution. It's basically stable and flat. We are known by disciplined cost management and operational efficiency. What's even more important for me is evolution of revenues. It is a red part of the chart that are after the drop in second quarter 2020 when COVID times has started growing a sixth quarter in a row. In last quarter, growth even accelerated.
Also cost of risk, you can see some cost of risk in the beginning of 2020, but nothing since that time, or almost nothing since that time. Didier will present in detail later on. No surprise that this added also to our profitability indicators, the bottom part of the slide. Just to select one of them, it's ROTE, return on tangible equity, so it's almost at 12%. It's necessary, probably I was mentioning also last quarter, to add that this is still suppressed by inflated capital due to ban on dividends. Without this surplus, it would be fairly above 13%. Next slide, please. Yeah, balance sheet. Total assets have increased by 6.6% year-on-year.
Main drivers are naturally the deposits growing in absolute terms by CZK 51 billion. Also capital, due to mentioned ban on dividends, so it is growing by roughly CZK 10 billion. In terms of placing of these new resources, they have been placed primarily to loans, as is our, let's say, clear preference and priority. So it's by CZK 45 billion higher than one year ago. The remaining liquidity surplus has been placed this year mainly to Czech govies growing strongly by 20%. It is not visible from this slide, so only a brief comment.
The balance sheet shrank in Q4 significantly, I mean, like quarter-over-quarter, by roughly CZK 130 billion or CZK 140 billion or around 10%, if you wish, as a result of its optimization due to resolution fund charge. You know, this reasoning and this story. To conclude, at this slide, balance sheet is strong, which is, by the way, also the case for the capital. This can be seen at this slide. We are standing at 21.3% now. It's worth saying that, this figure doesn't include new generated fresh equity. What I mean is profit of 2021.
If we edit 100% of this profit, the capital adequacy would be by roughly 250 basis points-260 basis points even higher. Year-on-year, it's a bit down. It is down by 100 basis points. Not surprisingly, mainly due to organic growth. I mean, mainly, of course, loans that deducted around 126 basis points. The pressure is still offset by retained profit from 2020. That was accrued in 2020, but majority of that not paid due to the mentioned ban. The risk-weighted asset density is important indicator as well is basically flattish. It is described at the bottom right part of this slide and is still below 40%.
It was already mentioned by Jan a couple of minutes ago. Of course, this capital strength is giving us a substantial space for returning it to our shareholders. We are going to do that and I will talk about that in a minute. Only two sentences about the chart on the right-hand side. It is showing accounting equity evolution in 2021. It has increased by, say, CZK 9 billion after inclusion of the yearly profit, while partially offset by the first tranche of dividends from 2020. So that's CZK 4.5 billion, I was mentioning before, at the end of 2021, and also by evaluations. Let's move to revenues, and let's start with net interest income. NII is booming and finally increasing, also on year-on-year basis.
It's +2% as shown at the bottom right chart. Still with negative on a yearly basis contribution from deposits, but at the same time very promising contribution from loans. You can see here that loans in last year income from loans increased by roughly 7%. It is attributed mainly to volumes as margins basically more or less remained flattish. Or if I would like to be more precise, a bit eroding in retail area, mainly in mortgage loans, but at the same time, growing on CIB business. If I have a look on quarterly evolution for that right upper chart, the jump by 20%, almost 20%, is a combination of acceleration of business activities or volumes of loans, if you wish.
At the same time, huge jumps of market interest rates given by CNB policy during both the last two quarters. Of course, here in quarter perspective, it's more impacting, positively impacting income from deposits as we place natural liquidity surplus for higher yields, while so far pass-through to deposit rates is rather limited. It is also worth to mention at this chart that in Q4 the growth was materially supported by NII generated by our IB guys, driven by increase in market interest rates. You can see here that it doubled from the blue part of the chart of the bar. It doubled from CZK 250 million to almost CZK 500 million. NIM, that's the left upper chart.
It's recovered quarter-over-quarter by 16 basis points, partially also due to technical reasons, and stands at 193. Year over year, it is still 10 basis points down, but obviously a bit better than we were guiding last quarter. Next slide, please. Yeah, thank you. I would say we are delivering a very solid result in Q4. It's more than 12% quarter-over-quarter. That's true that Q4, and you can see that even last year, is usually the best quarter of every year. But also on a year-over-year basis it is growing very strongly by almost 10%. From the chart below, you can see what are the main drivers. No doubts, driver number one in terms both in relative and absolute terms are fees from cross-selling.
It's a very important part of our strategy to increase penetration here. By increasing volume of assets under management and at the same time improving quality of these sales in favor to equity linked mutual funds. Another positive driver are specialized financial services that are growing even faster by almost 40%. Majority of this super fast growth has been generated in first half of this year. What you can see behind are the Debt Capital Markets and advisory services, maybe more generally value-added services. Also important part of our strategy. Please, let's go to financial operations.
Well, despite the correction in Q4, when the results are only CZK 675 million on a full year basis, and I can say that probably it is the best year in the history of the bank. The correction has been reported on capital markets side. Always we are saying that IB income is by definition more volatile. After super excellent three previous quarter at the level of CZK 1 billion, I would say that we got closer to normal. To remind what I was saying at NII part also here, in NII, IB was contributing more than one quarter ago by almost a quarter of a billion CZK. For the other part of these revenues, meaning the net gains on effects from payments.
That's the blue part of the chart. Also here the results are strong. It is at the level of CZK 400 million, so comparable to Q3 last year. The reasons or drivers are the same. It's basically continuing recovery in traveling, both inbound and outbound. Of course, obviously related currency conversions. Cost base, Kuba or David Formánek. I would say no surprise. Basically flattish. Only category growing are regulatory costs which was already announced at the beginning of the year. That's mainly about resolution charge and insurance fund charges. Otherwise it is basically flat, as can be seen at the bottom right chart.
Personal costs are positively influenced by increase of operational efficiency, further increase of operational efficiency, i.e., decrease of FTEs by roughly 4% in 2021, as shown on left upper chart. G&A bank is flattish. Maybe just one comment I would like to add here is that there is a bit shift in the structure, so lower real estate costs as we centralized head office buildings are offset by higher IT support due to transformation. Regulatory costs I was mentioning, so it goes basically together with the market. For market the growth was 15%, for KB a bit less. Unfortunately, I have to indicate that for 2022 the trend is going to continue. According to announcement of CNB the charge for the whole sector will be higher.
You will see it will be the part of KB. Finally, the depreciation and amortization is slightly up. It is +3%. That's nothing else than let's say accelerated investments into our transformation as well. Of course, positive jaws as FNB is growing much faster than costs, so this and further improvement of cost-income ratio. This trend is going to continue even in 2022. Cost-income ratio on full year basis and that's the left bottom chart is already below 50%. To remind our target for 2025 is 40% or below 40%. To say we do not have results of the tier one Czech banks yet. If I should indicate, I have no doubts that we stay leader in this area and in this race. That's a GUI.
Now I'm passing the floor to Didier for asset quality and cost of risk.
Thank you, Jiří. Good afternoon, everyone. Turning to the quality of our loan book and its evolution over the fourth quarter. Probably the most important message, which is not really detailed and illustrated on this slide, is that our key credit risk indicators in the fourth quarter reconfirm the resilience of our loan book. This is in fact seen on our default rate level, which across all client segments and across all retail loan product categories continue to be on a declining trend in the fourth quarter last year. In fact, more or less returning to their pre-COVID levels.
The second element on this slide related to asset quality, which I would like to comment in a little bit more details, is, as you can see on the top right chart, the evolution of our exposure classified as two, so sensitive part of our loan portfolio, which increased by roughly CZK 15 billion in the fourth quarter of last year. In fact, this 15 billion increase is made of three main elements, which I'm going to detail a little bit for you. The first one, at the level of near 8 billion CZK, is coming from a change in our credit risk classification methodology, which was implemented at the request of the European Central Bank.
This methodology change resulted into a limited increase of the probabilities of default for our credit exposure with better ratings. Had we performed this methodology adjustment at the end of 2020, the impact would have been at the same level. In other words, this first element is of technical nature having not much to do with the evolution of the risk profile of our loan portfolio in 2021. That's for the first element within this CZK 15 billion increase. The second one, at the level of CZK 6 billion, in fact is corresponds de facto to the anticipation of some possible risk rating downgrades that could impact our higher risk profile retail exposures in the context of the recent interest rate hikes and higher inflation.
Another sign of our prudent approach to credit risk monitoring and provisioning. The third element within this CZK 15 billion increase of our S2 exposure is at a much lower level of CZK 2 billion, and was generated by a rather prudent monitoring of our COVID III loan exposure. This portfolio entering its bullet amortization period, which in fact started in the fourth quarter last year, and is concentrated throughout the entire 2022 year. This low impact of only CZK 2 billion can in fact be positively interpreted as the result of our balanced corporate credit policies through the COVID pandemic period. Keeping in mind that KB's market share for this COVID III loan program reached a level above, slightly above 44.0%.
All in all, our S2 ratio moved a bit up from Q3 to Q4, from 5.8%- 7.8%. Mechanically, our provision coverage ratio for this asset class contracted a bit from 5.6% last quarter or Q3 to 4.3% at the end of Q4. I will go quickly for commenting the NPL asset class. As you can see, it further contracted a bit by CZK 1 billion, which took our NPL ratio down from 2.7% at the end of the third quarter to 2.5% at the end of the fourth quarter last year.
Behind this further decrease, the main element is the low migration intensity into default territory, as well as some positive resolution of some client situations in the default territory, again being positively resolved. All in all, our NPL provision coverage continued to be stable above the level of 50%. As in the previous quarters, above the EU average, which is fluctuating between 45% and 50%. Now turning to the overview of our cost of risk, on the next slide, and starting with the quarterly view. As mentioned by Jan and Jiří, in the Q4, we created only CZK 12 million.
This 12 million CZK provision creations, in fact, is the result of three main components going in different, if not opposite directions. The first one is a net provision release for nearly CZK 200 million, CZK 197 million precisely. This one was generated by the statutory recalibrations of our provisioning models and methodologies. Not to go into the details of this IFRS 9 complexity. In fact, this release reflected the improved macroeconomic prospects as well as the continued resilience of our recent recovery performance in the last two years, to be precise. Those two drivers were partially offset by the adjustment of our stage two credit classification methodology which I just mentioned earlier.
The second component, as you can see, is a net release for almost CZK 40 million on our defaulted portfolio. This one being broken down to two pieces. CZK 60 million in net creation on our defaulted corporate exposures, versus CZK 100 million in net releases coming from our defaulted retail exposures. This level of release reflecting the strong level in our recovery performance, both on our mortgage loan portfolio as well as our NPL small business portfolio. Finally, the third component, making up this CZK 12 million in net creation for the first quarter last year, is a net creation close to CZK 250 million on our non-defaulted exposure.
This illustrates what Jan said earlier, essentially reflecting our continued effort to monitor our more sensitive exposure in the post-COVID period, taking a prudent approach. A few words on the full year view. Our cost of risk was recorded at a level of 10 basis points, which is in line with what we issued as a guidance last quarter in November. Not a surprise, this 10 basis points is made of the foreign component, 7 basis points on less than 10 NPA corporate exposures, 9 basis points on our non-defaulted corporate exposures, half of it being booked on portfolio reserves in line with our prudent provision policy.
Zero cost of risk level on our defaulted retail exposure. Again, reflecting our strong collection performance mainly on mortgage loans. Then going in the territory of net releases, - 2 basis points on our non-defaulted retail exposures, reflecting the quality of our loan portfolio, for the retail segments, and - 4 basis points coming from these IFRS 9 recalibration of our provisioning models and methodologies. This level of - 4 basis points is quite an achievement, keeping in mind that IFRS 9 is a procyclical provisioning standard, and COVID was a rather turbulent environment, making this again a good level reached at the end of last year. Finally, before handing back to Jiří, just one word on our guidance for the full year 2022.
This guidance will be brief and prudent and will be at the maximum level of 15 basis point. Now handing over back to you, Jiří . Thank you.
Thank you, Didier. Let me now elaborate a bit on dividends and general management considerations on capital management. I think it's important. Let me summarize the context briefly to say due to the ban on dividends, so the banks, all banks, of course including KB, have not been allowed to pay dividends since COVID time started. That can be seen on the upper chart. Dividends both from 2019 and 2020 profits has to be retained, and that's basically why we are so overcapitalized. The things have started to change in September when CNB has informed the market that it would no longer apply sector-wide restriction for dividend payments.
At the same time, they allowed banks to pay kind of first tranche from retained 2019 and 2020 profits. That's what we did and paid roughly CZK 4.5 billion in December last year. A very important message on this slide is that now KB Board of Directors intends to resume its standard dividend policy which stays between 60%-70% of net profit generated in the preceding year. Having said this, and Jan already mentioned that KB Board of Directors is suggesting to the general meeting of Komerční banka that will be held in April, in two months.
Payment of dividends at level CZK 8.3 billion, which represents roughly 65% share of last year's profit. Of course, this proposal is still subject to different validations, consents. One of them is coming from CNB, another one from general meeting, and so on. Anyway, this is not all. After payment of the dividend from 2021, there will be, let's say, non-negligible surplus of capital in our balance sheet. As you might know, it is not our policy to sit on money of our shareholders.
To say, additional steps in releasing the excess equity will come and will be considered in the second half of 2022 upon finalization of the annual regulatory stress exercise. What I mean is, ICAAP as exactly as CNB stipulated in its letter dated in September of 2021 to all Czech banks. For 2022, it's easy and obvious from what I said before, board of directors is approved or is suggesting a dividend policy of 65% payout which is gonna be accrued throughout the year. That's capital dividends. The last slide of this presentation is related to outlook.
I think Jan already mentioned some key macroeconomic assumptions like growth of economy, inflation. Probably I should add only expectation on interest rates as important into our financials. I would say after all hikes CNB announced in previous, I don't know, nine months, I think that we are at the end of this cycle. Our financial plans assume that 4.5% repo rate, as is the case now, will stay there for some time. If I'm saying some time, around one year, and then will go down to, I would say, more of normal levels. Yes, we could be a bit surprised. There could be one more hike in March.
From our perspective, the most important input into these considerations is inflation, which by the way is gonna be presented to markets at the beginning of next week. I can imagine that if it goes above 10%, probably CNB will act, but it is not currently our baseline. Banking market outlook, our expectation is that it is going to grow mid-single digit both in lending area and deposit area. In lending, there will be two offsetting factors compared to 2021. It's related with housing loans are gonna accelerate compared to the previous year. This should be offset by deceleration of consumer lending area.
What will be our positioning at this growing market is not surprising. We would like to gain a bit of market share in loans, as was the case in 2020 and also 2021. Our clear intention objective is to grow upper mid-single-digit basis in total, while in deposit area we are okay with mid-single digit. In other words, let's say to maintain market shares. The reasons are obvious. Simply excellent liquidity is not pushing us to be very active in this field, as was already, by the way, mentioned by Jan. KB financial outlook. Well, revenues are expected to grow at a double-digit pace.
Maybe I should even be a bit more concrete. If I'm saying double-digit, I mean high-teens-digit growth. Driven mainly by net interest income. Double-digit growing net interest income. Cross-selling, yeah. Financial operations a bit down. Again, the reason is obvious. We don't think that repetition of 2021 would be realistic, so slightly down. OpEx we are saying here is going to grow below inflation. I agree with you that this is not super strong statement because inflation is expected at 8%-9%. To be a bit more precise, we are expecting well below, but at the same time digit and again, what you can see behind are basically a significant increase of regulatory charges.
This is one thing. Other thing, inflation and related increased prices of energy. But at the same time, also our investments into new digital bank and transformation generally. Did you already cover cost of risk? I'm skipping and moving to risks. I would say again, not a big surprise, so probably the biggest risk is a prolongation of the pandemic situation. We are here listing also other black swans like military escalation of the conflict in Eastern Europe and so on but definitely this is not our baseline scenario, at least, for the time being. That's it, and I'm pleased to return the word to Jan Juchelka. Or, Jakub.
I will thank you for the presentation part, and we will now answer your questions. Let me just remind you that this call is being recorded. If you have a question, please use the raise hand functionality on the upper part of the application screen. Later I will also give opportunity to ask questions for those of you who are connected via telephone, but let's start with the questions from the application. Our first question comes from Gabor Kemeny from Autonomous Research. Gabor.
Hello, thank you for this comprehensive presentation. I'd like to ask first about net interest income after this very impressive growth in the fourth quarter. Can you remind us about your interest rate sensitivity or your sensitivity to rising Czech interest rates? Probably easiest if we start from the Q4 level, which I think was a bit below 3% PRIBOR. What's the incremental upside from current levels of around 4.5%-4.7% that would be useful. Secondly, just on the guidance which I understand is high-teens NII, high-teens revenue growth, can we confirm that? I mean, on my numbers this would imply an NII growth well above 20%, potentially even above 25%. Can you talk a bit about that, please? Just on the dividends, are there any puts and takes we should be aware around the stress test you mentioned? Do we know the timeline here?
Lastly, on the magnitude of the dividends, did I get you correctly that you would look to pay out anything above the minimum requirement plus 200 basis points, which is roughly 19% capital ratio? Thank you.
Well, four questions. First one related to sensitivity, and basically, I understand the question, Gabor why so great NII in Q4 last year. Maybe to say that, and I think I was indicating during Q3 results that the short-term rates sensitivity for one hike is around CZK 300 million. At the end of the day, the result is even a bit better. Why? You know, the sensitivity we are presenting to you is assuming also let's say related change or adjustments in client pricing. To say, here we are a bit delayed. Yeah.
If I'm saying delayed, I mean consciously delayed. Basically I can say that this is the case for all tier one banks in the Czech Republic. That's true that the smaller, so challenging, banks already offer a much higher rates to the to the clients, not us yet. Why we do that? You know, some arguments have been already mentioned, simply super strong liquidity. Second one, deposits are becoming more expensive due to resolution fund charges. We are very much performance driven, so we wait a bit. How to calibrate it? Basically, we would like, and maybe I was touching this point also during the previous quarter.
Basically we would like to return to pre-COVID NIM levels which probably we will be able to be there in 2022. That's first question. Second question was just confirmation that if revenues are growing high teens%, that NII is growing above 20%. The answer is yes. Yes, we are really expecting a huge jump of net interest income. I can talk about that later on. Dividends, if I understand the question well. First sub-question was, are there any threats in stress tests? I, you know, never say never, but I don't see any because we are submitting stress testing. I keep on semi-annual basis.
Last one was submitted in November or maybe even December. From these stress tests didn't appear anything I would say threatening or appealing. I would say even perfectly under control. Timeline. What was the question? When the dividends are gonna be paid. The first tranche, so meaning dividend from 2021 profit subject to approvals. Last one will be by general meeting in April. The payment will be in 5th May . The other tranche, the release of remaining surplus of equity, as I was saying, it is subject to ICAAP Edition one 2022.
Which is gonna be according to timetables by CNB, submitted to CNB by the end of April. Of course, it takes some time because at the end of the day, this has to be somehow also validated or approved by college, ECB and so on. Usually, we are getting the first indications during the end of summer, beginning of autumn. That's why we are saying that the potential other tranche is gonna be paid in second half, if I should guess, September, October, but it is just my personal guess. The last one, my notice dividends plus 200. Well, okay.
If we do what I was indicating, so to pay CZK 65 from 2021, and CZK 65 from 2022, and to relieve the surplus. Here I'm getting back and referring to what I was telling you during Q2 and Q3 presentation. We defined a capital surplus at the level of CZK 10.5 billion, which is around CZK 55 per share.
How this figure has been calculated or quantified, if I take 65% of the profit from 2019 and 2020, this would give roughly CZK 15 billion, out of which CZK 1.5 billion have been already paid December last year 2021 and the remaining is CZK 10.5 billion. Please take it just and only as a simulation. This is not prospective statement, but if this happens, we are still slightly above the management buffer. Last point, we are not, or at least for the time being, it is not at our table to increase management buffer from current level which is 50 basis points to 200 basis points. I believe I answered all your questions, Gabor.
Indeed you did. Very helpful and comprehensive. Thanks. One small follow-up. Are you now expecting this CZK 300 million additional NII from one CNB hike, or is this now a lower number?
Uh, I just [crosstalk]
For me.
It is a bit lower number because you can see that current accounts or not paid deposits are decelerating. It is natural because simply clients are more and more pushing for some remuneration. On current accounts there is zero, they are switching their deposits into paid deposits, typically savings and time deposits. As of now, the sensitivity decrease, on top of my head it is around CZK 260 million per one potential hike.
Got it. Very helpful. Thank you.
Thank you. Next question is going to be asked by Simon Harris from Citi. Simon, please.
Oh, hi. Thanks very much for the call. Yeah, I was hoping you could elaborate a bit more on risk costs, the risk costs outlook for this year and where you see kind of the normalized cost of risk because I think it has been kind of trending downwards. If you could clarify a bit what you're thinking about for risk costs this year and the normalized cost of risk, that'd be my first question.
Thank you for the [crosstalk]
Should I go all the questions or should I go one by one?
It's up to you.
Yeah, why don't we go one by one?
Okay, basically what I said is that I put a cap of at 15 basis point, 15 . Basically, going forward, what we see is probably three things. One is some potential in terms of natural releases coming from the NPA corporate portfolio, the continued resilience of the retail portfolio, and here, as you have heard, we've booked another reserve just to be on the safe side.
The last one, which is still today very much an open question, is the nearly CZK 2 billion that we've accumulated as IFRS 9 reserves, being one, the forward-looking results and two, the overlay reserves, most of them being booked on a specific sector. This third component. It's probably the one that is the most difficult to predict. How we will manage it is still a bit an open question. This is why I said that 15 is our guidance, but definitely as a cap.
Understood for this year. Going forward, is that?
That's for 2020, so that's going forward. What I just said is for 2022 year end, so. We don't go beyond.
You don't go beyond.
No, no, no.
Okay. My second question would actually be on the capital position again. I mean, I think it's very clear. You're basically saying that you're gonna try to pay out CZK 10.5 billion of excess capital if you're allowed. Is that the message in September or October? And the other question actually is on your pillar two requirements. It went up by 40 basis points. What was the logic of that? And my second question relating to capital is the management buffer. I mean, it seems that the central bank is putting through a lot of increases to the capital requirement. Why do you think a 200 basis point buffer on top of those increases is necessary? It seems quite excessive.
I will start. First one, you know, Simon, I wouldn't say that the way you said it, if it is allowed, simply, it was just a kind of simulation. We will see what will happen. Of course, no commitments at all. I just wanted to show you what would be, what will be the space. This is first. Second, Pillar 2, I don't know exactly what do you mean? You mean the recent increase of Pillar 2? I don't buy by 40 [crosstalk]
Yeah, your-
Points from 2.6.
Yeah.
Well, you know, we have some indications what's behind from CNB. We do not have details. Details are not being shared. Our reading of that is that due to a kind of increased or still remaining uncertainty on the markets, CNB feels safe to add to majority or probably all of Czech banks. So that's our reading. The last question was what?
Just the 200 basis point management buffer.
Yeah. Why so much?
Given that your capital requirement is being raised.
Yeah
By the central bank so much, why do you feel you need such a high buffer on top of that?
Yeah. We believe that relatively soon the capital adequacy will go down due to the release of dividends. We are always adding a potential M&A in line with our strategic plan. We don't intend to change it. We have behind some, let's say, stress testing on, let's say, potential increases of risk rate of our assets. Also significant changes in the market interest rates with the impact into our OCI and so on. Currently I can just repeat that it is not on the table. One day we could get back to that. Not now.
Okay. Just one last thing, just on the regulation and resolution costs. How far along are you in filling those funds, and when could they start to decline?
The fund is almost full. It is expected that there will be last three contributions this year, 2023 and 2024. Then it will be full, and the charge is gonna go only, let's say, on a run basis, because now we are still in the phase it is being filled. Three years remaining.
Okay. That's all for me. Thanks. Thanks very much.
Thank you. Next question comes from the line of Mr. Taborsky. Please go ahead.
Good afternoon. Can you hear me, please? Okay, my name is Josef Taborsky. Thank you very much for your presentation. Can you elaborate a little more on the question why your proposal of first part of dividend is so low? Because it is obvious that there is a huge part of capital and that there could be a like bigger distribution of capital to shareholders. Thank you very much.
Should I take it, Jan? Okay. Well, I thought that I explained already during the presentation on capital planning. Simply the management of the bank is getting back to normal levels, which is the case for 2021 profit. That's why we are announcing 65%. At the same time, for the, let's say, retained rest of retained dividends from 2019 to 2020, it is subject to stress tests requested by the Czech National Bank. There is no other reason than this I mentioned right now.
Sorry, frankly speaking, it is not enough as explanation because there is no such a limit like that. There is no limit for now from Czech National Bank. You could propose or you could draft a higher dividend. Of course, you understand that you are damaging your shareholders. Like CZK 50 in May are not the same like CZK 50 in October or November.
Well, CNB clearly said that, let's say, dividend payments from retained earnings will be possible once getting stress test. When the development, now I'm quoting from the letter of CNB. When the development and impacts of the pandemic in autumn and winter first months are known. Still we are not there. The same like other banks. Not.
It's not full, it's full too, no? Moneta is going to pay more than its part of profit from 2021. Or intends to. I don't know if it will be approved, but.
We intend to pay also more than 65% of 2021 profit but in two tranches. First one now in May, and the other one in second half of the year.
Yes, it creates a loss for your shareholders.
I don't think so. Why are you saying this?
I don't know if I have to explain you, like, concept of time value of money. I suppose you understand very well that, like, as I said, CZK 50 in May are something else than CZK 50 in October, especially in such an inflationary situation in Czech Republic.
Okay. Time value of money. Okay. I'm sorry, but I do not have any more comment on that.
Okay, [crosstalk] thank you. The next question comes from an unidentified line. If you can, maybe, introduce yourself before asking a question. It's line number 26. Starting with 266. Please go ahead.
Hi. Good afternoon. This is Martin Amash here from UBS. Can you hear me?
Yes, Martin, we can. Go ahead.
Perfect. Good afternoon, and thank you for the presentation. I have a couple of smaller questions, please. Firstly, on NII and specifically deposit rates. I think, Jiří , you mentioned that we've seen a bit of a delay in terms of the tier one banks, the larger banks adjusting deposit rates. That certainly has led to the widening of the net interest margin in Q4. Could you share your expectation in terms of deposit betas from here onwards? Surely in this environment, you'll have to pass on a significantly higher amount. Also, if you could comment on client behavior in terms of shifting from sight deposits into term deposits, that would be helpful.
Second question is on operating expenses. I think you have mentioned mid-single-digit guidance for 2022. Could you perhaps break that down for us? What should we expect in terms of personnel expenses and what sort of growth could we see in G&A, you know, related to investments? Lastly, a question on fees. Clearly 2021 was an excellent year in terms of cross-selling, but also you benefited from DCM fees, advisory and other specialized financial services fees. Could you help us understand what is your expectations here for 2022? Perhaps significantly lower cross-selling fees. Maybe 2021 was a sort of like a peak. Also whether advisory and DCM fees should normalize from here onwards, maybe we even see a negative development.
Thank you.
Okay. I will start. First, Miroslav, do you want to take this first one? I can take it.
I can complete you because.[crosstalk]
First question was about more about NII and about expectation in terms of deposit rates, client deposit rates you are going to pay to the client. I can say what is the current situation. Basically, as I was saying before, on current accounts, there is nothing. It's 0 interest rate. For time deposits, we increase rates to level of between 1.5 and 2 percentage points. But it's mainly for new products.
Saving accounts, we went up to 1.5% and discussing further increase. In terms of client behavior, it could be seen already in Q4 last year. This trend is continuing. Simply, there is a switch from current accounts to time deposit savings. I don't have figures in front of me. Maybe Miroslav can complete me, but definitely growth and projected growth of deposits of time deposits/savings is much faster than current accounts. Current accounts are expected to stay basically flat-ish or very slow increase. Before coming to overhead expenses, maybe just a question whether Miroslav would like to complement or complete.
Thank you, Jiri. Just a few sentences. Clients are definitely moving or considering the move from side deposits to other, I would say, financial products. It's not just because of the rate going up, it's also because of the inflation. There's a lot of public discussion about inflation eating out your deposits. This is on one hand helping us to convert those side deposits to something different. You saw it, by the way, on very impressive performance of our assets under management or the new flow to our assets under management solutions. You asked about our gains or rates on deposits. We have never been, and we never intended to be a bank fighting over deposits through very high interest rates, and we plan to keep this approach.
Our mindset is we'd like to remunerate our clients in a fair way and staying around the mid of the market. In general, higher rates create space for higher margins, and this is something we would like to exploit, definitely.
Well, if I may to continue. The third question was about overhead expenses. Yes, I'm confirming that it will be mid-single digit, whatever, around 5%. You know, only if a resolution fund is adding more than CZK 200 million. On top of my head without this impact, the growth would be at the level of three, maybe a three point something, so on like for like basis, only the growth. The main components that are adding to our cost base is, of course, inflation and so price of energies.
It is not very much about staff costs because at the same time, we are coming with another measures. Maybe to mention some of them, we already decided and are going to implement, and it is kind of a public information, further optimization of our branch network. Another 20-22 branches are gonna be closed. At the same time, already confirmed and being implemented a further increase of operational efficiency also on a head office. Here we are talking about a further cuts of FTEs by another 3 percentage points. Probably it's also worth to say that we are probably getting before implementation of or finalization of implementation of a new digital bank.
We are coming to the edge of this exercise at the bank level. At the same time, we started to discuss and implement all these, let's say, centralization of back-office. Let's say, for the bank, also for the subsidiaries. We believe that this could bring another impulse to our efficiency. Let's not forget that on top of that, this is what I usually say or define a safety because we are implementing these features. At the same time, savings is being allocated to the transformation. It is a big topic, and we need to do that. That's overhead expenses and fees. What was the question for. It is going to grow by, let's say, 2%-3%.
We are missing the impulse of CNB, which was also the case last year ago. At the same time, you know, even if I combine growth of 2021 and 2022 on segment basis, this would lead to growth higher than 6% on top of my head, 6.2% or 6.3%. What we are guiding during the KB Change 2025 plan, strategic plan, was that the fees are gonna go on segment basis, mid-single digit around five. Even here we are a bit faster. My colleagues would like to complete me.
Maybe I would add one or two sentences related to the last question. We have signed the collective agreement with our trade unions with the expected average increase of salary at the level of 3%, which is unique on the market. We are still fighting for the best efficiency levels on our cost to income ratio part. You see that we are like north of 40 now, and we would like to turn the bank to the south of 40 or 40% in 2025. We will continue pushing on it. We don't have in our hands the regulatory costs.
We do have in our hands, to a large extent, the OpEx on operation of the banks or of the bank. Speaking about specialized financing related fees, you may have noticed that the beginning of the year was quite busy with a few sustainable linked bonds issued by Czech clients. Société Générale, together with Komerční banka, were appointed as senior members of the syndicate, active book runners. We do believe that a few of the largest companies based and headquartered in Czech Republic will continue their investments either in the country or outside the country, but it's very hard to predict the future.
You were right when saying that 2021 there was a lot of exceptional business coming from this corner. Speaking about the cross-sell, I think that Miroslav has perfectly covered the answer. Let us know whether it was fully answered. Thanks.
It was certainly fully answered. Thank you very much for the details.
Thank you. We have no further questions in the queue, so if you would like to ask a question, we are connected via telephone. Please, press star and six on your telephone keypad, and then ask your question directly. I will give you a few moments to do that. Okay. We don't seem to have any further questions, so I'm handing back to Jan for a concluding remark.
All right. Thank you very much again for sharing your time with us. As I mentioned already at the beginning, we are super happy that 2021 was a rich year for our bank. We believe that the contribution of Komerční banka in supporting Czech economy across the segments, households, small companies, medium-sized companies, large corporations, municipalities, regions, and the government was delivered at adequate level. I need to say that we are systematically working on modernizing the bank. We are investing money into creating a new digital stack and a fully digitized proposition for our clients. We see that already the existing improvements are paying back through the Net Promoter Score.
Speaking about employees, we will be less people working in the bank, and we are one of the few continuously pushing down the number of employees. We are optimizing the network of our branches. We are trying to create additional synergies with our subsidiaries, as I mentioned, hunting for highest achievable efficiency. As a result, we are able and we are glad to say that we are back on track with sharing with the shareholders the traditional level of payout between 60%-70% of the net profit of the previous year.
Yes, we know there is the remaining part of undistributed profits from 2019 and 2020, and as mentioned couple of times by Jiri today, we will decide on the usage in the second half of the year. In the meantime, we stay at the disposal of any of your further requirements, questions. Don't hesitate to turn to us in case there will be more questions to be asked. For today, we thank you very much. We wish you a pleasant afternoon and we are looking forward for seeing you and hearing from you at the latest the occasion of next of first quarter of 2022 results presentation. Thank you very much.
Thank you all, very much. This has concluded today's meeting. Have a nice day. Thank you. You can disconnect.