Afternoon, everyone. Let me welcome you to the presentation of the results of Komerční banka for first nine months of 2021. This time also with an update on deliveries in implementation of KB Change 2025 strategic plan. It is 4th of November 2021. Let me remind you that this call is being recorded. We are going to have the full management board today with us. Our speakers today will be Jan Juchelka, Chairman of the Board and CEO of Komerční banka. He'll be followed by Jiří Šperl, Chief Financial Officer. Didier Colin, Chief Risk Officer. Miroslav Hiršl, Head of Retail Banking. David Formánek, Head of Corporate and Investment Banking.
Jitka Haubová, Chief Operating Officer, and Margus Simson, Chief Digital Officer. As usual, we will begin with the presentation, which then will be followed by a questions and answer session. During the presentation part, all participants will be on a listen-only mode, and I would like to ask you to keep your microphones muted during that time. Of course, there will be an opportunity to ask questions later. Now I would like to hand over to the CEO, Jan Juchelka. Thank you.
All right. Thank you. Thank you, Jakub. Good afternoon, everyone. Thank you very much for being with us. We appreciate your time, your presence with us, and this is my big pleasure together with my colleagues from the management board of Komerční banka and with Jiří Šperl to provide you with the KB group results as of September 30, 2021, including today the update on the implementation of the strategic plan. We can move directly to page number four. Thank you. Here you see the main highlights of events and results as of the end of third quarter. Komerční banka was an active player on the rebounded economic activity of both retail and corporate segments in Czech economy.
The third quarter was represented by increased economic activity, increased traveling of people, increased order books of our clients, and we were active in providing our clients with the appropriate services. That being said, our loan book grew by almost 5% on year-over-year basis. The deposits from both the households and corporate clients was up by 12.1%, and we will come to the detail on the structure. I can say already now that traditionally the Czech households were keeping money or are keeping money on predominantly the new money, predominantly on the current accounts.
Hence here, there is the question whether in combination with the growing inflation rate, it's not time for longer term investments. It is translated into our numbers by creating the stock of almost CZK 200 billion assets under management. On the non-bank part, there was very dynamic growth by 6.1% across the business lines in charge. Mutual funds provided with, in partnership with Amundi, insurance products initiated by Komerční pojišťovna, and our pension corporation of Komerční banka in the field of pension schemes. Revenues grew up by 1.3% to the level of CZK 22.6 billion, whereas the operating expenses were down by 0.7%.
I am very proud of the entire management team who took very seriously the challenge on OpEx management, and we were able to deliver these positive results in this field of expenses and revenues. The cost of risk remained low, and Didier Colin will provide you with details in a few minutes, represented by 14 basis points, or if you wish, CZK 0.7 billion provisioning, which remains in a very moderate field. That being said, all of that translated into profit is displaying CZK 8.6 billion of net profit, which is by 41% more on year-over-year comparison.
We are comparing that with 2020, which was heavily impacted obviously by the pandemic. ROE climbing close to 10%. Return on assets almost 1%. We believe that these numbers will be appreciated or are already appreciated by you guys and by the markets in general. Komerční banka remains a very heavily capitalized bank, so core Tier 1 at the level of 22.5%, capital adequacy at the level of 23%. We will be paying out the dividend already now in 2021, fully framed and in accordance with the paper provided by the Czech National Bank.
It's CZK 4.5 billion Czech crowns, CZK 23.86 per share, already approved by the general shareholders meeting. In the field of digitization, in the field of business, let me say that we have recently celebrated 1 million clients of our mobile banking application. The number is growing further. We are very proud of that, and it's a clear confirmation of our hypothesis that the COVID situation and related processes in the society will simply move people closer to internet banking and mobile banking. With more than 1 million clients, we are indisputable leader in the mobile banking in Czech Republic amongst the comparable players.
During the previous quarter, we were able to make our homework also on the side of creating new potential for revenues by establishing and concluding strategic relationships with important players. Here in that particular case, it's worth to mention that we have signed a deal with ČEZ Group, ČEZ being one of the largest European utility companies and number one in Czech Republic, where we have put together ourselves and SG Equipment Finance, our subsidiary in charge of leasing of equipment, and ČEZ ESCO, when launching a new product for small and medium-sized companies in the field of installations of photovoltaic systems, either on the field or on the roofs of SME clients.
We can move to the next page, which is providing us with our view on the macroeconomic environment, and you are all aware that we are impatiently waiting for the result of the discussion and the decision of The B oard of the Czech National Bank, which should come up in more or less 15 minutes from now, what might be the new hike in rates. I will start with the rates. Czech National Bank has reacted lively on the situation with the inflation and was very active in hiking the rates.
The last decision was the increase by 75 basis points to level of 1.5%, and the market expects it will continue also after today's meeting. Let's see. During our call, we will know more. Speaking of market-driven rates, the longer term 10-year interest rate swap landed at the level of 2.44%, which is 116 basis points up on year-to-date comparison, and 10-year govies at the level of 2.09%, which is almost 80 basis points up on year-to-date. GDP is continuing the positive growth.
Nonetheless, recently our macroeconomists have reviewed their outlook and decreased slightly the level of expected growth of Czech economy. Let's say that the GDP growth is being mainly supported by private consumption and fixed investments from both the public and the private investor side. Car makers are living an unprecedented situation with the disruption of the supply chain and shortage of semiconductors. Also, the third quarter was accompanied by a rather visible decrease of car production when we compare with the previous quarters.
We all are not only the bankers, but everyone is observing that very closely, you know, with high interest of when the supply chain might be cured and will be normalized in not only, but also and mainly for us in the car making sector. The unemployment remained almost invisible. It is still below 3%. Nominal wages are growing up mainly due to the decisions of the government on the side of increasing wages in public sector. The inflation, which I have already mentioned, elevated to very close to 5% back in September, growing by 0.8% compared with August.
It's mainly housing costs, rise of energy prices, and others. We can go to the next page, pandemic situation and pandemic update. Czech Republic is experiencing now huge massive growth of of new cases of COVID-19. We are now breaching the level of 10,000 per day. New measures are being in place. Currently, we don't speak about any, like, lockdown type of decisions by the government. Everyone is also, like, closely monitoring what's going on on the side of potential future decisions of the government. Hopefully improving of the situation.
We as a, as an employer are not experiencing any, I would say, disruptive moments in that respect. Public finances remain stressed, if I may say. You probably know that there were general elections a few weeks ago. We are still waiting on the construction of the new coalition and construction of the new government. Currently, everyone is aware that public finances and the condition of state budget remain one of the most visible priorities for the future government.
Hopefully, the EU Recovery Fund and the National Development Program or National Development Plan, which should bring something like CZK 180 billion, representing almost 3% of the GDP in place in favor of supporting the investments into infrastructure mainly, but also to the modernization of Czech economy, decarbonization of Czech economy and others will help. Let me say that what we know from the public sources, there will be like dedicated ministry on digitization of the country. We hope that all this money which are pre dedicated to digital projects will be wisely used in favor of boosting the prosperity of the country. Sorry.
Komerční banka remains very active in providing the Czech economy with new financing, including the COVID-19 guaranteed lending, where KB plays an important role providing the market with more than one half of the existing CZK 74 billion of guaranteed loans which are already in place. Next page. The next page is dedicated to the multi-channel view on our business. As I've already mentioned, 1 million mobile banking clients was achieved. Hand in hand with that, there is close to 1 million clients who downloaded the KB Key, which is authentication, but in the near future also a signature feature made by KB.
We have also put in place the new, let's say, first stack of the new digital bank. We have, you can imagine sort of minimum viable product type of solution, which is combined with the core banking, the analytic layer and the front end, fully functional, currently tested by 500 users. We launched that back in October 2021, which is part of the story that we are, like, sticking to the deadlines on the development of the new technological stack. The share of sales by channel, and let me just focus on either end-to-end digital or partially digital. We are doing quite well, or very well in the field of consumer lending.
As far as more complicated or more complex products such as mortgage, etc., it's not so impressive. We believe that with the new technological solution brought by new digital bank, we will be able to fully digitize the journey of the client in almost every aspect of the products and services of Komerční banka. When speaking about digital, let me say that the share of either mobile banking or internet banking as a processor of payments is representing like 98% or more than 98% of the transactions processed by our systems. The remaining 1-2 percentage points is dedicated to classical channels, payment paper orders on the branches.
The mobile banking is also a visible enabler for the digital wallet use, where the Apple and Google users are, let's say, growing in very fast pace when using the tokenized cards. In that particular case, it was more than 30,000 on quarter-over-quarter basis and 107,000 on year-over-year basis in our portfolio. We can move to the next page, which is dedicated to lending operations. I have already mentioned, we took an active role in Czech economy when assisting our clients across the segments and providing them with fast, smooth solution on financing of their needs.
One of the most dynamic disciplines in that field was in third quarter the loans dedicated to housing, either provided by Modrá pyramida, which is our building savings company, our 100% subsidiary. The growth was at 17.4% or by the production of Komerční banka, 6.8%, or the activity of business loans. When we focus on the business loans, which is the right-hand side upper part of the page, you see that the main contributors were small and medium-sized companies or small businesses mainly, followed by corporate clients and followed by the dedicated solutions from the kitchen of SGEF, SG Equipment Finance, company.
We do believe that the growth of mortgages and the demand on mortgages, even though it's taking a colder shower coming from the increased rates, will continue in the country highly probably with lower dynamism, with lower rates of growth. Nonetheless, we believe that it will remain until the end of the year one of the main drivers of the loan book. Having said that, the net loans to deposits remained at very comfortable ratio of 68.1% and the liquidity coverage ratio of more than 200%.
Let me conclude that from the capital point of view and from the liquidity point of view, we have huge buffers on the balance sheet. We can go to next page. Here, we are showing you our achievements in helping the clients to realize their projects, realize their plans, realize their investments. One of the most remarkable transactions. We are proud of each of those which are displayed in front of you. Should I pick up three of them, I would probably start with CETIN. Komerční banka, together with Société Générale, was one of the instrumental banks when helping the clients on the advisory side, on the structuring side, when there was the disposal of the minority stake in CETIN.
The PPF Group was assisted by group of banks, where SG together with KB played one of the most senior roles. The other one is U.S. Steel Košice. This is the pioneering sustainability-linked syndicated credit facility, which is mainly helping the company to make other important steps in the field of sustainability, which is always with the steel makers. It's not the easiest homework for them. We are very proud that our Slovak team provided the client with the necessary support together with other banks.
The third one I will pick up here is the HELUZ Group, where Komerční banka was the sole financing arranger, underwriter, and escrow agent in an M&A situation for our long-term clients, one of the leaders in the construction materials. Let's move to the next page, which is dedicated to deposits. Deposits were growing by double-digit concretely to 12.1% on a year-over-year basis. As I have already mentioned, both segments, the households and the corporates, were super active in putting their money into their bank accounts.
The fact is that we need to translate and we need to understand whether these money are buffers for future spendings and investments or whether a part because they are predominantly sitting on current accounts or they might be translated into longer term investments in other products provided by KB Group. Speaking about the non-bank assets under management, I have already mentioned at the beginning of the presentation, there was very strong rebound, very strong momentum on the sales of mutual funds, which we are providing to our clients together with Amundi Group, which exceeded 8%.
1.7%, rather moderate sale of new insurance, KP life insurance products, so insurance, Komerční pojišťovna product, and rather stable and very sympathetic growth of 7.1% in the field of the products of pension schemes provided by pension company of Komerční banka. We can move to the next page, and this is the page where I'm handing over to Jiří Šperl, our CFO. Thank you.
Thank you, Jan. Good morning, ladies and gentlemen. Let me now reiterate a bit more on Jan's statement. He started the presentation. KB Group delivered very sound financial results in last quarter. Simply the positive trends continue after the bottoming in Q2 and Q3 last year. Q3 this year is the fifth consecutive quarter where we are re-reporting increasing net profit after tax. We are reporting more than double profit than one year ago and + 10% more than in the previous quarter. Here, it is driven mainly by strongly recovering net interest income. If I have a look on the results from nine months perspective, the group reported the net profit at the level of CZK 8.6 billion, as mentioned by Jan, plus 41% year-on-year.
From the waterfall chart, it's clear that still the main drivers are the lower cost of risk. That added the majority of the positive impact into our pre-tax profit line due to excellent payment discipline of our clients, but also the financial operations, the biggest jumper in our top line growing by 1/3 year-on-year. Also not to forget a very promising evolution in fees and commissions growing by high single-digit. Costs are not surprisingly under control. The only chapter where we still are a bit lagging behind last year is net interest income. Naturally, all these trends also flow into profitability indicators that are shown at the bottom of this slide. All these further improved, increased on average by 30 basis points-60 basis points, compared to half-year result.
For example, a return on tangible equity is already touching 11 percentage points level. The other indicators are basically following. Maybe here it's worth to mention that, and except our ROE, all these indicators are somehow decreased or suppressed by a massive capital surplus. Adjusted by this, it would lead even to higher values. Moving to the balance sheet. The balance sheet further accelerated given the offensive in the business. Total assets at the level of CZK 1.4 trillion surpassed another historical record. Quarter-over-quarter, there is a growth by roughly CZK 60 billion. Year-over-year growth at the level of 9% was supported mainly by very dynamically growing client deposits Jan was mentioning.
In absolute terms, we are talking about roughly CZK 130 billion, while these new funds have been placed into loans roughly CZK 30 billion and the rest as a liquidity surplus into repo loans with central bank. Having said this, naturally liquidity position further improved. Jan already mentioned some liquidity indicators. To add one more or another one, it's NSFR, Net Stable Funding Ratio, which is also safely above the regulatory limits and is at the level of 120-something percent. The following slide is showing our strong capital base or overcapitalization, if you wish. The capital adequacy in third quarter went down very slightly. It was roughly by 15 basis points, given mainly by organic growth.
While the interim profit has not, due to announced dividend payout at the level of 0%-100%, so it has not increased our regulatory capital base. All in all, capital adequacy stands at the level of 23%, increasing year-to-date by almost 70 basis points. Here at this stage, it is important to mention that, CNB announced some changes in the capital requirements recently. The first one valid since October 1 and following switch from systemic risk buffer to O-SII requirement, which decreased capital requirements of KB by 100 basis points to the level of 15.2. Anyway, it will increase again by cumulative 100 basis points from October next year due to announce two increases in counter-cyclical buffer to 150 basis points. Having said this, the impact is neutral.
That allows me to confirm what I said already during Q1 and Q2 earnings call. Our capital surplus is almost 700 basis points, and even this figure doesn't reflect profit of 2021. Recently, the extraordinary general meeting approved the dividend, as also mentioned. It will be paid to shareholders still before the end of the year. For the rest of the surplus, we will start to discuss with CNB in upcoming weeks. Let's move to key categories of our P&L. Let's start with net interest income. It is strongly recovering even more than expected three months ago. On a quarter-over-quarter basis, it's jumped by almost 9%. Naturally, on top of the balance sheet growth, it was also supported by CNB hiking.
If you go into the structure of NII on a nine-month basis, we are still down by 4.7%, influenced by huge drop of market interest rates in the first half of last year that due to our hedging policy transposed partially into the P&L with a delay, and thus hitting first half of this year. The recovery in Q3, and now I'm referring to the upper right chart, is however enormous, and obviously, it's seen mainly in the revenues, net interest income from deposits as we reinvest them for higher yields. Income from loans is increasing as well, influenced mainly by volumes, partially offset by lower spreads on retail loans, and it's relevant maybe mainly for mortgage loans.
Net interest margin stayed quarter-over-quarter flattish, year to date, at a level of 170 basis points, and the estimation for the year end is up by roughly 15 basis points. Please next slide. The fee income also here the trends continue on year-on-year basis growing by strong 8%, influenced by extraordinary result in field of debt capital markets and advisory services, but also by strongly growing fee from cross-selling, and it's mainly fees from sales of mutual funds and insurance. Altogether, it's plus by 18%. The transaction fees on nine-month basis still down, influenced by lockdown in Q1 this year.
If you move to quarter-over-quarter basis, that's upper right chart, there is a slight decline by roughly 3%, mainly influenced by drop in specialized financial services I was commenting before. Financial operations. It's another excellent quarter, delivering CZK 1 billion, exactly CZK 1 billion, and already now it's very clear that full year 2021 result will be a record year in the history of KB. It's even more valuable if you take into account the fact that both key categories here contributed positively. It's the case for our investment banking operation that succeeded to fully harvest the opportunity given the volatility on the markets related to the dynamic environment here.
What I mean is, expectation of increase of market rates related appreciation of Czech crowns, of course, supported by increased client hedging demand. There is also a good result in FX income from the structural book driven by recovery in traveling, and here I mean both outbound and inbound, and of course related currency conversions. It's worth to mention that in this chapter, I'm expecting a bit correction in Q4 given the fact that for tourism, the season is mainly Q3 naturally, and also COVID-19 is getting somehow back, that naturally will limit this type of operations.
Jiří, sorry for interrupting you, but it's maybe worth to mention that we have just received the decision of the Czech National Bank. If you have spotted that, there was an extraordinary hike by 125 basis points.
That's really a surprise. Back to OpEx. I would say as financial operations was kind of a surprise and a positive surprise, it is not the case for OpEx and no surprise. Still perfectly under control. In nine months, it's slightly down year-over-year in a similar structure like in previous quarters. Let me refer to the bottom right chart. It's - 0.7%, and still personnel costs are down by - 4%. The answer you can find in the left upper chart, it's because of decrease of FTEs in the bank year-over-year by almost 5%. Also G&A is increasing. Here the main impact is or are lower telco costs and real estate costs related to head office centralization.
Still just two chapters within the OpEx line are regulatory costs growing significantly by 11%. I will mention that later; it's going to even continue in 2022. Also depreciation, which is related to increased investments into our transformation. Last point at this slide is related to cost-to-income ratio. It further decreased and on a year-to-date basis is at 50% level. Also here we are expecting trends to continue and not only in Q4 this year, but also for following quarters. Well, that's for now from my side, and I'm passing thoughts to Didier.
Thank you, Jiří. Good afternoon, everyone. Now turning to the asset quality and credit risk profile for the third quarter. As it was the case in the previous quarters, our main indicators continue to confirm the resilience and stability of our risk classification. This is well illustrated, as you can see, by our S2 ratio, which continued to slightly decrease below the level of 6%, while the NPL ratio decreased to 2.7%. Those levels, in fact, being quite in line with the average level of our peers. We recorded some marginal increase of our default rates, especially focused on our terminated mortgage portfolio, but of a completely residual magnitude. Which is also a good sign in terms of the resilience of our portfolio.
As you can see on the right-hand side of this slide, our provision coverage for the defaulted exposures slightly increased in the third quarter. This was the consequence of some, I would say, positive resolution of a couple of corporate client situations, as well as the continued increase of the coverage of our defaulted retail exposures. Just reflecting here the time factor. Going to the cost of risk snapshot on the next slide. As Jan mentioned earlier, we recorded a level of net creation at a low level of CZK 50 million. The structure of this net creation, in fact, is quite similar to the one we've already observed and communicated in the past quarters.
On the one hand, we created a bit of provision at a level of CZK 150 million in net creation for corporate exposures. Here, again, concentrated on something like five client situations going both ways, some creations and some reversals. This was, to some extent, offset by some continued net reversals on our retail exposures. This mainly, as a result of, some continued strong recovery performance for our housing portfolios. Obviously this in a context of a dynamic residential real estate market. All in all, year to date, we recorded a cost of risk at 14 basis points. We are revising downward our guidance.
Guidance which was in the range of 10 basis points-20 basis points at the end of the second quarter, which we will revise down to a level below 10 basis points. Here, there are two main elements behind. The first one is that we anticipate some further net releases, both on our retail portfolios and on our corporate defaulted portfolios. While the second driver will be the impact from the statutory monitoring of our IFRS 9 models, methodologies and reserves. Here the level of this impact will to some large extent depend on the evolution of the macroeconomic environment. There is a bit of uncertainty for the second component. All in all, we are doing this downward revision, as I said, at the level of below 10 basis points.
Now I'm handing over back to Jiří who will complete this 2021 outlook. Thank you.
Thanks, Didier. Jan touched already on macro, so not to repeat it. In terms of growth in the area of loans and deposits, there are basically no changes in our guidance. Loans, both market and KB, still mid-single digit growth. On this growing market, KB is a bit gaining market share here. Deposits growing much faster. In terms of financial outlook, the situation is very dynamic, but it is not changing our guidance compared to what is written on the slide. We are upgrading our guidance in the area of net interest income. We are surprised by the hike by 125, but it's worth mentioning that the impact into 2022 is not very significant.
Let's talk about CZK 100 million compared to the variance of surprise. Newly we are guiding flat-ish or rate zero net interest income, if you wish, versus the previous low single digits decline, which naturally leads to revenue slightly up, let's say low single digits. To remind, three months ago, we are guiding revenues flat. No changes in the guidance for OpEx, so flat-ish and cost of risk was already covered by Didier. That's for outlook. I'm returning for Jan.
All right. Thank you very much. We can now continue together with my colleagues on the update of the implementation of the strategic plan. Just a quick reminder on page number 27, we are building and framing our strategic plan under the purpose claim, which says, we are building together with our clients a better and sustainable future through responsible and innovative financial solutions. Having said that, we see that there is plenty of opportunities of growth around us, and we want to become the leader of the new era of banking for 2 million active banking clients, which is the vision of the company for next five years.
Our clients are seeing three main values and pillars on Komerční banka based on which we can build our conviction on the strategy, which is growth, which is helpfulness, and which is responsibility. Having said that, we have, and you see that as the very last part of the page, the breakdown of company objectives into 10 strategic initiatives, and my colleagues will provide you with the detail of each of them in a second, which is digital bank for people with aspiration, new revenue sources, One Mortgage Factory, market leadership for corporate clients, agile and adaptive organization, fully digital sales and services, next generation of ESG, data-driven company, risk management 2.0, and operational efficiency. I'm handing over to my colleagues Miroslav Hiršl and David Formánek with the next page.
Thank you.
Thank you, Jan, for the floor. Good afternoon to all of you once again. Let's get to page 28 that we will share with David Formánek, and I'll start the comments by speaking about digital bank, new digital bank. The good news, and you heard it already, is that it's up and running. The first drop is alive. When I say the first drop, it's basically just a few functionalities from the client or user's point of view. We are speaking about onboarding. Once you have a KB Klíč, KB Key, you are equipped with it, you can be onboarded. It's opening of the current account and payments. By the way, it's just Czech crown payments, but both instant and standard payments. The point is different.
The point is that what you see touching the mobile bank application is basically just the tip of the iceberg because there's a lot behind. Without much of an exaggeration, I would say there's a whole new bank running behind that already or the start of the whole new bank running behind already. We have 500 registered users. These are all the people from friends and family, which basically means employees for the first part, and a few first accounts already active, and payments are moving, money are being transferred. I am touching the wood so far so good. Speaking about new digital bank, just to confirm that, first, that this is quite major achievement in my eyes.
By the way, it might be good to mention that we started counting people who were directly one way or the other involved in building this first drop, and we reached a number of 300. It's 300 people across the bank on the change path that already worked on this first prototype. Back to our plans, we are on the track, so this is where we wanted to be at this time of the year, and we still plan to keep increasing the number of users, testing things, keep adding additional functionalities, and we would like and plan to introduce the solution to the market in more or less one year time from today. Then at the beginning of year 2023, we should start migration of current client portfolio into the new stack.
That much about the digital side of the new digital bank. Even though we call it digital, it's based on two pillars, and the second one, obviously, is physical, because we very much believe that combining our traditional strengths of physical presence and physical footprint and all our relationships with the clients, with the new digital tools is the best way forward. When I say physical, just a few months ago, I think it was July this year, we opened a branch reconstructed into the new branch concept that is very much going hand in hand with our new digital bank principles. Things like completely paperless, a lot more focused on advisory are just integral part of that. It is just a first branch.
It's sort of a laboratory where we are testing and piloting all those new components and features. When I say testing and piloting, it's true both for our sales force and people in front line, as well as for our clients. Just to remind something that you know, in next four years, we would like to convert 80 out of our total 200 branches into the new branch concept. This is where we are heading. I would now move to the second topic, fully digital sales and services, which is very much linked to the first one.
Let me start by saying that when I would try to summarize where we stand on digital sales and services today, I would say we have an excellent foundation today, as we are pretty good at equipping our clients with all kinds of digital tools. You heard Jan commenting on more than 1 million users of Mobilní banka, a new record reached just recently. A number of users being equipped with KB Klíč reaching almost 1 million, and I am 100% sure that this threshold will be reached quite soon. Multiple of the transactions processed through mobile banking and all these things just, I would say, confirm that the traffic and client traffic there is quite strong. This is always, I would say, the first step.
You need to create the traffic so that then you can start selling and servicing clients there. Even though we are not yet champions in digital sales and digital servicing, and we have, I would say, more ambitious trajectories planned for the time when first deliveries from new digital bank will start coming, there are still some quite successful stories over there. I think you already heard about the consumer loans, end-to-end 27. Basically, if I would simplify, I would say we are selling 1/3 of consumer loans end-to-end in digital. Another 1/3 is still in digital, but digitally originated and processed somewhere within the process manually, and 1/3 in the traditional way. Also, the standard package, Můj Účet current account, already 17% of those accounts are sold in digital way.
We also moved quite well ahead in mutual fund contract selling. It's 14%, for the moment. That much for digital sales and digital services. There might be one more sentence that deserves a few seconds just to remind our long-term targets and ambition for 2025. We said that we would like our end-to-end digital sales in retail to reach 50% of the total, and then that we would like, and we still believe it's achievable, to acquire 40% of our all new clients through digital. By the way, there's one trend that we see, and that is part of our long-term plans as well. There's quite strong inclination of clients towards mobile, a lot more than toward the internet banking.
When you see the frequency of interaction of our clients with the bank, when you see how many times they log on, how many transactions they do, it's like growth by tens of percent every year on mobile and a decline in tens of percent on the internet side, which by the way, is another confirmation that our decision to build everything first on the mobile and only after follow with the internet banking solutions is the right one. Now really moving to the last topic on my list, and this is the topic number four, One Mortgage Factory. Just to say that it is in the phase of a project or initiative for the moment. It's running according to the roadmap.
We still keep our ambition to launch, I would say, the first processing of a housing loan in a year time, more or less from today. It will run first in the regime for family and friends again. A few months later, at the beginning of 2023, we would like to start processing mortgages and all housing loans there on, I would say, a normal operational basis. A year and a half to get to the point where we will have just One Mortgage Factory or better to say, one housing loans factory and all housing loans produced in the group under one roof. There's one small thing, well, it's not that small, important element as well.
Our daughter company, Modrá pyramida. It's now just about these days moving to the new head office that is close to the airport, Stodůlky, the one you know. It will be not just the factory under one roof, but the whole company will be sitting with all of us under one roof. Which I believe will even further facilitate already quite good or well-running cooperation between all the teams. I am touching the wood, but pretty optimistic for this project as well. That's it, and I'm handing over to David Formánek for the other two topics.
Thank you, Miroslav. Good afternoon to everyone. I would like to give you an update on our company objective, new revenue sources. To capture new revenues, we are consequently expanding the scope of our activities by either new equity partnerships, which we perform through our company KB SmartSolutions, or via business partnerships or by promoting or establishing and then promoting internal startups. As an example of the business partnerships, there is the common project, which has been published or publicly announced slightly more than one month ago.
This is the common project with the group ČEZ or the subsidiary of ČEZ ESCO, SG Equipment Finance from our group and KB as such. This alliance has been already commented by Jan earlier during this presentation. I would like just to maybe add that this is the very unique offer for the corporate clients. Giving them the opportunity to use some unused space to build and operate photovoltaic power plants, fully financed by SG Equipment Finance and operated by ČEZ ESCO. Giving these companies the gain on reducing their energy costs.
After one month of marketing of this offer, we registered more than 14 serious negotiations with the clients about the installations. Regarding our equity partnerships, we successfully develop the partnership with the company Roger, which is active in the SME financing and receivables financing, where we together develop especially the area of so-called micro factoring. A specific offer for supply chain financing when using the digital platform developed by Roger company, which is the, let's say, user-friendly platform enabling very easy transacting in the supply chain financing. Another equity partnership, the company Upvest.
Company Upvest is operating crowdfunding platform dedicated to offer the investment to retail clients to especially housing developer projects. We are now expanding the scope of the activities and the usage of this crowdfunding platform. Either to offer the investments into these projects also specifically or and partially exclusively to KB retail clients. We are expanding also the possibility to invest not only into the mezzanine type of financing, also to the senior type of financing, and then not only to the retail or real estate projects, but also to other type of project, especially aimed at ESG projects.
Company Lemonero, which is active in the e-commerce financing, providing or having a very unique assessment tool and then being able to provide financing to the e-commerce companies. As an example of a successful internal startup, I would like to mention a company named KB Advisory. KB Advisory is a small consultancy company active in advising the clients of our bank in the area of energy savings projects or investment projects aimed at improvement of the energy consumption. Also to advise them how to get specific support for various types of investments. During this year, this company was able to provide more than 60 opinions on energy savings projects and is also very active in ESG advisory.
Specifically in the advising the clients about the methodology, how to measure the CO2 output. Sorry, can you hear me?
Yes, we can.
Sorry. There was some interruption on the line. Sorry. Another example is the Bank iD services. Bank iD, this is a company owned by the major banks in the Czech Republic and providing a unified standard of verifying the identity and enabling the digital interaction of private individuals with service providers. KB is one of the banks providing this type of service.
On this platform, we already had more than 600,000 identity verifications, which were performed by 120,000 of KB clients. During this month, there should be additional service, and this is the digital signing inside the Bank i D environment. I would like to move to the next company objective, which is our ambition to be the market leader in the corporate banking area. One of the key results we measure this market leadership is our market share in lending towards corporates.
In this area, the current market share on the lending towards corporate clients is at 17.4%, and there was the increase during this year by roughly 60 basis points. We are on, I would say, well on track to fulfill our long-term objective for 2025, which is at 19.2%. Earlier you had the opportunity to see some examples of large transactions which we were part of during the last quarter, and which is basically also the evidence of successfully fulfilling the ambition to be the market leader in the area of corporate financing.
It's not only about financing, it's also about advisory and where we see a large opportunity for the next period of time. This is the area of sustainability. We established during this year an internet site called sustainablytogether.cz. This is an advisory portal, information portal for our corporate clients or for all corporates, and also a portal giving various examples, giving inspiration and ideas about projects, how to improve the energy efficiency or aimed at the circular economy. This internet portal has been established together with a company called CIRA Consultancy, which is a consultancy company active in the circular economy.
During this year, we also introduced a completely new application for our clients using our services in the area of trade finance. This application called Trade Finance Online, which replaced a previous application which become obsolete. This one is significantly improved the user friendliness. Thanks to this easy operation of this platform, we are able to expand our trade finance business also with smaller SMEs. At the same time, it brought us some productivity gains in the area of processing the trade finance transactions. Now let me hand over the word to Jitka Haubová.
Good afternoon to all of you. I have the privilege to give you an update about KB approach to sustainability as both regulatory and business project. We are investing money, sweat, and passion to take KB on a sustainable journey, which permeates all aspects of our organization. KB reduced its carbon footprint by 35% year-on-year. The reduction was of course driven both by pandemic restrictions, but also by significant energy consumption optimization, building operations and digital transformation effort. It is also about real cost savings. Secondly, KB is progressively reducing its exposure to the coal sector. On the other hand, we are happy to finance client green transition investments as Miroslav and David said before.
This is also the reason why new sustainable positive impact financing reached CZK 3.2 billion over the last 12 months. We have launched a new and adjusted retail and corporate sustainable products as financing with preferential interest rates for household sustainable technologies for retail clients, also donated by state grant schemes. Leasing for companies, as my colleagues mentioned, ESG oriented mutual funds without entry fees. We have advisory company for EU grant scheme management, which is very important because 42% of the initial development plan under which the Czech Republic will be able to invest will go to green. You can withdraw money in our recyclable ATM with recyclable payment card and then paid on fully recyclable payment terminal in the shop.
Bank i D is an online paperless identification card, another example. Regarding regulatory duties, we have followed both Sustainable Finance Disclosures Regulation and also Non-Financial Reporting Directive. Both reports are available on our webpage. I have to mention that the report has been awarded by Association for Sustainable Business as the best in the Czech Republic. Finally, Jan Juchelka was awarded as the most sustainable leader by Business for Society day before yesterday. We are on a good track to achieve our strategic target. I am handing over to Didier Colin.
Thank you, Jitka. Hello again. Now going to our Risk Management 2.0 company objective. Just as a reminder, this objective has two main ambition. One is to enable the implementation of our strategic plan from a risk perspective. The second one is to keep our capacity to identify new risks along our transformation journey. From a risk typology, we started with a scope covering credit and operational risks, and we are now gradually extending to market risk and compliance risks. When looking at the deliveries and our activities in the last 12 months under this company objective, it can be summarized in three main blocks. The first one is what I would call the COVID acceleration.
by that I mean the modernization of our retail collection capacities, accelerating the usage of voice bot technologies, as well as AI technologies in the interaction with our retail clients, mainly, at this point, individual client segments. The second one for this first block is the AI enhancement of our early warning signal capacity, which we apply to the more intelligent monitoring of our retail small business as well as corporate loans portfolios, here with benefits both in terms of operational efficiency as well as financial gains in the way of contained cost of risk. This is for the first.
The second block is in fact an integral part of our digital transformation with a focus on two areas. The first one is the extension of our historical strength in the field of retail credit fraud preventions, where we extended in two new directions. First one is the digital space, and the second one is the corporate world. If it's still a bit too early to measure the benefits, we have definitely implemented advanced fraud prevention components into our various setups in the last twelve months. The second development in this area is with the creation of new credit risk models and modules that will definitely support our end-to-end digitalization and automation for loan granting to small business and small SME clients.
There is also a third block that is not explicitly mentioned on this slide, but which has a critical importance, and this is the continued gradual construction of our new service-oriented architecture pack and platform for both credit risk and fraud risk management. This platform will cover all the entities of KB Group, as well as we'll have the ambition to simplify and better secure the key interfaces which we need to have with Soc Gen for all credit risk related matters. So all in all, the last 12 months have been marked with concrete deliveries and benefits that will definitely permit KB Group to keep its well-recognized risk resilience, while progressing on the implementation of this transformation. Now I'm handing over to Margus for our Agile 2.0 company objective.
Thank you.
Thank you, Didier. Moving on with the next objective, which is building the higher level of the agile, adaptive and effective organization, or as we call it, Agile 2.0. On that one, the key improvements have been mostly on the side of the better system stability and improved IT flexibility. We understand that as one big part of the new digital bank is going to be as an end result, the ability to release the new developments into the production continuously. This kind of continuous releasing, we have already moved to the 11 releases per annum. This is the release cycles that we are saying that they are giving us, like simpler releases.
It's giving us better stability, and it also reduces all of this overhead that is always related to getting the developments into production. Considering the state of the IT employee availability all around the world, it's also affecting quite a bit of the Czech market. We have been putting a lot of effort in together with or within our HR and IT cooperation into the insourcing activities. This is mostly focused on strengthening the internal know-how and improving the efficiency. We understand that we are going to need a lot of good people throughout our transformation, and we are working heavily in order to secure the necessary resources and necessary competence for the whole transformation cycle.
On the overall agile methodology, we have now reached also to the full rollout of the OKR on objectives and key results method across the whole organization. The whole organization and the way how the funding of the different transformation activities is being done is already following very clearly the OKR method. Meaning that our ability to dynamically change the priorities and then move forward with those activities that are the most crucial ones, this is already running on the new level. If we are looking into the NDB in general, then one very big part of the new digital bank is going to be the ability to run the whole IT technology significantly more cheaply and with less effort required.
This is one of those key cornerstone activities that is happening in parallel with all the functional developments, with all the system set up, so that we can really move towards keeping the running cost of the organization as low as possible. When we look into the next one, the data-driven company, then in this one our one of the biggest deliveries during the last 12 months has been the upgraded data analytics and the visualization capabilities together with using the Power BI platform. It's already quite extensively used, and we are very extensively also educating the employees within the organization to really work with data analytics tools on a higher scale.
What is not mentioned on this slide, but this is where we are putting a lot of energy throughout 2021, 2022, and then also in the later years. We really push hard for the whole organization to be very much data competent, so that the data literacy of being able to understand everywhere on the business technology and everywhere else in the organization what kind of data is available for us, how can we work with data, what kind of tools we need to use in order to take the maximum out of that.
There has been a significant attention on the matter, and especially in the years 2022 and 2023, with the introduction of the different digital sales capabilities, we are clearly moving towards the direction of making data a key cornerstone of every activity that we do in this organization. Now handing the operational efficiency to Jiří.
Thank you, Margus. Operational efficiency, I would say it's traditionally a part of our DNA. In this strategic activity, we are on a good track. I was mentioning already before, so we are able to cut the number of employees during the last 12 months by another 5%, and clearly this trend is gonna to continue further. Recently, we are also completing with some, let's say small exceptions, a huge one ever in our head office buildings management. It is to have the whole group head offices under one roof in our modern administrative complex in Prague Stromovka. Miroslav already mentioned the move of Modrá pyramida here, so I'll just add that it is also the case for another KB subsidiary. What I mean is KP.
That's KB Insurance company. The last point to mention here, and it's, I would say logical, after optimizing of majority of agendas at the bank level and having the bank and all subsidiaries under one roof, it's a perfect time to start to search for synergies across the whole of our group. Here, what I mean is, among others, centralization of support functions and stuff like that. That's in a nutshell operational efficiency, and I'm passing the word back to Margus.
Thank you, Jiří. Moving to the next slide, this is focusing on the new digital bank. Miroslav was already mentioning quite a bit of the achievements that what we have been doing. Just as a reminder, this new digital bank is mostly built on the greenfield as a greenfield initiative, and this is a complete overhaul of our banking processes, both from the technological and from the business side. When we are talking about the new digital bank, then we are effectively building a secondary technological stack where we are going to move the whole customer base and all of our services and processes to have the fully digital products and the fully digital banking processes running on top of that.
It has those kind of like the three major key elements here that we are building the new IT infrastructure. Already mentioned the new core banking coming from Temenos Transact is already being set up on its core and basics. It has been integrated to the payment hub, to the different customer management systems, to the data warehouse, and all the other already existing systems as well. We are in a very active progress of finalizing the card management system setup. We have developed over the last couple of years the full new payment hub and also the new customer management processes. The second stage in that one is that we very clearly also understand that we are building the new simple digital products on top of this new IT infrastructure.
This is a major difference compared to what we do and how the core banking system replacement usually happens in the banking sector. Typically, the banking sector, when they implement some kind of new system, they set up the new system more or less exactly as the old one was, and then they essentially copy the whole database over from the old system to the new one.
In our case, we are saying that we are going the other way in order to significantly reduce the number of products, in order to simplify the processes, in order to digitalize all the processes and get rid of all of this ballast or this kind of like the what we have been collecting over the long years that we do not need anymore to remain and then to keep the business optimized. We are basically leaving it all behind and moving on with a cleaned-up, simplified set of products and processes. Then the third component here is the new front end, and the new front end is also as Miroslav already mentioned, it's clearly moving towards the omni-channel. We have the mobile-first approach.
The new mobile bank has been already implemented during this first minimum viable bank development during the last 12 months as well. This mobile-first approach is now gradually going to expand into the full-fledged banking experience in the upcoming couple of years. If you are looking into this, what is our timeline, then we started the whole journey, the development of the new core banking system. We started it in exactly 12 months ago in October 2020. By now, after the first 12 months, exactly as planned, we have been delivering the new core banking system, and we are continuing the full development of the functionality especially for the retail space until the beginning of 2022.
Until the end of 2022. By that time, we already have something that we call a marketable retail bank or basically the moment when we start massive migration, business migration of the customers from the old technologies to the new technologies. This parallel development of the additional functionalities and migration will last throughout 2023-2025, and we are reserving the latest stages of the development in 2025 and 2026 to completing migration, cleaning up the old applications and closing down and decommissioning the old technologies that we have here. Essentially, by the end of 2025-2026, we are reaching to the point where we go back to having one technological stack only, and that technological stack is only the modern new one with significantly cleaned-up processes.
If I'm looking into the middle of the section, the main technological features and the planned key results, then we are moving towards real-time, 24/7 processing, analytics and lead generation, which is effectively significantly going to change our digital sales capabilities and digital service capabilities. We are moving towards continuous deployment, continuous innovations with daily releases if necessary, so that really fully automating the whole process of getting things developed and into production. We also go into addressing the customer and banking needs of this kind of on a significantly higher level. 100% paperless communication with customers, share of digital sales to exceed 50% and increase both the number of customers, but also in the customer satisfaction measured by NPS and the average revenue per user.
Those are the planned key results on our side. Clearly, connected to all the rest of the numbers, they improve productivity and how many customers per employee we can serve. They are also going to go higher. That's all about the new digital bank. Now handing back to Jan, I assume.
All right. We have two last pages dedicated to the strategy ahead of us. The first one is a reminder, how do we measure the outcomes of the strategic plan? We are planning to be above 50 positive points on the Net Promoter Score, i.e., to keep our clients happy or even happier than today with Komerční banka. Number of clients should be increased to 2 million active banking clients, which means that we do believe on strong traction created by the client's proposition through the new digital bank, as well as we are keeping our eyes open for potential opportunities on the market and a potential acquisition of clients. The bank branches we are targeting 200 branches.
Let me remind that back in 2019, we were managing the network of 342. 100 of them was taken out already in 2021. We took the bold decision in the middle of the pandemic situation, and we did it. It was a right decision because you can see that dynamics on digital are very strong and our business performance in retail is following the trend. I do believe that even though it will be the harder part of the job, we will be landing at 200 in 2025. Number of employees should continue decreasing to the levels of 5,500. Again, it is an ambitious target.
Nonetheless, you see that the commitments we are making publicly are being also fulfilled, and you can see that already also as part of our third quarter presentation. The employees' engagement, because we do fight also for the happiness and satisfaction of our employees, should exceed 80 positive points. Currently, we are finding ourselves somewhere at a level of 76.5, which is very strong results already, and we are convinced that it will continue growing. The modernization of the company, the democratization of the company will continue down the road. Our commitments in the ESG area remains also solid and strong.
We are currently based on the methodology linked with FTSE4Good index at 3.3, and we want to elevate that to four points, having a concrete plan of concrete actions ahead of us to be fulfilled. I'm handing back to Jiří Šperl. Thank you.
Thank you, Jan. Well, those of you who participated at the earnings call 12 months ago, when we were presenting our 2025 ambition, probably might remember that, it is a very much growing plan. My colleagues just presented the main elements of it. I will focus on transposition into financials. The key financial group targets are summarized at the bottom of this slide, so cost-to-income ratio below 40%. In other words, we are going to deliver positive jaws where the top line is growing much faster than costs and ROE more than 15%. From the figures as of September this year, whatever they are very sound, it's clear that we are not there yet. It's natural because it is a long-term plan.
What is, however, important for us is that we are on a very good track. Having said this, we are confirming both ROE target and at a level of 15% and cost-to-income ratio below 40%. By the way, this key performance indicator, what I mean is cost-to-income ratio is even evolving a bit better than planned. Naturally, on top of delivering our business targets, it's also supported by accelerated normalization of monetary policy by CNB. From today's decisions, it seems that the sky is the limit. So that's where we are now. I'm returning finally to Jan.
All right. Thank you. Thank you for paying the attention to us for so long. We wanted to share with you the performance together with the development of implementation of strategic plan, because we do believe that even though the external environment remains quite live and not always easy and challenging, we need to keep our pace and direction as far as the strategic direction is concerned. Now we are ready to react on any of your questions. Please feel free to raise your question. Thank you.
Thank you very much. Ladies and gentlemen, this has concluded the presentation part of this meeting. Now, as Jan indicated, we are happy to answer your questions. Let me remind you that the whole meeting is being recorded. If you have a question, please use the icon with raised hand on the upper part of your screen, and then please wait to be called. If you are connected through via telephone, I will invite you to ask questions later on. Our first question comes from Mate Nemes from UBS. Martin, please go on.
Yes. Good afternoon, and thank you very much for the presentation. I have a couple of questions, please. Firstly on the development of customer loans or your expectations on development of customer loans going forward, also perhaps beyond the next quarter. If you're seeing that perhaps the sales of new housing loans have peaked in Q2, I wonder if we should expect or whether you expect a continued perhaps slow decline from here onwards and maybe, you know, this trend offset by pickup in consumer loans or perhaps pickup in corporate lending as maybe supply chain disruptions ease or the RRF facilities come online, and then maybe we are seeing a bit more demand for investment type of loans from the corporate sector. So that's really the first question.
The second one is on NII interest rate sensitivity. Given the large hike today from the CNB, I'm just wondering if you could comment on your NII sensitivity at current levels. Presumably, deposit betas are changing now, and maybe those sensitivities are coming a little bit lower. Lastly, just a question on the long-term return on equity target of 15% +. Can you maybe clarify what assumptions are you using for CET1 or Tier 1 ratios for that target in 2025? Thank you.
May I start with the housing loans? Because I think this is a question that we all have on our table these days. Just to give you the full picture, as of today, the first nine months of the year, the year-over-year growth is reaching 90%, which is enormous, but it's slowing down already. If I look at September isolated, the year-over-year is just 40%. When I do some estimate of the total year 2021, I would say we can end up around 60% growth compared to the previous year. Just to say where we are today and slowing down already. For the next year, the expectation is more or less, and that it's not an easy thing to estimate it, by the way, -30% in the new production compared to the estimate of the year 2021.
We still see that housing loans should be quite strong, but the appetite of clients is definitely going down, and the news from today will even strengthen this trend, most probably. For consumer loans, we still believe that this can be an engine of growth. The next year, the estimates we have are around 6% ±1, speaking about the outstanding volume, because it gives, I would say, better notion of the development of the market, and we would like to beat the market, by the way. The same is true for housing loans. Just the first part of the answer, and now giving the floor to Jiří, I guess.
Yes, sure. I will take the other two questions. First one was related to net interest income sensitivity. Let me use two usual metrics we are issuing. First one is parallel shift of yield curve by 100 basis points and the impact into the upcoming 12 months is at the level of CZK 1.5 billion. That's a parallel shift of yield curve. Just to simplify that, and to use the metrics for only short-term interest rates hike. One hike, what I mean is 25 basis points is worth like CZK 300 million . It's increased a bit, mainly due to the fact that also our, let's say, current accounts and deposits increased significantly. It's mainly about volume effect.
Third question was related, what is the assumption used for capital level of our capital connected to our ROE target at level 15%. Of course, there is a lot of assumptions used, but assuming that our minimum requirement will stay at the level of 16.2, which is currently our baseline scenario, the capital adequacy at that time will be roughly by 120 basis points higher, meaning in the mid of our management buffer. For that, and again, I'm describing our baseline, we are assuming to issue one tranche of subordinated debt. Probably some of you know that we did it already roughly three years ago. It was at that time EUR 100 million.
Part of this exercise is support of our capital adequacy by another CZK 100 million, which will lead to the situation that we will utilize roughly 100 basis points-120 basis points of the regulatory limit, which is at level of 200 basis points.
Thank you very much.
Thank you. Next question comes from Mehmet Sevim.
Hi. Thanks. Thanks very much for the call. Just following up on the net interest income. I think you mentioned during the call that the 125 basis point hike today would have, you said a CZK 100 million incremental impact. Is that for this year or for next year? It's not clear exactly what you were trying to get across. My second question would be, do you foresee any impact on risk cost from the quite significant rate hikes that we've had? Do you have any clients that could be vulnerable to the higher rates? Also do you have any exposure to clients that are vulnerable to other increases in prices, I guess primarily energy prices, if you could elaborate on that risk.
Then just last on depreciation, I was surprised that it hasn't gone up more. You seem to be investing a lot into the new core banking system. Is depreciation expected to rise at a much faster rate going forward? Thank you.
Thank you, Sevim, for the questions. I will take the first one and the third one. Just to be precise, impact of today's announced hikes. I was mentioning roughly 1 million. 100 . It will be too small. CZK 100 million impact still in 2021. The impact in 2022, of course, will be much higher. If I simplify, you know, it's by 50 basis points more than we were expecting. Our baseline by the end of the year was 75 basis points. Now it is 125. You wouldn't make a big mistake if you add roughly CZK 600 million . Passing word to Didier for risk question, and I will get back to depreciation.
Thank you, Jiří Šperl. In fact, if you look at the various segments for individual segments in the way we have built our credit policies and the way we more specifically calibrate our limits, we have a level of buffer that really protects us very well against interest rate hikes. Small business is less of a question first because the maturity of our loan exposure is shorter. Second, because it's more in terms of fixed rate. Also the level of client rates or pricing is higher. We have here a bit of protection. I would say that you ask about vulnerable portfolios.
In fact, I would just give the example of the terminated moratorium portfolio where we've seen a bit of increase of our default rate. In a magnitude that was half the one we expected a year ago. I think this is definitely a good sign of resilience. Regarding your question on energy price hikes, in fact, we did a review of our corporate on the corporate side. The expected impact that we remind is surely manageable.
Now, your question is probably more a question on the retail side, but again, here, as was mentioned by Jan, the level of unemployment, the pressure on wages, all that makes us still believe that it will be definitely manageable.
Actually, I was interested in the corporate side. Thank you.
I will complete then the third one. Well, depreciation of investment nine months of this year was +8%, which is relatively a lot. It's very clearly influenced by, let's say, increased investments. Our transformation is gonna continue, of course. I see these 8%-9% rather like exceptionally. If you ask me for kind of, let's call it a run rate for upcoming years, it would be lower at the level of, let's say mid single digit. Again, 5%-6% would. Yeah.
Okay. Very clear. Thank you.
The next question comes from Michal Broniarski from mBank. Michal, please.
Okay. Thank you so much for the call. I've got actually two questions. First one, given this quite surprising move from Czech National Bank, I was just wondering what is your feeling where the base rate will go from here? What could be the level, ultimate level for it, this year and next year? This is the first question. Actually I would like to ask about cost of risk, maybe once again. What is your feeling for 2022? Is it possible to achieve cost of risk still below 10 basis points for the full year or it should normalize somewhat next year? Thank you.
Should I take the first one, Jan?
Yeah.
Yes? Okay. Well, you're perfectly correct. It surprised everybody. It's very clear that in the decision-making process, what to give the higher priority. What I mean is inflation versus potential support of the economy. Again, we selected without any doubt the first one. We are close already to 3%. What CNB was saying all the time that they see kind of through the cycle short-term interest rates is whatever between 2.5 and 3.5. So I think, I personally think, and maybe my colleagues will complete me, but the floor, kind of floor is, or cap is 3.5%. That's maximum from my perspective.
Did it answer your question?
Yes. Thank you. Yes.
Regarding your other question on the cost of risk outlook beyond the end of the year. In fact, I have not found yet a crystal ball to make this kind of forecast on the IFRS 9 standard. Still try to answer your question and looking at our regular ICAAP activities. It's not so much 2022, it's more through the cycle. Under our central scenario, we expect to be in the range of 20 basis points. On the stress scenario, it's more fluctuating between 35 basis points-45 basis points, which are quite good levels in terms of our resilience capacity, I would say.
Okay, perfect. Thank you so much.
Thank you. The next question comes from the line of Rostislav Táborský. Please ask your question.
Good afternoon, ladies and gentlemen. Can you give us some guidance for next year's dividend of KB and also some kind of longer outlook for dividends policy of KB? Thank you very much.
We had a similar question from the journalists earlier today. We are not guiding on the dividend for next year. What we can say is that the dividend which is to be paid in December was approved by the general shareholders meeting, and it was part of page number four of the presentation. Let me bring you back to the history of, let's say, normal course of business before the pandemic situation. Komerční banka has always fulfilled two roles. The role number one was that we were able to share the profits with the shareholders more or less in the latest years at the level of 65% of the payout ratio.
We were keeping our capital adequacy on the safe side, fulfilling the requirements of the regulator and keeping certain managerial buffer on top of it. If nothing unexpected will be appearing in the future, we would like to bring back Komerční banka to the normal situation also in the field of distribution of profits as we did before the pandemic. I don't know, Jiří, if you want to add a few words on that side.
I can. Probably I can touch our dividend sustainability story. You know, the bank is generally, or group is generally able to perform or deliver return on regulatory equity, whatever between 15%-20%, which means that every year on average, we are generating around 300 basis points of new fresh capital. If you take into account the consumption by organic growth, it is consuming, let's say, 1/3 , which is 100 basis points, and the rest basically could be paid to the dividend. This is our dividend sustainability story. It is rather retrospective statement, but that's how we see that.
Thank you.
Thank you. Now I would like to give opportunity to the participants who are connected through a telephone. If you want to ask a question via telephone, please unmute yourself by pressing star and six and then ask your question, please. We have no such question for the time being. I'll ask Jovan Sikimic from Raiffeisen International for his question through the platform.
Hello. Hi. Thanks for the call. I mean, just two questions. First of all, would you see some, let's say, pressure on fees given the rising interest rate environment? Second question, I mean, would you dare to say that your, let's say, 2025 ROE target of more than 50% could be reached, I don't know, 1-2 years before, given the, let's say, rate hikes above your estimates?
I will start. First question was about the potential pressures on fees given the increasing of market interest rates. Of course, at least theoretically, these pressures could slightly appear because the motivation of people to invest into our non-banking assets under management could be a bit limited. On the other hand, I don't think the hit here will be high still. Still the penetration of, in, for example, mutual funds and pension policies, insurance policies is relatively low. I'm not expecting any huge impact. This is one thing, and the other thing is, are we able to guide or indicate that ROE could be achieved, 15% could be achieved before 2025?
I don't want to speculate here. Maybe yes, maybe not. It's necessary to take into account that 15% is a really challenging target. If we achieve it by the end of 2025, we will be perfectly okay, happy, and satisfied.
Okay. Thank you. Thank you.
We do not seem to have any further questions, so I would like to hand back to Jan for a concluding remark.
All right. Thank you very much, everyone, for being with us. I hope you are sharing our excitement from the third quarter results. I'm proud of the entire team of Komerční banka, not only for the strong business and financial performance, but also for the very stable and very systematic push on the control and strict management of costs. We are very proud of being on top of the peloton as far as the efficiency of the operations is concerned. I also believe that the markets will appreciate that we are, let's say, after the ban given by the regulators, we are coming back with dividend.
We will hope together with you that there will be no strong, unexpected bumps on the road ahead of us in order to help us to bring Komerční banka and to continue the story of very stable, very predictable company with 40% of the free float, which is an attractive target for investors. Thank you very much for your attention paid to Komerční banka, and I'm looking forward to seeing you at the occasion of the fourth quarter and 2021 full year results presentation. In between, don't hesitate to connect with us should you have any questions on the performance of the bank or any other. Thank you. Thanks a lot, and see you soon.
Thank you. Bye-bye.
Thank you. Bye.
Goodbye.
Bye.
Thank you. Bye.
Thank you. Bye.
Thank you.